Arthur J Gallagher & Co. Aktie

Good morning, and welcome to Arthur J. Gallagher & Company's quarterly investor meeting with management. [Operator Instructions] Today's call is being recorded. If you have any objections, you may disconnect at this time. Some of the comments made during this investor meeting, including answers given in response to questions, may constitute forward-looking statements within the meaning of the securities laws. The company undertakes no obligation to update these statements.

These forward-looking statements are subject to certain 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 earnings release and Form 10-K and 10-Q filings for more details on such risks and uncertainties.

In addition, for reconciliations of the non-GAAP measures discussed during this meeting, please refer to our most recent earnings press release and other materials in the Investor Relations section of the company's website.

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

Thank you. Good morning, everyone. Thanks for joining our investor meeting today. We think these investor meetings give the investment community a chance to hear from our business leaders and better understand what continues to drive Gallagher's growth and long-term value creation outside of the busy earnings season. And in some cases, it serves as a primer for our new investors. I'll start by discussing Gallagher's 4 strategic pillars and why we believe we are very well positioned to grow revenues and improve profitability in this market. Then I'll give an update on the insurance market and economic conditions. After me, you'll hear from our business leaders. They'll discuss their businesses, markets, including the trends, growth opportunities and operating initiatives that continue to drive strong performance across Gallagher.

They'll also give some specific examples of how they're using AI and discuss how they see the second quarter developing. Then, Doug Howell, our CFO, will pull the comments together and provide a more detailed second quarter and full year outlook. Our prepared remarks should last around an hour. After that, we will open the line to the group dialed in for Q&A. One of the questions I hear most often is why Gallagher continues to grow across different market environments and outpace the industry over time? The answer starts with our 4 strategies that have stayed consistent for decades in which we continue to create opportunity for growth and long-term value. #1, grow organically; #2, grow through mergers and acquisitions; #3, increase our productivity and raise our quality; and #4, maintain and promote our culture. These have been tested through economic cycles, employment cycles, interest rate cycles and insurance pricing cycles, and they continue to deliver excellent revenue growth and profit improvement year in and year out.

We are a 2-pronged growth company, organic and M&A, and I continue to like our position on both because we have very little market share and the industry is highly fragmented. Even after growing organically over $3 billion and acquiring more than $6 billion of annualized revenue since 2020, we still touch less than 5% of the global insurance market. And there are perhaps 60,000 smaller agents and brokers around the world who recognize or will recognize they would serve their clients better by being together with us. Our future growth has, practically speaking, no real limits.

We're also highly profitable as a company with EBITDAC margins up over nearly 800 basis points since January 2020, and I continue to see significant opportunities to improve productivity, raise quality and increase profitability. And we have a team-first execution-driven culture that recognizes growing revenue and profits enables us to invest in talent, technology and expertise necessary to exceed our clients' expectations. Put simply, this business is built to deliver double-digit annual revenue and EBITDAC growth and to turn that into long-term shareholder value.

Let me take -- let me do a deeper dive into our first objective, growing organically and why I believe our combined Brokerage and Risk Management segments are still on track to deliver full year 2006 organic growth of about 6%. Gallagher has client capabilities in approximately 130 countries more than 72,000 employees and the ability to provide advice and solutions across insurance, reinsurance, human capital and claims management. Insurance remains one of the most essential products in the global economy. It touches just about every business, every asset, every transaction in the economy, all of which have increasing risk and greater complexity. The Swiss Re Institute estimates that there are more than $7 trillion of annual insurance premiums globally, which includes $4 trillion in non-life premiums alone. That premium base continues to expand as economies grow, insurance demand increases and new risks create new coverage needs. We touch about $200 billion of premium a year.

Frankly, global insurance premiums are growing annually more than we currently touch. What's contributing to that broader market growth is the ever-increasing size and complexity of risk, meaning insurers need our expertise more and more every year. Examples like data centers, cyber, energy transition, and evolving liability risks increasingly require specialized expertise, better data and more sophisticated advice. Today, you'll hear from the team how we have industry-leading talent around the world, deep expertise across products and geographies and a consistent successful approach to sales and service, all operating under an ever-increasing respected global brand. You'll hear those strengths are reinforced by the scale of our data, our centers of excellence and the technology and AI capabilities we continue to build across the organization.

And you'll also hear about the diversity of our model with operations across PC, retail, wholesale, benefits, reinsurance and claims, each with different growth drivers and sensitivity to market cycles. Our producer talent, niche expertise and global and diverse capabilities and client-first culture are the reasons Gallagher has grown organically in practically any environment.

Turning to our second objective. Another way Gallagher creates long-term value and revenue growth is through mergers and acquisitions. The opportunity for M&A remains substantial because insurance distribution continues to be highly fragmented around the world. When firms join Gallagher, they get immediate access to our niche experts, client and carrier insights, digital and AI tools, thought leadership, recognized brand and our elevated service from our centers of excellence. That creates immediate value for their clients and gives their producers more ways to win. It also strengthens Gallagher through the addition of talented producers, specialized expertise and local market relationships.

So far this year, we've completed 15 mergers, representing around $115 million of estimated annualized revenue. Looking at our pipeline, we have nearly 40 term sheets signed or being prepared, representing around $600 million of annualized revenue. We remain disciplined on valuation and focused on culture fit, and we believe the same factors driving our organic growth, our talent expertise, data and client solutions also continue to strengthen our position as a preferred acquirer.

The third objective of our strategy is to increase productivity and raise quality, and this has been a long-standing focus for Gallagher. More than 2 decades ago, we began building our centers of excellence, where today, over 18,000 colleagues handle many of our back office and client servicing activities. Through standardized processes and common systems, we've created a scalable, consistent operating model across the organization. That work is particularly important in the context of AI. What differentiates Gallagher is not simply that we are deploying AI today, but that we've built the foundation for it over many years, standardized workflows, centralized data and a global operating model. That foundation allows us to move with speed and consistency as we embed AI across the business. AI is not a future initiative for Gallagher. It's already integrated into how we operate, how we support our professionals and how we serve our clients. We're applying it in a practical workflow-driven ways across the brokerage, claims, benefits, reinsurance, and M&A with a consistent focus on improving speed, insight and execution.

In our brokerage operations, AI is reducing the time required to analyze carrier quotes, summarize loss data and prepare client deliverables, allowing our teams to respond more quickly and make more informed placement decisions. In our digital platforms, AI is making proprietary data more actionable for producers and clients, improving how we evaluate options and deliver advice. Within Gallagher Bassett, AI is embedded directly into the claims workflow. It helps identify severity and litigation risk earlier, triage claims more effectively and improve consistency in decision-making. These capabilities allow for earlier intervention and better outcomes for clients while improving efficiency across the claims process.

More broadly, these are not isolated use cases. They reflect how AI is becoming embedded in everyday workflows across Gallagher, improving workflow efficiency, enhancing producer productivity, strengthening placement outcomes and delivering better insights and results for clients. Similar benefits are being realized in reinsurance and M&A, where AI is accelerating data extraction, analytics and aspects of diligence, while our professionals remain focused on judgment, relationships and execution.

Importantly, AI makes our brokers, consultants and claims professionals more effective. It does not replace them. As risks become more complex, clients continue to need judgment, advice and advocacy and market access. We see AI strengthening those core capabilities, not substituting for them. The benefits from these investments are emerging in stages. We are already seeing gains in productivity and quality. Over time, these improvements support better responsiveness, stronger execution, higher retention and improved win rates, ultimately contributing to stronger economics and organic growth. The bottom line is simple. AI is helping us grow, improve quality and operate more efficiently. We believe we'll continue to reinforce our advantages in scale, data, expertise and market relationships. And given the investments we have made in our people, technology and operating infrastructure, we are well positioned to continue creating value for our clients and shareholders over time.

The fourth objective of our strategy is to maintain and promote our culture. As we've grown, our culture is unchanged. Our focus is on our clients, our people and doing business the right way. We believe our culture is a meaningful differentiator. It helps us attract talent, integrate merger partners, retain clients and continue executing consistently across a growing global organization. It is also what enabled us 2 decades ago to embark on centralization and standardization as a journey. Our teammates knew that this was better for our clients. They see the same thing coming out of AI. That culture has been a key contributor to Gallagher's long-term success and remains an important part of our growth strategy going forward.

Okay. Moving to an overview of the insurance market. Overall, we view the global P/C insurance market is segmented. Carriers look to grow in lines and geographies where they are earning acceptable returns and remain disciplined where underwriting margins require further support. Property conditions continue to ease as capacities return, especially on larger accounts, while casualty remains firmer given ongoing pressure on loss costs and underwriting margins. For the first 2 months of the quarter, we saw the following in renewal premium changes by line of business. Property lines down 9%; casualty lines up 5% overall, including general liability up 1%, commercial auto up 4% and umbrella up 8%. D&O, cyber and other professional lines, up 2%; personal lines up 3% and workers' compensation about flat. Overall, property decreases are offset by increases across most casualty classes. Excluding property, renewal premium changes are up about 3%, with stronger increases in the U.S. than in international markets.

We also continue to see meaningful differences by client size with large property risks driving most of the downward pressure overall. Across our renewal portfolio, premiums reflect underlying insurance conditions, but our revenue reflects the value of the advice, placement and advocacy we provide. Those don't move one for one, and that relationship varies by line of business and client mix. In some areas like property, we've seen premiums come down as rates normalize.

While in Casualty and Specialty lines, premium and revenue trends remain more aligned. And in our specialty business, where placements tend to be more complex, that alignment reflects the value of our niche expertise. Good accounts are still seeing some premium relief. However, accounts with poor loss experience are likely to see greater increases. In many cases, where clients are seeing savings in property, they are opting back into coverage or increasing limits. As for reinsurance, capacity remains ample overall with market conditions varying by line of business. In this environment, the value of a broker becomes even more important. Clients are not simply looking for capacity. They need advice on how to structure coverage, evaluate trade-offs, access the right markets and make better risk decisions. That is where Gallagher's expertise, market relationships and data-driven capabilities help differentiate us and create opportunities to continue winning business.

Moving now to our view on economic conditions. Through mid-June, our daily revenue indications from audits, endorsements and cancellations are still in positive territory and continue to point to solid underlying business activity for our clients. In the U.S., the number of job openings is still ahead of the number of people looking for work, and health care costs continue to trend higher due to innovative medical treatments and prescription drug costs. This dynamic has employers continuing to look for cost-effective ways to support their human capital objectives. Overall, these indicators suggest the underlying market conditions that support our business remain intact and continue to support our growth expectations for 2026.

All right. Let me preview what you'll hear from each of our business leaders, then I'll turn it over to them. Mike will discuss our Americas P/C retail and specialty businesses and how scale, niche expertise, data and technology continue to help us win in a rational market. Patrick will discuss our international retail, P/C, London Specialty operations, where our global platform, digital ecosystem and specialized expertise continue to support growth across international markets. Tom will discuss Gallagher Re and also as a separate topic, our global M&A strategy, including how our model continues to attract talent, merger partners and opportunities for growth. Bill will walk through our employee benefits and HR consulting operations, where employers continue to seek advice, cost discipline and talent solutions in an increasingly complex environment. Then, Scott will discuss Gallagher Bassett and how scale, data, technology and AI capability enabled claims management are helping deliver superior outcomes for clients and supporting continued growth. Doug will bring it all together financially.

Okay. I'll stop now, turn it over to Mike Pesch, who's going to discuss our P/C brokerage operations across the Americas. Mike?

Thanks, Pat, and good morning, everyone. I'm Mike Pesch, and I lead our Americas Property Casualty business. Today, I'll cover 4 topics. First, I'll provide an overview of our Americas retail and specialty operations in the U.S., Canada, Latin America and the Caribbean. I'll discuss current insurance market conditions, and then I'll outline how we've implemented AI across the business. Finally, I'll end with what we're seeing thus far in the second quarter. Our Americas retail P/C brokerage operations generated over $3.5 billion of revenue in 2025. Our largest Americas retail operation is in the U.S., where our U.S. retail P/C operations generated over $3 billion of revenue in 2025, including the recent acquisitions of Assured Partners and Woodruff Sawyer pro forma revenue would have exceeded $4.5 billion, with roughly $35 billion of premium placed here in the U.S.

In Latin America and the Caribbean, we generate around $200 million of revenue across 15 countries and have more than 2,000 employees. In Canada, we are a top 5 commercial lines broker with clients in all 10 provinces and 3 territories. Here, we generate nearly $300 million of annual revenue with approximately 1,500 employees. In our Americas retail businesses, we serve and compete for commercial clients of all sizes, from large risk management clients to small commercial lines and also high net worth personal lines customers, though to a lesser extent. Most of our clients are middle market commercial clients who spend between $100,000 and $2.5 million on their annual insurance premiums. That translates into roughly $10,000 to $250,000 of annual commission and fee revenue to Gallagher per middle market client.

These middle market clients often have complex insurance needs, but limited in-house risk management resources. We are well positioned to serve them because we combine deep industry specialization and local relationships with the scale, data and resources of a global platform. That lets us bring tailored advice, broad market access and practical risk solutions to clients who may not have those capabilities in-house.

As a result, clients rely on us to identify, evaluate and manage risk that embeds Gallagher more deeply in their operations, strengthens retention and creates more opportunities to grow with them over time. Gallagher Blueprint combines our knowledge and data-driven approach with AI to focus on the most important drivers of our clients' total cost of risk. In practical terms, that means helping clients evaluate coverage adequacy, improve loss control, manage claims, optimize program structure and decide when to retain risk first transfer it. Those are the kinds of decisions that directly affect the client's total cost of risk and make the broker relationship much more valuable than simply placing a policy. The risk management advice and solutions we provide are strengthened by our niche practice groups. These specialists understand the products, exposures and industry-specific needs that matter most. They work side-by-side with our producers in the field, so we can identify and address each client's unique risks.

We have a deep bench of niche specialists spanning property, cyber, technology, construction, energy, reinsurance, space and executive risks to name a few. Our industry experts often work together to support more complex risks. This niche strategy reflects more than 30 years of deliberate investment. We built it practice by practice. It gives our producers access to specialized expertise that is hard to replicate. That helps us solve more complex client problems, deepen relationships, and support retention and cross-sell over time. Data centers are a good example of how that specialist model creates value. They are one of the fastest-growing and most complex risks in the market today, driven by AI, cloud computing and digital infrastructure demand. They are also large capital-intensive projects often with insured values in the billions. These projects cut across property, construction, cyber, energy, business interruption and executive risk.

Clients need coordinated advice and placement across a broad carrier base. Our advantage is that we can bring those specialists together backed by hundreds of professionals who help data center clients with risk management, safety protocols, claims resolution and claims advocacy. Speed of execution is critical in this market, and our scale, market relationships and data capabilities help us secure capacity efficiently and deliver solutions for our clients. Ultimately, our role is to help clients place and manage these risks more efficiently as they scale critical digital infrastructure. And it shows how Gallagher's scale, specialty expertise and data capabilities help us solve complex client challenges in ways that are difficult to replicate. Claims advocacy is another real differentiator for Gallagher. When clients have a loss, we bring expertise, market relationships and execution to the claims process that helps clients recover faster and stay focused on running their business. It also deepens relationships, supports retention and cross-sell and makes the revenue stream more durable over time.

And that value extends to carriers as well. When we bring a client to market, we help carriers understand the risk, the client's operation, the loss control work already underway and the coverage structure that makes sense. Better submissions, better data and better risk conversations help carriers deploy capacity more efficiently and make more informed underwriting decisions. That is an important part of why the broker model continues to matter on both sides of the transaction. It is another example of how our platform helps producers win business, serve clients more fully and deliver value when it matters most. Our decades of work and hundreds of millions of dollars of investments are differentiators in the business. Whether you're a long-time Gallagher producer or a new merger partner, these capabilities are available from day 1 to help service clients more effectively, improve retention and drive new business production.

Let me shift now to our specialty business, which collectively generated approximately $1.5 billion of revenue during 2025. And with the addition of AP, our annualized run rate revenue is over $2 billion. Our specialty business includes our U.S. wholesale, affinity, risk program administration as well as alternative risk and capital management operations. Our U.S. wholesale operations, known as Risk Placement Services, or RPS, represent about half of the specialty revenues. RPS was founded in the late 1990s and has grown to one of the largest wholesale brokers in the U.S. It includes our open brokerage programs, binding and MGU, MGA businesses. We engage with over 25,000 retail clients, providing data, analytics, differentiated products and access to specialty markets and insurance solutions that align with their client needs. The other half of our annual run rate revenue comes from our other specialty operations such as our affinity business, where we offer specialized insurance solutions for over 300 national associations and affinity groups.

Our risk pooling business, where we offer a wide range of services to support public entities, education, faith-based organizations, nonprofits and other member-based groups, AP added strength here as well, particularly in public entity pooling. And ARTEX, our alternative risk solutions captive management and ILS administration business. ARTEX is one of the largest captive managers globally and a leading player in the broader ILS market.

Moving on to my second topic, insurance market trends across the Americas. Starting with U.S. retail. So far in the second quarter, renewal premium change, that's both rate and exposure combined, is down around 2%. While this reflects the premium change specifically, fees as well as stronger commission rates produced positive renewal revenues over the same period. There has been much discussion on property renewal premium moderation, which is still felt mostly by our larger clients. Casualty lines, on the other hand, continue to show increases with more uniform increases by client size.

That said, in many cases where potential price savings are available, clients are increasing their coverage levels and redeploying those savings into higher limits and broader coverage. If I break this down by line of business, property is down 11% with all coverages in positive territory. Casualty is up 7%, which includes general liability up 4%; Commercial auto up 8% and umbrella up 8%; Package is up 3%, Workers' compensation is about flat. D&O is up about 1 point and cyber is up 5%. Excluding property, renewal premium change was up approximately 4% over the last 2 months, which is consistent with what we saw in the first quarter.

In this market, we're seeing a further divergence between our renewal premiums and revenues on those same accounts as renewal revenues remain positive over the same period. Starting with property, this is where the disconnect is most visible today. As rates come down, renewal premiums are declining, but our revenue impact is more muted. That reflects strong retention, exposure growth and the work our teams are doing on placement and program structure. Many of the larger and cat-exposed accounts driving the headline changes are also likely fee-based, which is another reason the revenue impact is different. In Casualty, we're still seeing positive rate, so premium and revenue remain more aligned. As that rate environment moderates, revenue growth will increasingly reflect exposure and client activity rather than pricing alone. As we've discussed previously, many of the larger and cat-exposed property accounts are driving the headline changes, but these accounts are often on fees.

Moving to Canada. Renewal premium changes show decreases of around 2%. Property is down around 8% and Casualty is down about 1 point. Moving to the U.S. wholesale market environment. Through the first 2 months of the quarter, our open brokerage renewal premiums were down about 4% and binding premiums up about 2%. This is the kind of market where our expertise, product knowledge and data-driven insights matter most. Every client has a different risk appetite, a different set of needs and a different budget. Our role is to help clients navigate those trade-offs and find the right coverage at the right price for their risk profile.

At our March Investor Day, I talked about how SmartMarket and Gallagher Drive are using AI across our workflows. Since then, we've continued to expand those capabilities across the business. We are applying AI in 3 practical ways. First, turning our proprietary data into more actionable insights for producers and clients; second, improving placement quality and carrier matching through tools like SmartMarket and Gallagher Drive. And third, helping our people deliver better client outcomes through faster analysis, stronger submissions and more informed risk advice. These tools are already embedded in our workflows. They help producers evaluate carrier options faster, compare pricing and coverage structures and prepare submissions more efficiently before going to market. The impact is straightforward, faster response times, better informed placement decisions and more consistent execution. Over time, that supports stronger retention and higher win rates. These capabilities continue to scale as adoption expands across our producer base.

And finally, a brief update on what we are seeing in the second quarter. Through the first 2 months, the underlying trends remain constructive. Renewal revenue increases continue. Net new business spread remains positive, and we have not seen a meaningful impact from midterm policy activity, including audits, endorsements and cancellations. Taken together, those indicators, along with continued strong client retention, support our confidence in the outlook. Based on what we are seeing thus far, we continue to expect mid-single-digit organic growth in total for our Americas Specialty and our Americas Retail P&C businesses.

Looking ahead, we remain confident in our long-term prospects. We have differentiated solutions, strong sales talent, data-driven insights and a client-first culture that position us to continue delivering strong results. Those strengths are embedded across the business and supported by the scale, specialization and execution discipline that have consistently driven our performance.

With that, I'll turn it over to Patrick Gallagher, our Chief Operating Officer, who will discuss the rest of our major property/casualty retail operations as well as London Specialty. Patrick?

Thanks, Mike, and good morning, everyone. I'm Patrick Gallagher, Chief Operating Officer. Today, I'll focus on our retail P&C units in the U.K., Australia and New Zealand, along with our London Specialty business. Let me cover 3 things. First, I'll give you an overview of these businesses and what differentiates Gallagher globally. Second, I'll talk about the insurance environment in each market. Then I'll finish with what we're seeing so far in the second quarter and how that supports our organic growth outlook. Starting with our international retail businesses.

Today, our international retail operations in the U.K., Australia and New Zealand generate approximately $1.6 billion of revenue and place over $12 billion of premium annually on behalf of clients. Our international retail operations are an important contributor to Gallagher's growth story and one of the clearest examples of how we have successfully scaled our model across geographies. Taken together, these businesses reflect the scale, reach and market positions we have built across some of the most important insurance markets globally. What is most important here is that we are not operating as a collection of separate local businesses. Over the last decade, we have built a more connected global platform that lets us leverage expertise, data, technology and client solutions across geographies. That is one of the things that differentiates Gallagher and supports our ability to continue growing across these markets.

Our international retail clients look very similar in complexity to our Americas clients with a focus on the middle to upper middle market. We also provide brokerage services to large account risk management businesses. We also serve smaller commercial enterprises and high net worth personal lines clients, though to a lesser extent. Despite operating across different markets, these clients often share many of the same insurance and risk management needs. So our sales approach and tools look a lot like the Americas. We built that consistency by design over the last decade, and it is the foundation of our global go-to-market playbook. Rather than operating independently by geography, our teams leverage a common set of tools, expertise and capabilities around the world.

Today, we have unified global go-to-market playbook. At its core, it brings a consistent approach to risk management, industry expertise, data-driven insights and client service across our international platform. First, CORE360 anchors our risk management discussions with clients and prospects of any size, anywhere around the world, and it provides a common framework for how we identify, assess and address client risk. Second, our global niche practices cut across industries and products, allowing clients across geographies to benefit from our deep knowledge and expertise. Examples of our global niches include energy, real estate, hospitality and marine. Third, our data and analytics platform helps us deliver more informed advice and create a more connected client experience through tools such as Gallagher Drive, SmartMarket and Gallagher Go.

Gallagher Drive shows prospects and clients' insurance buying trends for similar Gallagher clients from around the globe. Within Gallagher Drive, a client or prospect can see information for clients like me, including coverage mix. limits, potential catastrophe exposure, and claims forecast. The platform further differentiates us versus the competition as producer adoption continues to grow. SmartMarket has evolved into a global offering used by most of our large carrier partners across our retail platforms, helping improve connectivity and efficiency across placement activity. For carriers, that connectivity matters because it helps them see business that fits their appetite, understand where they can compete effectively and engage earlier with the risks that align with their underwriting strategy. For clients, it improves speed, market access and execution. That combination is one of the reasons our platform creates values for both sides of the market.

And Gallagher Go gives clients a simple way to manage their insurance in one place. It provides a single digital experience and is becoming an increasingly important channel for how clients interact with Gallagher. While our retail operations use the same sales techniques, tools, data and analytics, they also rely heavily on our Gallagher centers of excellence for large portions of their client servicing work. Our centers of excellence are a good example of the operating advantages we have built over time.

For nearly 2 decades, we have made our processes more connected and standardized. That has driven productivity and quality gains while also creating the data foundation behind many of the technology capabilities I mentioned earlier. That foundation, along with a more unified technology infrastructure, lets us apply technology and increasingly AI in practical ways across the workflows that matter most. We are focused on use cases that improve productivity, strengthen decision-making and create better outcomes for clients. That includes policy checking and quote data extraction as well as better submission quality and embedding AI into core tools like Gallagher Go, Drive and Guide.

The key point is simple. We are using AI to take friction out of the workflow and create a more connected platform where data, insights and tools work together across placement and servicing. When we take friction out of the workflow, our producers and service teams can spend more time on prospecting, onboarding new clients and serving existing ones, and that supports organic growth. In Gallagher Go, tens of thousands of retail clients are already using the portal with adoption continuing to build each month. We are expanding it later this year into benefits, U.S. Small Commercial, Personal lines and Global reinsurance. Gallagher Drive is also seeing tens of thousands of dashboard views each month, and those comparative insights are helping us win new business and improve retention. This quarter, we built on that by layering in AI so producers and clients can query coverages, limits and risk appetite more directly.

The bottom line is that AI is already improving how we operate, but the real differentiator is the foundation behind it, our standardized processes, global data model, centers of excellence, niche expertise, and connected digital tools. That is what allows us to deploy AI in practical ways across the workflows that matter most while keeping our professionals at the center of the client relationship.

Now shifting to London Specialty. Our London Specialty platform has roots dating back to the mid-1970s. We focus primarily on larger commercial clients supporting retail agents and brokers around the world to place specialty insurance solutions across 6 main trading divisions. aerospace, marine, financial lines, casualty, construction, energy and property. We have over 1,300 colleagues within our London Specialty Group, which generates more than $700 million of annual revenue and places more than $6 billion of premium annually. London Specialty growth has been very strong in recent years, and we still have many attractive growth opportunities. There are 3 priorities there. First, we are continuing to deepen our specialty niches. We are constantly looking to expand capabilities, market relationships and product offerings that align with client needs, including financial lines, cyber and energy.

Second, we are adding and developing talent, including seasoned producers who add to our expertise across our 6 specialty trading units. We also continue to develop our own talent through our Gallagher Futures graduate program. Third, we are focused on placement efficiency and the best route to market. That includes greater use of more efficient placement structures where they give us a better process and better economics than traditional facultative placements.

Let me turn to the market and what we're seeing so far in the second quarter. Starting with retail. In the U.K., renewal premium changes, including rate and exposure are down about 1%. Property is down 2%. Commercial auto is up 1%. General liability is flat. D&O and cyber together are up about 3% and most other lines combined are about flat. Renewal premium changes in Australia are down also about 1%. Property lines are down 3%, Package is up 9% and other Casualty lines are down low single digits. In New Zealand, renewal premium changes remain under pressure in selected lines and are down about 6% in total. Property is down about 10%; Cyber is up 6%, while most other lines are flat to down slightly.

The London Specialty market remains well capitalized and competitive with ample capacity and generally favorable conditions for most clients. Carrier appetite remains very strong. That benefits clients and creates opportunity for us, but it also keeps pressure on rates across many lines. We still see pressure in cat-exposed property and other complex risks. Carriers remain disciplined, especially around attachment points, terms and underwriting quality.

In conflict-affected regions, we are seeing meaningful increases in marine war risk pricing and to a lesser extent, in aviation tied to recent geopolitical developments. In some cases, that rate pressure is being offset by slower activity as geopolitical uncertainty delays investment, infrastructure, and M&A decisions. The situation remains fluid and insurers are actively adjusting their underwriting approach. We are working closely with clients to secure coverage and navigate changing market conditions. This is exactly where specialty expertise matters. London remains the global hub for product creativity and development and the home for large and complex risks. In an environment shaped by conflict, political instability, climate change, inflation and higher insured exposures, we see continued opportunity for our London Specialty team to deliver strong solutions for clients around the world.

Pulling it all together, we continue to expect middle single-digit organic growth in the second quarter and full year 2026 for our U.K., Australia and New Zealand retail and London Specialty units combined. These businesses are performing well, supported by strong client relationships, specialized capabilities and disciplined execution across attractive markets. I see meaningful opportunity ahead, and we remain well positioned to continue delivering consistent growth and value over the long term.

I'll now turn it over to Tom Gallagher to cover reinsurance and our global M&A strategy. Tom?

Thanks, Patrick, and good morning, everyone. I'm Tom Gallagher. And today, I'll cover 2 topics. First, our global reinsurance brokerage operation, Gallagher Re, then I'll spend a few minutes on our global M&A strategy. Let me start with Gallagher Re. Gallagher Re is the third largest reinsurance broker in the world and was formed through the combination of our 2013 start-up Capsicum Re and the purchase of WTW's treaty reinsurance business in December of 2021. We finished 2025 with more than $1 billion of revenue, much of which comes in the first half of the year given the timing of major reinsurance renewals. We provide advice, modeling, strategy and placement expertise across treaty, facultative and other risk transfer solutions globally. As risk gets more complex and capital solutions get more specialized, clients rely on us to manage volatility, access capital and optimize program structure.

Within our reinsurance business, we've grown organically by investing in talent, capabilities and client relationships. We've continued to invest in talent across treaty and facultative, and that is driving strong organic growth. We finished 2025 with 14% organic growth, and we've had a strong start to 2026. And we still see a good opportunity ahead. A few examples. First, we are broadening our product offerings, including solutions across life and health, marine and energy, programs, cyber, and property. We're investing in talent across key product areas and geographies. That includes expanding our global facultative capabilities, adding seasoned producers and developing the next generation of reinsurance talent. We're leaning into our global footprint by growing existing client relationships and winning new business across all of our regions. We also help source additional capital for our clients through alternative forms of capacity, including sidecars, adverse reserve development covers and cat bonds.

Our integrated technology platform helps us harness our global footprint, proprietary data and market access to generate actionable insights at scale. We are using the power of Gallagher to create cross-divisional opportunities with Gallagher Bassett, our retail business, ARTEX, Specialty and our benefits team. And we are embracing AI to support our producers, service teams and clients. We are using AI in practical ways today to improve speed, quality and insight across Gallagher Re. For example, we use AI in core platforms such as Workbench to extract and structure quote information from documents and e-mails. This improves data quality, accelerates workflows and gives brokers faster access to usable market intelligence. We are also using AI with our data and analytics capabilities to generate better insight from proprietary data, helping teams compare trends across geographies and lines of business and bring sharper insight to clients.

The important point is that AI does not replace judgment, relationships, trust or market access. Instead, it makes our brokers better by giving them faster access to cleaner data, sharper analytics and more usable market intelligence. That strengthens the capabilities that have always differentiated Gallagher Re. Our people, data, relationships and platform. All this helps us operate with more speed, consistency and scale. The 4/1, 5/1 and 6/1 renewals reflected many of the same themes we saw at 1/1, abundant capacity, meaningful risk-adjusted rate reductions in property and specialty lines and broadly stable casualty pricing. In Japan, property cat renewals saw somewhat more downward pricing pressure, and this accelerated further in the Florida property cat market.

The conflict in the Middle East has increased uncertainty, but it has not changed the overall reinsurance market dynamic to date. And we do not currently expect it to alter broad pricing trends across the market. Where it does matter is in the exposure analysis, coverage review and structuring solutions for clients with more directly affected portfolios. As we look toward the upcoming 7/1 renewals, the broad backdrop appears consistent with what we have been seeing previously, ample capacity, continued competition in many lines and client demand for thoughtful structuring and advisory support. In that environment, we're helping clients clarify exposures, stress test coverage response and assess how current programs may perform under different scenarios. We promote the right program structure and price, including the use of alternative forms of capital through bonds and sidecars. We review war-related cover and wording where relevant and position upcoming renewals consistently. And we structure tailored solutions for clients in specialty areas such as shipping, energy, aviation, cyber, and political risk.

From the carrier perspective, the value of the broker model is also clear in this environment. Reinsurers and capital providers need high-quality data, clear exposure, analysis and well-structured opportunities where they can deploy capital with confidence. Our role is to help clients articulate the risk, evaluate alternative structures, and bring the right opportunities to the right markets. The reinsurance market remains well capitalized. Capacity is abundant and conditions are increasingly favorable for well-structured buyers. At the same time, client demand remains strong, driven by underlying exposure growth and the need for more sophisticated risk transfer and capital solutions. More importantly, this market is creating opportunities for clients to do more than simply reduce spend. They can refine program structure, add targeted protection and improve portfolio resilience while capacity is abundant.

Importantly, our growth is not dependent upon rate. Rate can move up or down, but clients still need advice on volatility, capital structure coverage, and market access. Our growth was driven by many different factors, including our ability to attract talent, expand advisory capabilities, win new business, source additional capital, and help clients navigate increasingly complex risk and capital decisions. Those drivers have supported strong organic growth across a variety of market environments, and we believe they position us well going forward. As we look to the rest of 2026, we remain bullish on our growth outlook. For reinsurance, our growth strategy is across lines, across geographies and multifaceted, a growth strategy that will continue to outperform in any market.

Now let me turn to M&A across our businesses. Alongside organic growth, M&A has long been an important part of Gallagher's strategy. Doug will cover capital allocation and discipline. But strategically, M&A remains central to how we add talent, capabilities and client reach over time. We have a long track record of tuck-in acquisitions, and we continue to see substantial opportunity ahead. The market remains highly fragmented with roughly 30,000 agencies and brokerage firms in the U.S. alone, plus substantial opportunity of another 30,000 or so across our other major operating geographies. Most of these firms are smaller and privately owned. Gallagher is a strong long-term home for these entrepreneurs who want to do more for their clients, grow faster and create more opportunity for their teams. At Gallagher, M&A brings together entrepreneurial spirit, local relationships, and specialized expertise with our scale and culture. Our merger partners bring expertise, market insight, entrepreneurial thinking, and strong client relationships, and these additions make Gallagher better.

Gallagher brings a broad set of capabilities to help our merger partners serve clients and grow, including specialized expertise through our various niche practice groups, access to our data and analytics capabilities, including Gallagher Drive, broader risk management capabilities across retail, wholesale benefits, alternative markets and reinsurance, deep carrier relationships and differentiated product offerings and scalable operational support through our Gallagher centers of excellence. We also offer something many owners care deeply about, permanence, Gallagher is a long-term home. Partners are not joining a business to be resold. And if they receive equity, it is the same equity held by everyone in our organization.

Merger partners also gain immediate access to our operating playbook, which helps them bring more value to clients from day 1. That can show up in practical ways for clients, including access to tools like Gallagher Submit that can streamline renewal workflows, use of Gallagher Drive capabilities, including clients like me to benchmark programs against comparable clients, faster certificate of insurance turnaround times and improved policy accuracy through more scalable service operations and a wide range of additional resources that smaller firms cannot build on their own.

We see a similar benefit in M&A where AI can help us move faster through screening document review and parts of diligence, while our people remain focused on judgment, negotiation and integration. For example, we're using AI to support target screening and review large sets of diligence materials more quickly, helping our teams identify patterns, surface issues and focus their time where judgment matters most. As in Gallagher Re, AI is helping us improve productivity and consistency, but it does not replace judgment, relationships and cultural assessment that matters most in successful M&A. Across both reinsurance and M&A, AI is helping us improve productivity, quality and responsiveness. More importantly, we're applying it in real workflows across the business to support our teams, serve clients better and strengthen an already differentiated model.

For many owners, the choice comes down to whether they want to build these capabilities independent over time with no guarantees that clients will wait or gain immediate access to Gallagher's scale, expertise and capabilities through our platform. More owners are recognizing that trade-off, and it is one reason our M&A deal sheet and pipeline remain robust. So we remain confident that our proven M&A strategy will continue to create value for our merger partners, our clients and our shareholders.

With that, I'll turn it over to Bill Ziebell, to discuss our benefits brokerage and HR consulting operations, known as Gallagher Benefit Services. Bill?

Thanks, Tom, and good morning, everyone. I am Bill Ziebell, Chief Executive Officer, Employee Benefits Consulting and Brokerage, and I lead our Employee Benefits and HR Consulting business, Gallagher Benefit Services, also known as GBS. My comments today will cover 3 topics. I'll provide a quick overview of GBS. I'll discuss how we help clients manage benefits and human capital challenges. Then I'll close with what we've seen so far in the second quarter. GBS was established in the mid-1970s and has grown into a global business focused on helping employers address their most pressing workforce and benefit-related needs. GBS was the fourth largest benefit broker and HR consultant in the world at the end of 2025, generating around $2.5 billion of annual revenue. And with the addition of AssuredPartners, our annualized run rate revenue was over $3 billion. The U.S. remains our largest geography and represents approximately 90% of annual revenues, while the remaining 10% is predominantly from the U.K., Canada and Australia.

Our producers provide solutions across a wide range of employee benefits products to help businesses address their human capital needs. About 2/3 of our annual run rate revenue comes from health and benefits offerings. That includes traditional group insurance coverages like medical, dental, vision, disability and life as well as benefit plan design, financial projections and cost saving strategies. The remaining 1/3 of our revenue comes from retirement services, compensation advice, executive life, HR consulting and other similar offerings that help employers address their human capital strategy outside of traditional health and benefit offerings. We often compete against local or regional benefit firms that do not have the product breadth and expertise that we have.

With that said, we serve clients of all sizes, including large or jumbo accounts where we provide a differentiated alternative to some of our larger competitors. This breadth allows us to address a wider range of client needs, deepen existing relationships and create additional opportunities to grow alongside our clients over time. We also can leverage our multinational consulting business to help employers with operations outside of our core geographies.

Before I get into some of our growth initiatives, I want to spend a moment on Gallagher People's strategy, our client value proposition. This is how we help clients think about total rewards programs that attract, engage and retain talent while managing costs. When you look across the benefits landscape, the opportunity goes well beyond traditional compensation consulting and medical coverage. Employers can support financial well-being through retirement and savings programs. They can also support physical and emotional well-being through a broader range of health and workplace solutions. So our role is not simply to place medical or health insurance. Our tailored approach helps clients address their most important HR and organizational challenges as they manage their broader workforce goals. This consultative approach helps differentiate Gallagher in the marketplace and strengthens our role as a long-term adviser to clients. When we consider growth opportunities for GBS, overall, the macro environment is supportive of growth.

More recently, we are seeing more employers focus on strategies and offerings to retain their employees compared to strategies to attract new talent. And while talent remains a top priority for most organizations, managing rising medical costs is becoming increasingly important for employers. As employers look for ways to support their human capital objectives while managing ongoing medical cost inflation, these are exactly the issues our professionals are helping them navigate. Our work goes well beyond placing insurance. We start by understanding the client and their employee population, and we look at plan design, workforce demographics and the key cost drivers. From there, we develop solutions that fit their needs. These solutions can include narrow networks, preferred provider arrangements such as centers of excellence and pharmacy strategies. Pharmacy costs are rising faster than medical, and our teams are skilled at working with PBMs to identify savings and opportunities for our clients.

As we consider market conditions within the health space, we saw medical cost trends rise throughout 2025, and we expect that pressure to continue in 2026. Fully insured renewals at our largest carriers are showing high single digit to roughly 10% premium increases. In Stop-Loss, we're seeing average premium increases in the mid-teens, in some cases, above 20%. These trends are driven by increased utilization, including the number of diagnostics and treatments, health provider consolidation and hospital workforce shortages and higher utilization of higher-cost drugs, including GLP-1s. So elevated health program cost pressure is likely to remain with us in the near to intermediate term.

Our job is to help clients mitigate that pressure through plan design, targeted solutions and advisory support. As health care costs continue to rise, employers increasingly rely on these capabilities to help balance employee outcomes with affordability. That complexity matters. Employers are managing medical inflation, pharmacy cost pressure, workforce retention and regulation at the same time. The more complex those decisions become, the more they rely on advice, analytics and execution.

Our continued investment in data and analytics has supported the rollout of Gallagher Drive and other new products and services for clients. Gallagher Drive remains a differentiator for our benefits team because it gives clients and prospects a clearer insight into the benefits program and performance, helping support plan design and coverage decisions. In many cases, our teams can identify savings while maintaining or even improving cost coverage. These insights help clients make better decisions while reinforcing the value of Gallagher's data, analytics and advisory capabilities. We are also using AI in practical ways across GPS. It is helping us move faster, generate better insights and deliver a more personalized experience for our clients and employees. That includes Avante, where we can give employees more tailored guidance while giving employers better visibility into benefit utilization, cost drivers and overall plan performance. And when you pair that with Gallagher Drive, it gives our teams better information to help clients make smarter benefit decisions and strengthen the advice we deliver.

We also differentiate Gallagher by sharing our expertise through webinars and thought leadership on topics such as HR compliance, pension derisking, weight loss drugs, and broader workforce retention-related issues. Along with our ongoing thought leadership efforts, these activities continue to deepen engagement with clients and prospects while reinforcing Gallagher's expertise across a wide range of workforce and benefits issues. Shifting to some comments on April and May. Recall the first quarter is our largest, yet during the first 2 months of the second quarter, we saw favorable net new business spread within our core U.S. Health and Benefits business and continued strong demand for our individual products and retirement consulting offerings with more muted demand for our consulting services. When I combine what we are seeing across our global business, second quarter organic growth of approximately 3% and full 2026 organic growth of 4% are tracking in line with our expectations.

Looking ahead, I believe we are well positioned for continued growth. Our expertise, tools and client approach continue to differentiate us, and we believe that positions us well to help the clients navigate the most important HR and benefits challenges.

I'll stop there and turn it over to Scott Hudson, who will discuss our Risk Management segment, Gallagher Bassett. Scott?

Thanks, Bill, and good morning, everyone. I'm Scott Hudson, and I lead our third-party claims administration business, Gallagher Bassett. If you're familiar with our financial statement reporting, it's also known as the Risk Management segment. I'll cover 3 topics today. First, I'll start with an overview of Gallagher Bassett or GB for short, including key elements of our strategy. Then I'll touch on what we're seeing in the business, along with the drivers behind our strong organic growth. And I'll finish with some comments on how we're positioning the business for the long term. Throughout my remarks, I'll touch on a few themes that we believe are key to our long-term success, the breadth and scale of our operation, our focus on delivering superior outcomes for clients and the investments we're making in data and technology, including AI-enabled claims management.

Gallagher Bassett was formed in the 1960s and has grown into one of the largest third-party claims administrators in the world. Our core business is straightforward. We adjust and manage claims on behalf of our clients. We don't take underwriting risks. In 2025, we closed more than 1 million P&C claims and paid approximately $18 billion in losses on behalf of our clients. For context, that annual -- that level of annual claims payment would place us near the top 5 P&C insurers in the United States. We have over 11,000 employees globally, supporting one of the largest and most diversified claims operations in our industry. And we finished 2025 with approximately $1.6 billion of revenue.

Moving to key elements of our strategy. We're focused on serving 4 types of clients. First, we serve large commercial clients, Think Fortune 1000 businesses. These clients have balance sheets that allow them to have large deductible programs or self-insure. They then outsource the claims resolution process to us. This is our most mature and largest client segment. Second, we serve clients in the public sector. This includes municipalities, state entities, federal governments and school districts. Third, we serve group captive or alternative market clients. These insurance entities utilize our services for their claims handling infrastructure. Our fourth and last client segment is insurance carriers. These are underwriting enterprises that choose to fully outsource or white label a portion of their claim handling operations. Outsourcing a portion of a claim -- a carrier's claims can help address aging claim systems and adjust the recruitment, 2 of the major challenges facing carriers today.

Carriers are a sizable and still largely untapped market for our services. Today, around 90% of U.S. claims are still handled by carriers. The same is true outside the U.S. However, we believe that dynamic is starting to shift as carriers look for more flexible, capital-light operating models, particularly given cost pressures and the need to modernize their claim infrastructure. Our goal is to serve these clients wherever they operate in the world. North America currently represents about 80% of our revenue, with most of the remainder coming from Australia and to a smaller share from EMEA. We expect North America to remain a strong driver of our growth, while international markets provide meaningful longer-term opportunity as we expand our capabilities and global reach. Our product -- our broad product set across workers' compensation, liability and property allows us to address many of our clients' P&C exposures.

Within liability, most of our volume comes from auto and general liability claims with additional expertise in specialty areas such as cyber, environmental, marine, medical malpractice, professional liability and product liability. Within property, we focus on specialty classes and complex claims rather than large storm or catastrophe adjusting. In terms of our revenue mix, roughly 60% of our adjusting revenue comes from workers' compensation claims, about 1/3 from liability and approximately 7% from property. Through our acquisition of My Plan Manager a few years ago, we also expanded in disability claims management in Australia. Today, we're the largest provider in that market and closed nearly 6 million claims in 2025. Customers choose us for our deep expertise, outstanding service and consistent execution, all of which help us deliver superior outcomes. Those outcomes may include mitigating or preventing losses, improving medical delivery, helping employees return to work sooner, shortening claim duration or increasing claim satisfaction.

Our clients also have different objectives for their claim programs, whether protecting their brand, strengthening customer loyalty or helping employees return to work sooner. We tailor our services to those objectives, delivering customized solutions and ultimately greater value. Our claim managers have access to proprietary tools and technology to guide decision-making throughout the life of the claim, prepare analytical reports and provide easy access to claim status and financial information. Our RIMS platform, Luminos, has consistently been recognized as the best in our industry. The system has risk analytics and benchmarking tools built in, providing our insurance carrier clients with real-time claim insights by geography and industry, which ultimately assist them in making better underwriting decisions.

We also have simple state-of-the-art processes and tools for exchanging vast amounts of data with clients, brokers and regulators. One of our biggest advantages is the amount and depth of the claims data we have, and that advantage only grows as AI becomes more capable. Our objective for using AI, help claim managers make better, faster and more consistent decisions at key points in the claim life cycle, support and automate as much work as possible, so claim managers can focus on what skilled professionals do best, showing empathy, building constructive relationships and exercising judgment in complex situations, use our expertise, experience and data to further reduce claim frequency and to significantly improve IT productivity and shorten technology delivery time lines.

We already have several AI capabilities in use across the business, including workers' compensation severity, prediction and early intervention models, auto liability severity prediction and reserve adequacy assessment models, a litigation prevention model, a claim summarization tool for both clients and claim managers, a fraud detection model and voice and e-mail sentiment analyzers.

In early May, we showcased our technology and AI solutions at RIMS RISKWORLD 2026, the largest -- the world's largest annual risk management event. The overwhelmingly positive response confirmed that our investments are on the right track. Among the solutions that drew the most attention was GB Navigator, our recently launched platform for claims professionals with embedded AI tools. Our newly developed system for nurse case managers also powered by embedded AI and Luminos, which I mentioned previously, our risk management information system. What matters most, however, is whether these solutions are delivering better claim outcomes for our clients, and they are. One clear example is our fraud detection model, which has already saved a single client in excess of $100 million. The opportunities to apply technology, including AI across our business are endless. They will help us deliver better service, higher quality and stronger financial outcomes for our clients. Combined with the strength of our team, technology, including AI, will be a key driver of new business client retention and consistent organic growth.

The last element of our strategy I'd like to highlight is M&A. The TPA industry is already more consolidated than brokerage. So there are fewer merger opportunities. That said, M&A is becoming a more important part of GB's strategy. We're not focused on scale roll-ups. Instead, we're looking for targeted acquisitions that add specialty capabilities or expand our reach geographically. In 2025, we completed 2 acquisitions. The first was W.K. Webster, a marine and transit claims specialist acquired in February. With operations across the U.S., U.K., Europe and Asia, W.K. Webster expanded our global footprint and broadened the services we can provide to insurers and global self-insured companies. We also acquired Safety Professionals in 2025, an expert in safety consulting solutions in the construction and manufacturing sectors.

In 2026, we closed on another 2 acquisitions, German-based Reck & Co, a global transport and marine claim specialist; and Mays Brown Solicitors, a U.K.-based firm that specializes in shipping and maritime legal services. Both acquisitions tuck-in nicely to our marine specialty teams and Reck gives us a presence in Mainland Europe. And today, we have an active pipeline of potential merger partners across all of our major geographies and businesses. As we look at the business today, momentum remains strong, supported by several factors driving our organic growth. First, client retention remains strong. We continue to win new business across all client segments and geographies, and our pipelines are very healthy.

Claim volumes are increasing, driven by both new business wins and growth within existing clients. And client cost pressures remain elevated, which continues to reinforce demand for high-quality claims management that delivers measurable outcomes. When combined with our continued investments in technology and productivity, these trends give us confidence in strong organic growth and solid EBITDAC margins for 2026. For the second quarter, we expect organic growth of 11%, driven by several large new business wins we talked about late last year. For the full year 2026, we now expect organic growth of approximately 8%. We continue to estimate EBITDAC margins in the 21% to 22% range for both the second quarter and full year. Longer term, we anticipate margin expansion driven by scale efficiencies and continued productivity improvements.

To wrap up, I'll briefly touch on how we're positioning GB for the long term. We're investing in developing new claims professionals as well as training our experienced professionals. We're expanding and continually improving our products and services. We're investing in technology, including AI to deliver even better service and outcomes, and we're committed to preserving and investing in our unique culture. Together, these priorities, our scale and our current momentum position GB for sustained growth, margin expansion and long-term value creation.

Okay. I'll stop now and turn it over to our CFO, Doug Howell. Doug?

Thanks, Scott, and hello, everyone. Today, I'll recap what you heard from each of our business leaders. I'll highlight some items from the CFO commentary document. I'll provide some comments on cash, M&A and capital management. And then I'll summarize some comments on AI that you've heard from the team, and then we'll move to Q&A. All right. Let me recap what you heard from our business leaders. Demand for our services is strong, and client retention and new business are both excellent. At the same time, the teams are using data, analytics and technology in ways that are clearly improving the outcome for our clients.

The market background is reasonably consistent with what we expected to see develop here in the first -- at the end of the first quarter. Property remains competitive, casualty remains firm and pricing still varies by account size, complexity and loss profile. Larger property accounts are seeing more downward pressure on the property side, while middle market and smaller accounts remain steadier. So overall, the market backdrop continues to support healthy underlying growth. Mike and Patrick highlighted compelling practical uses of our centers of excellence, technology and AI around the world, better workflows, better placement outcomes and better client service to name a few.

But there was also a broader point there on differentiation. In the middle market, especially our brokers and account teams are showing clients tools, data and benchmarking at the point of sale that smaller brokers simply do not have. That matters in winning new business and keeping it. This is the broker value proposition in action. We're using our expertise, our data and our carrier relationships and also our claims advocacy teams and our centers of all together to help clients make better decisions and not just buy a policy. Tom said much of the same thing in reinsurance. In this bifurcated reinsurance market with property down casualty firm, our judgment, market access and trust, bolstered by benefits from technology and AI are improving the speed, data handling and benchmarking and presentation work that we do for our clients.

Bill's comments pointed to a solid demand and benefits in HR consulting, but the real message is that the complexity keeps rising. Medical cost trend is an issue for employers. Plan design, cost sharing, pharmacy and workforce support are not getting any easier. That is supporting demand not just for brokerage, but for HR outsourcing, consulting and broader advisory work with technology helping us deliver it more efficiently at better scale.

And then, Scott, you just heard discuss how Gallagher Bassett is also giving us an additive growth profile. Claims complexity is increasing, international opportunities are growing and the work is less tied to the insurance pricing cycle than the brokerage revenue. GB is using AI inside claim workflows to improve triage, identify severity and litigation risk earlier and drive better responsiveness and outcomes. So Gallagher Bassett is not just performing well, it gives us deep insights into claim advocacy and is also an important growth diversification advantage for Gallagher.

So when you pull all that together, P/C retail, wholesale and specialty brokerage, then benefits, reinsurance and risk management, our outlook remains strong. And a very important point, these businesses don't all move the same way at the same time. That diversification helps deliver performance across pricing cycle and adds to the consistency of our growth. So as I look out, we still expect second quarter organic growth for the Brokerage segment at about 5% and full year '26 of approximately 5.5%. For risk management, some of the new business wins and international growth have increased our organic growth expectation to 11% in the second quarter with an estimated 8% for full year '26.

So let me shift now to the CFO commentary document that we posted on our website. Let's start on Page 3, which really includes our usual modeling helpers. Only one call out here for you to update in your models. FX moved a bit over the last 6 weeks. Turning to Page 4. This page recaps our organic growth outlook you just heard from the operating leaders. Each of our businesses have continued the momentum we saw in the first quarter. Now being 2 months into the second quarter, I have further confidence in the second quarter organic of about 5%.

Flipping over to Page 5. Here is where we summarize our investment income and rollover revenues. Please be sure to reflect in your models the interest income as it's shown here as it makes clear that prior year interest income earned on the funds held to buy Assured Partners does not repeat. Moving down, we've updated the rollover revenues for brokerage and risk management to include acquisitions closed through yesterday. So please use these figures when you're updating your models. And remember, these amounts do not include AEP.

You'll see that now when we flip to Page 6, Assured Partners information. I want to spend a minute or so here. Three points as you consider how to use this page within your model. First, remember that forecasted numbers we provide in this table are at the midpoint of our estimates. As we convert locations onto our systems or gain deeper insights into their old system, there could be some small movements between quarters and some additional small netting like we've seen in the last few quarters. That's just geography.

Second, the footnote reminds you that the noncash figures shown on this page, which reflect depreciation and earn-out payable are included within our estimates on Page 3, so please don't double count that. Third, this table does not include any revenue or expense synergies. So those would be incremental to the numbers you see here, and you'll need to model those separately. When you review the numbers on the page, you'll see our second quarter and full year '26 outlook for Assured Partners EBITDAC is unchanged.

The integration story continues to improve. Since closing 10 months ago, we've made terrific progress on integration. Nearly all back-office systems and processes are fully implemented and up and running. Vendor and real estate consolidations are ahead of plan. And here in the second half of '26 through mid-'27, we'll get the vast majority of the roughly 300 branches onto our agency management systems. That progress is also showing up in the synergy outlook. You'll see that in the footnote.

We now expect annualized run rate synergies of up to $325 million by early '28, up from $300 million that we had forecasted when we last spoke in April. And even more impressive, $325 million is well above the $160 million we originally estimated when we announced the deal in December of '24. That kind of synergy progression says a lot about Gallagher's acquisition strategy, our integration pipeline and our ability to create more value from these deals over time.

So let's now flip to Page 7, the Brokerage segment EBITDAC margin bridge. There is no new news here from what we spoke about in April. Our margin expectations are unchanged. More importantly, this page helps you dig out 3 things. First, the first few lines show that the 2025 headline margin is highly distorted because last year, we had interest income that we earned from cash we are holding to buy Assured Partners. Second, and perhaps most importantly, the line near the bottom shows our productivity and quality efforts should again deliver another year of terrific underlying margin expansion.

And third, in between those lines, there are some other puts and takes, but we're starting to get additional margin lift from rolling in AP and AP synergies. Longer term, we still have a long runway of margin expansion from organic growth and scale advantages from M&A. Our platforms are industrial strength and can handle billions more of revenue with little incremental cost.

So now let's turn to Page 8 to the Corporate segment. Three updates here. First, the interest and banking line. It's updated now to include interest expense on incremental borrowings, primarily related to another $170 million of share repurchases, incremental M&A and debt retirements. Second, the corporate line. That's updated now for 2 noncash items, an unrealized FX loss of about $6 million in the second quarter and a few million dollars less of permanent tax benefits from the exercise of shares under our employee option plan. Again, both of these are really noncash, but they do impact EPS.

Third, the lower right box gives detail on our cash taxes. At March 31, we had $165 million of tax credit carryforwards and another $11 billion of tax deductible amortization expense related to our acquisition strategy that we'll deduct in the future. Together, credits and amortization are worth about $3.4 billion of future cash tax savings. This means our cash taxes paid will be around 10% of EBITDAC for the foreseeable future. Model that and you'll get close.

But the real punchline that will get you -- that you'll see is that these tax items create a nice cash flow sweetener to fund future M&A. That continues to be an important story. Moving now to cash, capital management and M&A funding. When I look at our available cash on hand, expected free cash flows and future investment-grade borrowings, we estimate close to $10 billion of capacity to fund M&A over the next 2 years before using any stock. Our M&A pipeline remains strong and its full of targets at attractive multiples, which still creates immediate shareholder value through a nice arbitrage.

Also to note, in the first quarter, we repurchased approximately $310 million of our shares. Thus far in the second quarter, we've repurchased another $170 million. We continue to believe our equity is undervalued by the market, so this repurchase was opportunistic, but our priorities remain unchanged. We're going to continue to invest in organic growth. We're going to remain active in mergers and acquisitions, staying consistent in our approach and disciplined in our pricing. And we'll deploy excess capital in a way that maximizes long-term shareholder value. All right. Let me make a few comments on AI and then we'll get to Q&A.

First, I'm as enthusiastic today as what I see as the opportunity from AI as I was 22 years ago when I first went to India and hired and we hired our first 6 employees. We are now 18,000 strong in a dozen lower-cost locations around the world. Second, what you heard this morning is real. It's already in the works. AI is embedded into standardized workflows. It's using our common data and it's improving the operating infrastructure speed that we've built over many years.

Third, we're funding it inside our normal technology budget. And fourth, the benefits come in stages, productivity and quality first, then margins and over time, revenue lift through better service retentions and win rates. And finally, as I said in our March IR Day, I do believe on the cost side, over the next few years, we could see about 5% savings in our producer and field sales layer costs, maybe 10% to 15% in our service layer cost and 20% to 30% in our back-office layer cost.

Now of course, some of that will be reinvested to meet changing customer demand, our investment needs and an ever-evolving insurance market landscape, but it still could be a substantial improvement in our profitability. Okay. Those are my comments. Let's -- so let's go now to Q&A. But we're going to do this time. We're going to try this in 2 parts. First, we've listened over the last 6 weeks and distill a lot of common questions into 8 or 10 questions that Sara Walsh, our IR leader, will pre-address for about 5 minutes, then we'll get to those on the line for other questions. So Sara, fire away on the Q&A.

Great. Thanks, Doug. First question here is for you, Pat. Let me start with the bigger picture. So what do you think investors are still missing about what drives Gallagher's growth?

Well, thanks Sara. When I take a look at it, I think that there's an underappreciation in the marketplace of the consistency of our execution. That's probably more than anything else. In our business, new business matters, having boots on the ground, bringing customers in makes a difference. Retention matters, diversification matters. And I think some people just focus too much on the cycle. I've heard so many investors just say, well, cycle is softening, here we go, we're out of brokers. And they're not looking at the actual growth that we're delivering to our shareholders. And you have a broad book and strong producers, very producer client oriented and you keep winning, you're going to grow through these various cycles. And I think we've showed that historically.

Great. And Mike, on that same point, so what gives Gallagher an edge in winning new business or, I guess, taking market share?

Yes, Sara, we're a great large account broker. In fact, I think I've shared with this group in the past that is our fastest-growing segment. But remember, 90% of the time, we compete against a smaller broker. And in the middle market, the tools, the data, the analytics are a real advantage. And we can walk into a meeting with better benchmarking, better structure ideas, better claims advocacy than a smaller broker usually can. So that's what helps us win business and keep taking market share.

And Patrick, so when you and Mike have talked about Gallagher having an advantage here. So what do you mean by that?

I mean we have an advantage given our scale, data and process. I think we've spent a lot of years standardizing our workflows and centralizing our data, as Doug talked about, which already puts us ahead. A lot of firms can test tools, but fewer can deploy them broadly and safely. Now if you already have common systems, common data and repeatable workflows, it's so much easier to deploy AI, which will add a lot of distance to our lead.

Great. Thanks, Patrick. Will, so some investors are asking whether AI could eventually pressure the benefits growth if it slows down employment or changes the workforce mix. Why do you think the benefits business remains resilient there?

Thanks, Sara. I appreciate that. I guess the way I look at it is I don't think of it as a simple unemployment story. It's really more about role changing. People will change the type of job they're looking for and doing. In other words, whether people are fully employed or underemployed, it's probable that they still receive health, welfare and retirement benefits. And as that happens, the need for advice does not diminish, it actually increases benefits will become even more relief in people work.

So employers still need help with benefit affordability, plan design, financial well-being, communications and retention, and that plays directly into our advisory, analytics and brokerage capabilities. So I wouldn't think about this business as purely linear to headcount. If anything, the advice requirements increase as organizations redesign their workforces, which is why we think the employee benefit business remains durable and supportive of organic growth over time.

Great. Thanks, Will. Mike, back to you. One other topic that we continue to hear about on growth is data center. As AI-driven build-out accelerates there, what do you think about that market for Gallagher?

Well, look, I think this is a great market for us. In fact, we just picked up a very large win just last week. But I would frame it as part of a broader complex risk opportunity. It's not one vertical that changes the whole company. Data centers bring large values, technical risk, cyber exposure and complex placements. That plays perfectly into our strength. So yes, it is a positive area, but I wouldn't overstate it financially. We're going to get our fair share of wins.

Great. So I guess, where do you think we help the most?

Well, really, 3 places. So risk analysis, the program design upfront, the placement across the right markets. And then, of course, claims advocacy. And remember, I've shared with this group, we have over 400 claims advocates across the country. So these are complex risks, and our clients tend to value a broker that can support the full program.

Great. So I'll throw it back to you, Pat. Why are you not worried about AI having a disruptive impact on our organic? And why are you so confident it helps the model instead of versus?

Well, everywhere I look, the world is just getting more complex. And that, I think, is what drives advisory-based business. And that's what we are. I mean we already know AI can improve analysis, workflow, but it doesn't replace judgment, trusted advice or market access and insight. So a client buying a complicated casualty tower or dealing with a tough claim still wants an advocate in the middle. And that's why I see AI as a real enhancer to the broker model, not a detriment.

And Patrick, on the carrier side, why doesn't AI lead to more disintermediation? Why is the broker relationship still valuable to carriers?

It's a good question. Thanks. I mean it's because carriers value brokers who bring them well-structured business, not just more submission flow. A good broker helps frame the risk, improve the data and place it with the right market. I mean that makes underwriting more efficient and usually leads to a better outcome for the client and the carrier. And brokers still matter after the placement, too, at the renewal, when exposures change, when a claim happens. So even as technology improves, the advisory role stays important to both sides of the market.

Great. Thanks, Patrick. So Mike, back to you. I guess, what do we think it does for producers day-to-day?

Well, I can tell you, listening to our producers speak, they love it. It helps them get more prepared faster to give better advice. Look, they -- it can upwards -- take upwards of 2 to 3 days to analyze and compare policies. We've got that down to half hour, an hour. That in practical terms, less time on the mechanical work and more time with our clients and more selling. And if you help producers get to an answer faster, look smarter in front of their clients, they're going to win more, and that helps keep good people as well.

Thanks, Mike. Doug, do you have any thoughts here?

Of course. Let me take that from -- maybe from the client standpoint, we talked about this in our March IR Day when we were talking about this. Look at it from what the client is paying for their insurance. We know that it's about 3% of their total cost base. Our share of that is about 10%. So 30 basis points of a customer's cost base is what a broker really charges for a customer to have our advice.

Clients know the value that we provide. And they know that they have 99.7% of their other costs to worry about. So yes, I think the important thing is let's look at it this way. We really don't sell insurance to our customers. We buy insurance on behalf of our customers. We're their outsourced risk manager. And frankly, I think that they quickly get to the point that they know what we earn as a bargain. And lastly, don't forget, AI isn't free to deploy either. And so I think that our customers clearly know and trust our advice, and they've got 99.7% of their other costs that they've got to worry about.

Great. Pat, -- so taking a step back, how do you think AI changes the insurance industry more broadly? Does it create any pressure on broker economics or even commission rates even over time?

Well, clearly, I think you hear on the table. We are -- we know that AI is going to help the industry work better. It's going to give us better underwriting, better claims handling and way better service. But it doesn't make insurance simple. Everywhere we look, the world is getting riskier and risk is complex. So advice is going to matter more and more. And as Doug pointed out earlier, we give that advice at a very reasonable rate.

On commissions, I certainly wouldn't jump to any conclusion that automation is going to put structural pressure on the comments Doug made earlier again. We're just not taking that much out of the system. So I think it helps us structure programs, access markets, navigate claims. And as it matures, it helps us do a better job that supports the business. It doesn't undermine it.

Great. Thanks. Back to you, Doug. Let's shift from organic here. So how should investors think about the timing of the financial benefits to Gallagher from our own AI investments?

Listen, I think that you heard me say in my prepared remarks that we're going to get productivity and quality first. Margins will follow that. And then over time, I see us getting revenue benefit through better service, like I said, faster response time. And I think that we're going to win more on it. And I think that as I gave some of those comments in my earlier comments, that's a 3- to 5-year journey, but I think that we're starting -- this is accelerating every day. We've got 1,000 flowers blooming around the company. We're experimenting. We're learning. I think that we're going to be able to push the opportunities for AI efficiency and profitability. It will come faster than I think any of us really realize.

And I'll stay with you, Doug, for one more question here. So let's talk through a few of the numbers or at least one specific one I'll call out in the CFO commentary. On brokerage organic growth, we've been talking that property is softer across parts of the market. But why are you still comfortable with that 5.5% organic we have for the full year '26?

Well, listen, nobody has a crystal ball, but I think that's a ground-up approach to figuring out how we get to it. So we've really done some deep -- we have a process in place that our divisions do to give us an insight into their future. But also, I think that getting there that our 5% organic growth shows the diversification in our model. And it's also -- it's a bigger story than just property pricing. Casualty is still firm in a lot of places, too. So that's in most places. And so our broader point is it's not -- we're not tied to one pricing index as maybe people think.

Rates, sure, they're contributing, but maybe only around 1% of our organic outlook today. But the bigger drivers are new business, retention, client activity, exposure growth, new coverages, customers opting into coverages that they went without during -- when prices were coming -- when prices were going up. So I think that we tend to track more closely with things like nominal GDP payrolls, insured values, the exposure growth of our customers, which you heard Pat say, our overnights are showing that we have -- we're really operating in a strong economic condition right now based on our data. So pricing matters, but it's only one input. Nothing that we're seeing today changing our confidence in our outlook.

Great. Thanks, Doug. So I've got 2 more questions here in front of me. I'll end with a couple of questions on capital allocation and M&A. Pat, how are you thinking about the M&A environment today? Are we seeing valuations or even competition changing the opportunity in any meaningful way?

Well, I mean, our approach has not changed over literally 20-plus years. So the market is active. There's competition for quality businesses. Our discipline, I think, matters. We still want to concentrate very closely on culture and cultural fit. That's been a very -- that's been a big part of our success over the years, and we continue to see a very healthy pipeline. Our standards remain the same. We want a strategic fit. We want people who love the business, who can run a good business, who fit culturally, and that's what creates shareholder value.

Thanks, Pat. So final one to you, Doug, here. At Gallagher's current valuation levels, how are you thinking about buybacks versus M&A?

Well, listen, you've heard me say this in other situations. If we buy back a share of stock, we get a nice picture of Art Gallagher, who is a hell of a salesman. But you know that I tend to favor trying to get more boots on the ground, get new partners, get new ideas, get new geographies, get new niches. Frankly, we're buying brains. We're not buying businesses. And I think that brains that have the opportunity to trade with ourselves, work with our wholesales, work with London, work with Gallagher Bassett, work with our captives.

Those to me, sure, there is a slight safety opportunity, risk-adjusted safety by buying our share back -- shares back that we think are undervalued. But boy and boy, this is a business that's growing so much -- like Pat said, it's growing $200 billion a year in premiums. We need more boots on the ground and we get that through organically by our internship that's got 600 kids in it this summer, and we get it through doing nice tuck-in acquisitions. So it's a trade-off that we balance, but I tend to favor growing our business rather than contracting it.

Yes. Great, Doug. So operator, let's now open the line for other Q&A.

[Operator Instructions] Our first question comes from the line of Elyse Greenspan with Wells Fargo.

My first question is on brokerage organic. So you guys have pointed to the organic picking up in the second half of the year. I think, Doug, in the past, you said it was based off of incremental reinsurance demand during the midyear renewals. Did you guys observe that as you expected around these renewals? And is that still, you think, going to be the driver of organic picking up in the Q3 and the Q4? And then I know we don't get Q3 and Q4 guidance yet, but would you expect those 2 quarters to kind of be similar to each other and both show improvement relative to the first half of the year?

Yes, in answer to your question about reinsurance, we're still seeing that happening. In fact, we're seeing across all of our business that customers are opting in to buy more insurance. Second quarter might be a touch higher than -- excuse me, third quarter might be a touch higher than fourth quarter when we look at how it rolls in. But I'm going to say it's 5% or 6% in each of the next 2 quarters, maybe we'll get 6% in the second and maybe it will be 4% in the fourth or it's 7% and 5%, something like that. But just realize that there might be -- but it's not -- you're not going to see 10% in the third quarter and you're going to see 1% in the fourth. It's not that -- there's not that kind of variance around our expectation by quarter.

And then my second question, so on the brokerage organic guide for the Q2, the 5%, I know you guys guide all in, right, including supplementals and contingents. If you were looking at base organic, would that be similar to the 5%? Or are you looking for outside growth in subs or contingents in the quarter?

I think -- listen, if there's a variance at the point, it's not something big. But here's the thing oddly enough, as our supplementals and contingents continue to grow and maybe they outpace our base commissions, it shows you the value that we're bringing to the carriers. It shows you the value of the quality of business that we're bringing and the volume of business. So I think if supplements and contingents are running at 1 point or so better than base commissions, I think that's a really good story.

Our next question is from the line of Tracy Benguigui with Wolfe Research.

Doug, you mentioned that pricing is only around 1% of your organic outlook today. That's reassuring. But help me understand and why we saw a nice uplift during the hard market. Are you suggesting that pricing is asymmetrical?

Well, listen, I think what we're talking about is total premium change. And yes, I think it is a little bit asymmetrical as rates were going up and exposure units were growing so much because remember, we kind of give you a total premium change in that, not just pure rates. But yes, there is an asymmetrical relationship.

And also, Tracy, let's not forget, this is Pat. As rates are going up, our main function for a client around advice and dealing with the risk is also mitigating that price increase. So yes, that's definitely asymmetrical.

Yes. And also as prices are going up, we do take pay cuts along the way. And as on the way down, we tend to do a pretty good job of rediscussing with our clients the value that we bring and reminding them that we took pay cuts on the way up and maybe now it's the time to -- that we get -- we share a little bit on that downside. And they think they're very smart. They know that what the value that we bring, there's inflation in that, too. So these are smart, smart customers that understand that we don't need to make as much on the way up, but we need to get some of that back on the way down.

And let's remember, we're totally transparent with our clients. So this is an adult conversation about the value we bring.

Okay. Great. And since I believe you use net debt in your leverage definition, so adjusting for cash, is it fair to use your long-term leverage target of 2.5x as a bogey to assess how much buybacks you could complete I would not be asking this question on M&A since acquired EBITDAC helps leverage while buybacks do not.

Well, I'd have to see what your puts and takes are in getting to the 2.5, but it depends on the rating agency aspect, depending on the debt covenant. We do have private placements out there that have some different -- but there are a lot of adjustments that go into that. But the point on this is, is 2.5 the right number? Is it 3, including earn-out? You've got to look at those 2 bigger components. So I think I understood your question. But as we think about how much we can buy going forward, not trying to reduce or increase our debt ratio is our objective.

Okay. Yes. Maybe I'll just rephrase. Maybe you could just clarify how you look at leverage and if that gives us any insight on how much buybacks you could complete?

Yes, I think that we're comfortable moving our leverage up in order to do M&A. I don't think we'd want to push our leverage ratio up for the sake of buybacks. We have so many opportunities for M&A. So we have been consistent that we'll run the debt ratio up when we do M&A, and we're consistent when we bring it back down. So think about it more as a driver of M&A capacity than share repurchase capacity.

Our next question is from the line of Mike Zaremski with BMO Capital Markets.

I guess back to the organic growth part of the value creation for Gallagher. Patrick, you talked about the 4 powerful strategies that allow you all to take market share. I thought that was helpful. And you also talked about how one of the biggest main questions you get from investors is how you're decoupling from the decelerating pricing power environment.

So just kind of back to the crystal ball question you received earlier, Doug. So do you all expect pricing to stabilize and maybe even improve, meaning property doesn't fall as much next year? Or maybe net new, which I think last update, you said it was running at to 2.5 points-ish. And I think historically, it's been as high as 3 to 4. Maybe that's improving. Maybe you can kind of just offer some more insights into why you guys are thinking that growth bottoms around in the 5s.

Listen, I think that as we look out for the year, the 5.5% number is kind of assuming a point from rate. I think that you're going to probably get maybe 0.5 point or so to exposure units growth, maybe a full point there. And I think we have a forward thrust of about gaining share of about 3% on that. So that's kind of how we're looking at.

And what have we thought about for property? Yes, we're getting through the heavy property season right now. We are assuming that property will continue to move lower somewhat throughout the year. We haven't started looking at next year yet, but I'm not really -- sitting where we are right now, I'm not seeing a huge slide in '27 as much as we've seen it come down between '24 and '25 and '25 and '26.

I believe if you look at that, it's been sequentially going down about 10% each year in the past. I don't think there's another 10% coming out of this market next year overall. [indiscernible] Property is also not just coastal exposed property. You've got a lot of non-cat exposed property that is still seeing significant issues with convective storms. We've got a big storm coming through Chicago while we're speaking here. It's pretty dangerous out there when it comes to convective storms. So I would not expect the property market in '27 to have a similar down step as we would between '24 and '25 and '25 and '26.

That's helpful. And lastly, just sticking on organic, and I guess I'm nitpicking, but does the guide include the same amount of revenue synergies from Assured is kind of as you've spoken to in the past in terms of a small amount of revenue synergies starting probably more in the back half of this year?

Our organic growth has not contemplated much of any of that.

And so then would that be a cushion to the extent you do have some revenue synergies that I believe you've guided to when the transaction was done, that would kind of go into organic that you're not contemplating in your -- in the guide then?

Right now, you should assume that, that comes and will be attributed to the AP numbers. It will be hard to unscramble that egg in some cases. But by and large, if an Assured Partners person gets a better commission structure because of on our programs, it will be pretty hard for us to pull that out and put it in our organic numbers. But maybe there's a ghost organic coming out of that, that's not in our calculation of our -- the way we calculate it.

The next question is from the line of David Motemaden with Evercore.

I had a follow-up on the data center piece and interesting to note that you guys just had a win last week. So I'm wondering how much you guys are expecting data center-related placements to contribute to organic growth now? And then also just maybe talk about the pipeline and your market share in that market.

Yes, David, this is Mike Pesch. So if you heard my last comment on that question, I said, really, I wouldn't factor it into a true impact to organic. It's going to be part of our normal organic growth storyline. So I wouldn't single it out that way. As far as your other questions on market share, it's a little bit more difficult to unpack. And I think in prior conversations, we've talked about data centers come in very different sizes. I think the average size is about $0.5 billion of total insured values all the way up to the big ones that you read in the newspaper of $15 billion and $20 billion.

So we play very well, and we organized our structure. We already had the pieces in place. to really solve the data center opportunity across the infrastructure. We organize them globally. So our teams in London, our teams here in the United States all talk on a routine basis. They put out content. They're prospecting. We have the relationships with a lot of the real estate developers and others and construction companies that are building these. And so I can't speak to the overall market share. But as I said, we will get our fair share, and it was a great win last week.

Great. And then just the pipeline, how that's looking, the timing of when you think that will convert? Any comments on that?

Yes. The pipeline -- and you may have read, there's a lot of articles out there about some of the pushback from some of the municipalities for some of these data centers. So we wouldn't share our pipeline in a public forum on this sort of thing, but it's a robust pipeline. But the timing of these things can be a little bit funky in the sense that there's a lot of pushback from municipalities. There's a lot of question marks around whether or not people want these data centers where they live. But again, we're going to get our fair share. We've got the relationships with the developers and the people that are building these things. And when they go live, we believe we have the team to service those accounts.

What we did instead you totally eliminate the little [indiscernible]. If you go to your 30,000 competitors in America that we are buying up every chance, they get stumble across an opportunity in a data center, they can't do it. So you got a few players in this market and we'll do just fine.

Got it. No, I appreciate that. And then Mike, I think you also -- in your remarks, you had mentioned some of the divergence between RPC and renewal revenues. And I think you had mentioned retention, exposure, but you had also mentioned stronger commission rates. I don't know if that was a property-specific comment or that was broader. So I was just wondering if you could elaborate on commission rates and if that's something that you guys can continue to push up.

Yes. I would go back to some of Doug's comments on that in addition to mine. In a market that's softening, we -- commission economics becomes very important, right? We drive value, and you heard Patrick talk about the quality of submissions the volume that we're now placing when you combine Woodruff and you combine Assured Partners gives us that opportunity to increase our commission economics.

Again, of course, to Pat's comments, this is fully disclosed to our customers. But it also comes in a package of asking if we're on a fee, which is about 25% to 30% of the time, where we're driving tremendous value to our customer and where we can earn a raise on that placement for the great work that we're doing, not only on the placement, but also the stuff that we do behind the scenes in claims advocacy and so forth. So it comes in a bunch of different packages beyond just commission. It comes in a lot of different areas. And so we feel like in this marketplace, we'll be successful given the fact that we have the volume, we have the quality, and we have the relationships with the carriers to drive that.

Our next question is from the line of Katie Sakys with Autonomous Research.

Patrick, I think you did a great job illustrating how Gallagher Drive is driving new business wins and improving some client retention. I was kind of curious across the broader brokerage business, if you guys can quantify the extent to which Gallagher Drive and perhaps some of your other initiatives are actually improving new business win rates and/or the client retention rate.

Yes. I mean I think we have some decent stats on when Gallagher Drive is utilized or frankly, any data or digital output from our teams are used with a client and/or a prospect that we do see our close ratio go up. So if you generally close 30% of the prospects that are in your pipeline, we're seeing that increase to 40% and 50% when we place digital or drive and benchmarking in front of our customers. So yes, getting it out into the field into as many hands as possible and in front of as many prospects as possible will definitely drive our hit ratio.

Got you. And then I think you guys have made it very clear that most of the time, you're competing against smaller brokers. But in the cases in which you are competing for new business against larger peers, how do you think your new business close rate compares to theirs?

This is Mike Pesch. Again, I would tell you that it's on par with exactly what Patrick just said. We think that the tools that we've invested in show very well against -- and we've been told by outside consultants and other firms that our platform, Gallagher Drive and Blueprint and others stand out as a differentiating factor from impartial third parties. So we believe that those sort of things give us a very successful opportunity when we compete against someone of our size or bigger.

Also, let me make a comment on that, Kate. This is Pat. A big part of competing at the larger end is our expertise. People want to do business with people that know their business. And that's when you get to our verticals and our niches. And that's the differentiator 90% of the time, supported by the kind of things that we can do with the data and the data advice. And then you get into larger accounts, it makes a huge difference when it comes to where things should be placed, how it should be shared, how it should be layered, what markets you're in. And that we'll put our expertise in our verticals up against anybody all day long.

The next question is from the line of Yaron Kinar with Mizuho.

I apologize if you already replied to that with Mike's question, I may have misunderstood. But when I go back to Page 6 of the CFO commentary and I look at the revenues expected from Assure Partners, those have been coming down a bit. I think as we start looking into the second half of this year, that should impact organic, right? So if organic is actually a tad lower from Assured Partners, where are you getting a better lift than you expected to keep that 5.5 -- approximately 5.5% growth expectation for the year?

All right. Yes. So let's go back to the narrative of that. As I think that we've had some netting that's going on as we understand their systems, -- so as they come on to our systems, co-brokerage fees or commission shares with other outside brokers, et cetera, we're showing -- they were showing gross revenues and then some expenses associated with that. Now we show that net. So if we co-broker with somebody, we do not put that into the revenues nor do we put it in the expense. That's just their share of the revenue.

So you're seeing a little bit of apples to oranges between the blue and the pink sections on this sheet. We will say that those revenue numbers as we discover more and more of where there's commission sharing going on, you could see a decrease in the total revenues, but the EBITDAC is not changing. That's just geography and accounting. So we've said before, I would not take the $720 million of revenue in fourth quarter '26, divided by the $704 million that you see in fourth quarter '25 and come to the conclusion that, that's an organic growth number of 2.2% or whatever I just did the middle math here on it that you would see in organic. So I don't think the schedule would say that. What I would say is that Assured Partners when we bought it, the thesis was is that they were running nice organic growth, not at the level of us. And therein lies the opportunity.

They were running maybe 1 point, 1.5 points less than that. So the opportunity is when we get Assured Partners into our fourth quarter numbers, we will now have a year of opportunity that hopefully, we're seeing some terrific organic growth coming out of it. And truly, we're having some terrific wins that I see from the CFO's chair, I see the great wins that are coming up. We are better together. So you can't use this table to judge how organic is going to be. Our thesis that we're going to improve organic growth for those producers at Assured Partners that have been waiting -- we were waiting 11 years for sales enablement tools is going to come true.

There's nothing that makes us think it's going to be different. But you can't use this table to reach that conclusion. So you didn't miss the answer to the question because we didn't answer it quite that directly in the past. So it's a good question, but I would not jump to those conclusions.

Perfect. And then maybe just to confirm, the fact that the EBITDA from Assured Partners, the EBITDA expectations remain unchanged, that's because the -- what had been expected as revenue is now coming in more than expense save. It's not because the integration cost saves are greater for '21.

This table on Page 6. What it's saying is that the geography between a gross up of revenues and gross up expenses has nothing to do with the EBITDA that we think that we're going to realize out of this. And what I'm particularly pleased that, boy, if we hit full year '26, that $1.57 billion before synergies, and we think by the end of the year, we could be running maybe $160 million of synergies, too. What a terrific deal that's continued to be not only on a valuation standpoint, but just our teams -- it's pretty exciting how they're coming together...

Yes. Yes, definitely see that as well. And then maybe shifting gears a bit. The M&A that we saw this quarter are seeing quarter-to-date continues to be a bit lighter than maybe we've seen in past quarters and years. But the term sheet pipeline seems to be very robust. So are we just looking about a timing difference here?

We always are a little short in the first couple of quarters. People tend to accelerate to try to get something done between now and the end of the year. Sometimes that can be tax driven. Some of it can be estate planning driven based on that. I think there is a realization that's happening right now. The sellers are coming to grips that the valuations that they're going to get by selling the business is probably not as rich as they used to think it was. But here's the thing is we're finding that our story is getting better and better on that. the mystery of what equity means given by a PE owner versus our equity. We've got one common stock that every single person in our organization has.

We pay a cash dividend. We pay our earnouts in cash. We're not asking them to take promissory notes because we -- because they can't make their earn-out payments. They're understanding the tools and capabilities that we can show at the point of demonstration are better for their people. They're better -- all the tools that the guys talk about for an hour. They get that -- 18 days after we bought Assured Partners, the sales force had our tools and capabilities on their desk ready to use. It's been a training exercise to get them to use it.

You get more from Gallagher by selling to it. But sellers have to come to grips that valuations are coming down. That's the thing. So it's just -- sometimes it takes a little while to realize that something -- maybe I need to take a better thing because if I were a small broker agent, I need those tools now. I can't wait.

By the way, the deal brokers are still telling that the multiples are not coming down. So you get into a bit of a conflict.

The next question is from the line of Greg Peters with Raymond James.

This is Mitch on for Greg Peters. My first question today is on -- on the competitive environment for producer talent. Have you guys seen any changes in recruiting behavior, employment contract terms or how firms are using nonsolicit protection?

Yes, Greg, look, we think we've got a great place to work. And so we look at that as an opportunity to recruit great talent. Doug mentioned it, we've got 650 young people coming into this business through our internship program this summer. We recruit our own. We build our own, but we are very strategic. If we have someone who's unhappy where they are at today, we abide by noncompetes.

We don't see that changing. And if we want them on the team, and we think that they can build a bigger book of business with our expertise and our capabilities, we go about doing that. So our pipeline hasn't changed. We still have an active group out there connecting with people to make sure that we can build -- continue to build a great franchise with great talent that wants to be a part of it.

Mitch, this is Pat. Another point here, I think that doesn't get made very often that I think is going to be a big part of this is you talk and look at all these team lifts and what have you, clients are getting smarter. What's in this for me? Okay, fine. So you're happy because you're making a move there.

And I think when Mike's point is when we try to recruit someone from someone else with the tools that we're talking about, what have you, we give the answer to that question. I'm going to Gallagher for myself for sure. I want to work at a place where I'm happy, but you as a client are going to win. And an awful lot of our competition doing team lifts and all this other garbage don't have that answer.

Yes, I got to say, I think that another year of the fact that some of the return expectations that maybe these producers were expecting in their current homes, if they have any type of equity aren't coming through, I think we're going to have more and more opportunities because they just can't wait for point-of-sale capabilities to better them. They can sit and at their old firms for a long time, and they're never getting the sales enablement tools that we have. So the miles will come together. So I think we're going to be a net winner on it.

And that's kind of the U.S. lens. The London is pretty frothy right now. There's a lot of change and a lot of movement going on in London, and I think we're the calm home.

So Alex, your line is open for questions.

Sorry about that. There was a lag there. I had a question on the risk management business. You provided a lot of good commentary on AI. And I think at one point, you mentioned the benefits on growth would come a little later, but it does seem like you're growing pretty well in risk management and some of the things you talked about were compelling. I'd just be interested in more color on is that a place where you actually are beginning to see some of that? And could we see growth accelerate related to some of those things you're doing there?

This is Scott. I think the -- I mean, the fact is over the last year or so, we've seen a lot of really nice new business wins. And it continues -- I think it's a reflection of the investments we're making, our emphasis on great outcomes. We're building that story. It's becoming more compelling. And it's across all the segments that we serve, whether it's the carriers, the large risk management clients. So I think we feel really good about the spot that we're in, and the story is resonating in the market.

Great. Can you talk maybe a little more specifically about headcount? Like what we should expect as you're executing on some of the things that you talked about from an efficiency standpoint, some of those cost reductions you talked about. Will we actually see headcount reduce? Or is there -- is more of that operating leverage? I'm just trying to understand how we'll expect it to come through in margins.

So let me break it down for it. I think that you're going to see our headcount on producers go up. I think you're going to see our middle office that as we bring more and more efficiencies to the middle office when I talk about regardless of whether it's our technologies, our quality centers, our centers of excellence. And then if you think about AI, I think that we have enough internal attrition that will naturally contract that workforce. But frankly, we're growing so much that just holding steady could be a really, really -- it would be a really, really nice win.

In the back office, I do believe that AI will continue to allow us to, again, harvest the benefits of natural attrition. And that won't be a perfect one-to-one match as AI comes in. But one thing I will say right now is that we are hellbent on making sure that if some technology causes a job to be no longer necessary that we work very -- our human resource department works very hard to find -- to repurpose that employee into a spot where we've had attrition someplace else.

So attrition will do most of our natural work over the next 3 years on that. We lose 15% of our people a year. So I mean there is -- it will probably be a net hire during that, but that we'll be able to net hire at such a great -- at such a pace.

Our next question is from the line of Mark Hughes with Truist Securities.

You talked about in property kind of the disconnect between some of the more dramatic rate increase numbers we've seen in your own experience. I wonder if you take into account what you're doing on commissions and maybe policyholders buying more coverage and maybe also taking into account contingent, how would you have seen property revenue in the last few months, last 6 months? I know you've given us some premium renewals and pricing, but how about your revenue when you think about property.

Let's break that down to that basic. Remember, any large account or any medium-sized account where they've got a big property tower or they've got a huge cat exposure, we're working on a fee for them by and large. By and large, that's it. When you get into kind of more the in exposed property and package and everything, those rates are still holding in there compared to cat-exposed properties. So we work on a fee in many cases, as you get into a package policy to get to unique property placement in some of our real estate and higher ed type positions, there are commissions on that to a certain extent. But by and large, think about it is that we're protected from the -- and we didn't benefit on the upside. When it was going up 20%, our property book wasn't -- our commission on that property wasn't going up 20% because there's a lot of fees in -- so the mix of our business on property, you need to think of the huge, huge property placements is more of a fee-based business than it is a commission business. Does that help you?

It does help. And then if you crystallize that into a number, how -- with all of those dynamics, what has that meant for property, just so we can think about your real experience hitting your P&L versus some of these other numbers.

I said earlier that 1% was probably where I thought that the overall organic was influenced by rates in general. Maybe property getting a negative of a point and casualty is a positive point or something in that range. We're not having huge swings based on our property. It's a very narrow range around that 1%.

Yes, that's helpful. How about on U.S. wholesale property pricing, you gave us some broader numbers, something including retail. What's the wholesale experience been on property?

You're going to see that as being a little bit more outside of that. I think you're going to see that. That might be the tail. That's the tail that went a little bit more...

And then if you looked at overall wholesale renewal premium, do you have a number you might share on that?

Listen, I'd have to dig out what we said in the scripts on that. But wholesale right now, I think that we're -- depending on how you define wholesale, you've got open brokerage, you've got programs, you've got finding a business. That's running in kind of the mid- to low single digits combined organically. Mike has a bit.

Yes. Mark, I would just add. So where you're seeing maybe that be more impacted to the traditional flow of business, specifically from Gallagher into RPS, that does have an impact. But we -- the benefit of Assured Partners, just in the last year, the premium trade into RPS from AP is up 129%. Submissions are up 182% and RPS revenue connected to AP is up 95%. So while you see some puts and calls relative to the traditional Gallagher business, the benefit of AP is making a big impact into RPS, and that's the beauty of doing a deal like that.

And then if I might, just to tack one on, where did you find $100 million in fraud in the risk management business?

I think it's one of those things as we look at -- Scott will actually -- I don't think we answer the customer, but when we -- it's basically fraud detection, but go ahead, Scott.

It's -- this one specifically, Mark, was the -- all about fraud detection in the auto space specifically. And it's -- they have a large exposure and some new innovative ways, in particular, using AI that we were to detect it. And probably more importantly, they were aggressively pursuing it, which in partnership with them, it made a big difference.

Our next question is from the line of Meyer Shields with KBW.

Two-part follow-up for Doug first. Can you explain why it takes, I guess, 3 to 5 years for the revenue benefits of better service to show up? This is in the context of AI. And I'm wondering if you're seeing any initial attempted pushback from the carriers for whatever reason?

All right. So you mix up a couple of things. Revenue benefits will take a little longer as it emerges into our hit rates. When we sell somebody today, if we use AI to help us sell and sometimes that's an 18-month sales cycle. What I think -- what I said is when the benefits come in Gallagher, it will take us 3 to 5 years to probably realize those numbers that I gave you earlier in my prepared remarks.

Real reason why is that a lot of that has to do with span of control when you come in as workloads of not the worker bees and not the leaders, but in that span of control layer that sits in the middle, as we start to improve what the daily workers are doing and then scrape that information to a reportable information in the span of control layer, it just takes a while for that to get implemented and then for those -- that span of control to increase.

And again, we're going to do most of that with attrition. And so as we expand out span of control, it just takes a while for us to put that in place. An example would be is I don't know if I want AI to do wire transfers, but I have no problem with AI tabulating how many wire transfers, scanning it for quality control, scanning it for fraud for doing that. I don't want AI actually doing it yet. but I don't have a problem with it being there tabulating and reporting out on what's happening. And that just takes a little while to lay over the actual work layer.

Okay. That's helpful. And then I guess a question for Pat. Like you made the comment that you're growing faster in large account space. And I guess I'm just curious because I would imagine that there's a greater gap in competence when you're competing with smaller brokers, not take anything away from Gallagher. But when we look at the large account brokers, they seem stronger than I would imagine your typical storefront broker could be. So I was hoping you could dig into that a little bit.

Okay. Let's not confuse the two. I'll let Mike answer in a second. I did not say that we're growing faster taking accounts away from our bigger competitors. I said our book of business and our new business is growing faster in the large account space. And a lot of that is taking large accounts and pieces of large accounts away from the smaller brokers who don't deserve it in the first place.

Yes. I would just add, Pat is exactly right. Our takeaway ratio, our win rate against our larger competitors is about on par with our win rate, maybe when we look at it overall. But I'll share just a quick story with you. We just picked up a really nice account here in Chicago, 3 6-figure accounts that had been with a local broker for 20 years. And we came in and showed all the tools and resources that we could provide to this account. It was a gut-wrenching decision for the CEO of this company to fire what was one of his best friends.

That -- back to Doug's point about the implication of -- or the impact of AI, the impact of our tools and resources can take 18 months, 2 years, 3 years to unravel those relationships. We have to get someone fired to get hired. And so that's a very difficult thing when you're talking about a 20-year relationship. But the tools and resources, the tipping point of those continues to show itself in our win rate, whether it's a smaller competitor or a larger competitor.

Our last question is from the line of Robert Cox with Goldman Sachs.

First question, I just had a 2-part question on the Middle East. The first part is you talked about lower activity in some cases in the Middle East. I'm just curious, and I know it's not having a big impact, but curious what type of activities or products you're seeing delays and how that trended versus the first quarter? And then the second question is just if you think we might see some lagged inflation impacts kind of show up in RPC over the rest of the year from the Middle East conflict?

Well, it's a moving -- this is Patrick, sorry. It's a moving piece. The biggest portion of our business that touches that is the London Specialty the marine team, the aviation team. When I was talking about a slowdown, there has been a slowdown in aviation in the region. And so while there are war risks and other rate issues that drive revenues and exposures up, there is some delay in construction projects for energy construction. There's some delay in flying, but then there's also the marine that is insuring the boats and the straight of hormes. So it's a real moving feast. The delays are mainly in regard to aviation.

Yes. And I will add, just from Doug, as we're looking at our organic outlook for the quarter when it comes to our London specialty business, there is one large account that I'll be honest, I don't know if it's going to renew here in June or on July 1. I don't know if it's going to be a June 30 placement or we'll get it put to bed in July. And that might be a $4 million or $5 million flip between first -- second quarter to third quarter. But I think that overall, what we're feeling is there's a lot of pent-up demand to get on our marine business, our aviation business. So there could be some timing between quarters, if that's what you were plumbing for on it, Rob, or if -- but I think the fact is the demand for our services is going to be even more -- and I don't think rates are going to just drop down immediately because there's been a minimal of understanding about of what's going to take 60 days to get flushed out.

And on the inflation piece, do you think that we might see that flow through in a bigger way over the rest of the year?

Well, listen, I think inflation causes pressure on replacement value. You've heard me speak before that I'm not completely convinced that the carriers are done with their march to get properly paid on replacement costs across the sector. I think inflation puts pressure on medical. I think inflation puts that pressure on replacement costs on liability settlement. I just think that fundamentally, clients struggle with the impact of inflation because of their premiums go up.

And that's where we're there to help them. And I think that that's our job is to help them navigate through the inflation. So I think there could be inflation pressures, but I'm not completely convinced that that's -- that the business can't handle that in terms of the premium rates. It might put a little bit of a floor in some of the -- if there's some rate cutting pressure competition out there, might put a floor in that pretty quickly.

One last comment before we get to my final remarks, Rob. It's really been interesting to me to look at our data, which I think is sensational data on our cancellations, our audits and what's actually happening in our book of business, the resiliency of the middle market accounts literally across the world. And you keep seeing things -- we've got a war in Iran.

We've got Israel Lebanon at each other. And you expect, oh my gosh, business has got to slow down. our middle market businesses are robust. And I think they've been able to deal with tariffs. They've been able to deal with inflation. I think we're going to see continued growth in that area.

And then just a follow-up on one last question.

This will be the last.

Yes, fair enough. U.S. retail commercial auto renewal premium change, I think, accelerated 6 points quarter-over-quarter. I'm not sure if last quarter was just artificially compressed, but just curious if there's anything to point out in terms of what's going on there.

Yes, you got a lot of bad accidents and huge settlements. I don't think I distracted driving and people running into each other.

Thank you again, everybody, for joining us this morning. I think you heard the team today loud and clear that we're incredibly confident in our ability to execute and believe that we're very well positioned for continued long-term growth. And so we look forward to speaking with you again after our second quarter and our earnings call this summer. Thanks for being with us today. Thanks, everyone.

Thank you. This does conclude today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Good afternoon, and welcome to Arthur J. Gallagher & Company's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's call is being recorded. [Operator Instructions]

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 reconciliation 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 Jr, Chairman and CEO of Arthur J. Gallagher and Company. Ms. Gallagher, you may begin.

Thank you very much. Good afternoon, and thank you for joining us for our first quarter 2016 earnings call. On the call with me today is Doug Hall, our CFO; and other members of the management team. We had a terrific first quarter. For our brokerage -- for combined Brokerage and Risk Management segments, our two-pronged revenue growth strategy, growing both organically and through acquisitions delivered revenue growth of 28% in the first quarter. Organic growth was 5%, and M&A contributed 23%, driven by strong results from Assured Partners. On a segment basis, brokerage revenues were up 30%, of which organic was 5%. We saw strong growth across retail PC, wholesale, reinsurance and benefits. Our Risk Management segment or Gallagher Basset, posted revenues up 14%, of which organic was 10%. We saw excellent new business and strong client retention, and we continue to generate excellent profits our Brokerage and Risk Management segments combined reported net earnings growth of 12% and adjusted EBITDA growth of 18%.

This quarter marks 24 consecutive quarters of double-digit adjusted EBITDA growth. And we had another quarter of solid underlying margin expansion, which Doug will break down for you in a few minutes. Today, I'll touch on all 4 of our strategic pillars: growing organically, growing through mergers and acquisitions, improving our productivity and quality and our culture. First, organic growth. Our client retention, new business win rates and client business activity continue to be tailwinds and in today's environment, insurance rates are still contributing to organic growth, but to a lesser extent than over the last few years. Carriers are continuing to behave rationally and looking to grow in lines and geographies where there's an acceptable return, yet remaining disciplined by seeking rate increases were needed to generate an appropriate underwriting profit. Good loss experience accounts can typically see premium relief while accounts with poor experience are seeing increases. Breaking this down by businesses. Within our global retail PC businesses, the first quarter '26 market environment is materially unchanged from the prior quarter. Insurance renewal premium change, which includes both rate and exposure continued to increase in the low single digits in the first quarter, with property decreases more than offset by increases across most casualty classes.

By product line, we saw the following in our global PC retail businesses. Property down 7% with rate pressure most pronounced in CAT exposed and larger risks. Professional lines, including D&O and cyber, up 2%. Workers' comp up 2%; personal lines up 4%, package up 2% and casualty lines, which includes general liability, commercial auto and umbrella up 4% overall. Excluding property, renewal premium changes increased 4% in the quarter, with higher increases in the U.S. versus international markets. We continue to see significant differences in renewal premiums by client size, with our larger accounts driving much of the downward pressure in premiums. Our customers are opting in and buying more coverage as their prices decrease, whereas over the last few years, they were opting out of coverage when their prices were increasing. Within the U.S. excess and surplus market, we continue to see a bifurcated market. We're seeing submarkets behaving differently after several years of a very strong hard market. E&S property, particularly cat-exposed risks is the most competitive area right now. That reflects a pricing reset, not a demand issue. Policy counts and submissions remain healthy and E&S continues to be the right solution for complex property risks.

E&S casualty remains firm. Renewal premiums are up mid-single digits. Capacity is disciplined and demand is steady across general and excess liability as well as umbrella. E&S professional lines are largely stable with renewal premiums up low single digits and better underwriting discipline than in prior cycles. The fastest growing part of E&S continues to come from emerging specialty risks, such as data centers, and AI-related infrastructure is whether as well as other complex exposures. These risks don't fit well in the admitted markets and represent a structural multiyear growth opportunity for E&S. Moving to reinsurance. The market remains well capitalized and renewal activity continues to reflect ample capacity. In the first quarter, we saw strong growth across lines and across geographies with another excellent quarter of new business overcoming rate headwinds. At the 1/1 renewals, we saw rate decreases across property and specialty lines with lower layers holding up better than the top end of the reinsurance towers. Within casualty, pricing was broadly stable as most reinsurers remain cautious around U.S.-focused casualty risks, given loss cost trends and prior year loss development.

Outside the United States, additional capacity put some downward pressure on pricing in selected markets. The 401 renewals showed similar conditions with a bit more downward pricing pressure on the Japan specific renewals. Outside of Japan, we saw continued interest from carriers and managing earnings volatility and supporting growth through additional protection. Geopolitical developments, including conflicts in the Middle East are impacting specific coverages such as marine war and political violence and terror bodes though it's too early to assess any broader ultimate impact on reinsurance pricing. Today's dynamic market is ideal for our reinsurance team to demonstrate our expertise, product knowledge and data-driven capabilities to ensure the best coverage for our clients. Turning to London Specialty. Similar to U.S. E&S market, pressure continues in North American cat exposed property, while competition in D&O, professional lines, financial institutions and cyber is moderating. Related -- war related risks remain the clear exception. Marine, aviation and political violence exposures tied to active conflict zones are seeing significant repricing and more selective deployment of capacity. War cover remains available, but it requires careful structure and coordinated execution across markets.

Our teams across London, the U.S. and our international network are working closely together to secure capacity under current market terms and help our clients to navigate this rapidly changing environment. Moving to Employee Benefits, which continues to perform very well. We're seeing steady demand from employers across health, retirement, voluntary benefits, executive benefits, life and HR solutions. Our clients are still actively hiring and remain focused on talent attraction and talent retention -- and there is more and more demand for our experts to provide creative solutions to help our clients control their escalating benefits costs, driven by general procedures, innovative medical treatments as well as prescription drugs. As clients compensate us based on our advice efficacy creative plan design and cost management strategies, all of which support both demand and retention across our benefits business. Last but not least, Gallagher Bassett posted another strong growth quarter. We continue to see strong new business and excellent client retention, the team is adding new products, new services and embracing new technology, including AI and machine learning to further improve the claims experience for our clients. Gallagher Bassett is positioned for a fantastic growth again in 2026. Next, let me provide you some comments on our view of the economy.

The U.S. labor market continues to show strong demand for new workers with the number of job openings still ahead of the number of people looking for work. Our daily revenue indications have historically been a terrific indicator of economic activity. Our proprietary data from audits, endorsements and cancellations, continues to show solid business activity through the first quarter and actually through yesterday. This data shows that exposure units such as revenues, payroll headcount or trucks on the road to name a few are still in positive territory, and our clients' businesses are continuing to grow. So to wrap up my thoughts on organic growth prospects, today, pricing, property pricing is moderating. That's well understood. But property is only one part of our very large and very diverse portfolio. Casualty, benefits, reinsurance and Gallagher Bassett are all strong, and that strength is broad-based across geographies, client sizes and products. In addition, our client exposure growth is solid. Our retention is stable, and we are seeing excellent new business wins, all positively contributing to our organic growth. The demand for our expertise continues to grow because clients value our advocacy, our analytics and our ability to navigate complexity. This gives us confidence in the durability of our results that provides further confidence in our 2026 full year organic growth outlook of 6%.

Now shifting to our second strategic pillar, mergers and acquisitions. During the first quarter, we completed 9 new tuck-in mergers representing around $60 million of estimated annualized revenue. Looking at our pipeline, we have over 40 term sheets signed or being prepared, representing around $400 million of annualized revenues. For those new partners joining us, I'd like to extend a very warm welcome to the Gallagher family of professionals. Good firms always have a choice, and it would be terrific if they chose to partner with Gallagher. As for the Assured Partners acquisition, we are following our proven integration playbook, developed from doing over 750 mergers over the last 20 years, we are on plan without exception. The cultural alignment has been exactly what we expected, a culture with a strong client-first mindset and a genuine excitement for leveraging our expertise, tools and capabilities. We are 8 months in, performance is terrific, and we are already better together.

Let me move to our third strategic pillar to continuously improve our productivity and quality. We view AI, digitization and automation as a continuation of that long-standing strategy. It builds on decades of work standardizing processes, centralizing our global data and improving execution, all to help our people provide the very best advice and service to our clients. At our March 17 Investor Day, we spent considerable time discussing how we were already deploying AI across Gallagher. I invite you to listen to this webcast still on our website.

Let me summarize a few key points from our March commentary. First, we expect AI to be minimally disruptive when it comes to selling insurance, providing consulting services and managing claims. Our business is advisory-led, complex and relationship driven. Second, AI actually should accelerate our growth. AI enhances our ability to deliver faster, higher-quality advice, and more tailored client solutions, improving our speed to market, win rates, retention and provides better client experiences. Third, operational change is not new to Gallagher. For more than 2 decades, we've standardized processes and centralized our proprietary data across the company. That foundation allows us to deploy AI today across PC claims, reinsurance benefits and mergers and acquisitions because we have embedded operational excellence into our DNA. We already have the brains and financial resources to quickly deploy AI. In our view, we're ahead and that advantage compounds over time. Fourth, AI has already deployed across many of our core platforms and workflows. It helps our teams make better decisions and spend more time advising clients while continuing to raise productivity and quality. And finally, and most importantly, AI strengthens, not replaces the broker and adviser model PI is another tool that strengthens how we serve clients. It does not change the fundamental nature of our business. AI makes every single one of our professionals better at what they already do by amplifying our expertise, our data in our market access.

Let me wrap up by spending some time on our fourth strategic pillar, our culture. We are a growth culture company. If you spend some time reading our mission statement and the 25 tenants of the Gallagher Way, you might come to realize that they are all really about supporting growth, but growing the right way, the collaborative way, the professional and respectful and ethical way, all the while holding ourselves accountable for execution and growing shareholder value. We are a long-term growth culture that recognizes we grow because of the relevance of our advice, our analytics and our ability to navigate complexity, not because where we are in an insurance pricing cycle we've proven we can grow through any cycle, and this one is no different. Culture also allows us to scale. As we grow organically and through mergers, we don't change who we are. Our culture promotes welcoming new colleagues into a model that emphasizes collaboration, entrepreneurship and shared success, all supported by strong processes, data and tools. And importantly, culture is what makes our investments in talent, technology and AI work. Our people embrace change when it helps them better serve their clients, improve quality and deliver stronger results. So when we talk about Galaxy's performance, our culture isn't separate from the numbers, it's embedded in it. Okay, an excellent quarter behind us, a terrific future ahead of us. I'll stop now and turn it over to Doug to walk through the financial details. Doug?

All right. Thanks, Pat, and hello, everyone. Today, I'll spend about 3 minutes flipping page by page through our earnings release and give some quick highlights I'll visit spend about 5 minutes on the CFO commentary document we posted on our website and then close with a minute on cash, M&A and capital management. Overall, the punchlines you'll hear today, and you've probably already seen that in your review of our information, we are right in line and in many cases, better than what we forecasted in our March IR day. Okay. Let's go to the earnings release, Page 1. Just step back for a minute. Adjusted revenues, EBITDAC and EPS all up 30%. It will get to those percentages when you remove from prior year numbers $143 million, that's $0.41 of interest income we earned on the funds we are holding to buy Assured Partners. You'll read that in the footnote at the bottom of this page. That's an amazing quarter and demonstrates our 4 strategic pillars are delivering terrific shareholder value. Moving next to Page 2. Brokerage organic at 5%, right in line with our March IR Day expectations. One call out here. supplementals and contingents combined up nearly 10%. As you've seen in the past, there can be some geography between those 2 lines, especially in first quarter as we renegotiate contracts to start a new year.

At the bottom of the page, you'll see we had a solid start to the year for our tuck-in M&A program. Our 2-pronged growth strategy combined, that's organic and M&A posted 28% total revenue growth this quarter for our Brokerage segment. That would be 33% if you remove the $143 million of interest income on the AP funds. That's absolutely terrific. Moving to the top of page -- moving to Page 3 and the top of Page 4. As we discussed during our last few earnings and IR Day calls, current quarter percentages at the bottom of these tables are not really all that helpful when compared to because prior year had that interest income from the AP funds I just highlighted. It really clouds comparability. So I think it's better for me to defer comments on our margin until I get to Page 7 of the CFO commentary document. When I do, you'll quickly see that our productivity and quality strategic pillar delivered strong underlying margin expansion this quarter, right in line with our March IR Day forecast.

Moving now to the bottom of Page 4, an excellent quarter for our Risk Management segment, Gallagher Bassett, organic at 10% and M&A added another 2.5 points, bringing total reported revenue up 14% and adjusted revenue up 13% for this segment. This, too, shows the power of our 2-pronged growth strategies. So moving now to Page 5. Risk management showed continuous compensation and operating expense ratio improvement, leading to an adjusted EBITDAC margin up 130 basis points. There is no noise in this segment from interest on funds held to buy AP. So it's very easy to see the excellent growth in our revenues, improvements in our productivity and our growth in our adjusted EBITDA all better than our IR day commentary and forecast. Flipping to Page 6. The Corporate segment adjusted results were in total, we're pretty close to the midpoint of the range we provided during our March IR day. So there's no new news here. Last, on Page 7. About halfway down, you'll read, we repurchased about 1.4 million shares for approximately $310 million this quarter.

All right. Let's leave the earnings release and go now to the CFO commentary document. Starting on Page 3. Most items are very close to what we provided in March, so just double check that these items are considered in your models. Going to Page 4. This is the new organic growth table we started providing last December. Here are the punch lines. First, we saw solid first quarter organic growth across each business and geography with each posting organic at or above our March IRD commentary. Next, we've now added our second quarter outlook and see similar performance for each of our businesses. These percentages incorporate all the information Pat just provided such as net new business wins, customer buying behaviors, the rate environment and the economic landscape. These are our midpoint best estimates ground up as of today. Third, same with our full year outlook, which has not changed from March. We post that and '26 will be another excellent year of organic growth. Moving to Page 5, the investment income table. Three comments here. First, our '26 forecasts reflect current FX rates and changes in fiduciary cash balances. Second, our forward estimates now assume one future 25 basis point rate cut in September. Third, this is a helpful table to show you a full historical view of the amount of interest income we earned on the funds we were holding by AP. And it's a reminder as a heads up, when you build your model, second quarter had $144 million of interest earned and then $76 million in the third quarter of $25 million. which will again cause comparability noise throughout our results when we post our next 2 quarters' results.

Staying on Page 5 at shifting down to the rollover revenue table, which excludes Assured Partners. For quick comments here. First, the first quarter total of $126 million for Brokerage came in pretty close to our March estimate Second, looking forward, the pinkish comps to the right include estimated 26 revenues for brokerage M&A closed through yesterday. And of course, you'll need to make a pick for future M&A also. Third, one modeling heads up to make sure you adjust your prior year revenues for the divestiture and other line before you apply your organic growth assumption. And fourth, you'll see the same information down below for our Risk Management segment. All right. Let's move to Page 6. Information on Assured Partners. A few comments here. They're mostly modeling helpers and then I'll add some qualitative comments at the end. First, remember that forecasted numbers we provided in this table are at the midpoint of our estimates. As we convert locations onto our systems, there could be some small movements between quarters and some additional small netting like we saw last quarter. Second, the footnote there reminds you that noncash figures shown on this page, which reflect depreciation and earn-out payable are included within our estimates on Page 3. So please don't double count.

Third, this table does not include any revenue or expense synergies. So those would be incremental to the numbers you see here, and you would need to model them separately. The footnote says that we still see annualized run rate synergies of $160 million by the end of '26 and then up to $300 million by early '28. That said, more and more, I'm feeling there could be some additional upside to these numbers. Maybe I'll have an update during our June IR Day. Fourth, a reminder that you can use for modeling the second quarter '26 column as is but for third and fourth quarters, you should only add the delta between the pink numbers and the blue '25 numbers. Fifth, as for financial performance, an excellent first quarter, which came in fairly close to our March IR day estimate, only a few small changes to our outlook for the rest of the year also. Qualitatively, our clients are happy and client retention is excellent. The integration is planned is tracking to our expectations. Our teams are energizing coming together. We're having some terrific new business wins, showing that we are indeed better together, and our employee and producer retention is strong and right at historical norms. All of this gives me confidence in our 2016 financial performance outlook.

Moving now to Page 7, the Brokerage segment margin bridge. Favorable comments continue to come in that this picture is worth a thousand words. It's very easy to see all the components that influence our margin change period-over-period. Let you quickly dig out that our productivity and quality efforts are delivering underlying margin expansion. You'll see that on the second to the last line of the table. We had terrific expansion this quarter of 50 basis points. And you'll see that the far right, we're still forecasting full year 40 to 60 basis points of underlying margin expansion. Both of those are right in line with what we had discussed during our March IR Day. And despite sounding like a broken record with another call out that the first line of this table shows you the impact of investment income earned on the funds we held to buy AP. That's what will again cause the headline headache for the next 2 quarters. Then thankfully, it should be an easier compare.

Let's move to Page 8, our Corporate segment. You'll see that our adjusted first quarter as well as our outlook for the rest of the year are very close to what we presented in March. Just 2 call-outs here. The upper right box shows you the changes in FX, which caused the corporate line to bounce around a bit. But remember, these unrealized gains and losses are noncash. The low -- now look at the lower right box, this is new and a bit of housekeeping here. We removed the separate page that recapped our historical clean energy investment cash flows. This box tells the same story just shorter. It showed you that we had $655 million of tax credit carryovers that we will use over the next few years. Second, it also shows you that we have about $11 billion of tax deductible amortization expense, which we will deduct in the future. Together, these 2 items are worth about $3.4 billion of cash tax savings, which gets you to the punch line we've added in this box. Our cash taxes paid will be around 10% of EBITDA for the foreseeable future. You model that and you'll get close.

All right. Finally, a few comments on cash, capital management, M&A funding. When I look at available cash on hand, expected free cash flows and future investment-grade borrowings, over the next 2 years, we might have close to $10 billion to fund M&A before using any stock. Our M&A pipeline remains strong and is full of targets at attractive multiples, which we are seeing coming down a bit, still creates an immediate shareholder value through nice arbitrage. I mentioned earlier that in the first quarter, we repurchased approximately $310 million of our shares. We continue to believe our equity is woefully undervalued by the market, so this repurchase was opportunistic. But our priorities really haven't changed. We'll continue to invest in organic growth. We'll remain active in mergers and acquisitions, staying consistent in our approach and disciplined in our pricing and we will deploy excess capital in a way that maximizes long-term shareholder value. So those are my comments. A great quarter to kick off what looks like could be another terrific year. Back to you, Pat.

Thanks, Doug. Operator, I think we're ready for some questions.

[Operator Instructions] And our first question comes from the line of Charlie Lederer from BMO Capital Markets.

I appreciate Pat's comments on the strength outside of property lines. Just looking at Slide 4 of the CFO commentary, can you expand on what your expectations for the high organic growth in Americas Retail in the second quarter? I guess it's just a little surprising given the greater property mix in 2Q.

So the question you're asking about, if I look here in the second quarter, we believe there's 5% in our Americas Retail Brokerage segment. Is that what you're looking at?

Yes.

Yes. So if you really look at what last year, what happened is Canada actually had a slightly smaller quarter in the second quarter last year. So that's why it gets closer to that 5% number as we're going forward here.

Got it. And then can you talk a little bit more about whether the M&A environment has changed over the last couple of months and how much that's factoring into your buyback decisions? And can you share how much you repurchased so far in the second quarter?

So the question here is, let's [indiscernible]. We've been in a quiet period the entire second quarter, so we have not repurchased any shares thus far this quarter. As for the environment on M&A multiples are coming down. We are seeing that. We're seeing that sellers are becoming a little bit more rational on that. First quarter is historically always our smallest quarter. So you can't really read much into that. We typically have a wrap up to the a little bit more to the end of the year, we'll show more in the later quarters. And then Finally, I think that when it comes to balancing M&A versus share repurchases, if there's a terrific opportunity out there right in the middle of the fairway that makes us better together, that is a long-term buy. We still think there's value in that number over our shares. So it's -- but it's got to be at the right multiple in today's world.

And our next question comes from the line of Elyse Greenspan from Wells Fargo.

My first question is on the core commission and fee organic growth on the 4% in the quarter. In your mind, does that represent a floor?

I'm sorry, does that make -- Elyse, I just didn't hear you say it again.

Does it represent a floor?

Yes, like a Florida where you see the growth from here be 4%.

Yes. Yes. As we look out for -- at this point in time, as we said in our prepared remarks, as we look forward, we see a pretty good year coming at us.

And then my second question, right, you guys obviously provide a lot of guidance and disclosure by line, right? So it looks like organic growth, right, in brokerage, you're looking 4.5% in Q1 on you're looking for in the second quarter and you left the guide for 5.5% for the full year that does imply a pickup in the back half. Doug, I think last we spoke, you were just talking about incremental reinsurance demand as being somewhat of a driver there. So I mean I know it's being a little nitpicky relative to half or maybe 1 point in the back half of the year. But is that still your expectation that, that's what will drive improving organic growth in the second half of the year relative to Q1 and Q2?

Yes. Let me give you a couple of reasons why I think that -- we have a really successful new business pipeline right now, and we're seeing that in reinsurance, retail, London specialty and then in our -- really in our kind of cap business right now. We've also done a good job of getting in raises on our fee accounts. So that's a little bit of a I think that we were going to see some pretty strong growth in supplementals and contingents for the rest of you. You've seen the numbers that carriers are posting that should bode favorably for us. And then I think there's -- just in general, we're seeing some pretty good success that's going to push through a property market. Now property sells off over the next 60 days in a big way, that's going to be a whole different discussion. But it's in that 5% range. So it's plus or minus a little bit on that. I think we're in great shape.

And this guidance assumes consistent property declines for the rest of the year, relative property price declines relative to what you saw in the Q1?

That's correct.

And our next question comes from the line of Dean Criscitiello from Wolf Research.

So just sticking on the organic growth real quick. Your full year estimate for the specialty in U.S. wholesale growth is 6%, which implies sort of a pickup of organic in the back half of the year. So sort of curious whether your expectations under because of the pricing environment is obviously not great sort of your expectations as to why you think it will pick up?

All right. So the question is in our -- here's property is going to take its biggest tool in the second quarter. So I think in the second half of the year, we've got a pretty good view on property right now, at least in the -- we're a month into it right now. We'll see what happens in the May and June renewals got a good eye towards that. For the rest of the year, we just don't have that much property stress.

Got it. And then my follow-up, I noticed in the CFO commentary that the multiples that you list for tuck-in acquisitions, the lower end of that range came down a bit. So I was curious maybe if you could add a bit more color on what you're seeing in the market on multiples and kind of why you think that is?

Yes, that's just what we're seeing right now. I think the term sheets that we've got in the hopper are recognizing that the multiples are coming down a little bit. So yes, yes, we did put that on Page 3 of the CFO commentary and I made mention it and when I was wrapping up on cash. So yes, you're reading that the right way.

So why? Look at our stock price. Our multiple is down. Pretty simple. We're not here to our shareholders.

And our next question comes from the line of David Motemaden from Evercore ISI.

Just -- just one question on the -- I believe, Pat, you had talked about insurance rates still contributing to growth in the quarter, but just to a lesser extent. You guys in the past, you guys have broken out some of the different components of organic between net new and then like price and exposure growth. So just wondering if you could unpack that maybe within this quarter and how you're thinking about that within the outlook for the 5.5% for the full year?

Listen, I think the way to look at it right now is new business will exceed lost business, customers will opt in, which will come through as rate and exposure growth as exposures grow, our customers' business. So let's say it's a 6% year, we're probably in a period right now, we're going to get net-net-net from rate 1%, 1.5%. When you think about new business forward thrust, we'll probably get 2.5%, and then you're probably going to get exposure growth in there of another 1.5 points, something like that. I think that might add up. So I'm not saying it's 1/3, 1/3, 1/3. I think that rate might be on the lowest end of that growth piece, so that's going to be net new business wins and then our clients' exposure units growth and our clients opting in and buying more insurance. And then rate will be what it is.

Got it. And -- sorry about that. And then just on the property pricing, maybe just thinking about the down 7 for this -- or the down 7 RPC -- if that were to get down to, like, let's say, down 10 or 11, how -- could you help sensitize the organic growth to that sort of RPC movement?

All right. I'd have to think about that here a second and do the mental math. It might put a point of strain overall for a full year on it, something like that. But that might have to go to closer to 12% or 13%, might almost have to be at double on that. Remember, a lot of our property also is done on a fee some of our big property schedules. So that mitigates that a little bit. That's why the impact of the floor completely falling out of it from what we can see right now, it may be a point for the full year. I mean.

And rates are approaching a pretty low level right now. In some instances, we're seeing rates approaching 2017 pricing. So I don't think there's a structural big time jump further beyond that could be.

And again, just rates are one thing. But remember, our revenues are based on exposures opting in, growing risk profile. Casualty is still tough. I know your question had about property but it's not just rate for us. It is highly sensitive also to exposures, which are growing right now.

And our next question comes from the line of Meyer Shields with KBW.

This is [indiscernible] on for Mr. My first question is on yes. you cut the data center and AI-related infrastructure as the fastest growing part of the E&S market. could you kind of help us size kind of like what percentage of the submission today is kind of related to that? And going forward,

Right. As a percentage, it's a very small item. It's not anecdotal, but it is also illustrated especially market comes in 5 different types of buckets. So you got to think about these as a headwind in that -- as a tailwind in that vertical that as these things come online, they're going to go to the specialty in the E&S market in order to get that cover. In terms of what we're doing on it, boy, we've got a terrific practice in that. I think that the way we're coming together, the way we've got a bespoke model that brings the right experts for the various covers that go along with the data center is pretty remarkable.

And let's not get it wrong. I mean, there's great growth opportunities for us across the whole data center effort. And as Doug said, the E&S market is responding to that. It takes world markets to complete those. It takes great expertise, which we have. But as a percentage of the overall market, this is not first shattering.

Okay. Got you. Very helpful. My second question is on the Middle East conflict. I think you flagged the significant repricing and selective capacity deployment in marine or physical violence, terror, et cetera. For Gallagher specifically, is this a net organic tailwind given your London Specialty and reinsurance positioning?

Yes, it is. And we've got to be very sensitive about that. First of all, just because well rates are there and the cover is available, doesn't mean ships are sailing. You got a very big caution light on making sure that crews are safe and shippers are not necessarily going to take the risk. But the market is available. It takes a lot of skill and a lot of diligence to put these together. But in the end, when they bind, yes, they're a net positive.

Got it. And just 1 quick follow-up on past capacity constrained, clerk placement difficulties that your ability to capture that or...

No, not at the present time.

And our next question comes from the line of Yaron Kinar from Mizuho.

One question for me. The Assured Partners estimates, I see revenues down a little bit again. and margins up a tad more than that. Is that the same real of signals that we had talked about in the March 17 Investor Meeting -- or is there something else driving this?

All right. Sorry. That's a great question. First of all, remember, those revenue numbers are at midpoint of our range. They do move around a little bit as we put them on to our system because we get deeper insight to the source of revenues. For instance, last quarter, we're going to have some netting -- and the old accounting on Assured partners. Sometimes they put a -- some branches would put a co-broker as an expense versus a contra revenue like we do. So that will cause that number to move around. It did move, what, $10 million this quarter on a $800-some million estimate. So it's a 1% kind of variance. The reason why this isn't an issue for us is that we purchased cash flow. And that's the great thing about the Assured Partners acquisition. There was no questions in their cash flow. The gross up of the revenues are the -- and expenses in some branches and the netting and other branches was in relevancy it was irrelevant to us because that's why you see the EBITDAC estimates holding right up to what we're talking about. We purchased that cash flow. We call it EBITDAC and it's delivered right where it'd be.

There's going to be a percentage point bounce around a little bit on the revenue numbers as we completely sort out the netting of co-broker revenues branch by branch. And we're going to -- we put a ton of branches up just this last weekend, and I think we're doing a terrific shape of getting that rolled out to our books in the next 15 months.

Got it. And those balances are a bit between the line items, that will no longer be the case on the business rolls over into organic...

That's right. I mean, once we have a better insight into whether these numbers are coming to us gross or net river, they're all on individual agency systems when you do it on a client-by-client basis, you'll see whether or not there's a co-broker number going through the operating expense. And again, cash flows are the same. It's just the accounting.

And our next question comes from the line of Mark Hughes with Truist Securities.

A number of your competitors or a couple of your competitors have talked about challenges with new business. And it sounds like you're seeing things go pretty well -- is there any reason why, say, at this point in the cycle, with property down and maybe a little more pressure on casualty perhaps. Why would new business be more difficult. And again, just from a kind of a broad cyclical perspective or anything else that might be contributing to that?

So Mark, we look at that closely. And a couple of things you might remember from discussions in the past. We have found over the last few years that if we digitize the relationship with the client, it will actually increase our retention by a full point. Now that means it takes it from something like 94.5% to 95.5%. I would contend that, that's pretty close to renewing 100% of eligible, not measured, not for sure, but darn close. Now those same tools are increasing our hit ratio. So I can tell you that if we take our Gallagher Drive product out in a prospect call, when I started selling 50 years ago, my hit ratio was about 32%. And before we got our tools going over the last decade, our hit ratio is about 32%. So it was all about getting at bats. With our tools now, we know this statistically we're approaching 45% hit ratios when in fact, we use the tools, and we have a number of them, not just Gallagher Drive. This week at RIMS, we'll be announcing blueprint, which is all about improving the risk and insurability of our clients making their profile better. Our reinsurance people have got a workbench product that uses AI to show clients all kinds of different approaches, et cetera, et cetera. these tools, we're spending hundreds of millions of dollars, and they're really getting traction.

And I think that is a differentiator. It's a differentiator, especially when you remember that 90% of the time when we go out to compete, -- we're competing with somebody substantially smaller than we are. And they all walk in and go, we've got our ChatGPT. That's not the point. Let us just show you what we do with your risk profile, which we can now categorize numerically that says, as you adjust today, you score on our profile, 65. That's not great. But if you work with us, on loss control, on improving your risk profile on the things you need to do we can take that, we think, to 87%. Now that translates directly to an improved position in the marketplace, better pricing, which, frankly, today is easier to get and bigger orders. So our hit ratio is increasing. We've got a lot of at bats. And I feel really good about our new business.

Okay. Excellent. Is there any kind of structural or cyclical reason why putting your advantages to the side, it might be harder to sign up new business in this kind of environment since prices are going down, it's harder to tempts people away or easier perhaps because you can offer a lower pricing?

No, I think it's -- frankly, it's interesting. I've said before. The brokerage business is a tough business. You've got to go out and convince somebody to leave somebody they're happy with. And that's difficult. And it's a very strong relationship business. The reason they're with people is they like them and they trust them. We are trusted advisers. So we have to go and make a very strong case for the fact that they benefit their shareholders, most of the time, their family by making the move to Gallagher, and we're just getting stronger and stronger at that. So it's not easier for sure whether it's a softer market because there's less pain. But at the same time, I think we've got confidence in the step of our producers that if they can get a shot at something, they've got a pretty darn good chance of writing it.

Operator, I think that's our last question. So let me just make a few comments here to wrap up. Everyone that's on the call. Thank you for joining us this afternoon. As you can tell, I remain extremely confident where Gallagher is headed. Our strategy is consistent. Our execution is strong, and our culture continues to differentiate us to more than the 72,000 colleagues around the world, thank you. We've got a great quarter, new talent and dedication of what makes this company great, and that is the Gallagher Way. Thank all of you for being on, and have a great evening.

Thank you. And with that, ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time, and have a wonderful rest of your day.

Good afternoon, and welcome to Arthur J. Gallagher & Company's quarterly investor meeting with management. [Operator Instructions] Today's call is being recorded. If you have any objections, you may disconnect at this time.

Some of the comments made during this investor meeting, including answers given in response to questions, may constitute forward-looking statements within the meaning of the securities laws. The company undertakes no obligation to update these statements. These forward-looking statements are subject to certain 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 earnings release and Form 10-K and 10-Q filings for more details on such risks and uncertainties. In addition, for reconciliations of the non-GAAP measures discussed during this meeting, please refer to our most recent earnings press release and other materials in the Investor Relations section of the company's website.

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

Good afternoon, everyone, and thanks for joining our investor meeting today. These quarterly investor meetings provide an opportunity for the investment community to hear from our business leaders and get further insight into our operations outside of the hectic earnings season.

For today's meeting, I'll start by covering Gallagher's strategy. current insurance market backdrop and our organic growth expectations for full year '26. And then I will end with some comments on how we're ahead and winning with AI. After me, you will hear from our business leaders. Each will speak for about 10 minutes, providing background information and insights into their various markets as well as discussing some of the exciting growth and operating initiatives, including AI, we have going on in Gallagher. They will also provide an indication of how they see organic growth for the first quarter. Then Doug Howell, our CFO, will pull the comments together, add some additional comments regarding AI and provide you with a more detailed first quarter and full year outlook. Our prepared remarks should last around an hour. After that, we will open the line to the group dialed in for questions and answers.

I always like to start these meetings by outlining our value creation strategy which is based on 4 key initiatives: number one, grow organically. Number two, grow through mergers and acquisitions. Number three, increase our productivity, raise our quality; and number four, maintain and promote our culture. The consistency in our strategy is one that we're proud of. This strategy has been tested throughout economic cycles, interest rate cycles, employment cycles as well as insurance pricing cycles, and there are no plans to alter our strategy, stated today we are a 2-pronged growth company, organic and M&A, and I continue to see nearly limitless opportunities for both as we have very little market share.

We are a profitable company, and I continue to see enormous opportunities to further improve our productivity and quality. And I'm confident in how I see our future because of our bedrock Gallagher culture. All that leads to a future of double-digit revenue and EBITDAC growth producing strong shareholder returns.

Let me dive deeper into revenue growth, starting with organic. Gallagher has client capabilities in approximately 130 countries, over 71,000 employees with the ability to provide professional advice and solutions across insurance, reinsurance human capital and claims management. We have industry-leading talent, a recognized global brand, deep expertise across products and geographies with a consistent approach to sales and client service.

As I look around the world, across industry verticals and product offerings, the future organic growth opportunity for Gallagher remains immense. Insurance is the oxygen of commerce, touching just about everything in our daily lives. It doesn't matter whether you're a restaurant owner or building a new warehouse or transporting goods across land, air or sea, you need insurance. And the market today is large and growing.

The Swiss Re Institute estimates there's more than $7 trillion of annual insurance premiums globally with $4 trillion alone in non-life premiums and these global non-life premiums are growing each year due to economic expansion, increasing insurance demand and new coverages purchased by those that are already buy insurance as well as emerging risks and exposures. We touched less than 5% of that premium, leaving 95% of our oyster. That's why Gallagher has and will continue to grow in particularly in any environment. Today, the team will lay out why we believe we could compete, win and grow faster than the industry.

Another way Gallagher is creating long-term value for shareholders is growing our total revenue through mergers and acquisitions. Since the beginning of 2020, we have acquired more than $6 billion of pro forma annualized revenues and the opportunity for future growth through M&A remains massive. That's because insurance distribution remains very, very fragmented around the globe. It's estimated that there are tens and tens of thousands of agencies and brokerage firms across our 5 major geographies, including 30,000 in the U.S. alone according to a leading consulting firm. Most of these firms are family-owned, have less than $25 million of annualized revenue and hold strong roots in their local communities.

So when they sell to Gallagher, not only do we get revenue and profit, more importantly, we get new talented entrepreneurs in locations, niches or specialties where we can excel together. Our new merger partners get immediate access to Gallagher's suite of tools and capabilities. overnight, they get access to our niche experts. Our extensive client and carrier data, our AI and digital tools, our thought leadership library, a recognized brand and elevated service from our centers of excellence. This creates immediate value for their current clients, gives them a terrific story for prospects and provides more career opportunities for their employees. Health wins in our merger activity are the clients to get deeper insights and advice on top of better service.

In 2025, we completed 33 mergers with over $3.5 billion of estimated annualized revenue. So far this year, we've completed 7 mergers, representing around $60 million of pro forma annualized revenues. We have an exciting global pipeline of opportunities with nearly 40 potential mergers representing around $250 million of annualized revenue. So our pipeline remains strong and full of tuck-in M&A opportunities around the globe that can contribute to our long-term strategic growth.

The third piece of our shareholder value creation strategy is to increase our productivity and raise our quality. Over 2 decades ago, we set out to build our Gallagher Centers of Excellence, where today, we have over 7 that handle many of our back-office and client servicing tasks. We now have standardized processes and common systems that are industrial strength. Standardization is the foundation for reliable and consistent data that allows us to deploy quickly technology, digitalization and AI both to grow more and to service at lower costs. I'll get to AI in a minute.

Okay. Moving to an overview of the insurance market. I'll provide a few observations from a global perspective and our business leaders will follow with more detail on what they see in their operations. Overall, we continue to view global PC insurance market is rational. Carriers are generating good returns driven by interest income and improving personal lines and commercial property underwriting results offset somewhat by certain casualty classes. They know what products and geographies are generating appropriate returns in areas that need to be re-underwritten or repriced to improve profitability. Conditions today seem a lot like the fourth quarter.

Through the first 2 months of the first quarter, global renewal premium changes, which includes both rate and exposure continued to increase in the low single digits. Once again, property decreases are more than offset by increases across most casualty classes. Breaking this down by line of business, here's what we're seeing, property lines down 7%, casualty lines up 5% overall, including general liability, up 3%, commercial auto up 3% and umbrella up 7%, package is up 2%, D&O up about 1 point, workers' comp up 1%; and personal lines up 4%.

It's important to note that renewal premium changes excluding property, are seeing renewal premium increases of 3% with higher increases in the U.S. markets. We continue to see significant differences in renewal premiums by client size, with property risks driving much of the downward pressure in premiums for our larger clients. Good accounts are still seeing some premium relief, however, accounts with poor loss experience are likely to see greater increases.

As for the reinsurance market and 1/1 renewals, the strong 2025 underwriting results posted by reinsurers means capacity continues to be plentiful with opportunities for our clients to push on price and coverage. The property and specialty reinsurance market continues to see rate decreases in the teens with lower layers holding up better than the top end of the reinsurance towers.

Pricing across casualty lines continued to be broadly stable as most reinsurers remain very cautious of U.S.-focused casualty risks with continued concerns over elevated loss trends and loss development. Outside the United States, increased capacity has driven pricing lower in some markets. Looking ahead to 4.1, our early indications suggest similar conditions with a bit more downward pricing on Japan-specific renewals. We believe it is likely carriers will continue to explore buying additional protection to further reduce earnings volatility or support growth throughout 2026.

Today's market, combined with dynamic geopolitical risks, is the ideal market for us to show our expertise, product knowledge and data-driven capabilities. Our talented reinsurance team can help clients navigate market complexities while ensuring the best coverage for our clients.

Moving to our view of economic conditions. Through mid-March, our daily revenue indications from audits, endorsements and cancellations are still in positive territory indicating continued solid business activity and no signs of a broad slowdown. In the U.S., the number of job openings is still ahead of the number of people looking for work, and health care costs continue to trend higher due to innovative medical treatments and prescription drug costs. This dynamic has employers continuing to look for cost-effective ways to support their human capital objectives. So we're just not seeing signs of economic weakness with these data points indicating the economic backdrop is still favorable for our business.

This favorable macro backdrop, growing demand for insurance solutions and continued strong net new business spread within a similar rate environment provides further strength to our full year '26 organic outlook of 6% for our combined Brokerage and Risk Management segments. Doug will provide you with greater detail in his comments. Over the next hour or so, you'll hear from each of our business leaders.

Let me give you some quick sound bites. Mike Pesch will tell you our Americas PC retail and specialty businesses are posting strong performance. Renewal premium increases continue business activities remain solid, and net new business remains favorable. Patrick Gallagher will tell you our international PC and London specialty operations are performing quite well. international retail renewal premium changes varied by geography and our London specialty business continues to show strong performance.

Tom Gallagher will tell you that our reinsurance operations are, again, a great performer through 1/1/26 renewals and are well positioned for further growth through the remainder of this year. He'll also provide comments on our global M&A strategy. Then Bill Ziebell will walk you through our employee benefits and HR consulting business. He will highlight a stable macro backdrop and favorable net new business trends driven by continued demand for our services.

Scott Hudson will tell you our third-party claims administration business, we're seeing good growth driven by our strong new business diversification and specialized products, technology innovations and continued ability to drive superior outcomes. And Doug Howell, our CFO, will bring it all together and tell you what we think this means financially for the first quarter and full year '26.

And today, I want to conclude with the topic that is forefront of many recent publications and headlines, but nothing new to Gallagher, AI. You'll hear the team tell how we are rapidly deploying AI into our businesses and the benefit of AI to Gallagher. Here's what you should take away from today's meeting. First, we are spending nearly $1.5 billion a year on technology-related initiatives and a meaningful portion of that data and AI. Second, the deployment of AI is happening now. It's not just on the drawing board. We have hundreds of applications and use cases for AI and digitization right now inside Gallagher.

Third, we are finding and will find more and more uses for AI. Each will help us grow, make us more cost-effective and in many cases, both. Fourth, for 2 decades, we have standardized our processes and centralized our data and analytics. Laying this foundation is absolutely mission critical for deploying AI and I believe we lead the industry in laying this foundation. Fifth, we have the data across thousands of carriers, capital providers, risk retention organizations and self-insured. Our data rules Supreme. We know our customers better than anyone or anything.

And finally, AI is an existing exciting opportunity for brokers to get better, faster, smarter. It strengthens the role we play for our client. Remember what a broker does, we serve as advocates for our clients, no matter their size, industry or geography. We understand our clients' risks and negotiate the right coverage, terms and conditions at the best price. And most importantly, we advocate for our clients when a claim occurs, Gallagher has a long history of innovation and operational excellence. We are not complacent, and I'm confident it will be Gallagher that harnesses AI and we will be the winner.

I'll stop now and turn it over to Mike Pesch, who's going to discuss our property casualty brokerage operations across the Americas. Mike?

Thanks, Pat, and good afternoon, everyone. I'm Mike Pesch, the leader of our Americas property casualty business. Today, I plan to go over 4 topics. First, I'll provide an overview of our retail operations in the U.S. Canada, Latin America and the Caribbean as well as our North American specialty business. Second, I'll discuss current insurance market conditions. Third, I'll outline how we've implemented AI across the business. And fourth, I'll give you some early indications of how the first quarter 2026 is playing out thus far.

Our retail P&C brokerage operations across the Americas totaled more than $4 billion of revenue as of the end of 2025. Our largest Americas operation is in the U.S., where our U.S. retail PC operations generated over $3.6 billion of revenue in 2025, when combined with AssuredPartners and Woodruff Sawyer, these revenues would increase to more than $4.5 billion on an annualized run rate basis. We placed over $25 billion of U.S. premium in 2025 and more than $35 billion of premium when you include AP. In the Latin America and the Caribbean, we generate around $200 million of revenue across 15 countries and have more than 1,700 employees.

In Canada, we are a top 5 commercial lines broker with clients in all 10 provinces and 3 territories. Here, we generated nearly $300 million of annual revenue with approximately 1,500 employees. Within our Americas retail businesses, we serve and compete for commercial clients of all sizes, from large risk management clients to small commercial lines and also high net worth personal lines customers, to a lesser extent. With that said, most of our clients are middle market commercial clients that spend between $100,000 and $2.5 million on their annual insurance premiums. That translates into roughly $10,000 to $250,000 and of annual commission and fee revenue to Gallagher per middle market client.

We find these middle-market clients very attractive businesses of this size typically have in complex insurance needs, yet they don't have a dedicated risk management professional on their staff, thus, they rely on our experts to identify and evaluate risk on their behalf and, of course, find the right markets to place their insurance coverage. Essentially, our experts become the client's risk management department, which embeds Gallagher inside their business. This knowledge-driven approach focusing on the most important drivers of our clients' total cost of risk is the foundation of our global client value proposition called CORE360.

The risk management advice and solutions we provide to clients is bolstered by our various niche practice groups. These specialists have deep insights into the products and unique needs for the industry verticals. These industry-focused professionals work side by side with our producers in the field, ensuring we identify and address the unique needs and risk characteristics of our customers. We have a deep bench of niche specialists spanning property, cyber, technology, construction, energy, reinsurance, space and executive risk to name a few.

Our industry experts often work together to support more complex risks. Take data centers, as an example, our breadth of expertise allows Gallagher to advise clients and prospects to the full cycle of a data center from site selection and construction through operational risk, power strategy and business interruption exposures. This exemplifies our coordinated approach to the complex and evolving risks surrounding data centers. After we place the coverage, we also have hundreds of professionals working with our clients to develop safety protocols and risk management programs while also assisting in claims resolution and advocating on behalf of our clients.

So through our focused risk management advice, differentiated coverages and products and claims resolution advocates, I believe our complete offering is an advantage when competing against the tens of thousands of brokers across the Americas. Our decades of work and hundreds of millions of dollars of investments proved to be a differentiator in the business, whether you're a longtime Gallagher producer or a new merger partner all our offerings are available from day 1 to help service more, retain more and sell more business.

Moving on to our Americas Specialty businesses, which collectively generated approximately $1.7 billion of revenue during '25. Within this business, the largest piece is our U.S. wholesale operations, known as Risk Placement Services, or RPS. RPS generated over $1 billion of revenue in '25. Founded in the late '90s, RPS is one of the largest wholesale brokers in the U.S. and includes our open brokerage programs, binding and MGU MGA businesses. Here, we are engaging with our 25,000-plus retail clients constantly providing data and analytics, innovative and differentiated products and access to markets and insurance solutions that align with their clients' needs.

The remaining $700 million of revenue includes our other specialty operations, such as ARTEX, our alternative risk solutions, captive management and iOS administration services business. our affinity business, where we offer specialized insurance solutions for over 300 national associations and affinity groups. And finally, we have our pooling risk program administration or RPA, where we offer a wide range of services for risk pools, including public, private, face-based education, public entity and nonprofit customers.

Moving on to my second topic, insurance market trends across the Americas. Starting with U.S. retail. Our customers continue to experience renewal premium increases, that's both rate and exposure combined across most lines of insurance. Overall, we're not seeing any significant changes in the pricing environment. So far in the first quarter, renewal premium change is up around 2%. There's been much discussion on property renewal premium moderation which is still felt mostly by our larger clients.

Casualty lines, on the other hand, continue to show increases with more uniform increases by client size. That said, we are seeing in many cases where there are some potential price savings available. Clients are increasing their coverage levels. If I break this down by line of business, property is down 9%, with all other coverages in positive territory. Casualty is up 5%, which includes general liability up 6%; commercial auto up 2% and Umbrella up 7%. Package is up 3%. Workers' compensation is up around 1%, and D&O is up about 1 point and cyber is up 2%.

Moving to Canada. Renewal premium changes showed decreases of around 4%, and properties around 9% and casualty is in the low single digits. Moving to the U.S. wholesale market environment. The first 2 months of the quarter, our data shows renewal premium increases of around 1% with open brokerage renewal premium down about a point and binding premiums up about 3%. Breaking this down further, property renewal premiums are down 10%. General liability is up around 3%. Umbrella is up 9%. Commercial auto is up 9% and Workers' compensation is down 2% and most other lines outside of D&O and cyber are up low single digits.

So across the Americas, we continue to see rational carrier behavior with pricing differences driven by client loss experience. Good accounts will see some premium relief in property and other lines However, accounts with 4 experience are seeing greater increases. This is the ideal market for us to show our expertise, product knowledge and data-driven capabilities. Every client is different. Different risk appetites, different needs and varying budgets. Our job as brokers is to understand each of these aspects advising our clients on the right coverage at optimal pricing, all within their risk profile. This is a market where our producers can continue to shine, and I believe we have the most talented team in the industry.

Following Pat's comments, I want to highlight a few examples of how we are utilizing AI within the Americas Property Casualty business. Our SmartMarket and Gallagher Drive platforms are already utilizing AI to help our producers and our service and support teams drive revenue growth and efficiencies. Take SmartMarket, where carriers can tag accounts in classes of business that they find attractive. This technology creates efficiencies in the renewal process. helping producers quickly match carrier appetite with client needs.

Today, with carrier partners, we have implemented AI using our SmartMarket data in a few different ways. AI is used to combine our SmartMarket data with third-party information providing quotes across certain lines of business without the need for a submission. We are also utilizing AI with our 10 years of SmartMarket data to look at submission flow and hit rates, mapping opportunities with specific producers. Combining our SmartMarket technology in AI in a collaborative way, we are faster to market and more successful with our key trading partners.

Another exciting way we are using AI to help improve our clients' risk profile with the input of their business details, our AI risk profile to provides a fast, consistent and quantifiable risk improvement plan for our clients. This is a critical differentiator to our sales teams. Not only are we understanding our customers' risk, but we're saving our customers' cost on claims and future premiums as they take actions to reduce their risks immediately.

Within our wholesale binding operation, our teams leverage AI and automation for tasks such as submission optimization, which automatically rates our submissions and renewals, analyzes -- analyzing against specific account and client attributes. This information is in hand for our underwriters to better prioritize their efforts, which, in turn, improves bind to quote ratios and speed to market.

We also have a tool to standardize policy application data and rating variables from multiple carriers into a single output, allowing our teams to have carrier quote indications across multiple carriers quickly ultimately improving our speed to market for our underwriters. And these are just a few of the exciting tools used within the specialty teams, AI combined with our tools and market knowledge allows our producers to focus their time on advising clients, structuring solutions and winning business.

And finally, I'll conclude with some thoughts on the first quarter. Through the first 2 months, we are seeing continued renewal premium increases, positive net new business spread and no significant impact from the year-over-year changes in midterm policy adjustments including audits, policy endorsements and cancellations. So based on what we are seeing thus far, we think first quarter '26 organic will be around mid-single digits in Specialty and Americas retail P&C. Looking ahead, I remain excited about our long-term prospects. We have solutions, sales talent, data-driven insights and a client-first culture, which puts us in a position to consistently win.

Okay. I'll stop now and turn it over to Patrick Gallagher, who will discuss the rest of our major property casualty retail operations as well as our London specialty. Patrick?

Thanks, Mike, and good afternoon, everyone. This is Patrick Gallagher, and my comments today will focus on our retail P&C units in the U.K., Australia and New Zealand, in addition to our London specialty business. Similar to Mike, I plan to cover 3 topics. First, I'll dimension each of these businesses. Second, I'll discuss the P&C insurance environment in each geography, and then I'll finish up with some comments on what we are seeing thus far in the first quarter.

Starting with our international retail businesses. We operate in approximately 60 countries globally and have client capabilities in another 70 countries. Today, I'll focus on our large international retail operations in the U.K., Australia and New Zealand. Combined, these 3 geographies finished 2025 with around $1.6 billion in revenue, placing around $10 billion of premium on behalf of clients.

Breaking these operations down further, we are 1 of the 5 largest retail brokers in the U.K., generating more than $1 billion of annual revenue across approximately 100 locations. In Australia, we are also a top 5 broker and in New Zealand, we are one of the leading commercial retail brokerage firms in the country. Combined, Australia and New Zealand generate approximately $600 million of revenue annually through 80 different locations.

You heard Mike talk about our sweet spot within Americas Retail is the middle to upper middle market. Our retail customers in international geographies are similar in complexity to these clients. with a focus on the middle to upper middle market. We also provide brokerage services to large account risk management business as well as smaller commercial enterprises and high net worth personal lines clients to a lesser extent. So similar sizes of customers with similar insurance and risk management needs. Accordingly, our sales approach and tools mirror that of the Americas. That was built by design over the last decade.

Today, we have truly unified global go-to-market playbook. Let me give you a few examples. First, CORE360, which Mike covered. While we introduced CORE360 around a decade ago as our U.S. go-to-market strategy, it forms the foundation of our risk management discussions with clients and prospects of any size anywhere around the world. Second, our niche practice groups that cut across industries and products. Many of them have been organized at the global level, allowing the clients across geographies to benefit from our deep knowledge and expertise. Examples of our global niches include energy, real estate, hospitality and marine.

Third is our data and analytics platform. which showcases innovative technology such as Gallagher Drive, SmartMarket and Gallagher Go. Gallagher Drive provides prospects and clients insurance buying trends for other similar Gallagher clients from around the globe. Within Gallagher Drive, a client or prospect can see information for clients like me, reviewing lines of coverage purchased, limits ultimately being bound as well as potential catastrophe exposure and claims forecasts. The platform further it differentiates us versus the competition with producer utilization of drive continuing to increase. We also have SmartMarket, which has evolved into a global offering. The SmartMarket platform is utilized by most of our large trading partners across our various global retail platforms.

And finally, our Gallagher Go mobile app, an application that makes reviewing and managing insurance coverage and easy stop for our clients. Here, a client can access their insurance account 24/7 order a certificate of insurance, managed locations, vehicles, drivers and other insurance-related content without the need to call their producer or servicer. While our retail operations utilize the same sales techniques, tools and data and analytics, they also rely heavily on our Gallagher Center of Excellence for large portions of their client servicing efforts, too.

Within our center of excellence, we have spent nearly 2 decades standardizing our processes, which have resulted in significant productivity and quality gains for Gallagher. This standardization gives us very clean and structured client, industry and carrier data. The same data that enables Gallagher Drive, Gallagher Go and SmartMarket. Over the same period, we've unified our systems around the globe. This combination of standardized processes and central data models have equipped us to better harness the power of technology, implement AI and remain nimble for changes in client needs.

Gallagher's early use of AI included policy checking and extracting information from carriers quotes to populate client proposals, which provided immediate efficiency gains. These efficiencies have allowed us to redeploy resources for sales enablement and prospecting, helping to drive further revenue growth. Mike just spoke about the success we're seeing utilizing AI within our SmartMarket platform. We're also embedding AI in our global digital products, Gallagher Go, Gallagher Drive and guide. AI combined with Gallagher Go differentiates us from our competitors, where we're not just offering point-specific tools.

We are creating an ecosystem around our customers. Many competitors will give you a single tool for a single moment in the buying or servicing process. What we've built is a front door. Once a client comes in, they have access to a connected set of capabilities across their entire customer journey. It's one place where clients can access tools, guidance and capabilities that evolve with them over time. Our clients are increasingly asking how they can use AI within the context of our services and just as importantly, what risks are associated with that use.

A key differentiator for us is how clearly we separate internal use of AI to service clients from how clients themselves use tools. Many competitors co-mingle the 2. We do not. Our focus is on what a broker should provide across the full customer journey, not just advice, but access to the right tools at the right time, all in one ecosystem.

As we consider this, I want to throw out some stats on our digital platforms. In Gallagher Go, we have tens of thousands of U.S. and international retail clients already using the portal and adding over 1,000 more each month. And later this year, we are deploying to our benefits, U.S. small commercial personal lines and global reinsurance clients. Gallagher Go will be one of the primary digital channels that the clients will experience AI from Gallagher. Here, they can perform analytics, program information as well as detailed policy and contract comparisons.

Gallagher Drive has another tens of thousands of dashboard views each month. And this is just today. In any market, the value of these comparative insights to prospects significantly increases our win rate. We've also seen an increase in retention rate when our current clients are presented with Drive. Over the next quarter, we're adding an AI platform on top of Drive. This AI will allow producers, customers to prompt with questions on coverages, limits and risk appetite to name a few. Gallagher's digital platforms will continue to differentiate us from our competitors and provide a true benefit to our clients prospects and merger partners, and our innovation does not stop here. We're embracing AI and digitization, and I'm confident our tools and capabilities will make us the winner.

Now shifting to London Specialty. Our leading franchise has roots dating back to the mid-70s. Here, we tend to focus on larger commercial clients, supporting retail agents and brokers around the world placed specialty insurance solutions across 6 main trading divisions, aerospace, marine, financial lines, construction, energy and property. Our 1,300 colleagues generate more than $700 million of annual revenue and place more than $6 billion of premium annually. London specialty growth has been very strong in recent years, and we still have many exciting growth opportunities. Let me provide you with a few of our priorities.

First, we continue to invest in and further deepen our niches and specialisms. We are constantly looking to expand our capabilities, market relationships and product offerings that align with client needs, including financial lines, cyber and energy. Second, we are looking to onboard and develop new talent. This includes seasoned producers that will add to our expertise across our 6 specialty trading units. We also continue to develop our own through our summer internship program and our graduate program, Gallagher Futures.

Third is the utilization of SmartMarket. This important technology platform provides information to carriers, allowing us to trade more efficiently for the benefit of our clients. Specialty carriers are looking for ways to grow in classes of business they find attractive, so we believe there will continue to be a lot of carrier appetite into 2026 for a SmartMarket,

Now moving to my comments on the insurance market. Let me discuss what we are seeing so far in the first 2 months of the first quarter, starting with retail. In the U.K., renewal premium changes both rate and exposure combined, are around 4%. If I break that down by coverage, property is up 5%, Commercial auto is up 2%, general liability up 5%, package is up 1%, D&O, cyber and other professional lines together up about 4%, and most other lines combined are up mid-single digits.

Renewal premiums in Australia are up about 2%. Property lines are down mid-single digits, packages up high single digits. Most other casualty lines are up low single digits, while professional lines are flat. New Zealand's renewal premiums are down 3%. Property and commercial auto are down mid-single digits, while most other lines are flat to down slightly.

The London specialty market still has ample capacity with renewal premiums for the first 2 months of the quarter flat to modestly lower from most lines. Within the London specialty market we continue to see pressure on North American cat exposed property risks and upstream energy. However, carriers overall are maintaining their underwriting discipline in our view. The competition we saw in early 2025 across D&O, professional liability, financial institutions and cyber have all moderated.

Specialty cover for aviation and marine risks in areas of conflict are seeing substantial premium increases with the longer-term impact on the market unknown. Within aviation, we see short-term premium increases for clients with trapped planes or those continuing to operate in the area and marine war risk premiums have risen sharply for vessels that are stuck in the area, which is offset by less ship traffic.

For our clients and prospects that require war cover, our teams are working together to quickly secure the cover at current terms and conditions and capacity in the market. Casualty rates for most areas have flattened off with the exception of U.S. exposed risks, showing modestly higher rates.

Pulling it all together, I see both first quarter and full year 2026 for our U.K., Australia and New Zealand retail and our London specialty units combined in the mid-single digits. These businesses are continuing their solid performance from 2025, and I remain excited about 2026 and beyond.

Okay. I'll stop now and turn it over to Tom Gallagher, who's going to discuss our reinsurance operations and global M&A strategy. Tom?

Thanks, Patrick, and good afternoon to everyone joining us on the call. Today, my comments will focus on 2 separate topics. First, our global reinsurance brokerage operation, Gallagher Re and then I'll pivot to discuss our global M&A strategy in more detail.

Starting with an overview of Gallagher Re. Gallagher Re is the third largest reinsurance broker in the world and was formed through the combination of our 2013 start-up, Capsicum Re and the purchase of WTW's reinsurance business in December of '21. We finished 2025 with over $1.3 billion of revenue, much of which comes in the first half of the year given the timing of major reinsurance renewals.

We strive to be the go-to reinsurance broker that can help advise clients globally regardless of location and size, utilizing our deep expertise and analytical capabilities. Our 3,200 reinsurance professionals provide advice, modeling, strategy and placement expertise on a wide range of offerings, including treaty reinsurance facultative reinsurance and other risk transfer products to nearly 1,000 underwriting enterprises around the globe.

Within our Reinsurance business, we've seen growth both organically and more recently, we have driven additional growth via tuck-in acquisitions. Further investments in talent, including treaty and facultative capabilities continue to drive organic growth in double digits. We finished 2025 with 14% organic growth and have had a great start to the year in 2026. For mergers, we've closed 4 acquisitions in 2025 and 1 thus far in 26. And we see many attractive and exciting growth opportunities ahead. Let me provide you with some examples.

First, we are broadening our product offerings to include solutions across life and health, marine and energy, program, cyber and property. We continue to grow our global facultative team. We are leaning into the strength of our global footprint. This includes growing our client base in existing geographies, while engaging with opportunities and winning new clients across Asia, Europe, Latin America and the Caribbean. We are investing heavily in new talent, targeting the same product growth areas and geographies. Here, we see the opportunity to add seasoned protection talent that brings experience and expertise in the reinsurance market, while also leveraging the Gallagher internship program to develop the next generation of reinsurance brokers across our global operations.

We have been very active in sourcing additional capital to serve our clients' evolving needs by adding alternative forms of capacity, such as side cars adverse reserve development covers and cat bonds. We have integrated modern technology platform that was designed to power our next phase of growth. It allows us to fully harness our global footprint, proprietary data and market access to generate actionable insights of scale. We are using the power of Gallagher with our teams identifying and executing on cross-divisional opportunities.

Working together is ingrained in our culture, we are well positioned to lever existing Gallagher relationships, whether through Gallagher Bassett, our retail business, our MGA and programs operations, and we are embracing AI to support our producers, our service teams and our clients.

AI is not a new concept to Gallagher Re. Our teams have extensive list of current uses of AI as well as what is in development. Let me highlight a few examples. We use AI to automate work within our production and service teams, elevating the work that requires human judgment. We've deployed AI across data processing, benchmarking and repeatable analytical tasks bringing our employees to focus on structuring, advising and decision-making. Some examples include: we use AAD directly in our core platforms such as Workbench to automatically extract and structure quote information from documents and e-mails. This eliminates manual work, improve data quality and accelerates trading, ultimately giving brokers better market intelligence and more time to focus on advisory services and our analytics teams time to focus on higher value activity.

AI, combined with our centralized global data model accelerates insights across geographies and lines of business. To give just one example, our cyber team uses an Agentic AI model to integrate proprietary loss data, policy wordings and threat intelligence into a risk analysis for our clients. This is a key differentiator for Gallagher Re and it is helping us win new clients and support our strong client retention.

We also use AI to accelerate our presentation time line. AI generates a draft presentation using prior responses and content library and combines this with senior expert input on clients or prospects strategy. A quicker time line allows faster information into our clients or prospects hands, generating higher win rates and a clear differentiator versus our competitors.

In Gallagher Re, AI reinforces our business model that cannot create distribution, trust or market access. AI increases the value of our assets that are hardest to replicate at scale such as our proprietary data, long-standing client relationships and global market access, which in turn lowers the cost of building new tools provides efficiencies within our sales and support teams and ultimately accelerates our revenue and EBITDAC growth.

Next, let me provide some comments on the reinsurance market environment from January 1 renewals. A quiet wind seasoned health care is post strong underwriting results during 2025, resulting in adequate reinsurance capacity to support demand for our 1/1 programs. Within Property Reinsurance, we saw rate decreases in the teens for cat exposed property and more downward pricing pressure on the top of the reinsurance towers. In this environment, our clients use these savings to buy more cover whether on lower attachment points or aggregate cover.

Within specialty lines, aircraft leasing losses were a focus for the larger and more complex programs with loss-effective programs able to renew this year with incumbents. Other programs that were not loss affected, we're able to see reduced pricing, offset in part by purchasing increased cover through lower attachment points or broadening coverage. The casualty reinsurance market continues to be cautious, reflecting concerns over prior year loss development and rising loss cost trends. Pricing was stable with terms and conditions broadly unchanged.

We continue to see increases in available reinsurance capital driven by strong earnings in both insurance and reinsurance. In this market, carriers will explore by additional protection to further reduce earnings volatility or support growth throughout 2026. While early, our initial indications for 4/1 reinsurance renewals are suggesting broadly similar conditions as earlier in the year, with a bit more downward pricing pressure on Japan-specific renewals. The conflict in the Middle East could shift rates, but it's too early to tell the ultimate impact of these events.

In the near term, it is unlikely the pricing trends will be impacted across the market as a whole. This dynamic geopolitical environment is one where a Gallagher Re team can show their unique value to our clients. We're working with our clients to clarify their potential exposures articulate possible loss estimates within their current cover. Our team is ensuring that clients with April renewals have war cover that is consistent with that of the 1/1 renewals and our team is supporting the overall insurance industry by providing unique solutions to specialty insurers for coverages such as shipping, energy, aviation, cyber, political risk, property to name a few.

As we look to the rest of 2026, we remain bullish on our growth outlook for reinsurance. Our growth strategy is cross lines, across geographies and multifaceted, a growth strategy that will continue to outperform in any market.

Okay. Now I'll shift to M&A across all of our units, clearly an important part of our shareholder value creation strategy. Gallagher has a long successful track record of tuck-in M&A, and there remains a massive opportunity to continue to grow through mergers. That growth shows up initially as acquired revenues and then the brands we buy help fuel future organic growth.

According to one of the leading industry consulting firms, there is upwards of 30,000 insurance agencies and brokerage firms in the U.S. alone, and we think there could be another 30,000 or so across our major operating geographies. Most of these firms are smaller, family owned and operated. We believe Gallagher is a natural home for these entrepreneurs who are looking to add additional value to their current clients, accelerate growth in their business and help further advance their employees' careers.

M&A for Gallagher is about being better together for the benefit of our clients. That 1 plus 1 could possibly equal more than 2 perhaps 3, 4 and even 5. Our merger partners bring us expertise, market insights, creative thinking and relationships. We get their brains and that makes Gallagher better. And Gallagher has many exciting tools and capabilities to offer our merger partners, including top-notch leading industry expertise through our various niche practice groups, access to our data and analytics platform, Gallagher Drive, increased breadth of risk management solutions, retail, wholesale, benefits, alternative markets and reinsurance. We have fantastic relationships with our insurance carrier partners, including unique product offerings and a more efficient back and middle office through our Gallagher Center of Excellence and a truly recognized brand name.

We are merger partner's ultimate and final home. They won't have to ever change their name again. They won't be flipped. They won't have to stop investing in the business or make drastic expense cuts to pay rising debt costs. And if they got equity in the business, they noticed the exact same type as other employees and the management team here. No second, third or fourth class owners at Gallagher, we are all for 1 and 1 for all.

Merger partners immediately get our operating playbook and knowledge, allowing them to bring more value to their clients from clients renewing through Gallagher submit to using Gallagher Drive clients like me to compare their insurance program against other Gallagher clients to the quick turnaround time of certificates of insurance and the accuracy of their insurance policies and many, many more.

Our M&A teams are also using AI as a tool to help accelerate our growth by automating repetitive tasks while our experts handle the strategy and negotiation. Some examples include using AI to screen for potential merger targets, scraping company databases and cross referencing to public websites. We can use this tool to search for similar targets to those already acquired. We utilize an AI tool to help with the purchase agreement drafting and identification of errors or differences in legal language from commercial intent. And as we go through due diligence, AI also helps us review the data room to summarize and detailed documents.

We're also developing AI tools to automate due diligence reports term sheets and preparing executive summary reports and using AI to review data rooms to indicate key issues for missing information. These examples are exciting. And there are many, many more projects in the pipeline. We believe AI can work for our M&A team, just as I outlined for Gallagher REIT. AI will accelerate our organic growth, acquisition growth, all while providing further cost efficiencies within our business.

As an owner, you have a choice to make, get all of Gallagher's capabilities overnight by joining us. Otherwise, you could hope that your clients don't demand it or spend numerous years and lots of money and energy trying to build it. More and more owners are recognizing this decision, and it is why our M&A deal sheet and pipeline continue to be robust. So we are confident of our proven M&A strategy, and we'll continue to deliver excellent results and returns for our merger partners, our clients and our shareholders.

Okay. I'll now turn it over to Bill Ziebell, who is going to discuss our benefits brokerage and HR consulting operations, known as Gallagher Benefit Services. Bill?

Thanks, Tom, and good afternoon, everyone. I am Bill Ziebell, and I lead our employee benefits and HR consulting business, Gallagher Benefit Services, also known as GBS. My comments today will cover 3 topics: First, I'll provide an overview of GBS. Second, I'll give you some insights into the health and benefit market and our client value proposition and our execution strategies. And I'll conclude with some observations from the first 2 months of the first quarter.

GBS was started in the U.S. during the mid-70s and expanded internationally since 2010. First in the United Kingdom, Canada following in 2012, Australia in 2017, and New Zealand in 2025. Today, we have significant scale and expertise focused on an employer's most pressing needs. This includes talent, employee benefits and employee financial well-being. GBS was the fourth largest benefits broker and HR consultant in the world at the end of 2025 generating around $2.6 billion of annual revenue. And with the addition of AP, our run rate annualized revenue will grow to over $3 billion this year.

The U.S. remains our largest geography and represents approximately 90% of annual revenues, inclusive of AP, while the remaining 10% or so is predominantly from the U.K., Canada and Australia. Our producers help businesses address their human capital needs by providing solutions and access to a wider range of employee benefits products. These products include traditional group insurance coverages such as medical, dental, vision, disability and life.

We also have access to various voluntary products for employers to offer to their employees. In addition, we advise on employee benefit plan design, provide financial projections of benefit plan and can also suggest potential cost savings strategies. These offerings combined represent more than 2/3 of our annual run rate revenue. The remaining 1/3 of our revenue comes from retirement services, compensation advice executive life, HR consulting and other similar offerings that help employers address their human capital strategy outside of traditional health and benefit offerings.

Many times, we are competing against local or regional benefit firms that don't have the product breadth and expertise that we have. With that said, we serve clients of all sizes, including large or jumbo accounts, where we provide an alternative to some of our bigger competitors. We also can leverage our multinational consulting business to help employers with operations outside of our core geographies.

Before I dive into some of our growth initiatives, I want to spend some time talking about Gallagher People's strategy, our client value proposition. Gallagher People's strategy is the approach our benefits professionals take when developing a total rewards package for our clients. It's a complete strategy that employers can use to attract, engage and retain talent while simultaneously managing costs. When you consider offerings in the benefit space, there are many employee benefits and rewards outside of traditional compensation consulting and medical coverage. For example, employers can enhance financial well-being through defined contribution plans or offer physical and emotional health products to their employees.

Our engagements and approach are not just about being a medical or health insurance broker, rather our bespoke and tailored approach for each client helps to tackle their most important HR and organizational challenges to achieve their human capital goals. When we consider overall opportunities for GBS, the macro environment is supportive of growth. And with that said, we are seeing more employers focus on strategies and offerings to retain their employees compared to strategies to attract new talent.

And while talent remains a top priority for most organizations, managing rising medical cost is becoming increasingly important for employers. So as employers are looking for ways to support their human capital objectives, while also managing continued medical cost inflation, these are exactly the issues that our professionals are helping them navigate.

Our work goes way beyond placing the insurance. We first understand the client and their employee population. How are their plan designs match with their demographics, with their peers. We then identified cost drivers and identified bespoke solutions for their needs. These solutions include narrow networks and preferred providers such as centers of excellence. Pharmacy costs are rising faster than overall medical, and we are very good at negotiating with PBMs to deliver savings for our clients.

As we consider market conditions within the health space, we saw medical cost trends increasing throughout 2025 and expect that trend to continue in 2026. Fully insured renewals at our largest carriers are showing high single digits to upwards of 10% premium increases. And for stop loss, we are seeing average premium increases in the mid-teens and in some cases, north of 20%. These trends are driven by increased utilization, including the number of diagnostics and treatments. Health provider consolidation and hospital workforce shortages, cautious from Medicare and Medicaid to commercial plans, higher levels of chronic conditions and newer cell and gene therapies to name just a few.

For pharmacy costs, we're expecting trends into the low double digits due to higher utilization of higher-cost drugs, including GLP-1s. So elevated health program price increases are likely here to stay for the near to intermediate term. But remember, our job is to help mitigate these increases through program design and various point solutions and services.

Our continued investment in data and analytics has helped us roll out Gallagher Drive and add new products and services for our clients. Gallagher Drive continues to be a differentiator for our benefits team. This technology provides clients and prospects, insights on their benefits program and performance, allowing further support to recommended program design or coverage changes. Many times, our experts can find savings while maintaining or even enhancing coverage.

Within GBS, our teams have embraced AI, allowing us to deliver faster insights, more personalized service and to build stronger client relationships. We have a multitude of various AI projects in development. Today, we are using AI to access third-party data enrichment to better understand risk when claims data is unavailable from the carrier, which improves our client retention and helps drive new business. We layer AI on to our clients' total rewards portals to better engage employees and provide additional new revenue opportunities to our talent business. And we use AI to more easily find targeted opportunities and better qualified prospects that meet the criteria.

Within GBS, AI helps to provide quick valuable insights to our clients and prospects. It delivers efficiencies and improved accuracy within our client support and enhances our offering to potential merger partners and AI supports our employees at what they do best, and that is to act as a trusted adviser to our clients to help them achieve their human capital goals. We are also differentiating Gallagher from the competition by showcasing our expertise through webinars, thought leadership and various online and print content.

Our recent webinars have covered topics like HR, compliance updates, pension plan derisking, weight loss drugs, employee retention among many others. These online events on top of the thought leadership pieces we are publishing on a regular basis, continue to drive ongoing engagement with our customers and prospects.

Shifting to some comments on January and February. During the first 2 months of the first quarter, we saw a favorable net new business spread within our core U.S. Health and Benefits business and continued strong demand for our individual products in retirement consulting offerings with more muted demand for our consulting services. When I combine what we are seeing across our global business, first quarter organic is running in the mid-single digits, with full year 2026 organic still estimated at approximately 4%.

Looking ahead, I believe we are positioned for continued growth. Our experts are delivering on our people strategy value proposition. And when combined with our thought leadership, expert insights, leading tools and products, we believe we can help clients navigate their most important HR and benefit needs.

Okay. I'll stop now and turn it over to Scott Hudson, who's going to discuss our Risk Management segment or Gallagher Bassett. Scott?

Thanks, Bill, and good afternoon, everyone. I'm Scott Hudson, and I lead our third-party claims administration business, Gallagher Bassett. If you're familiar with our financial statement reporting, it's also known as the Risk Management segment. I'll cover 3 topics today. First, I'll provide an overview of Gallagher Bassett or GB for short. Then I'll give some insight into what we're seeing so far during the first quarter, and I'll finish with some comments on how the business is being positioned for the long term.

On to the business overview. GB was formed in the 1960s by the Gallagher Brothers and Sterling Bassett and has grown to one of the world's largest P&C third-party claims administrators. GB finished 2025 with $1.6 billion of revenue of which approximately 80% of our revenues are generated in North America, and the remaining 20% is spread across Australia and to a lesser extent, EMEA. We have nearly 11,000 employees globally, and many of our claims managers work from home.

Our business revolves around adjusting and paying claims on behalf of our clients. We don't take underwriting risk. In 2025, we closed well over 1 million P&C claims and paid out around $18 billion on behalf of our clients. Put into perspective, that level of annual claim payments would put us close to 1 of the 5 largest P&C insurance companies in the U.S. About 60% of our adjusting revenue is derived from servicing workers' compensation claims, around 1/3 comes from liability claims and approximately 7% relates to property.

We have numerous specialty liability offerings, including medical malpractice, professional liability, environmental, product liability and cyber, to name a few. When it comes to property, we focus on specialty classes and complex claims. We're not large storm chasers or catastrophe loss adjusters. So across workers' compensation, our many liability lines and property were able to service most of our clients' P&C exposures. Lastly, my Plan Manager, our disability claims handling unit in Australia closed nearly 6 million claims in 2025.

Moving on to our different business segments at GB, which we define by client type. First, we serve large commercial clients, think Fortune 1000 businesses. These clients have balance sheets that allow them to have large deductible programs or self-insure. They then outsource the claims resolution process to us. While this is our most mature and largest client segment, there's still significant potential for growth. Second, we serve public sector clients. This includes municipalities, state entities, federal governments and school districts. We have tremendous potential for growth in this segment as well.

Third, we serve group captive or alternative market clients. These insurance entities utilize our services for their claims handling infrastructure. And once again, we see significant potential for growth in this segment. Our fourth and last client segment is insurance carriers. These are underwriting enterprises that choose to fully outsource our white label a portion of their claim handling operations. Outsourcing a portion of a carrier's claims can help address aging claim systems and adjuster recruitment, two of the major challenges carriers face today.

Another compelling proposition for insurance carriers is our specialist runoff claims capabilities. It allows carriers to move a large group of legacy claims to our platform, a move that can result in better outcomes and reduced loss adjustment expenses as carriers wish to reduce or eliminate claims infrastructure that's no longer needed. With around 150 different carrier clients, even more when you include the Australian work comp schemes, this continues to be the fastest-growing portion of our business today. That said, carriers are a sizable and still largely untapped market for our services. Today, around 90% of U.S. claims are still handled by insurance carriers and the same is true outside the U.S.

Customers choose us because of our deep expertise, consistent execution and outstanding service, which in turn leads to superior outcomes. A superior outcome could be mitigating a loss or avoiding a loss altogether, a quicker return to work, more efficient medical care delivery or greater employee satisfaction. We tailor our offerings to provide customized service and increased value for our clients. Our clients can each have different objectives for some it's brand protection, others customer loyalty or getting employees back to work sooner. We adapt and tailor our services accordingly with a clear execution plan.

Our claims managers have access to proprietary tools and technology to guide decision making throughout the life of the claim, prepare analytical reports and provide easy access to claim status and financial information. Our RMIS platform, LUMINOS, has consistently been recognized as the best in our industry. The system has risk analytics and benchmarking tools built in, providing our insurance carrier clients with real-time claim insights by geography and industry, which ultimately assist them in making better underwriting decisions. We also have simple state-of-the-art processes and tools for exchanging vast amounts of data with clients, brokers and regulators.

One of GB's greatest advantages remains the vast quantity of claim data we possess. We've introduced machine learning and other AI capabilities across our business to further improve risk and claims management performance. GB's objectives in using AI are as follows: first, use AI to enable our claims managers to make better, faster and more consistent decisions at critical points in the claim life cycle. This leads to optimal service, quality and financial outcomes for our clients.

Second, use AI to support and automate as much work as possible so that claims managers can focus on tasks for which skilled professionals are uniquely suited, demonstrating empathy, forming constructive relationships and applying judgment in complex situations. And third, use AI to mine our skills, experience and data to further refine methods of reducing claim frequency itself, which is the best possible outcome for our clients.

We have several AI assets in use in our business today, including a workers' compensation severity prediction model, a workers' compensation early intervention model and auto liability, severity prediction and reserve adequacy assessment model, a litigation prevention model with specific recommendations for preventing litigation, chatbots to assist users of LUMINOS. A claims summarized for both clients and claim managers, a document summarizer a fraud detection model that has already saved 1 client more than $100 million and voice and e-mail sentiment analysis.

The uses of AI in our business are endless and will enable us to provide even better service better quality and better financial outcomes for our clients in the future. Our team, combined with AI will be a key ingredient to winning new business, retaining clients and ultimately driving strong, consistent organic growth.

Moving to mergers and acquisitions. The TPA industry is much more consolidated than the fragmented brokerage market. So the opportunity set for mergers is narrower. With that said, throughout 2025 and early '26, we were successful in adding firms that expanded our offerings and deepened our expertise. In 2025, we closed on 2 acquisitions: first, our February 2025 acquisition of W.K. Webster, a marine and transit claims specialist, with operations across the U.S. in the U.K., Europe and Asia. It expands our footprint and adds to the services we're able to provide insurers and global self-insured companies.

We also acquired 100% of safety professionals in 2025, an expert in safety consulting solutions in the construction and manufacturing sectors. Earlier this year, we closed on German-based Reckon Co, a global transport and marine claims specialists rec tucks in nicely to W.K. Webster and expands Gallagher Bassett's footprint in Europe. So M&A is used as a strategic tool for GB. Today, we have an active pipeline of potential merger partners across our major geographies.

Moving on to some comments on first quarter 2026. Let me provide you with some data points on what we're seeing through early March. First, client retention remains very strong. We don't lose many customers due to our outstanding service, industry-leading tools and expertise. Second, we continue to see claim counts growing year-over-year due to both new business wins and to a lesser extent, growth from existing clients. And third, our new business pipeline remains very strong. Our diverse offerings and value proposition of superior outcomes are very important as prospects react to cost pressures across their businesses.

Pulling it all together, we're excited about our opportunities in 2026. For the first quarter, we estimate organic growth of about 9%, reflecting the solid new business we spoke about late last year. We still see full year '26 organic around 7%. In terms of EBITDAC margin, we still estimate both our first quarter and full year '26 margin in the 21% to 22% range.

Before I hand it over to Doug, I want to close with a few comments about how GB is being positioned for the long term. GB continues to invest in claims professionals and additional training for our seasoned professionals. We're adding new products and services organically and through M&A, including our enhanced marine and safety capabilities in order to cover even more of our existing and new clients' exposures.

We're embracing new technology, including AI and machine learning that further enhances and improves the claims experience and financial outcomes. And our compassionate client-focused culture continues to drive high levels of climate and client satisfaction. So as you can tell, I am extremely excited about our near and long-term prospects and I believe the business is in fantastic shape.

Okay. I'll stop now and turn it over to our CFO, Doug Howell. Doug?

Thanks, Scott, and thanks to everyone for joining the call this afternoon. Today, my comments will come in 2 main portions. First, I'll cover my typical 3 topics. I'll recap organic revenue and market commentary from each of our business leaders highlight some items from the CFO commentary document and then some comments on cash, M&A and capital management. I think that will take me about 6 or 7 minutes.

Then for my second portion, Sara Walsh, our new IR leader, and I will do a virtual fireside chat on AI. While that might take an additional 10 to 12 minutes, I would hope it answers many of the questions you might have and shortens Q& a bit as we have a 6:15 p.m. Eastern time hard stop.

So all right, to the business unit organic revenue recap. Mike, Patrick and Tom all provided you with strong outlooks on our global P&C retail, specialty and reinsurance brokerage operations. Across each of our business units, the teams continue to deliver strong new business production and excellent client retention with solid 1/1 renewals for our reinsurance team, too.

Within our renewal premium data, we are seeing the first 2 months of '26 look a lot like where we ended '25. Property continues to see moderation and casualty rates continue steady increases. We also continue to see a bifurcation in renewal premiums by client size, with property prices down more for larger accounts than for midsized and smaller accounts. You also heard from the team that in many cases where clients see savings in their premiums, they redeploy those savings and opt in to buy more insurance.

Then repeating what Pat said, we continue to see a solid underlying business activity as our data on first quarter audits, endorsements and cancellations continues to trend positively. As we consider all of this information, it feels like our global P&C units, including reinsurance combined might post first quarter organic somewhere around 5%.

Then Bill walked you through our employee benefits and HR consulting business. He has seen favorable net new business spread within the core U.S. Health and Benefits business and continued strong demand for our individual life and retirement consulting. This offset slightly lower demand for our talent and communications consulting. Continued increases in medical costs and solid demand for our individual products and offerings will support strong organic growth in '26.

Accordingly, we see first quarter organic around 4% within our global benefits operation. So when we combine P&C reinsurance and benefits, it's looking like first quarter brokerage segment organic will be in the 4.5% range and still supportive of a midpoint, 5.5% organic full year. That would be a fantastic quarter and full year.

Now moving to the CFO commentary document that we posted on our Investor Relations website. Starting on Page 3. This provides you with the usual brokerage and risk management segment modeling helpers. Just a couple of changes from the end of the January document. First, FX. Relative to late January, the dollar has weakened a bit, mostly against the pound. So please take a look at the updated revenue impacts we have provided here for the remaining quarters and full year. And second, just an annual reminder to take a look at our quarterly brokerage segment noncash expenses and noncontrolling interest forecast for '26 as these amounts can vary by quarter.

Flipping to Page 4. This page breaks down our organic performance by business that we've provided a couple of times before. We've gotten very good feedback in providing this. Some takeaways. First, our full year '26 organic estimate remains the same in total compared to what we estimated in January. Second, we've now added our first quarter '26 organic estimates by business in the pink column, which align with the outlook you heard from each of our business leaders today. Third and one last point. We've been asked to define what approximate means on this page. That means our best guess today within a range.

For first quarter, the range around that estimate is very small given we have 2 months in the books already. But admittedly, March is a larger month. For full year, it could be 0.5 point or so on either side. As for the Risk Management segment, Scott just told you, first quarter organic is likely to be terrific, coming in around 9%. For full year '26, we're still expecting organic of approximately 7%.

Turning to Page 5 in the Corporate segment, nothing significant here, no change to full year outlook and only some timing between quarters. Moving to the top of Page 6. Our interest income table only a few small tweaks from what we provided in January and one repeat from January. Please review the second line of this table for the amount of interest income we earned on funds we are holding to buy assured partners. Clearly, that has gone away, and you can see it won't repeat here again in '26. I'll talk more on the impact to EBITDAC margins when I get to Page 8.

Staying on Page 6, but shifting down the page to rollover revenue table, we've updated for M&A that we've closed through yesterday, made a few tweaks on earlier closed M&A, and you'll clearly see that it excludes Assured Partners that I'll get to on the next page. So moving to Page 7. This is the same page we have provided several times before to show you the impact of AP rolling into our numbers. Recall at the end of January, we were a week away from wrapping up budgets. So the only update to the January version is a reclass between revenues and expense and a slight shift in quarterly seasonality. No change to full year EBITDAC estimates.

Then please be careful here. For modeling, you can use the first and second quarter '26 columns as is. But for third and fourth quarter, you should only add the delta between the pink numbers and the blue '25 numbers. And it's important to read those footnotes. I'll repeat them again. They say the table reflects the midpoint of our estimate and does not include any revenue or expense synergies. The noncash figures shown on this page, which reflect depreciation and earnout payable are included within our estimates on Page 3. So please don't double count. And finally, we still see annualized run rate synergies of $160 million by the end of '26 and you'll read we're moving up our estimate by early '28 to be around $300 million. So this is a page of really good news.

Moving on to Page 8, a table we first added in January to help you better understand items that impact the comparability of our Brokerage segment adjusted EBITDAC margins. We are told this is much more helpful than me doing a verbal bridge as I had done historically. I guess a picture paints a thousand words. I know it's noisy but it's so important for investors to see that for full year, we're expecting underlying margin expansion, and we're also expecting margin lift from rolling in AP and AP synergies. That gets clouded mostly by no longer earning interest income on funds. We held through August 18, '25 to buy AP, and it gets clouded a little bit from rolling in mergers that naturally run lower margins. It also really helps understand the significant difference between Gallagher seasonality and AP seasonality.

But here's the punch line, and we've conveyed this before that headline margins will be going backwards in first and second quarter, but then flip the other way in third and fourth. That might fuel negative click date, but the real story is that our business is getting more profitable every day, both organically and through scale advantages from our acquisition strategy.

Flipping to Page 9 to our tax credit carryforwards. Just a reminder that we have about $713 million of tax credit carryforwards and another $1 billion of future tax benefits related to our purchase of AP. This creates a nice cash flow sweetener to fund future M&A. For modeling purposes, just assume our cash taxes paid will be around 10% of EBITDAC for the foreseeable future, and that should get you close.

Alright, moving to cash, capital management and M&A funding. When I look at available cash on hand, expected free cash flows and future investment-grade borrowings, over the next 2 years, we estimate close to $10 billion to fund M&A before using any stock. And also, please note, you can read our 10-K that we ended 2025 with a share repurchase authorization of $1.5 billion. Thus far in the first quarter, we have repurchased approximately $250 million of our shares. We believe our equity is woefully undervalued by the market. So this repurchase was opportunistic, but it's not in place of a growth through M&A strategy. Quarterly, we will continue to watch the market for M&A pricing versus our stock pricing.

That said, when we look at our M&A pipeline now, it's strong, it's full of targets at attractive multiples, which does immediately create shareholder value through a nice arbitrage. And one last bit of good news on this part. Last week, we were upgraded by S&P to BBB+, another testament to our consistent two-pronged growth strategy and our continued profitability improvement.

So that covers my typical prepared remarks. Now I'd like to spend 12 minutes or so on AI, but I first want to introduce Sara Walsh as our new Head of Investor Relations. Sara has been at Gallagher for nearly 20 years. She is also Treasurer and Vice President of Corporate Finance. Many of you have already met Sara over the years, but what most of you probably don't know is that Sara has been in the investor room with me and the management team, providing us all the numbers for all of our Investor Days and quarterly earnings calls for nearly a decade. So this role is a natural for Sara, given she's already so entrenched in our business and our financials, and so she'll do a terrific job leading our IR efforts. So welcome, Sara, and take it away.

Thanks, Doug. I look forward to working with all of you that I already know and also meeting those that I haven't met over the next month or so. So I'd like to get to our virtual fireside chat, covering 1 of the most prevalent topics in the insurance industry today, AI. Over the next hour, management each gave a minute or so of comments on AI within their businesses. But Doug, I'd like you to dig in more from your vantage point as a CFO.

Sure. Happy to.

Okay. Let's start simple. How much is Gallagher spending a year on AI.

All right. Well, you heard Pat say, our technology-related budget is about $1.5 billion a year. It's a little hard to unscramble that into exact buckets because AI is happening centrally, and also a lot is decentralized too. but a decent guess of direct AI-related digitization, cost to feed AI, our data and training AI to do our processes leads me to estimate we're spending about 10% of that $1.5 billion on AI-related costs. And to date, really AI has not required a separate outsized investment cycle. I think that our normal rate spend is sufficient to fund our AI efforts for the foreseeable future, too.

Okay. So Doug, where would you say Gallagher is in adopting AI?

Well, we believe we're well ahead, particularly in the middle market and perhaps even overall. It's important to remember that 90% of the time or more, our competition is the 60,000 mid- to smaller-sized brokers around the world. They just can't invest into AI like we are. More importantly, we believe this head start is going to compound with time. But here's some by the numbers. We have 40,000 employees already using AI. They were doing about 1.6 million self-serve AI prompts a month, and that's just to illustrate that self-used is broadened across our workforce.

We also have a robust AI training program. We're already rolling that out to tens of thousands of Gallagher employees. And we've also been able to deploy AI quickly because since 2004, you've heard us constantly talk about standardization and essential data strategy. While we're never going to be done with that journey, we are so far along with standardizing, centralizing, automating and having that single global data strategy that we've been able to quickly deploy AI at scale.

So when I look at some other numbers for specific broad-based use cases, not the $1.6 million self cases. You heard the team over the last hour, but some more numbers. There are dozens that are broad-based and full end use another 2x that number in launch phase and another 5x in the treatment, and we'll build it phase.

Thanks, Doug. So I guess, what platform is Gallagher using? And why do we choose it?

All right. First, let's remember, we are using not building large language model AI platforms that are built by other developers. We're using it, not building it. But we have built our own common user interface and internal AI that lays on top of 1 of the 3 household LLM names in AI. That has a lot of benefits. It allows us to ring-fence our data in from becoming available to the outside world and it protects our process IP. It also is very important for data security.

But then we are also plugging into that to our user interface layer, bespoke small language models for the unique parts of our business. It also means we're not tied to a single vendor. We could easily deploy multiple large language models or lean into one over another if they evolve at a different pace. And it also helps us avoid retraining our folks on -- regardless of which model we use or switch to use. Our strategy of owning and building the user interface layer with a robust security and governance frameworks, lets us remain flexible at the underlying bottled player.

Okay. So now, I guess a more meaty question. Can you help provide some context around the size of our global revenues, let's say, from personal lines and what I'll call micro commercial assume micro here means under $10,000 of annual premiums. And can you help reconcile, I think what Mike Pesch had said back in September of '23 at our IR day, he then indicated that our personal lines revenues had made up about 3% of the U.S. retail revenues at the time.

Sure. But let me work backwards on that. Mike 3% back in 2023 was U.S. only and also included high net worth E&S personal lines placements and other highly complex personal lines, let's say, yachts and boats, et cetera, that are that are very complex to ensure. But let me frame it a different way today in the context of AI disintermediation. We generate global revenues from our personal lines of micro commercial Standard Lines clients of about $500 million of revenues, maybe at a margin of around 35%.

So call that 3% of our global revenues. But it's important, please everybody listen, that's not the right number to use here. When you peel that apart and we see less than half of that at risk of AI disintermediation. So arguably, $200 million of revenue exposed, call that 1% to 2% of our global revenues.

Okay. So walk me there. How do you get to $200 million?

Well, obviously, we have so much data on our customers. So we sliced and diced it. We went through all of our personal lines and those micro commercial clients details for each of our businesses. There's a huge portion of that are in markets inherently harder to just intermediate. They're specialized or E&S markets. Another large portion is in a complex industry. It could be in a high-risk area, have poor loss experience. And then we looked at those that buy 2 or more policies, but the total is below $10,000. Each of those situations, plus then there's another half dozen of smaller other reasons, quickly whittles away the exposure and leads us to conclude a very small risk for AI disintermediation.

So when we talk about disintermediation, we sum it up by saying it's concentrated a small subset of low complexity, small commercial and personal line policies. Another way of understanding it, the more complex threats, the more valuable the advisory relationship becomes. That's where 98% to 99% of our revenue is concentrated. Our business is advisory-led. It takes on complex issues and it's relationship-driven. AI will strengthen that model rather than disrupt it.

And one last slot. Frankly, even most of that $200 million that's left over is arguably not even at risk because customers could probably buy their insurance directly if they are -- if they want it, but they don't because they understand the additional value they get going to using a broker.

Okay. So not to dwell on that 1% to 2% of Gallagher's business, but why don't these clients buy direct now?

All right. That might be a little bit longer answer, and I'm not going to repeat what we've already said and everybody has said on this call that evolve the value you bring to the relationship. So maybe we should look at it from the customer standpoint. To start, we know insurance premiums comprise about 2% to 3% of our micro and small and mid-market customers annual expenses. We earn on average, let's say, 10% of these premiums. That means a broker gets about 0.25%, 25 basis points of their annual expense -- of our customers' annual expense budget.

So our customers are smart. They know that they're much better served to focus on the other 99% of their expenses. And more importantly, they know that making a mistake to save 25 basis points of their cost, could cost them 1,000x that amount or even bankrupt them. So they know that they get all of our expertise, access to markets and we negotiate the risk pricing. And when the -- most importantly, where their advocate when they have to make a claim. We represent them. We are the trusted adviser. And finally, they do know what we make. We disclose that. It's no mystery and they know that we're a bargain.

Thanks, Doug. Most of your commentary so far seems to be focused on Gallagher's moat. So give me some examples on where Gallagher is on the offense using AI.

Okay. Well, this will take me a minute or so. Let me pick a few examples of what the business leaders covered earlier but give you some numbers to show why this -- by using AI to better enable us as exciting.

All right. I'll start with how we're using AI to quicken our turnaround of insurance quotes. Last year, the US P&C retail team generated about 55,000 quote letters for our clients in one vertical. They have compiled the critical information from multiple carrier quotes. This used to take us about 45 minutes for each letter. Now our teams using AI. We're down to about 30 minutes a letter, creating about 35% efficiency on this one single process.

We had similar success in GBS. You heard Bill talk about this. We're doing about 30,000 marketing spreadsheets a year when we pulled out all that critical information from the carrier quotes. So it used to take us about 40 minutes and now this process with the addition of AI is down to 20 minutes. That's -- we've cut that in half or 50% efficiency. In GBS, we're also using AI to help populate our agency management system by extracting details from statements of benefits coverage. We have a lot of -- 55,000 of these this year before AI, it takes about 60 minutes, and now we're down to about 45 minutes. So we picked up 25% there.

Within our brokerage division, we're using AI to summarize our clients and process loss runs for proposals and quotes to the carriers. We've got about 60,000 of these loss runs were reviewing a year, and it previously took us about 150 minutes to manually summarize each document, AI has given us about a 60% efficiency in that. We're down to about 100 minutes on it.

And in GB, you heard Scott talk about this a lot. Our claims managers receive about 90,000 critical and other time-sensitive e-mails for things like policy limit demands or summons and complaints. The average turnaround time to respond to these e-mails used to be around 3 days. AI is now drafting real-time responses and enhance the accuracy of output. Well, these are just a few that the guys talked about today and I picked out. We continue to find more and more uses of AI, but you can see that there's substantial productivity improvements there. All of that will help us grow faster, save costs, in many cases, do both.

Those are really great examples, Doug. So can you help translate those operational gains into future cost savings for Gallagher?

Yes. Listen, let me do this, but I'll do it this way. And this probably undersay -- let me talk about the financial gains on this or the green money probably understates the qualitative or Blue money savings to. But alright, let's dimension our cost.

Let's say Gallagher will post about $17 billion of revenue this year. This is for illustration and allows me to do some easy math, and this is not a forecast. About 1/3 of that is already EBITDAC profit. About 20% goes to our production layer, about 15% goes to our customer support layer and about 15% goes to our back office layer. So that's where the $17 billion goes.

So perhaps between AI, other technology and further use of low-cost labor locations, maybe we could see 5% savings in our production layer cost, maybe another 10% to 15% of the support layer cost and perhaps 20% to 30% of our back office layer. And that might take us 3 to 5 years to fully realize those levels.

Thanks, Doug. So where did you get those percentages?

Well, using some of the early metrics that we're seeing that I just discussed above, combined, and this is the most important thing, but what we've already learned from our time and effort metrics over the last 2 decades, and our experience of lifting and shifting work to our centers of excellence. So I'd say those percentages are an educated guess.

Well, I guess it seems like a lot of costs are coming out. So do you worry about how that impacts our employees or Gallagher's bedrock culture.

No, actually. We know because of our lift and shift to lower-cost location, it actually creates better quality jobs. The AI opportunity is to eliminate repetitive work and better support our folks. And then also from a workplace planning standpoint, just realize normal attrition already gives us flexibility.

Think about it this way. Around the world, excluding our Centers of Excellence, last year, we had to rehire filling open positions just from -- that arose from normal attrition, about 5,000 people comprising about $500 million of compensation costs. So over the next 2 to 3, 4 years, our normal attrition, even with modest hiring, could easily allow us to realize this productivity benefit without having to lay anybody off. So our view is that AI will help us upgrade work and expand capacity, all while remaining consistent with the Gallagher culture.

Thanks, Doug. So far, we've heard so many mentions the Gallagher centralized and standardized processes. Both you and Pat have touted Gallagher's data is a competitive advantage and why it is required for AI? So why is this so meaningful?

All right. That's all -- that's a great question. Data does run Supreme, real Supreme for us. And it's -- all this is interrelated and underpinned by the basics of insurance. You can't profitably underwrite and price risk without deeply knowing the risk. So because of our centralization and standardization, what we know are all the questions that thousands of carriers ask to underwrite risk. We also know more about a customer than is publicly available.

We also know about risks that never get a quote from a carrier. If they are in a captive, are self-insured in pools, recycles, risk retention groups, et cetera. We also know new business start-ups, spin-offs, put downs, et cetera, that have no history or have changed history. And we know when a customer's business has or will change long before it ever gets submitted for underwriting. And don't forget, we even know the details and have tons of data on prospects that don't end up being clients yet.

So because of our centralized data on all of these customers, carriers, insurance policies and prospects, all of the details, we have a competitive advantage. AI is only as powerful as the quality and accessibility of the underlying data. We believe our data foundation is a real differentiator.

Thanks, Doug. So one more for you. How does Gallagher's centers of excellence play into this AI story?

That's another great question. They are hand in glove. It is a competitive advantage that we have 17,000 employees in our centers of excellence. The vast majority are knowledge-based employees that have been deeply trained in thousands of narrow technical verticals. It is this knowledge-based workforce who are already building our small language models and having early success using Agentic AI. In other words, we have the Army that can quickly train, train and retrain AI.

Okay. So we need to wrap up and get to Q&A. Do you have any last comments?

All right. I'll see if I can get this down quick. Yes. I hope that every listener, I hope you take away from our cumulative -- we spent about an extra half hour on this today across everybody in my comments that we have embraced AI, and we have proved we are not late to the party.

We've discussed the following: AI can accelerate analysis, accelerate revenue growth and create efficiency, but it does not negotiate tailored covered advocate claims, assume professional liability or even take responsibility for risk decisions. Those elements remain inherently human and are central to the value we provide as brokers.

Again, I'm confident that we have the domain knowledge, and we have access to the markets. We already put in the hard work to standardize and centralize, that gives us the know-how and critical data, and we have an army to train and continue to implement AI. And then from a financial perspective, we expect AI benefits to first accrue through productivity, efficiency and workload expansion, which will positively impact our margins over time. The revenue benefits are more gradual and come through improved responsive, higher win rates and even stronger client retention more than offsetting any disruption, in my view.

And finally, I'm confident we're well ahead of our competitor set and that AI is integrating naturally into Gallagher. It's going to help us grow organically, grow faster through mergers and acquisitions, rapidly improve our productivity and quality while reducing our cost, and all of this will bolster our already rock-solid client-first culture.

So those are a lot of words for you all to digest today. Operator, if we could move to Q&A, we'll see if we can get a -- get that done here in the next half hour or so.

[Operator Instructions] And the first question comes from the line of Yaron Kinar with Mizuho.

This is Sadik on behalf of our Yaron. Our first question is if you could provide any color on what percentage of the company's revenues are tied to client headcount?

So that would probably be in our benefits business, Bill. I don't -- by the way, everybody we're scattered around the world today. So Bill, if you're still on, I think it's a pretty small portion, we typically work on a fee, but go ahead, Bill.

Yes. Let me try to break some things down for you there. First of all, we're going to finish about over $3 billion this year. Majority of that is in the employee benefit space about $540 million will be in the financial business lines and about $200 million is in the talent space. So the head count -- if you think about the talent business, mostly project-based and they are susceptible, obviously, to downturns in economic situations. But that's all about outcomes. It's not really focused on any head count whatsoever. The financial space is very similar. That is going to be very much assets under management, project based for actuaries, that kind of a thing. And that -- again, we don't see any real sensitivity to head count in that space.

Now going over to the benefit side, that's about a little over $2 billion globally for us with majority of that in the U.S. And there is some connection to head count in that business throughout. That being said, the small group by definition and state is definitely going to more of a PEPM, per employee per month as opposed to a percent of revenue. And that is roughly about $250 million when I include AssuredPartners. Then you have another similar number up to about $300 million that is going to be -- in terms of 300 employees, I'm sorry, that is also very much tied as a commission to a premium.

When we started getting into the middle market self-funding and above all the way to jumbo, the compensation is more negotiated on the front end. And it's not a linear progression on that. The larger the client, a lot of the revenues we earn is more negotiated on the front of this end as I said. And the difference between, let's say, as an example, a 2,000 employee group and an 1,800 employee group isn't much different. And so if, in fact, any of those companies were going to have a downturn of employee population. In the short run, that revenue wouldn't change because the scope of the work is still unchanged on that.

And our segment is over 1,000 employees and above is our largest segment in terms of total revenues. So the tied to head count is more on the smaller side. Now revenue downturn on the economics, every employer is going to come back and talk about our fee and so forth. But it wouldn't be a direct impact immediately for the mid and larger clients. So I hope I answered your question.

Yes. That's super helpful. And just a follow-up. Do you have additionally any color on what percent of the company's revenues are hourly. And if you guys are doing anything to move these revenues to outcome based? And if so, what percent do you think a percent of revenues will be outcome based within 5 years?

Doug, do you want me to handle that for GBS.

Yes. I don't know -- I don't think you do a lot of hourly work. So go ahead.

Yes. It's something like 8% of our revenue is hourly, 8%. And so -- and a lot of those, they are under contracts, and it's more about the work, not the head count per se as well. So again, 8% of our total revenue is hourly fees. Everything else is more of a project revenue or that kind of thing or commission. So it's not significant for us.

The next question comes from the line of Alex Scott with Barclays.

First one I wanted to ask is just for an update on AssuredPartners and noticed that the revenue looks like you ticked down a little bit in your estimates, but there's an offset from expenses. And it's just interesting getting color on that.

All right. This is Doug, I'll answer that. The way co-brokerage expenses are accounted for -- at Gallagher were net. So if we share a commission with co-broker, we would deduct that from the revenues, and we would not call that an expense AssuredPartners when we went through the budget, they're grossing that up, so we just grossed it back down. So it's geography. It has no -- you'll see the EBITDAC hasn't changed other than the little seasonality in the business, too.

Got it. I had a feeling it might be a nuance to it. So that's helpful to understand. For the next one, I'd be interested just at a high level. When I look at what your expecting for 1Q and then the full year is, I guess, a few of the segments where you're coming in lower in 1Q. And I'd just be interested at a high level, like what is it that you expect to reverse in sort of the final 3 quarters of the year? Like what are the key things you'd point to that you're expecting to get better in your full year? Is it seasonality or...

Just for clarification, you're talking about on Page sorry. Page 4, the CFO commentary that the first quarter numbers are running lower than where we see the annual numbers. Is that what your question is?

Yes. And I'm just interested in my confidence level around that...

No, I got it. No, I just wanted to make sure I understand the question. Yes. Listen, there's kind of a story -- a different story on each of these. But we had some pretty hard compares. Like if I look at the Americas, I know off top, Canada had a terrific first quarter last year. And this year, it's -- the had some onetime revenues because remember, this includes some of our onetime revenue type clients. There's a program up there that had some repricing in it this year.

When you -- otherwise, when you look at it, I wouldn't overly react to a slightly less work. Reinsurance stands out probably as the big one, we had a 21% quarter last year. First quarter, we knew that wasn't going to repeat. So that's probably one that's there. Reinsurance is going to see some uplift this year in later parts of the year because of customers buying more cover. So those are a couple of the stories in there, but this is the first time we put out the first quarter.

So as a matter of fact, if you levelize reinsurance last year and you levelize for reinsurance this year. If you just take that noise out there, you'll find that our organic growth in the quarter is about the same this quarter -- this first quarter as it was last year, first quarter other than reinsurance.

Our next question comes from Elyse Greenspan with Wells Fargo.

My first question was also on the Q1 brokerage guidance. So the 4.5%. I was hoping that you could break that down between like the core, I guess, baseline organic as well as what you expect with supplementals and contingents in the quarter?

For purposes of doing these estimates, we haven't assumed an outsized contingent or supplemental quarter on that. We have a pretty good line of sight into it now. We do have a few more weeks to collect to see how our estimates for last year, but really don't have -- I wouldn't say that we're assuming that number to be any bigger or that organic to be anything different than our base commissions and fees. It could be some upside surprise there, but I don't think so where we are in the quarter.

And then my second question was on AP and RPS, like I had assumed I think you guys discussed this last quarter, right, that if AP brings wholesale business do you guys write that's, I think, included within organic. So have you guys started to see that? Or is that something that perhaps is also a tailwind to organic growth in the later stages of this year?

It could be. Maybe I'll have Mike talk about what he's seeing coming out of the cross-sell between retail and wholesale coming into the hotel market. Still early days, but Mike, are you still out there?

Yes, I'm here. Can you hear me all right?

Yes, we can.

Okay. Good. All right, Elyse. So yes, the first part of this process is making sure that we've socialized with our new colleagues at AP that we have wholesalers that we trade with. And we've also socialized extensively that RPS is priority #1. And so the good news is, I think we told you this maybe last year that AP was starting this journey, they hadn't mandated it, but they were starting on that journey. So we are now about 6 months in, and we're already starting to see some really good work together and collaboratively where now we have all of their information into our data lake and it's in Gallagher Drive.

So our colleagues within RPS can do specific outreach to our new AP colleagues, and I'm actually sitting in Chicago, where we have all of our groups from our specialty group and our retail group. Tomorrow, they will be spending extensive time together to continue to socialize and build those relationships. So the direct answer to your question is yes, I anticipate that RPS will not only get their fair share, but they'll get a significant chunk of that business that is currently being traded outside of those 5 approved wholesalers.

And then we don't share all of our strategies and tactics, but we have some specific strategies that we've deployed over the last several months around what we want to go into, either an RPS binding facility or to RPS open wholesale brokerage that we are executing on right now. So I do believe that will be a big help for RPS throughout 2026.

And our next question comes from the line of Tracy Benguigui with Wolfe Research.

On the topic of AI disruption, is the real outcome potential hybrid model where AI enhances the revenue prospects and efficiencies you're talking about rather than just intermediation. So I'm wondering if you foresee any pressure on broker commissions and fees as a consequence especially in a soft market where carriers may want to squeeze commissions.

Well, listen, I think the value that we bring to the model, I think it should be the other way around. I think that our customers understand exactly the value that we bring, and we're happy with the way the carriers are paying us now I would not feel that pressure or accept it, in my opinion.

Okay. Got it. And Doug, you mentioned that your M&A pipeline is strong. Your targets are attractive. Has the sector of AI disintermediation brokers made any of the private small ones we're willing to sell? Or are you talking about your typical like 10x for tuck-ins and 12 to 13x as you go upmarket?

Yes, I don't see us at 13x on deals. I think that we're down in single digits on some businesses, I think, really for one right down in the middle of the fairway, the number is around 10x. I think that the realization we're going to have to take a look at their book of business on if there is a risk of disintermediation there.

We'll also have to take a look -- we always take a look at 1 trick ponies that if they've got one very large client wouldn't have to put it through an idea of what's going to happen with AI on that, if there's any risk there. So our eyes are wide open. It's early days on it. I think that, like I said, our 60,000 competitors out there.

I don't know how much they're opening their eyes to AI right now. I think -- this is new. So it could cause folks to say they need investment dollars. This is more -- this is a reason to join Gallagher. So it could increase our pipeline considerably. And then they're going to get a fair price for their business with us. And if they want to take our stock, they have the opportunity to write it back up.

And the next question comes from the line of David Motemaden with Evercore ISI.

Okay. And the next question comes from the line of Mark Hughes with Truist Securities.

On the property line, I asked this question, maybe last call, where do you see it in terms of the incremental trend that's obviously down, but has it stabilized at a low level? Or do you think it's going to step down further from here?

That's a great question. I think our customers are going to get some more pricing breaks as we come into that -- into the second quarter. I think they are starting to do more opt in and buying more coverage, though, too. I think that first year was kind of a benefit. I think second year, it that our message that risk is growing, your exposure is growing, starting to resonate.

So property lines, you heard Pat say that probably is down around 7%. Q4 was maybe 5% down, 6% down, something like that. So it's not like the bottom is falling out of it. And you saw that bifurcation. I mentioned between larger accounts and smaller midsize.

Yes. And then I don't know if Scott Hudson is still on, but talking about liability claims that you all are closing. Noticing anything there on inflation, social inflation and liability claims now versus 6 or 12 months ago?

Mark, this is Scott. I wouldn't say anything noticeably different. I mean there's still upward pressure, but not necessarily different than it would have been 12 months ago or 24 months ago.

[Operator Instructions] The next question comes from the line of Rob Cox with Goldman Sachs.

I was just wondering, so in the claims administration business, could you give us a sense of what portion of the claims are lower complexity? And do you think you can significantly streamline some of those claims with AI? And then just related, you guys provided a lot of details on both businesses and how you're leveraging AI. But how would you stack rank or benchmark the impact of AI on risk management versus the brokerage business, high level?

Doug, do you want me to take that? I can start with the -- the question on the low complexity claims. I think there's -- I'm going to be clear on one thing. There's a significant number of our claims are low complexity. However, a significant portion of our revenue is due to the more complex claims. And I think we are -- every single day, whether it's AI or just general automation, we're looking for opportunities to limit the amount of time we spend on very, very simple claims. It can be a medical-only claim in work comp. It can be a simple fender vendor on the auto side. It can be a one of our clients, a cart in a retail parking lot, dense a car.

So those we are constantly looking for ways to kind of simplify the amount of time and energy that we put into those things. But interestingly, I don't think that will dramatically impact our revenue because we don't get paid necessarily a significant amount of money for those. I think the question, Doug, in terms of a comparison -- and maybe you can ask the question again about comparing it to the brokerage business. I'm not sure the maybe what you're trying to get at in terms of kind of the risk management versus the brokerage business and AI's applicability.

Yes, just I mean say the question again, maybe I'll plunge on that.

Yes. Just overall, curious if you see more opportunities, sizing the opportunities and risks, how would you kind of plot those for each of the businesses?

All right. Well, listen, I think the value-add creation on the risk management side, just us stamping out fraud, having nurse case managers being able to really get at that. Remember, just like on the brokerage side is that the fees that we take out on the risk management side and what we charge for the insurance placement and claim advocacy side are such a small part of the overall cost of insurance. So when Scott handles a low complexity claim when he has tools that go through understanding fraudulent claim practices it's a savings of the claim amount that where the value is, the actual cost to do that, whether it's done by a person or whether it's done by AI or Agenetic AI, I think they're still going to have to -- somebody's got to be able to figure out the AI to do it, and we have the domain knowledge.

So I would say that Gallagher Bassett they might be a little bit ahead on Agentic AI when they can get the -- their -- maybe their first notice of loss talking to Agentic AI talking to the carrier. If they're servicing for a front-end carrier or for self-insured, they might be able to deploy that a little faster. But it's not going to dramatically change the revenues.

And in the brokerage side, the tools that we're putting together will really, really improve the accuracy and quality of the service layer. And it's going to really, really have a big impact on our support layer costs that I talked to you before about. So it depends on where you want to look at the advantages Gallagher Bassett might be a little bit out in front when it turns to Agentic AI, I think, in process improvement, the broader corporate side and then also in just some of our -- what we're doing on some of the small language models might help us a lot on the back office.

And the next question comes from the line of David Motemaden with Evercore ISI.

Doug, thanks for that detail on the $500 million of revenues in Personal Lines and standard micro commercial lines with premiums under $10,000 I'm wondering, is there a way to think about exposure to similar business with under $10,000 in premiums and employee benefits? And I'm wondering your view on the disintermediation risk in that part of the business.

Yes. Bill provided some of that information. We took a look at it. And the issue is this, is that the buyer is not necessarily the insured in this case, the buyer is a human resource executive or a CFO or a business owner. To be real honest, they are so underprepared and underqualified to think about disintermediating a broker on those purchases that I just -- I see it as an even lower risk than on lower personal lines, auto or personal line or small micro commercial lines.

So Bill has gone to this business, but it's going to be very hard to disintermediate that on the benefit side. So I'd be surprised if it's much of anything.

Got it. Okay. That's helpful. And then I was wondering, just on just on claims advocacy, I think that's a really interesting point that you brought up. And I'm wondering if you could just -- maybe just talk about how often Gallagher gets involved on the claims side on behalf of the clients, particularly on the small end of the spectrum.

Yes, Mike, that's in your wheelhouse, Talk about our claim advocacy group, it's 1,000 heads strong. Talk about that for a second.

Yes, I'd be happy to. So the -- a number of years ago, we organized all of our claims and loss control people into a central unit across the Americas, across the country. And these folks -- these are not claims processors. These are claim advocates, ex nurse case managers, things of that nature, attorneys that help our clients navigate through those claims. And it can be an account of any size. So clearly, we're spending a lot of time with customers that have many claims per year. But if a smaller client has a difficult claim as a tornado has a hailstorm, those sort of things, our advocates get involved with that customer to help get that claim closed after doing AP.

So we had about in legacy Gallagher about 350 of those individuals around the country. AP gave us another 300. So we have roughly 600 to 700 of those folks around the country that are helping our clients when they have claims, navigate through. And by the way, someone mentioned the claims, there is no simple claim when you're the claimant. For anyone that's been in an auto accident, you know it can be pretty complex. And so imagine that on a commercial business that has a claim that could potentially shut down their business. They need an advocate to walk them through how to not only just file the claim, but to navigate the nuances of the legal contract, which is the policy to make sure they get proper coverage.

And we have all of those claim advocates on behalf of our customers servicing those customers, and then we have loss control engineers. These are folks on top of the insurance company engineers that go out and help our clients make their place of work safer for not only insurance purposes, but for their employees. And so the combination of those 2 is a powerful punch and we were excited to have AP join us to more -- to basically double that group of professionals.

David, this is Pat. I think that you struck right on the key that doesn't seem to have discussed at AI at all. I'm just going to tell you that what Mike said is right on. Every time I've had a claim over 50 years that has any nuance at all, the client throws up their hands and says, please help. And it's just elaborate of difficult questions. There's all kinds of things that have to get done to get a claim right and most clients regardless of size, just can't deal with it.

And the next question comes from the line of Meyer Shields with KBW.

Great. And I really appreciate all of the detail that you've provided tonight. I had a question on the large account space. I'm wondering whether there's any -- I understand that Gallagher has a ton of information that's proprietary, but is there any program design that these larger clients that themselves have resources can use AI for. So Gallagher is obviously integral in terms of understanding the appetite for risk, but maybe some of that program design goes back to the client.

Well, maybe I don't know, Patrick, if you want to take that one or Mike, you can talk about the towers that we put together and how programs are started assuming what you're talking about. I don't know if you're still on Patrick.

Yes, I'm on. I mean the need for data, the need for us to be able to say to risk managers, clients like you buy something of this limit for this price in this geography, I think it helps them choose what they're going to do. Now are there opportunities for the risk management community at large accounts to be doing some of that themselves, sure, but they don't have the proprietary data that we have on a myriad of clients that are just like them.

So I was in a reinsurance meeting today. We're really talking about comparing a large carriers portfolio with another large carriers portfolio or our entire portfolio. They need the insights from the rest of the market. That's what Gallagher has within Gallagher Drive and within our clean data set is we can basically show them the entire marketplace. Yes, there are going to be competing models, which we do with them on PMLs and foreseeable losses and stuff like that. But we -- with risk managers, they just really want to consume the data from everywhere. I think we're in a great position to use Gallagher Drive especially to talk them through what clients like them are buying.

And the next question comes from the line of Katie Sakys with Autonomous Research.

Great to hear the top end on AssuredPartners synergies has increased a little bit there. Can you update us on year-to-date progress on synergies and where you anticipate there may be execution risk? And then more broadly, what's driving the slightly higher $300 billion all-in synergy view? Does that reflect like a pull forward? Or is that a further increase to revenues? Or is it a further increase the expense synergy side?

All right. This is Doug. I'll speed data on that real quick and just say listen, every place that we turn, we see opportunities to be better together. No question about that. The very little of that upside, first of all, is revenue synergies. It's mostly continued cost synergies, all right? So we're seeing the opportunity for consolidating real estate. We're seeing it on contract negotiation. The reality is a lot of our enterprise licenses, the incremental cost enroll those folks, the AP associates onto that is pretty small relative to what they had to buy on their own.

I think the execution risk on it is small. And I think that what -- the only gating factor on achieving this is we are being thoughtful on how we convert each location's agency management system. And that will be -- that's kind of the long pole in the tent that will take us over the next 18 months to 2 years. We're well on the way of having everything taken care of in the back-office, treasury, Sarbanes-Oxley compliance, real estate, expense management, procurement, those things are really doing well. And I think getting the folks onto the common agency management system will allow them to use our productivity tools much better.

So I see low excretion risk in getting to that number. And I think that every time we look, we see an opportunity to be better together when they put it that way.

If I can squeeze in one more really quickly. Thinking about all the color you gave on the billion dollars of remaining buyback authorization, your $1.5 billion budget for tech and analytics and ongoing M&A efforts. Can you tell us how you're thinking about prioritizing those today versus the next year or 2? And if the macro or the insurance cycle turned, what would make you tilt that mix more defensively?

All right. So the IT spend is just embedded. That's just what's coming through our normal budget process, and we don't have an outsized single winner take-all type strategy in there, in the IT. So that's just embedded cost in our structure. So I think that we've got plenty of money in there to continue to invest.

I think that on the M&A front, we're looking at deals. I think some sellers are sitting on the sidelines, but I think we'll see them kind of in the summer and the fall, we typically have a kind of a slow first quarter. And then balancing it with share buybacks. We think our stock has a lot of value right now and we're just not going to chase multiples on M&A. And if that means that we have excess cash, we'll use it to buy our shares back.

And our final question comes from the line of Mike Zaremski with BMO Capital Markets.

My first question, Doug, kudos for giving us your best estimate on kind of how AI could impact, I guess, productivity and expenses over the next few plus years. Just curious if I use your math, you're getting -- I'm getting to a substantial 6-plus point improvement, all things held equal in EBITDAC margins. What's your best guess of kind of how -- will the whole industry kind of be a fast follower and Gallagher only keeps a proportion of this? Or how are you guys thinking about that internally?

Well, let's bifurcate the industry and to those that -- listen, I just don't see that -- you won't see in our 60,000 smaller agents and brokers. So the private ones, the smaller ones, they just don't have the money to put into these type of investments to really drive that on it. So I would say it's I think it's probably a better question for the other larger global brokers on what they're doing and what they're seeing coming out of this. We already have a pretty darn good margin and 6 points, yes, that's how the math might work.

The real question is, can we toggle some of that into an accelerated organic growth? And that's that always that trade-off is if we see an opportunity because we really didn't get to it today, but we will have another time when we're about out of time. How was AI going to enable us to sell more, win more and retain more. There's some exciting stuff we're working on, on that too, that we didn't get to today.

So the answer is yes, the math might see another 600 basis point improvement, maybe 2/3 of that is probably more realistic when you take a look at it, just by looking at what you see for some inflation keeping folks around that might be a little bit higher compensation costs. So I wouldn't put 600 basis points on the bank, but that's how the math might work.

Okay. Great. And really quickly lastly, I guess [indiscernible] on the queue is that a number of questions have come into just asking to further clarify why organic growth should be a bit better in the back half of the year. And I think you answered most of it, but maybe be willing to just offer your views if property is part of the culprit in terms of the decel, what are your -- what's embedded in your view on property pricing in the last 3, 4 plus of the year?

All right. You really broke up on us on that question. I think I understood about why -- what's our confidence level for the rest of the year? Listen, we're having some really successful new business pipeline growth right now. We're seeing a lot of opportunities maybe in our marine business, the or rate premiums as goods move around the world. We're seeing some opportunities there.

The reinsurance business, people are really starting to wait in now and starting to spend more on insurance. I think that we've done a really good job in many case of getting a raise on our fee accounts. So there's -- and then there's also just a few outliers that had super strong organic in the first quarter last year. They're making a slightly difficult compare. I mentioned Canada on and reinsurance.

If you levelize that out, it kind of looks like what we talked about here in the first quarter. And we're talking about 6% in the next 2 quarters, something like that. And in the fourth quarter, we'll bring it home that gets the average down to about 5.5% as a midpoint. So there's a story on each line item. But if you really think about Canada as an example, and you think about reinsurance as an example, it kind of gets you to a pretty consistent growth pattern throughout the year.

Well, I think that's all the questions for today. It's time to wrap up. Doug, are you good with that?

Yes. I think we're.

Good. Well then, I'd just like to thank everybody for joining us this afternoon. Really appreciate it, and great questions, and thanks for those. As you heard from the team today, I think Gallagher continues to execute and is incredibly well positioned for continued long-term growth. And we look forward to speaking more with you about that during our first quarter earnings call, which will happen in April. Thanks again for being with us. Thanks for the thoughtful questions, and have a great evening. Take care.

Thank you, everyone.

And thank you, ladies and gentlemen. That does conclude today's conference call. You may disconnect your lines at this time.

Good afternoon, and welcome to Arthur J. Gallagher & Co.'s Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's call is being recorded. [Operator Instructions]

Some of the comments made during today's conference call, including answers given in response to questions, may constitute forward-looking statements within the meanings 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 factor 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 reconciliation 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, Jr., Chairman and CEO, Arthur J. Gallagher & Co. Mr. Gallagher, you may begin.

Thank you. Good afternoon, and thank you for joining us for our fourth quarter '25 earnings call. On the call with me today is Doug Howell, our CFO; and other members of the management team.

We had an excellent fourth quarter and a terrific year, [ our ] strong revenue growth strategy that's organic and M&A delivered revenue growth of more than 30% during the fourth quarter. That includes organic growth of 5%. Adjusted EBITDA growth was 30%, marking our 23rd consecutive quarter of double-digit growth. So a great quarter, highlighting our durable value creation strategy that drives consistent double-digit growth in revenue and profits.

Moving to results on a segment basis, starting with the Brokerage segment. Reported revenue growth was 38%. Organic growth was 5%, in line with our December commentary. Adjusted EBITDA margin was [ 32% ] and ahead of our expectation with underlying margin expansion of 50 basis points.

Let me provide you with some insights behind our brokerage [indiscernible] organic. Americas retail PC organic was up 5%, U.K. and EMEA up 7%; APAC, up 3%; specialty and wholesale up [indiscernible]. U.S. [indiscernible] up 7%, reinsurance up 8% and benefits up 1%. So we continue to deliver organic growth across retail PC benefits, wholesale and reinsurance and Doug will further unpack organic in his comments.

Next, let me provide some thoughts on the [ global PC ] insurance pricing environment. Florida insurance renewal premium change, which includes both rate and exposure continued to increase in the low single digits. Once again, property decreases were more than offset by increases across most casualty classes. Let me break that down further. Property lines were down 5% and casualty lines, which includes general liability, commercial auto and umbrella up 5% overall, with U.S. casualty lines up 7%, package up 3%, [ D&O down ] a point, [ workers comp ] up 1 point, and personal lines up 5%. So many lines are still seeing increases outside of property. In fact, excluding property renewal premium change, we'd be up about 3% during the quarter. With that said, premiums are ultimately determined by loss experience, and good accounts will get some premium relief while accounts with poor loss experience will see greater increases.

Moving to reinsurance. Let me provide you with some thoughts on the 1/1 renewal season. With the strong underwriting results posted by carriers during 2025, which was helped by a quiet U.S. wind season there was plenty of reinsurance capacity to support client demand. The property reinsurance [ would saw ] rate decreases in the teens with lower layers holding up better than the top end of reinsurance towers. We saw some continued demand for more cover and increased purchasing by client. In fact, despite double-digit price declines for property cat globally, property reinsurance premiums were down only mid- to high single digits relative to last year.

Within specialty lines, marine and energy experienced increased carrier competition. Pricing across casualty lines continued to be broadly stable because most reinsurers remain very cautious of U.S.-focused [ casualty risk ]. Looking ahead, we expect the buyer's market will persist through 2026, absent any outsized current year or prior year loss activity. While clients are comfortable with their purchase reinsurance programs at 1/1, we believe it is likely that some carriers will explore buying additional [indiscernible] to further reduce earnings volatility or support growth throughout 2026.

Moving to employments. We continue to see strong demand for our services as clients manage rising health insurance costs. Medical costs are expected to be up high single digits again in '26, driven by increased utilization provider consolidation and newer high-cost treatments and therapies. So we are engaging with [ players ] to help them implement innovative solutions such as medicine programs, wellness initiatives and [ tailored benefits ] packages to alleviate these cost pressures. Additionally, talent retention strategies remain top of mind for many of our clients given the [indiscernible] U.S. labor market. So we're expecting another strong year of growth.

Moving to some comments on our customers [indiscernible] activity. Our proprietary data, which has been a valuable indicator of the economy, continues to show solid client business activity. Fourth quarter remediations from audits, endorsements and cancellations [ remain ] positive and were more favorable compared to both fourth quarter 2024 and third quarter 2025. And through the first 3 weeks of January, these favorable trends continue. We're watching customers' business activity daily, and we are just not seeing signs of economic weakness. Regardless of market and economic conditions, I believe we're very well positioned to grow. Our global resources, data and analytics, expertise and unique product offerings put us in a spot to peak and to win. So as we sit here today, we continue to see brokerage segment full year '26 organic growth of around [ 5.5% ].

Moving into Risk Management segment, Gallagher Bassett. Fourth quarter revenue growth was 13%, including organic of 7%. We saw another quarter of strong new business growth and ex client retention. Looking ahead, we are well positioned to drive new business production and believe full year '26 organic growth will come in around 7%. Fourth quarter adjusted EBITDA at [ margin ] is 21.6%, a bit better than our December expectations. Looking ahead, we see full year '26 margins in the 21% to 22% range.

[indiscernible] mergers and acquisitions, starting with some comments on AssuredPartners. We are already seeing a lot of success with the AP team leveraging our products and analytics, insights and tools. Our teams are hard at work integrating the [ 300-plus ] tuck-ins, agency management system conversions and training of our middle office will be in full swing during 2026. Additionally, a little more than a week ago, all of our U.S. retail operations were rebranded Gallagher. When it comes to our back office integration, we are ahead of plan, including going live on our general ledger, HR, payroll, treasury and T&E systems. So we remain firmly on track with our integration plans and are confident we will be able to deliver on our synergy targets.

Moving to fourth quarter merger activity. We completed 7 new mergers, representing around $145 million of asset [ in ] annualized revenue. This brings our full year 25 annualized acquired revenue to more than $3.5 billion. That's fantastic. For all of our new partners joining us, I'd like to extend a very warm welcome.

Looking ahead, there are thousands of brokerage firms across our footprint, and Gallagher is a great home for [indiscernible] entrepreneurs looking to grow their business, add more [indiscernible] their current clients and further advance their employees' careers. Our M&A strategy is about being better together, so the 1 plus 1 [indiscernible] 3, 4 or even 5.

Shifting to -- today, our pipeline is showing more than 40 [ firms ] [indiscernible] being prepared, representing around [ $315 million ] of annualized revenue. Good firms always have a choice, and it would be terrific if they chose to partner with Gallagher.

With a strong close to the year, let me reflect on our full '25 financial performance for brokerage and risk management combined, 21% growth in revenue, 6% organic growth. 26% growth in adjusted EBITDA and more than $3.5 billion in annualized revenue. Another fantastic year driven by our talented colleagues and our bedrock culture, frankly, our culture is unstoppable, and it drives our success year after year, that is the Gallagher way.

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

Thanks, Pat, and hello, everyone. Today, I'll first walk you through our earnings release and provide some brief comments on organic growth and margins by operating segment and also on our corporate segment results. Next, I'll move to the CFO commentary document we posted on our IR website. I'll walk you through our typical modeling helpers and our outlook for '26. Additionally, this is where I'll spend a little more time on organic and margins. Then I'll conclude my prepared remarks with my usual comments on cash, M&A and capital management.

Okay. Let's go to the earnings release to Page 3. Brokerage segment fourth quarter organic growth was 5%. That's right in line with the information we provided you at our December IR day. Since we've received really positive feedback from the investment community for [ levelizing quarterly ] noise caused by the timing of large live sales and deferred revenue accounting assumptions. That's a fantastic reflection of our sales culture to post 5% [indiscernible] and 6% for the year.

Flipping to Page 5 of the earnings release to the Brokerage segment adjusted EBITDA table at the top half of the page. We told you in December that our fourth quarter '25 headline margin would not be comparable to fourth quarter '24 because as the footnote to that table explains, we are no longer earning investment income on funds we were holding to [ AssuredPartners ], and there would also be a rolling impact of M&A. The footnote tells you that was about 130 basis points. So the quick math shows levelizing for that gets you to 50 basis points of underlying expansion right at the midpoint of our 40 to 60 basis points of expansion we estimated during our December IR day. That's really terrific work by the team.

So I'll give you some more information on brokerage margin when I get to Page 8 of the CFO commentary document because of the [ same ] noise will happen in the first and second quarter of '26 again.

Sticking on Page 5. Fourth quarter Risk Management segment growth was 7%, right in line with our December expectations. That reflected -- reflects strong new business revenues and excellent client retention. Looking to full year '26, we continue to see organic around 7%. And then when you flip to Page 6, the Risk Management adjusted EBITDAC margin of 21.6% was a bit better than our December expectation. And as we look forward, we see full year '26 margins in the 21% to 22% range.

So turning to Page 7 of the earnings release and the corporate segment shortcut table. For the adjusted [ interest, banking, ] clean energy and acquisition lines all were varied to the midpoint of our December expectations. The adjusted corporate line was a couple of pennies less than our midpoint estimate partly due to a noncash unrealized tax remeasurement loss and a small tax items. Also, while we adjusted out, we substantially completed the wind down and annuitization of our long ago frozen pension plan, creates a noncash GAAP expense here in the fourth quarter and will again in Q1 '26. But those reverse through [ the OCI so it nets to zero ]. But more importantly, we hit the market just right and didn't have to inject in cash into the plan.

All right. Let's leave the earnings release and go to the CFO commentary document. Starting on Page 3. These are our typical modeling helpers. Most of the fourth quarter '25 actual numbers were close to what we provided back in December, so there's nothing new here. Looking at '26, as you build your models, please use these helpers. In particular, the estimated impact of [ FX ] and the forecasted depreciation and earn-out payable expense.

Turning to Page 4 of the CFO commentary document. This page breaks down our organic performance by business, and it's like what we provided for the first time at our December IR Day. This view helps you see [indiscernible] [ things ]. First, it removes the quarterly comparability impact caused by the large live sales; and second, removes the comparability impact caused by deferred revenue estimates. These 2 items were causing a lot of quarterly noise. But as we said in December, and you can see here, they are really a no never mind on a [indiscernible] basis. Third thing this view does is it shows you the quarterly seasonality of our business; and four, that give you organic growth, another level down in the table.

Two callouts on [ each ]. First, in total, our fourth quarter and full year actuals in blue were in line with our IR [ day thinking ] as shown in the gray column. Second, when you move to the pinkish column, we've wrapped up our full year '26 organic budgeting and our outlook is unchanged. We continue to see '26 brokerage segment organic growth of around 5.5% and will be another fantastic year.

So when you turn to Page 5 in the Corporate segment, just 2 small items. Our full year '26 estimate is unchanged from 6 weeks ago, and we're now providing a first look at our quarterly estimates. That said, we do have a little more work to do on the corporate segment quarterly budget, but full year is done. So maybe a tweak here or there between quarters. We'll update you during our March IR Day.

Turning to Page 6, the investment income table. Three comments here. First, our '26 forecasts reflect current FX rates and changes in fiduciary cash balances. Second, our forward estimate continues to assume 2 future 25 basis point rate cuts over the course of the year, one in April and another in September. Third, the second line of this table shows you the amount of interest income we earned on [indiscernible], that we were holding to buy AP. Clearly, that has gone away, and you can see it won't repeat here in '26. More on the impact of this on our headline margins when I get to Page 8.

Staying on Page 6, but shifting down to the page to the rollover revenue table. The fourth quarter '25 column subtotal of $145 million for brokerage came in close to our December estimate. Looking forward, the pinkish comps to the right include estimated '26 revenues for brokerage M&A closed through yesterday, and you'll see that clearly excludes AssuredPartners. We provide a separate page on Page 7 for AssuredPartners. And finally, you'll see the same info for our Risk Management segment below that. And then to this, you must make your picks for what you think might be unknown M&A that hasn't closed yet throughout 2026.

Moving to Page 7. This is the same page that we have provided several times before. It shows how we view AP, both -- now it includes [indiscernible] fourth quarter '25 results and our full year '26 outlook. A few comments here. AP's fourth quarter revenues were in line with our expectations for the fourth quarter. [indiscernible] expenses came in a little better than expected. Some of that is a little timing between now and throughout '26. Next, the second item, there could be some small refinements in '26 numbers because we're still a week or so away from having AP budgets locked down. That said, we don't expect anything significant. And of course, we'll update you in the March IR day. Third, be careful when rolling in AP into your '26 models. You can use first and second quarter columns as is, but for third and fourth quarter, it is the delta between the pink numbers and the blue numbers. Fourth, I also ask you to closely read the footnote. You're going to read 3 things in them. This table reflects the midpoint of our estimates and does not include any revenue or expense synergies. The noncash figures shown on this page, which reflect depreciation and earn-out payable are included within our [indiscernible] on Page 3, so don't double count there. And finally, you'll read that we still see annualized run rate synergies of $160 million by the end of '26 and then up to $260 million to $280 million by early '28. I'm also more and more comfortable there could be upside to these numbers, but give us some more time before we update our estimates. So this is a page of really, really good news.

Moving on to Page 8. This is a new page to help you better understand items that impact the comparability of our Brokerage segment adjusted EBITDAC margin. In the past, I've done a bridge in my verbal comments to get you past the noise from the [ amp of ] FX, changes in interest income from cash we're holding on AssuredPartners and then when M&A that naturally runs lower margins rolls into our numbers. We think these tables paint a better picture than all the words we were using before. Hopefully, this will be more helpful when you build your '26 models.

Since this is the first time we provided this page, let me make a few comments. First, the upper blue table, the punchline is we improved fourth quarter by about 50 basis points that's all due to the incredibly hard work by the team to control costs. The lower table gets you started on modeling '26. Blue section level sets '25 by removing the investment income on funds we were holding to buy AssuredPartners and also resets for estimated FX [ at ] rates. FX will likely change, but at least it gets you something as of today. The pink section of this table has ranges and margin impact commentary from what we see today. The punchline is nothing has changed since our December IR day. And we'll see underlying margins expanding 40 to 60 basis points in '26, and we will also begin to benefit from synergies by being better together with AP. You also see that we've added a line called [ unknown ], no estimate provided. This is more of a placeholder for you to just think about factors that could impact margin comparability.

All right. Let's go to Page 9 of our tax credit carryforward page. At December 31, we had $713 million of [ tax credit ] carryforward, and you'll see in the footnote there that says that we have [ a $1 billion ] of future tax benefits related to our purchase of AP. The punchline from this page is the same. It creates a nice cash flow sweetener to fund future M&A. As for some modeling thoughts, when you're modeling cash flows, just assume that our cash taxes paid will be about 10% of EBITDAC for the foreseeable future, and that should get you close.

All right. Let's move to [ casual ] management and M&A funding. When I look at available cash on hand, expected free cash flows and future investment-grade borrowings, over the next 2 years, we might have close to $10 billion to fund M&A before using any stock at attractive multiples. And this is an important point. Well, we talk about organic a lot. Important reminder that our M&A strategy creates immediate holder value through a nice price arbitrage and it also creates long-term shareholder value through additional sales talent, niche expertise and further scale.

So those are my comments. An excellent '25 for our combined Brokerage and Risk Management segments. Organic growth of 6%, more than $3.5 billion of estimated [ acquired ] revenue adjusted EBITDA growth of 26% and adjusted EBITDAC margin of 35%, up 70 basis points this year on an underlying comparable basis. And it might be worth a reminder that since COVID hit us every year, our margins have marched higher, [ we're ] up over 400 basis points since then. And we still see many more opportunities to improve. Those are fantastic results. So we're on to '26. We have an unstoppable momentum driven by an amazing culture. I see '26 being another terrific year.

Okay. Back to you, Pat.

Thanks, Doug. Operator, let's go to questions and answers.

[Operator Instructions] Our first question is from Rob Cox with Goldman Sachs.

First question for you. There's been a lot of talk about digital infrastructure. And I think some industry participants have commented that growth in the economy, excluding digital infrastructure like data centers, not all that inspiring. Could you just talk about how you're positioned to take advantage of digital infrastructure build-out and somewhat related. I'm just curious how your construction practices have been performing recently?

Well, first of all, our construction practice is our largest practice. And as you know, we emphasize our vertical capabilities at every production opportunity. We have very strong vertical capabilities and about 90% of our new production around the United States, actually around the world falls into those niches. Doug [ mentioned ] in his comments, when we do an acquisition, one of the benefits of that is we pick up people that add to our vertical capabilities. And of course, one of those, everybody is focused on data centers as we are as well. We have the ecosystem to job for our clients across the entire span of what needs to go into a data center construction site. You've got real estate issues, you've got supply chain issues, you've got energy issues, et cetera, et cetera.

In fact, our Head of Construction, Brian Cooper, was just recently quoted in Leaders Edge, which is the brokers magazine, about all the things that we're pulling together in that ecosystem to be able to manage that opportunity. And a great bit of that opportunity is the subs and all the activity that has to go into the whole process of building it. There's a huge drain on capabilities locally just for the construction expertise. And so I think every one of us that has contact with those types of clients that are going to be building those centers out leasing them, renting them whatever is going to need an awful lot of cover. You're going to need an awful lot of capability in simply placing the huge amounts of cover needed, and we're right there in the middle of that mix.

That's helpful. And I just had a follow-up on JLT pricing and your outlook for RPC embedded in your organic growth outlook for 2026, which is unchanged. It just seems like the RPC for casualty has dropped a little bit here versus the high single-digit levels earlier in the year. Just curious if you think that's -- I know there's been some companies out there talking about loss trend behaving a little bit better [indiscernible] more -- in more recent periods.

I think that basically, we're not -- I mean, I'm talking from a Street perspective now. I'll let Doug comment on what we're seeing in our actual data. But no, we're not seeing people jumping on the casualty bandwagon here like they are property. [ Property is soft ]. There's no question about it. I think the [ casualty ] is still got to have focus from the underwriting community, both on the reinsurance side and the primary side. I'm not so sure that they're confident in past years reserves. And so I'm not seeing the same kind of activity there that we see on the property side at all.

Yes, Rob, if I read across my page on [ casualty ] renewals now maybe at '22 at 8.4% and '23 is somewhere between 8.4% and 8.7%, '24 was 8.5%. This year it's 8.1%. So I mean this is -- we're just not seeing in our numbers any big pullback in [ casualty ] pricing and all the systemic factors that are out there that are [ not ] pushing casualty rates higher, like Pat said, on some and all of them be read about, I just don't see softening coming in the casualty lines. So what do we assume for next year as we're thinking about it. We're assuming that casualty rates will be up in that 7% to 8% range.

Next question is from Andrew Kligerman with TD Cowen.

First question is around talent retention. We've all been hearing about the coaching and it seems to be a big challenge for a lot of brokers out there. Could you talk about A.J. Gallagher's ability to retain its producers in particular? And how you see that playing out on your organic revenue both this year and [ the next ]?

Well, I think -- yes, I'm happy to talk about that. I'm very pleased about the fact and just -- our [ original ] producers has not changed against historical norms in any way, literally over the past number of years. If you take a look at the machine that we've built that does acquisitions, I think we bring people in last year, we've recruited -- the acquisition process over 2,000 new production talents. And we're lighting them up with tools and capabilities. We like to tout the fact, frankly, that we're a broker run by brokers. We understand the sales process, everybody from myself on down is involved in that sales process. People know that they can reach out and get that kind of support. Everybody understands how important production is. And frankly, we pay our people to produce and they get a piece of that, and we're very happy with that.

So I'd have to tell you that our written rates remain strong. Do we ever [ poach ]? Of course, we do -- and I think that there are right ways to hire people in there, there's wrong ways to hire people. And we're very defensive and we'll litigate where we feel somebody has done it the wrong way. And we also do root from other competitors, and we always try to do it the right way. So I think that my answer to your question is, I'd simply say, number one, very stable; number two, adding to that to that capabilities with head count from acquisitions as well, let me mention, let's not forget, about [ 6 ] young people in our internship every single year, we'll recruit half of those or even sometimes more. That internship continues to grow. It has huge impact to the sales firepower that we bring into the company and has been a very big part of our success as an organization. So I'm pleased where we are. I'm not naive to the fact that there are people [ field ] trying to wave a magic wand that somehow their deal is going to be better and bigger. I would caution any of those that are enticed by that to take a hard look before they make the jump.

Yes, just on a number [ basis ] of percentage producer retention is exactly dead flat it's that way since I've got [ us here and ] going back to 2019, and it's dead flat on it. So we're having any real change in our producer retention statistic. And also, you've got -- you're right at the [indiscernible], but this still is a business that needs producers to [ tow ] it and to sell it. So we think that being a broker run by brokers and having a sales and marketing mentality inside of our company is critical. [indiscernible] maintain, we wake up every day, we work on it. And we also [indiscernible] ton of money in sales tools illustratively. Within weeks, our cutting-edge Gallagher Drive program, which is the digital experience that our clients -- our producing [indiscernible] with our clients was on the desk of every single salesperson at AP. They're using it. We're winning together already.

So the answer to this is we need people to sell, we need people to produce, and we need to keep fueling them with tools and capabilities to make them better point of sale. And I got to tell you, if you look at who's trying to poach people right now, they just don't have it. We do. And I think you'll see some headline come out about it. That's a drop of water in the Pacific Ocean. It doesn't even cause a ripple. So we're pretty proud of our culture. We're pretty proud of the hundreds of millions of dollars investing every year in technology and data and analytics to make our [ folks ] realize that this is the very best place that they can toil and work and produce better than any other place. So we're [indiscernible] people that can't see that, but we haven't seen any change in our retention.

I reemphasize the culture. I mean every chance I get an opportunity to talk about the culture I do. It's -- I think it's one of the most important aspects of our success. And again, it's a sales culture driven by salespeople who honor the fact that selling insurance to and risk-managed services to people is a very honorable profession.

That's very helpful color. My follow-up question is around AI and disintermediating the intermediaries. I've been getting that a lot. And it's one kind of small commercial. Could you talk to what your thoughts are out on the horizon, how that might affect your small business production? And one thing [ I'll just ] layer on to the last question, AssuredPartners. I'm assuming that matured partners is aligned with everything you just answered my first question. Retention is very similar way.

[indiscernible] board. Very happy. We've probably met in person now, 90% of the population of AssuredPartners, we've done an outreach where about 20 of our executives traveled, visited offices, did town hall meetings. We attended their sales meeting in Indianapolis before the close and met over 1,000 there. And we've had 6 sessions enrolling meadows with 300 to 500 of their people at each session. And I'm telling you the excitement -- there wasn't one of those where I didn't meet someone who came up to me and said, Pat, I can't tell you how I'm excited. We wrote an account together because I had this and you had that I'm like there it is, that's the magic.

So yes, I think it clearly played -- in fact, the nice thing about AP is that still -- all these toys are now new things still. There's shiny objects. And it kind of builds a lot of excitement momentum.

So let me go to the AI question because I'm the old man in the room. Okay. I addressed the same thing when we had the dawn of the Internet. Goodbye intermediaries. This is all going to be done by me at home on my computer, and that showed just not to be true. Well, why is that? And in particular, in the small end, and in personal lines. Guess what? Everybody has a need for some really good counsel, and they want to talk to a person about what they should do. And I can turn the question right back to the investment community. But why would anybody use you guys. Why don't they just go to AI and say, pick my portfolio because, guess what, people make a difference. So when that person who's a small account with 5 trucks and he or she is trying to make sure people are on the job, someone got sick, and they're replacing that person, but they've got a commitment to build this building by a certain date, you think they've got the confidence to pick their insurance online? Even if ChatGPT says, this is the way to go. It's just not happening.

The trusted adviser is more important today because of AI than it was before AI because everybody is confused because AI tells that it knows exactly what you should do, and we all know it lies. So if you're comfortable doing that on your own, good luck.

Yes. I'll turn it another way [ on is ], I think that we stand to benefit for that because if there is a product that can be sold with AI, we will likely be the ones that can out there and put it out there, have AI, get it to the point of sale and then have a producer do the final piece of it. The second thing is [ reporting a ] customer is different than servicing a customer, too. So I might tell you what the best product to buy is, let's say that works. But then you got to service that policy. And then you've got to handle the claims on it. And then you've got to interface with the carrier. I doubt that there's an AI tool that will sell a policy to somebody who have a serious issue in their borrower restaurant and then AI is going to tell AIG to pay the claim. It just [ does it that ] way. There's going to have to be an adjuster there. There's got to be a counselor called the producer that helps them understand how [ the claims ] [indiscernible]. Maybe they can put some policies on the books, but the service load that will come along with that.

On the other hand, we see AI as being a terrific benefit for us to get better, faster at lower cost. We have spent 20 years working on standardizing our processes, [ centralizing ] them in our low-cost centers of excellence, driving the quality very high. AI is going to help us automate a lot of that. So the service layer, I think that we're going to be able to deliver a better, faster and less expensive service offering. But when it comes to actually onboarding the customer, maybe a little bit actually servicing the customer long term. That product has got a long way to go if you don't have a CS, a customer rep between the technology and the customer. So we're spending a fair amount of money on AI. We're getting some really terrific results, especially like in our Gallagher Bassett unit for -- on the claims adjusting side, the claims resolution side. We're seeing some nice speed to market that we can do. Just a lot of our back office functions could really benefit for us. And honestly, there's only 3 or 4 of us in the industry that are going to be able to devote the money into this that will actually benefit. So it's a terrific tool. It's not a replacement for production. It will improve service. And I think that service will help us improve our retention rates. So -- but actually selling insurance, I think it's going to be a long time for that to happen.

Our next question is from Mike Zaremski with BMO Capital Markets.

For Doug first, on Page 3 of the press release, you showed $882 million and $171 million of M&A divestitures and other 4Q '25 versus last year. I think that includes life sales, assumption changes, et cetera. I mean are there any -- do we need to break -- to help breaking this out for us to help model the life sales and assumption changes in future periods? I know that's something maybe we could take off on -- I don't know if you want to think it's worth helping us here.

Yes. I think maybe since this is -- since more of a -- it is an annual impact, and there is -- this quarterly impact is the bigger thing. Maybe we do take it off-line. But maybe the punchline on this, as we think about all of this change, the life sales than our deferred revenue assumption changes. When you boil it all down and you look at it, what does it all mean? What does it all mean is that had we had exactly the same level of life sales in -- throughout '25 as we did in '24. And if we had, had the same level of service quality improvement, in '25 as we did '24. We improved our service considerably, just not as much as we had done in '24. It's all going to boil down [ $25 ] million of EBITDA. So on $4.8 billion of EBITDA [ last ] year, that's the kind of magnitude of what we're talking about in here in a lot of these quarterly ones. So we've tried to put a bucket, try to exclude it from our organic growth because it was clouding the true underlying organic growth -- the company because of these things bouncing around, especially on a quarterly basis, so as you unpack it with Ray after this call, you're going to [ find it boils ] down to a very small number.

Okay. Understood. I guess my follow-up is just on the pricing environment and how it impacts your organic. I think you guys have some good charts showing the industries pricing levels versus your organic going back 30-plus years. And you can see that when pricing goes to very high levels, there's kind of like a decoupling, right? Your organic doesn't go to [ 15 or 20 ], but it improves. But I think more importantly, when pricing falls like it is today, your organic actually decoupled and it stays usually positive. So I'm just curious in a market that you're describing of properties very soft and you might say stay harder. Is there any -- does that dynamic still hold? Or is there any nuances to kind of given with this -- it's a tale of 2 markets, property versus casualty as we think about '26 and further?

I'm going to try to [ get our ] head around that question. So if I don't, please give me some help. But first of all, as prices are running up, you're exactly right. Of course, our revenue doesn't track directly with that. Our job what we sell to our clients is mitigating that increase. So that's where we counsel them and when they should opt in on coverage and opt out. And our background [ and our history ] is the whole concept of risk retention. That's the birth of Gallagher Bassett. And when you see rates go up, the alternative market, I guess we still call it that, is one of the fastest-growing aspects [ of ] market where people like ourselves, counsel our clients and don't pay the premium, take the risk yourself. And then, of course, when it comes down, we don't tend to migrate the other way as quickly either because there is a portion of opting in.

In our prepared remarks, we talked about the fact that in the reinsurance side, we are likely to see this year off-cycle some additional purchases of reinsurance. That's exactly the kind of thing I'm talking about, that translates into the retail market as well. So in this cycle, I do think what we've been saying for the last number of years, which [ is ] holding true is that you can't talk about the cycle. We're very clear on what's happening in the property line.

By the way, our clients deserve that. Property went up through the roof and underwriters needed the premium -- and now they're getting a decrease on that because it's been a benign loss year. But if you take a look at the other cycle, casualty, we're still seeing increases there because maybe the capital that's been deployed isn't necessarily adequate at this point to give discounts. So what we're seeing is cycles within the cycles. So D&O, as you might recall, over the last 3 or 4 years, came down quickly. capital flowed into those rates 3 or 4 years ago and brought the price right down. And now you're seeing it maybe bottom out and start to increase again. Workers' comp interestingly enough has been pretty flat for a decade, which I find very interesting, given that medical indemnity is such a big [ proof ] of that product shows you what managed care has done for the line.

And then you have casualty separately and property separately. So I don't know if I actually got my head around your question, but you add all those together and what you've seen in the past will probably reoccur this time as rates go up and down in all these lines.

Okay. I think you've got -- you helped us just to see if maybe this cycle could play out differently, but it sounds like it will be a similar to [indiscernible].

Because you got to look at the individual lines. So every quarter, we report pay attention to what we're seeing in casualty, we're seeing in comp and property. And sometimes the property will break between the [indiscernible] property and just general property, and we'll break that out when that happens.

Yes. We tend to talk a lot about [ cat ] property rates -- but if you throw it all in a bucket with all of the other property rates, and let's not discount the impact of fire and conductive storms, et cetera. Our property book is down -- the pricing is down 4% or 5% overall. So this isn't a 20% down market. When you look at what's happening and when carriers didn't have the deep insights into their loss cost trends as they do now, you had a little more volatility in it. I believe that the sales folks that have the tools that we do, if you're going in and trying to talk to your customer about a 30% rate increase, now I'm going to talk to you about kind of a flat renewal, you can see our wares and you can see what other services you get from -- you get more from Gallagher. So I think that our customers will be wise, they'll hop back in for more coverage, and that will stump the decrease a little bit in property rate [ lines ].

Our next question is from Elyse Greenspan with Wells Fargo.

My first question is on margin, right? I know, Doug, you went through the new page in your CFO commentary it seems like the margin, if I add up the pieces around 60 basis points in '26. Appreciate right, the underlying component has been unchanged. Obviously, a lot of pushes and pulls. When we think beyond '26, obviously, I guess, M&A and interest rates on for this year you could always come into play. But is it right to think that's from a forward modeling perspective beyond that, that we'd kind of be back into the thinking of, right, like 4% plus organic and kind of that 50 basis points of underlying margin expansion or something within that ballpark?

Your recollection is right. That's what we've said, and we still believe that. We believe that you can start seeing some margin expansion at about 4%, and then you go up 5%, 6% or 7%, you get more margin spend. The other thing, too, is that I think you'll really see -- we're going to have noise in the first 2 quarters of next year because of the -- with the lost interest income on funds we are holding for AP. So that's going to cloud the headline story. So a little patience with us, so you can [ cull ] that down and not really get to the underlying expansion. But also, we're going to start seeing the synergies come through from the AP acquisition. And that's going to also -- we'll break the pieces out, probably can do that pretty well in '26. By the time we get to '27, it might be hard for me to tell you whether that savings -- did we get better because of legacy Gallagher, we get better because of legacy AP coming together.

So a question about looking out for '27, the numbers there gets you to a pretty good spot. But just remember, there could be another $100 million to $120 million of cost savings that we get out throughout '27, so that by the time we get to early '28, we're kind of at that $260 million to $280 million additional profits or additional EBITDAC on it. So you're looking at the right way, your recollection is that. We still see that this is the same environment that we can improve margins starting at 4%. So an answer to your question, I think it's yes to your question. But with all that background, I think that we've got 2 levers that are going to be pulled or just the natural increase as we grow more and then also the roll-in synergies of AP.

And then my second question, I guess, goes back to organic and maybe a slight follow-up on Mike's question, right? So you guys change the definition right [ to title ] what you outlined in December. But I think like the 2 pieces, right, the life and the revenue assumption changes probably would have been a negative 3% in the quarter, which feels large, I guess, it would have been kind of net breakeven in the other 3 quarters. So it feels like from what you said, Doug, it's like $25 million of EBITDA. So these things are like $70 million of revenue and maybe more pronounced in the Q4. I just want to make sure I'm thinking about this correctly? And I guess maybe it was the higher end [indiscernible] that guided in December. And I guess, even if these things [ bounce ], they'll stay in the core commissions and fees and [ be backed out ], it should be that big of, I guess, overall EPS and revenue noise.

Yes, let me [ sort of like pack ] that a little bit for you. First of all, the life sales in the fourth quarter came in at negative 1% and we were guiding for the 1%. And then the deferred revenue came in at negative 2% versus a negative 1%. So we were -- it was kind of within the range of estimation that we had there. I think it's important to understand, though, that the 2% for the deferred revenue assumption changes. If we updated our deferred revenue assumptions [ prorataly ] throughout the year versus doing it on a quarterly basis, kind of like annual reserve reviews that the carriers do. It's a very laborious takes a long time. There's lots of surveys. [ You'd expect ] the 1% for the full year across quarters, and it would have been 25 basis points of impact. So the way you have to think about it, this table plumbs and gets you to what do we believe our underlying organic growth is? How -- what's the business running? And we saw it running 5% in the fourth quarter, and we see it running in about the 5.5% net range for 2026, 6% for '25 in total. So you have to think about this as a quarterly discussion, not an annual one.

Okay. Our next question is from Tracy Benguigui with Wolfe Research.

Sticking with organic revenue, some areas within brokerage in the fourth quarter where you're at or below your plan, even though Investor Day was in late [ December ]? Can you add some color on your experience within specialty U.S. wholesale or you're somewhat ahead in reinsurance where you were behind -- I'm sticking with reinsurance, if you could compare on how 1/1 renewals may play into organic [ rental ] for 2026?

All right. Let me tackle that. First of all, when you talk about the reinsurance number, we were forecasting about 10% of organic growth, and it came in at 8% for the fourth quarter. It is an extremely small order for reinsurance in terms of dollars. The difference between that 8% and that 10% is $1.5 million. So when you think of a degree of estimation that can change on a percentage, that's what's causing it.

I think you had another question about specialty. [indiscernible] a couple of points better. I think that our -- we had a really good wholesale month. And it came in strong at the end of the year as we were putting some placements to bed. So again, it was probably another [ $4 million ] of revenue, something like that. So the degree of estimation risk around a percentage point on some of these is pretty small. I think notably, though, [ we're starting ] to do 5% in the retail P&C. Well, that's a $3 billion business. and we came in at 5%. So what we thought on the big business, there's not -- the law of large numbers helps us get those numbers a little bit more accurate, so to speak.

And just a follow-up as well. I think the 1/1 reinsurance renewals were a little bit worse than what was expected at Investor Day. So like how does that play into your guide for '26?

I don't know where you picked that up in our commentary. Is there something you heard?

That's wrong.

Yes. I don't think -- [ it'll get ] softer, but I don't think our performance is weaker. People are buying some more coverage. That's -- I just want to make sure we said it right.

Okay. So that piece is helpful. You reiterated prior remarks of $10 billion to deploy towards M&A without the need to issue stock. So what I thought is I looked at the bottom of the top 100 brokers and we estimated that it would take more than 65 deals to get -- to exhaust that full $10 billion of funds. And that number [ rounds ] if you focus on real micro targets with less than $20 million of annual revenue. So that's just on the deals. The playbook is great, but I'm wondering how feasible it is to close a large volume of deals. And if that doesn't transfer how would you deploy any dry powder?

First of all, let me address the deals. One of the things that I think we have that a lot of other firms don't is we've got people in the field who have done deals already. We now have hundreds of offices around the country, organized in regions and zones both on the property casualty side and the benefit side. And they're out talking every day to that exact population that you're talking about. And the ones that are $1 million, $2 million, we don't even announce them. And we bring deals to the table like that literally every week. And so what we've got in terms of the ability to vacuum up, hoover up a lot of these little brokers because I think a very unique opportunity as they begin to realize that they don't have the tools. They have 1 or 2 big accounts, they want to take care of, and we're a great place to build their career, their family secured. In an IR Day sometime I might be able to address actually the people that have taken advantage of that opportunity. And then we're ready and willing to talk to [ ones ], and when you take that dry powder, having just spent $13.5 billion and realized that there's [ not just ] that many people in the marketplace that can do that. I think we've got both ends of the spectrum covered better than anyone else in the market.

Yes, [ let me add on ] some other stats, if you go back to 2014, we did 59 deals in 2014 when we are as big as we are. We can do acquisitions in Canada, in the U.K. and in every single line of business. So being able to do 60 deals, we did 50 -- what I say, 59 in '14; we did 58 in 12; we did 46 in '18 and '19. So -- and these -- that doesn't include the $1 million or $2 million. The smaller ones that we kind of [ tuck-in ]. [ But these are on the ] sheet that I have here, if anything, [indiscernible]. So I believe that we have substantial opportunity to continue to [indiscernible] 50 to 75 deals a year and not even blink.

And Doug mentioned it's a global practice. It's a global opportunity. There's $7 trillion of premium floating around this globe spreading risk. Those are [ Swiss Re ] numbers. We touch about $250 billion. What do you think the opportunity is?

It's huge. The other thing too is so many of these agencies are owned by baby boomers that don't have succession plans in place. I think that we're going to get our fair share, 60,000 of these brokers around the world, if we can clip off 75 a year. I have confidence in the team that...

Look at the numbers that are put out by -- I can't [indiscernible] have in front of me, but we're probably approaching over 900 acquisitions here that have been announced and pick those up from MarshBerry and OPTIS Partners and others.

Our next question is from Gregory Peters with Raymond James.

So I ordinarily wouldn't do this, focusing on the fourth quarter numbers, but I am getting some inbound e-mails on it. So I think it's worth spending a minute on it. And there's just some confusion over what the Street consensus has like they're doing the old definition or the new definition, the 5% looks great. We're just trying to -- and I know what's inside my numbers, I don't know what's inside the consensus and maybe the consensus has difference. I wouldn't ordinarily do this guys, but I'm getting inbound e-mails asking me about it. So I thought I'd throw it out there for you to comment on it.

All right. Let me hit a couple of things on consensus. Let's start with the EPS consensus, I think, was around $2.68 or $0.69. For brokerage, we posted $2.74. [indiscernible] was [ $0.21 ]. We posted [ $0.22 ]. In corporate segment, the midpoint of what we told -- the Street was [ $0.56 ], I think -- the Street may have had [ $0.55 ] and we were a couple pennies than that. So when it comes to EPS, I can comment on the consensus. When you look at what [indiscernible] within the organic growth models. I think that I would hope that what's in the models would have been the 5% we told you in December to compare when you ferret out the noise or exclude the noise from life sales on that.

So I don't know if I have it either Greg. So I don't know -- I'm kind of digging through some papers when I'm talking, maybe I can come back to that question. But I mean, if consensus listened -- if the sell side [ listened to what ] we said in December, we posted exactly that.

Well, it is consistent with what you said, but I don't have visibility on consensus I wouldn't have asked you this if -- unless that was [indiscernible].

I just don't have the information in front of me. I can probably dig it out, what each different analysts has. But even our -- even our transparency into that [ isn't ] all that great.

Yes. That's fair. Can we -- can you go to 7, the AssuredPartners disclosure. And as you're walking through that table, you said, hey, be careful about the third and fourth quarter of '26. And what I'd like you to come back is reexplain that, one of the line items that caught my attention in there. Is if I look at the fourth quarter '26 projected fee tax income from AssuredPartners at $194 million, down from the $201 million in the fourth quarter of '25. It was just -- I know there's a reason behind it, but you said some other comments around this table, and I just wanted to go back and [indiscernible] that, please.

I got you. I understand. First, when you build your models, we think you should be adding in rollover revenues from back on Page 6. To -- because of our acquisition program. We've talked about that for years, right? When you get to Page 7, what I was fearful of is that you would pick up the pink section and you would add in $745 million of revenue out in fourth quarter '26, when the fact is we already have assured partners in our numbers for fourth quarter '25. So there is no rollover. So if I would have changed this table to be a rollover revenue table, it would say rollover revenues are $880 million in the quarter, $755 in the second quarter. $509 million, that's the delta between $815 million and $306 million. And that would be $40 million in the fourth quarter, right? What we're trying to do is that the peak of the section here is showing what a full year would be not necessarily the rollover impact.

And so that's why I said be careful. You can use exactly the first and the second quarter numbers drop them into your models, but take the delta between third quarter '26 and the third quarter '25 and drop that into your models for the rollover [ pact ] of AssuredPartners. That doesn't have synergies in it. This is a midpoint of the range. So there could be some numbers around that to go one way or another. We're doing our budgets of Assured partners here, and so it could change a little bit by quarter, but this gets you started and as you're trying to project next year. I just was fearful you would add $775 million in the fourth quarter I got that.

I got that. Can you go -- can you just address -- and now I'm hung up on this fourth quarter '26 number, the $194 million versus the $201 million 4th quarter '25. Why would that be lower in the fourth quarter '26 pre-tax than it was in the fourth quarter '25. I'm sorry to beat this one up.

There is a static table that we provided to you before, that number will likely change when we get to March. And also, maybe another way to think about it is the $201 million, when I said there was a little bit of [ teen ] in that one, I wouldn't expect that timing to repeat when we get out to 2026. In a perfect world I would say $201 million over there, it says $194 million versus $201 million, kind of the same number, but a fair question.

Our next question is from Andrew Andersen with Jefferies.

Maybe just back on M&A. If I think about some of the disclosures around term sheets and annualized revenues, it does seem to be coming in a little bit over the past few quarters. And I think part of the idea with AP was it would give access to some new M&A pipeline. Is the right way to read this, maybe that new pipeline just hasn't materialized yet or the quality of these term sheets is better than they were in the past?

Here's the thing. I think there's a natural slowdown. [ And in ] sitting here, it took 9 months for us to get this approved to the DOJ. That freezes people. We've been together now, let's call it, arguably 5 months now. I think the teams are starting to gel. They're starting to understand that they have a 2-pronged growth objective as a branch manager because they got to grow their brands organically. They got to find good merger partners.

What I really love about is we got 300 more advocates out in the field right now, looking for opportunity. That will naturally improve our deal pipeline. 90% of our acquisitions are sourced at the local level. Well, it's not like we've got a team of bird dogs that are running around trying to call on 400 opportunities. What we've got, we've got a thousand different branches around the world now, maybe more than that, that every day, they're talking to the competitor down the street about how we can be better together. And that's where we get all of these when Tracy was asking me, can we do 75 of them -- for, I would think that 1,000 different voices out there will do a pretty good job of sourcing out of 60,000 opportunities. I think that our M&A program will be alive and well I also believe there's maybe a little systemic slowdown here as sellers come to the realization that maybe the [indiscernible] are coming down, and it takes a while to -- for people to realize there's a new norm in that.

And then just on that margin table. As you think about the AP synergies in '26, is that including both revenue? I guess this included both revenue, expense synergies, but I would think the revenue synergies are coming online pretty quickly since it's just changing some contracts and the contingents and supplementals in there. Is that the right way to...

Actually, no. I think that they'll both be at a steady pace throughout the next 2 years and everything. But remember, revenue synergies could be from cross-sell. They could be trading with ourselves, wholesale London markets doing that. Joint selling could be some of the revenues. And then you got the carrier contract that still take -- it takes us a couple of years to get those rolled out and have the combined value proposition communicated with the carriers. So probably not as fast as maybe you have in your mind, but I'm not in your mind. So I think expense and revenue synergies are going to grow kind of a [ rebase ] over the next 2 years.

Our next question is from Alex Scott with Barclays.

I just wanted to go back to AssuredPartners and see if you could comment a bit about how their growth's coming in. I know we can see some of the numbers you disclosed revenue and so forth. But interested if you talk about their organic growth and how that's progressing relative to your plans? And what sort of underlying and underpinning your estimates?

All right. So let's go back when we bought AssuredPartners. We merged -- we thought that they were running organic, [ about a point, 1.5 points less than -- ] terrific sales, culture, terrific producers out there. And I'm seeing that still about the same [indiscernible] the opportunity. I think that us being able to deploy our tools across their terrific sales folks is going to get them back their organic growth close to ours as we go forward. So I would say there'd be no dilutive impact to [ margins ] as we hit 2027 when they start being in our organic numbers.

And I can tell you from the visits that we've had, as I mentioned earlier, we've had a whole bunch of them come to basically trade fairs in Chicago, in Rolling Meadows. They are really turned on by the opportunities. And so it's put a big push behind them, [indiscernible] behind their back, if you will, to go out and talk to people that maybe they didn't write before. Story's changed. We've got more resources. Let me bring something to see you. It's pretty exciting.

That's all helpful. And on the M&A pipeline, could you comment a bit just around how you're seeing valuations and maybe if there's a difference between larger or smaller acquisitions and if there's been any [ move ]?

They're coming down. I can't remember the last time I saw and [ asked for 16 ]. these are over 100 on the nice tuck-in acquisitions and you're down in that 12 to 13x when you're talking about the bigger ones now. One heads up for everybody on the phone. This is a great call. I'm going to -- we're going to try to answer the next 5 or 6 questions a little faster. Because there's a line of folks that want to get some questions in. So if we seem like we're just giving you a yes, no or whatever, it's just out of fairness to the other folks that are in the queue.

Our next question is from Paul Newsome with Piper Sandler.

Just ask one question. And apologies, I missed it, but [ broadband ] was talking about movements from [ limited and nonlimited ]. Any thoughts on if having in a material way for your book as well?

It's not.

There you go.

[indiscernible] sure, Paul, what can I do for you? [indiscernible] but I mean, I was trying to be funny or -- but the fact is, no, we're not seeing a lot. We have the data on that. And wholesale markets are doing a pretty good job of renewing their business, which is good for our clients and good for us, good for [ RPS ]. But we are not seeing the kind of movements in the softening market. Now part of that is you're dealing here in a softening market was primarily property. Well, guess what, that found its way to the [ E&S ] markets for a reason, and it certainly wasn't about 5% increases or decreases. So no, there's not a big jump back into the primaries at this point.

Our next question is from Mark Hughes with Truist Securities.

Pat, you'd previously given pricing by customer size. Do you [ haven't ] have an update for that?

Basically flat across the book right now. We talked about that before we did this. There's no sense to put it in my prepared comments. So really, what we're seeing on large accounts and the small accounts is there basically you recall, we were seeing large accounts get a bit more discount, it has changed a bit. And now both big, medium and small accounts, all 3 are getting about the same decreases and increases interestingly enough on the casualty book.

Our next question is from Dave Motemaden with Evercore ISI.

Just had another question on the organic and the deferred revenue assumption changes that were 2% this quarter and 1% for the year. I know you guys have the new definition now of organic. But just on these assumption changes, is that something that you guys can sort of implement any sort of process improvements or anything in terms of like assumptions starting at the beginning of the year to just have less of a potential drag in the future? Anything there that you guys are looking at?

Well, listen, when I look at it, when you look at the last 3 years of this for the [ full ] year it's 0 and 0, 0 and 0, 0 and negative 1. So doing a wholesale change in our process being [ a 1% ], I understand the quarterly -- that's why we spent so much time on in December, and we were talking about it beforehand, and we're signaling it. That's why we're trying to do it. If this were just an annual, if we only reported results annually, you would never ask a question about it. It would be so minor. And I think that putting a new process and, of course, we take a look at it, but to have hundreds and hundreds of people update surveys and their time studies and everything every 3 months, I just I think it adds a burden of cost that it's probably worth it. So I guess my ask for you is to try to look past the quarterly noise, look at it on an annual basis and say, we've done a job of making sure that you -- it didn't cloud the fact that we're running a [ 5% ] organic growth business right now, and we see that going forward.

Got it. So you would think that would be 0 for 2026?

Well, I would actually like it to be a positive number next year as we improve our service quality, we can improve it a little bit more next year. But I'm -- we've done a really great job of getting our service to the point where we just don't make [ states ] and even more to provide certificates of insurance over -- within 99.9% accuracy within 24 hours. Just [indiscernible] years ago, that was taking a little bit longer several days to do in our auto ID cards and our policy review. So we're getting to the point where the chassis is so industrial strength right now. And the bigger we get, the impact would be much smaller on that.

Our next question is from Meyer Shields with KBW.

Great. And I'll try be quick too. Could you expect that there is disruption in the London wholesaling market as one of the major players there build a retail platform in the U.S.? Is that an opportunity for RPS? Or does the fact that Gallagher has retail operations itself make that a tougher [ sell ]?

It's a big opportunity. The answer is yes, both in RPS and in our London-based wholesaling operation with customers that [ sell ] through that unnamed [indiscernible] company, and we're looking for a new [ out ] for their wholesale placements.

Our next question is from Katie Sakys with Autonomous Research.

One for me. I want to zoom in really quickly on the benefit [indiscernible] consulting outlook. Looks stable versus 2025 at 4%. Health inflation, does it seem like it's incrementally changed this year relative to last? And maybe that's going to be less of an uplift to employee benefits organic. Can you kind of walk us through what you're thinking on what's going to keep that 4% organic growth rate this year?

You crackle that something there -- [indiscernible] having awards before you have finished. But can you just ask the [indiscernible] one more time because we just got to crackle from somewhere.

Yes. Sorry about that. It doesn't seem like health inflation might be as much of an uplift to employee benefits organic this year as it may have been last. Can you walk us through [ your thinking ] on keeping the 4% benefits brokerage organic growth rate stable?

Yes, here's the thing is that truly a lot of our services are priced on a per employee per month basis. So as rates go up, doesn't necessarily follow that like you would see in the PC side. But what it does do is it does cause -- it does present many opportunities for more advisory projects. That [indiscernible] of they see increasing medical cost, increasing premiums, they changed their programs, how do they change their deductible, gives us more pharmacy benefit view engagement. So we feel pretty good about the fact that as you [indiscernible] on your labor force benefit cost, it leads to more opportunities for us to go in and consult and give them advice. So that's why we feel pretty good about it.

I also feel like it's going to give our consulting operation a boost because everyone is going to shop their employee benefits. I think everyone is [ set up ] with employee benefit with health care inflation, and while they like the people they've been consulting with, and it's a very sticky business, I think they are open to the kind of [indiscernible] efforts that we have now, the size, the scope and our capabilities, even in the smaller side of the market, people I think are just a little bit more willing to listen right now.

And we do have some creative solutions. There are things that we're doing [ in all ] of medicine, as I said in my prepared comments and what have you. that are different than what the small local broker. We just -- when we closed on AP, what we found we have over the last 20 years, most benefits in PC people were housed together and embedded in the same P&L. And we, literally 30 years ago, decided that we would break those apart, certainly looking for cross-selling synergies working together, not changing it to not be Gallagher. But to work together in a treat separate benefits capability, separate benefits operation in [indiscernible]. I think that's been very, very successful for us. And it proves the point, I think, to the buyers that we do look at it as a practice, as a different profession in the sense of its advisory [ nature ], and they should be listening to us now. And I think there's a lot more opportunity to build our pipeline than there has been even in the last few years.

Our last question is from Ryan Tunis with Cantor Fitzgerald.

Yes, we got the [indiscernible] that we've been -- so in the spirit of that, Doug, I'll put you on the spot a little bit here. [indiscernible] helpful? Little bit confused. Can you just give us an over under on 2026 EBITDA margins, what you're thinking about [ it ]?

All right. So you do have a little bad connection on it. And so let me see if I can repeat what you said. You're saying where do I think EBITDA margins are going to land for full year '26 and taking an over under.

And over under, it's a guess.

We're in over.

And what, what number?

Listen, you guys got to -- we're putting the range. We're going to try to tighten down these ranges there that are on Page 8 of the CFO commentary document. But I think that -- I feel I told you, I think we have some upside in synergies. And I think that our teams are going to be really focused on continuing to get better every...

Hey, Ryan, get Doug off the hot seat and call [ Fanduel ].

No, no, no. So yes, so like my follow-up, I've been reckoning on the numbers. I mean the impact -- you can help [ destitute ] the 4.5% in the [ CS ], you guys think...

4.5% in what?

At the point of the [ CRs ].

I don't know [indiscernible] out of it. We're not focused on that as a...

Well, thanks, everybody. I think that's our last question. I want to thank you again for being with us this afternoon. As we said, we had a great quarter and a great '25. Very excited about '26. Our new colleagues that have joined us not just from AssuredPartners, but Woodruff Sawyer and dozens and dozens of others around the world thank them. There's a lot of competition out there for acquisitions, and I think they made the right choice. That's 71,000-plus colleagues, and I want to make sure I say thank you to them. I do believe we have the most talented team in the industry and it shows. So we look forward to speaking with the investor community again in March during our Investor Day, a good evening. Thanks very much for being with us.

Thank you. This does conclude today's conference. You may disconnect your lines at this time.

All right. So good morning, everyone. I'm Ray Iardella, Head of Investor Relations at Gallagher. I want to welcome everyone to our fourth quarter 2025 Investor Meeting, including those of you that are here in person and those that are joining via the webcast.

So in lieu of our business leaders getting presentation sort of vertically across the business, we're going to focus on 2 fireside chats today talking about our two-pronged growth strategy of organic and M&A in 2, 30-minute sessions. Towards the end of each discussion, we'll open it up for Q&A on the topic that we're discussing, whether it's organic or M&A for those here in the room.

And what I would ask for the benefit of those on the webcast, we ask that you wait for a mic to get a question. So people can clearly hear the question, then the answer as well. Additionally, we handed out our updated CFO Commentary document a few minutes ago, and we posted the same document to our website at www.ajg.com/december16materials. An 8-K regarding this information was filed this morning as well.

So before we get started, I'd like to make a quick legal comment. Some of the comments made during today's meeting, including answers given in response to questions, may constitute forward-looking statements within the meanings of the securities laws. These forward-looking statements are subject to risks and uncertainties described in our reports filed with the SEC, our CFO commentary and those that may be discussed today. Actual results may differ materially from those discussed today.

With that out of the way, I'm going to hand it over to J. Patrick Gallagher, Jr., our Chairman and CEO. Pat?

Thank you, Ray, and thank you all for coming out today on a brisk day, and I know some of you traveled to get here. I was talking to Joe and it took them like 36 hours. So thanks very much for making the trip. We appreciate it. I'll tell you, it's a -- I think it's going to be a fun couple of hours, and we want you to just feel free to please ask the questions that you've got.

I'd like to just start a little bit by talking about our competitive position and kind of how we feel about the business and simply add is just a bit of overview as we get into the day. Our business is in really, really good shape. The team, I think you're going to see is -- continues to be very, very strong. We see our future growth and underlying growth activity is just being literally massive.

When you take a look at what's going on in our business, I know, and you'll hear we'll talk about what's happening in the rate environment. Yes, rates are moderating in particular in property. But overall, insurance premiums are still rising. In addition, when you take a look at our statistics relative to what's going on in the economy, in particular here in the U.S., our businesses are strong. We still monitor every day what's going on with endorsements and with policy cancellations and those continue to be very, very strong.

When you look at the overall worldwide community of insurance buyers, there's about $7 trillion of insurance premium purchased in the world, about $4 trillion of that is non-life P&C. And you step back from that opportunity, you look at say, "Oh my goodness, that's a huge, huge business." Including AssuredPartners, Gallagher will touch about $200 billion of premium. So if you put it in another perspective, if you take our largest publicly traded competitors and ourselves and you add us together, we have no market share. So Gallagher virtually has no market share. And if that pie grows with the world economy. In many instances, it will grow bigger than the share that we already have. At the same time, you've got a world that's getting more dangerous that has all kinds of needs for risk management spread of risk that grow every day.

When I started in the business, nobody ever heard of cyber, it didn't exist. Today, cyber is something that we're talking about literally down to the bodega owner. You've got to have this cover. This is why, this is what you need. Gallagher now is in a position where we can literally talk to any client of any size, and we want every client of every size in any industry, no matter where they're located in the world, and we can do that business.

We feel really good about our growth prospects, but we want to be clear about how we view that. So we look at our world as two-pronged in terms of our efforts to grow. And clearly, when you take a look at what Gallagher is trying to do, organic growth is our primary pillar of growth. Every day, and we're proud of this. We get out and we sell insurance and risk management services. We get out and talk to people about why they should be part of Gallagher and what we can do for them.

The second prong to that, however, which I sometimes think gets a little bit overlooked is our merger and acquisition activity. If you go back to 1984 when we came public, we had a $64 million company, that was our total revenue. We raised $11 million, that was our total balance sheet. But the reason we went public in large part was to get a currency to be able to do acquisitions.

Today, 40-plus years later, we are basically a merger company. We're a company that was built by partners all around the world. And as Doug coined years ago, the phrase we use is, yes, when we do an acquisition, we want revenue and continuing earnings, no question, but we're getting capabilities and brains. And that activity continues today to be very, very important to us. And you'll hear an update, of course, on how we're doing with AssuredPartners. I couldn't be happier with that acquisition.

I've been out now with this team that you'll see today, we had about 20 of us that went out, saw probably 60 individual branches, maybe 70 individual branches. Presently, we have about 500 people coming to the home office and tranches over 6 tranches of meetings. By the time we're done with that activity, we will have touched in person probably 90% of the 11,000 people that are joining us. And I will tell you that I really haven't met anybody in the whole process that I would think, oh, they don't fit. It's going to turn out to be a real seminal event for us.

And what that does for the company, while we're very -- every day emphasizing organic growth is it takes us to a position even in 2026, where regardless of what the market is doing or what have you, our growth is going to be over 20%. And the activity around acquisitions looks to only be getting stronger, not weaker. There's 30,000 agents and brokers in the United States. The difference between that local broker who, by the way, when we compete 90% of the time, we're competing with somebody smaller than we are. You'll hear more and more about our capabilities, and that is really what I think is going to drive both acquisitions as well as continuing organic growth.

The third thing we try to do every single day is get more productive and have a higher level of quality. You've -- Many of you have followed us for a long time, and you know that we started 20 years ago, moving work to India. Today, we have about 16 people -- 16,000 people there, and they deliver services across all over the world that literally cannot be replicated in the local environment.

Our benefits business is strong. Our claims service is strong. Economic activity is strong. Organic growth is strong. Merger and acquisition opportunities are strong. Our integration of AssuredPartners is strong. Our pipeline for tuck-in acquisitions, which is really where we focus most of our M&A time, presently, we're talking to literally hundreds of people. We've got dozens of letters of intent out and it looks to us like we have a good line of sight to have another very, very strong year this year.

So with that, what I'll do is just simply say welcome again. Thank you for taking your time to join us this morning. I think that you'll find is time well spent. And of course, when we get to Q&A, if there's anything along the lines that I can add to it, Doug and I will be up and take those questions as well.

So Ray, I'll turn it back to you. Thank you for being here.

Thanks, Pat. So maybe our business leaders may come on up and we can start the first chat. So maybe to just first level set who we have on stage, maybe we can get on the road, just introduce yourself and then what you will be primarily speaking about today.

So Mike, do you want to begin?

Yes. Good morning, everyone. I'm Mike Pesch. I'm the CEO of our Americas P&C business, which is really 3 key areas. It's our U.S. retail P&C business. And over the last 12 months, obviously, with AssuredPartners, Woodruff Sawyer and a host of other mergers that have joined us, that business will be about $4.5 billion of revenue in 2026. That's run by Pete Doyle. And then we have our Canadian, Latin American and Caribbean operations. Canada is about $300 million in overall revenue in the Latin American and Caribbean is about $150 million and rapidly growing.

And then our specialty business, which is run by Patrick Kennedy, it's about a $2 billion business. And if you remember, in AssuredPartners, they had their retail business and then they had what they called Accretive. And the Accretive businesses, 21 of which fit perfectly within our specialty business, which includes RPS, which includes our captive business, our affinity business and our pool administration business. So that business altogether is $2 billion, serving customers across the whole spectrum from $100,000 in premium up to millions of dollars in premium annually.

Patrick?

Patrick Gallagher, Chief Operating Officer. I'm involved with all the businesses around the globe. I'll be mainly covering international property and casualty today, which for all of you, it's about 60 countries in which we have offices and 70 in which we have capabilities, so about 130 countries where we have capabilities to serve. When I talk about international P&C, I'm mainly talking about our retail businesses in the U.K., Ireland, Australia and New Zealand, which makes up about $1.8 billion of our revenue, and we are top 5 in every single one of those markets. I will also touch upon our London specialty business, which is our London wholesale business, about $700 million with about 1,200 colleagues in the U.K. doing specialized London wholesale.

I'm Tom Gallagher, and I am President of the company. And today, I'll be talking about our reinsurance operation until the AP transaction, that was the seminal event for the company. Gallagher Re started in 2013 with Capsicum. And when Capsicum came on to the company 4 years ago, right now, we acquired the Willis Re operations, combined them and created Gallagher Re.

Right now, we are doing everything we can to be the broker of choice for our large insurance companies and actual smaller risk takers as well. We're the third largest of the reinsurance brokers in the world. Over 3,000 of our teammates are actually in the reinsurance business. We've had a terrific 2025. I'll talk more about that later. But our business split is about 25% casualty, about 35% specialty, property being 40% to the overall business and about 1/3 of the revenue comes from the property as well. North American property is 40%. And overall, about 1/3 of the revenues are from property itself.

With that, I'll pass it over to you Bill.

Good morning. I'm Bill Ziebell, and I lead Gallagher Benefit Services, our employee benefit and HR consulting practice for Gallagher with AssuredPartners, we're on a run rate around $3 billion. We operate -- most of our business is in the U.S., but also in Canada, U.K., Australia and New Zealand. So I'll be talking about what's going on in the benefit space in terms of both the organic and the merger side as well. That's mine, Bill.

I'm Scott Hudson. I run Gallagher Bassett. We're the claims paying business inside Gallagher. Our run rate will close out this year probably around $1.6 billion. We handle claims on behalf of our clients. We don't take risk. We've got operations throughout the world. The majority of it is P&C claims and the majority of the P&C claims that we handle are in the workers' compensation space, but we do handle claims in other specialty lines. And more recently, we got into the disability claim handling business down in Australia, of which we are probably the dominant player in that as well.

Perfect. All right. Well, maybe we'll shift over to talking about some of our organic growth initiatives, the value proposition tools that we have available for our brokers and other initiatives that we have around. Patrick, do you want to talk about CORE360 and our value proposition?

Yes. Many of you have heard about our CORE 360 value proposition. When you're as big as us in property and casualty and as diverse as us, it's really important that you have a common approach and a common language in which you're speaking to customers. So for every customer, we're using a unique value proposition to talk about coverage choices, program structure, risk control and mitigation, all the things that go into the cost of protecting a business other than the premium. We get into the premium as well in that.

But I think the common language is super important because when we go and call on a mid-market manufacturer, we're bringing in a property expert, we're bringing in a D&O expert, and we're sitting down with them. And if all 3 of the people that are the person who brought the opportunity, the property person, the D&O person are speaking a common language, it's much more easy for our buyers to kind of understand the common way we're trying to mitigate their expenses when it comes to insurance.

It's also a common investment tool within Gallagher. When we look at something where we see an opportunity to help our customer make themselves a better risk, we will invest in it only if it fits into one of the quadrants of our value proposition. And so you've got an opportunity here where you're sitting with a mid-market CEO or CFO. This is where it works better with mid-market and upper mid-market because they don't have a risk manager. They don't have an insurance professional that's sitting there. They want to talk about the entirety of the business and what they need to do to protect themselves. And CORE360 is just something that hangs together around the globe to be able to offer our unique value proposition.

Mike, do you want to add anything or...

Yes, I would just say -- so we talk about a two-pronged approach to growth, organic and mergers. And internally, I'm not so sure if we use it externally, but internally, we talk about mergers as buying brains. And it really -- when you think about CORE360 and you think about some of the key parts of it, what we bought with AssuredPartners, what we bought with Woodruff Sawyer, added to the CORE360 offering. When you think about the niche practice groups, not only did they add to the existing areas of specialty, but they added to ones that maybe we needed to add to all along, which is things like energy, technology, construction. We now have a team that is, I think, second to none in the industry.

When you think about CORE360, you think about data, I'm really proud of our team in just a period of literally 90 days. They were able to get all of the AssuredPartners information into Gallagher Drive. Now to give you some scope there, that's $11 billion of premium that we now can break down by industry of what people are buying, who they're trading with, how much they're buying as we give great advice through CORE360 to our clients and prospects. That is huge to add to our $20 billion of premium that's already in Gallagher Drive, to be able to predict what's going to happen in the marketplace, to be able to build programs and facilities.

And then the last thing I'll say is we've talked about in the past about our national risk control platform. These are our loss control and claim advocates. These are the folks in the field that help our clients get better at what they do to be safer. And when they have a claim to get through it without -- by getting paid by the insurance companies or by avoiding litigation. When we bought AssuredPartners and Woodruff Sawyer, we added over 150 of these professionals. So you think about CORE360 and then you think about the additive approach to M&A, buying brains, I couldn't be more excited about our value proposition going forward.

Yes. Since you cover the specialty business, too, do you want to touch on what we're offering clients there?

Yes. The specialty business, again, I think sort of our key market strategies, our go-to-market strategy is another thing that I'm really excited about. And you all didn't get this, but this is a document that we built -- Patrick Kennedy actually built and his team as we figured out where the AssuredPartners businesses fall, whether it's open wholesale or binding operations or programs or our pool administration. Many of these facilities -- many of these programs that AP had fit perfectly into what RPS had and what ARTEX had. And so I couldn't be more excited as we go to market. That business went from $1 billion to $2 billion in revenue with very specific areas of capabilities.

The other thing I'm really excited about from a specialty perspective is our ability to build programs. We're building them every day, specific to what our retail customers need. There will be a time where we will be able to take the information in the not-too-distant future and get down to the very specific micro vertical to go find capacity in the marketplace and build a facility or a program with the expertise that we have in specialty to solve a problem for our clients and for our producers. So I'm really excited about our go-to-market strategies in specialty.

Great. Bill, do you want to hit on the benefits go-to-market strategy?

Sure. So we call our value proposition of your people strategy partner. If you think about what's important to an employer, I can't think of anything more important than their employees. It doesn't matter what business people are in or house, what their size is. Think about your own employer relationship, what brought you to them. Obviously, our biggest is in the benefit space. This is where it's very regulated, very complex. It takes a lot of information to do a good job with that.

There's only 5 national carriers and every competitor can get the same quote. So our differentiation is using data to help navigate, help them give good suggestions on how they can mitigate those costs. I'll get to more of that later. But the benefits is our primary business, about 2/3 of our business. That's number one. Benefits is our biggest business globally. Number two is the financial business lines. This is where we have our retirement plans, defined contribution, defined benefit, we also put in there things like pension derisking. Our executive benefits is in that space. So it's a lot about retention as well for our clients.

And then the third is our talent business line. This is where you have comp consulting. We have communications, engagement capabilities. We can survey employees, what do they feel about their employer or things of that nature. We have fractional HR support for our clients. All 3 of these things are universal across the globe. The value proposition of our clients, the employers that are looking for ways to mitigate costs, but also how they're going to keep their talent in their seats and doing what they needed to do. And it changes a little bit in terms of what's important by country, but it's also by industry and size of the employer in terms of the leverage they have available and also what they're trying to get done.

A law firm, as an example, may have a completely different type of benefits philosophy than a small manufacturer or a distributor. Their margins are different, what they're trying to attract is different. So we have to customize those solutions for every one of our clients, depending on what they're working on. So our specialization of our people and using the data to really help our clients drive decisions. That's what we're doing at Gallagher Benefit Services globally.

Great. Thanks. Scott, do you want to hit Gallagher Bassett?

Sure, Ray. The first thing to know about how we go to market is that we've segmented into 4 different groups of prospects for us. The first is large corporations. That's been kind of the core of what Gallagher Bassett or who Gallagher Bassett has served over the years. Those are the large organizations that self-insure. In our roster of clients, you would see names like Costco, FedEx, UPS, McDonald's, those organizations that -- because they're self-insuring, they need somebody like our organization to handle the claims for them.

Second is public sector clients, all forms of public entities, whether it's states, local municipalities, school districts throughout the U.S. primarily. We also serve some of them in the U.K. Then you've got the alternative market clients, large captives. Mike talked about programs and MGAs. We would be the claim-paying entity for those type of organizations. And then more recently, insurance carriers. And we're going to them and basically saying that, look to us to handle your claims, you don't need a claims organization to do that any longer. And that probably at this moment is the fastest-growing segment. And a piece of that are the large schemes, which, in essence, are insurance carriers down in Australia, each of the state work comp schemes, the disability scheme down there are clients of ours as well.

Years ago, we would go to market by basically asking those organizations, how do you want us to handle the claims. Today, given our deep expertise and kind of the breadth of our experience, we're basically saying we've got a strong point of view, take our expertise to help you design a program that will meet your needs. So it's not all about just doing what they want us to do, but kind of bringing our perspective to the table.

Yet at the same time, we will customize those -- our programs to those different entities. I mentioned there's 2 different companies may have a different point of view on how they want their workers' compensation claims handled as it relates to their employees. When we're handling liability claims for these organizations, that is -- we're representing their brand in the marketplace and how they want that handled, how they want us interacting with the individual that has the claims in large part will be dictated by their strategy and how they're going to market. So we are in a position to be able to customize our offerings client by client as well. But our point of view is definitely an integral part of how we design programs for these organizations.

Great. Thanks, Scott. It's already come up a couple of times the sort of the niches and the specialization of our brokers. Tom, do you want to talk a little bit about the niche strategy? I know you created and led one of our niches early on. So can you talk about that?

It's almost 30 years ago now. As each one of them talked about, specialization is incredibly, incredibly important to the way that we perceive our opportunity to grow the business organically. Today, we've got more than 30 practice groups in the company, where we believe we've got outstanding capability to differentiate ourselves at the point of sale. Our managing directors can have a practice group that is just U.S. or it could actually be global. And by virtue of being able to do that, we can bring all the best of what's happening inside of our company to our prospects and to our clients and to our team.

Think about it, if you will. We had the Assured team into Chicago, as Pat mentioned, over the last couple of weeks, and we will be doing more of this in January. We bring these people in and go through a trade fair with them to give them an opportunity to look at what we do and how we do it. Many of our practice groups were actually part of that. There was tremendous excitement about being able to go back to their offices and bring that kind of skill set to their prospects. We see the success of it happen constantly inside of the company. It also drives retention. Today, more than 80% of our business is tied into those practice groups. It's an incredibly important part of what we've been about and what we will be about for a very long time.

Great. I don't know, Bill or Scott, if you want to add anything on the niche?

Yes. We have a very similar approach on the vertical niches as well. Our biggest is health care, and we also do very well in private equity and in public sector. It's interesting about health care because that's where a lot of pain points are going on right now with those health systems in terms of the cost of their labor, cost of delivering services and so forth. And we're winning a lot of business from large competitors these days because we come in with a fresh set of eyes, read the contracts, find savings of millions of dollars for them. And it's a really important value proposition. And that niche for us is growing pretty rapidly.

I would also add in the benefit space, segmentation is a big deal for us as well. And we service clients that could be down to 2 employees up to 200,000. And so having the right athletes in front of those clients is really important, not only at the point of sale, but on the service side as well. So matching those up, getting people trained up on what does a 50 employee group need versus a 5,000-employee group are vastly different. So we're doing a lot in the segmentation of our business in addition to the niches.

Scott, do you have anything to add?

Yes. The -- I mentioned the 4 different types of clients we have, and that's primarily the way we're going to market. We do serve clients across all industries. We're quite significant in whether it's retail, hospitality, transportation and so forth. But more recently, we have started pivoting a little bit to thinking about the segments and delivering specific offerings to given verticals.

The one that we're probably the furthest down the path on is with construction. And a few years ago, we actually acquired a couple of companies and started building capabilities around loss prevention and safety. And we're quite well established in doing that in the construction space. And so we go to market with construction companies, and we basically say we can help you on your construction sites, make sure claims don't occur. But if by chance they do, then we're there, whether it's a workers' compensation claim or some other transportation type claim.

And we're starting to do that as well in the health care space and a little bit with transportation companies. But our primary approach, Ray, has been staying within our client segment. But I think in time, we'll see much more emphasis on the individual verticals.

Great. Thanks, Scott. Maybe shifting a little bit. Data and analytics have come up a couple of times in the comments of both Bill, Mike and Patrick. Patrick, do you want to talk about Gallagher Drive and sort of what we built on the P&C side right now?

Sure. So if you think about Gallagher 8 years ago, and you think about our competition that we compete with, where 90% of the time, they are smaller than us. And you even think of AP, AssuredPartners, as of August, the old way of insurance broking was we would take the submission data, send it to the carriers, negotiate with each carrier the best opportunity or the best quote that they could put out, so we go to 5. And then you get the best quote and you compare those quotes and the best one for the client is the one you pick, and that's it. But there's not a lot of what are clients like me for Gallagher 8 years ago for our smaller competition.

What we embarked on 8 years ago is our -- what we call Gallagher Drive, and it's our data and analytics tool that really helps you understand through our book of business, what coverage to buy, what limits to buy from which carrier to buy it, roughly how much it should cost. And we have all that benchmark in our data. And that informs the actions as well to be taken through the CORE360, national risk control, coverage limits, what coverage to purchase. And so it informs a much better conversation with our customer, not just buy from AIG because it's a better quote than Chubb.

It's -- this is the journey we're on to get you to buy the right insurance program. We capture submission data, quote data, market conditions, claims data, industry data, and we put that all together to create purchasing trends, client losses versus peers, and we sit down with the customer and have a much more informed discussion. The data and analytics movement that we've done over the last 7 to 8 years, maybe sits right behind the niches as the #1 reason people buy from us.

If I could just jump in for a moment. I was in a pitch a couple of weeks ago where our Drive team came in and was making a pitch talking to a prospect. We had 3,500 companies in the United States in that practice area that we were talking about. We're able to boil that down to a region. We're able to boil that down to a size. We're able to provide them meaningful, meaningful data as it relates to what's actually happening to those accounts and what the industry is doing at that moment. Just tremendous amount of information that we're able to gather.

Great. Mike, do you have anything to add on Gallagher Drive? Or do you want to hit SmartMarket as well?

Well, I'll hit SmartMarket, but I'll tell you, Pat referenced it. We've held in-person meetings at the AP locations, and now we're doing it in our home office in tranches of 300 to 500 of the AP folks. And in those cases, we are having a little mini exhibit hall. We have some speakers in an exhibit hall where we show them actually how to utilize their own data through Gallagher Drive. And the aha moments that you're seeing from folks that have been thirsty for this, where they trade in the mid-market and upper middle market, as Patrick put it, where that information is incredibly valuable. It's a differentiator. They're so eager to now be able to go out in front of their clients and prospects. And if they don't quite know how to use it, we have the teams to support them and to go on calls with them in the field.

So it's incredibly exciting to just watch it come to life within a group of 11,000 people that have never seen something like this before, and they're thirsty for it. So as Patrick said, we differentiate ourselves from our smaller competitors, these sort of things, not only to our producers, but ultimately, our clients are really, really important.

Ray asked me to just make a comment or 2 about SmartMarket. So we've talked about SmartMarket in the past. I always like to say it's sort of like an Uber in the insurance industry. It connects willing buyers and sellers together through a digital interface. That's really what it does. And if you think about it, Patrick talked about going to market.

And at Gallagher, for the most part, our producers, our account executives take this submission and go to the insurance marketplace and tell the story on behalf of that customer. We like that approach. It gives a personalized approach. That's what we see in smaller competitors, that personalized approach. But we have to use our size and scale to leverage the knowledge about the marketplace, and that's what SmartMarket gives us. So our insurance carriers, our key trading partners can see inside our book of business and be very prescriptive about opportunities they want that fit their appetite.

And AssuredPartners, if you think about it, I don't want this to only be about AssuredPartners, but Gallagher, legacy Gallagher had about 90 offices for retail P&C. And if you think about all of those individual producers, about 1,200 producers marketing their own business, it's very challenging to make sure you're up to speed on appetite and what carriers are interested. And for the carriers, many of whom have local offices, but some don't, to be able to interact with our people in a very prescriptive way. So SmartMarket gave them that advantage.

Now you add on 200-plus AssuredPartners offices, almost 300 offices across the United States, SmartMarket will be the game changer for many of those folks because AP did what we did, which is, for the most part, market their clients' business via submission to their insurance companies. They didn't hub the submission process. So the technology of SmartMarket will not only continue to support the existing legacy Gallagher offices, but the 200-plus AP offices to make them faster to market to make sure they're getting the right carrier at the right time for the right account. And so we're incredibly excited about with what SmartMarket will bring to our new colleagues.

Yes. And maybe, Patrick, do you want to talk outside the U.S., that was mostly...

Yes, it's not just the U.S.A thing. I mean, I think I -- one of the things I like about our company is when we come up with a good idea, and it seems to be working, we get the other divisions, other areas of the globe, other niches, other specialties, a chance to learn and be part of that new initiative. SmartMarket definitely started here in the U.S., but we have 15 markets across Australia, New Zealand and Canada and now 10 in what we call specialty markets.

And as Mike alluded to, I mean, it's just a great carrier appetite guide. Hartford can come in and say, we want to write construction, but they don't want to write crane operators and they don't want to write electricians. So it's hard for people to understand when they say construction, I mean construction, but -- well, if they're in SmartMarket with us and working with us and they're tagging the construction accounts that they want and showing our producers, that's the actual construction I want. It's a much more efficient process to be working with our carriers and knowing their day-to-day changes in what appetite they have and what risks they want to write for us.

Great. Maybe sticking on the P&C side, Patrick, do you want to talk about Gallagher Submit and Gallagher Go.

Yes. So feeding into this data and analytics is how do we get that submission information. And while we do have a great team in our Gallagher Centers of Excellence that can pull in the random submission information from our clients and put it into a great submission to the market and lead that to proposal, we've endeavored to make -- to take the friction out of the renewal process.

So the CFO is now receiving from us a very tech-driven cleaner data set of what we're looking for, for the submission information. So it's easier for our CFOs to submit the information we require to go to market on their behalf, but also it's easier for us to get it into our carriers' hands in the way that they would like to see the submission. And also at the same time, it gathers cleaner data for our One Source data lake.

So if you're thinking about a submission flow from 10 years ago, it's a bunch of back and forth between the buyers, send me this document, send me that document. Submit is our technology platform to take the friction out of that. And it's -- the clients love it because it's pre-populated at renewal. They don't have to go through the same process every year, makes them a much stickier customer.

When you think about Go, now that we have this data, and we're pulling it into our centers of excellence, we can now basically have a banking app. So you've got it on your computer or on your phone that basically says, these are your policies, you can manage your locations, you can issue certificates, you can issue auto ID cards, a future state, you can track your renewal like a Domino's Pizza come into the house. But it makes -- when you think about SmartMarket and then you think about Submit and then you think about Go, those are all 3 digital experiences.

In the current world and in the world going forward, we find that anyone that has a digital experience with us, any of those 3 is a much stickier account and much less willing to take competition from our brokerage competitors.

That's a great overview of those products. Another way, though, that we differentiate or use our data and care relationships is to create new products. Do you want to talk about the advantage products, Mike?

Yes. I think you've heard me talk a bit about this in the past. But just as a reminder, about a decade ago, we sat in a room trying to figure out whether or not we could take a line of coverage or even an industry and tailor-make coverage solutions, approach the carrier marketplace and put sort of an RFP or an RFQ out to see who would be willing to participate as a panel member where they would guarantee that our clients would get certain terms and conditions that were enhancements to your normal coverage for that line of coverage. And they would, in essence, get more of the volume because they were providing a service to our customer. And of course, then they would also pay us more remuneration.

Well, the first one was Umbrella that we launched about a decade ago. And now we've added about 16 other lines of coverage with about 5 to 6 insurance companies participating on each one of these panels. Put these out to bid on a regular basis. Typically, we're oversubscribed. The insurance companies are hungry to get on these panels. It's a win for them. Most importantly, it's a win for our mutual customer. They get coverage terms and conditions that they ordinarily wouldn't get for that line of coverage in the marketplace. And it's a win for our producers and ultimately for Gallagher because we get paid more compensation.

So all 3 parties in the food chain win and now we have about 17 of these products. The best part of the story is that effective January 1, all of the AP business will roll into our Advantage products, therefore, getting better terms and conditions for their clients and better compensation for their producers and ultimately, Gallagher AP.

Great. Thanks. Most of those comments are focused on retail specialty. Tom, do you want to talk about some of the reinsurance organic growth initiatives we have?

Sure. You take a look at 2025, we've had a terrific '25 for the reinsurance group, great new business wins all throughout the year, coming into the end of the year in a very strong position as well. When you look at the opportunity that they have inside of Re right now, we've talked about it from the very first time that they came in that we're good at cross-selling among the various businesses that we have. This year alone, we will do over $8.5 million worth of cross-trade revenue. This is something that they never had ever in their prior employer.

We're also developing the capability to help our carriers with alternate solutions to problems that they have. So you talk about sidecars, cat bonds, insurance-linked securities, all types of different things are coming together for our reinsurance team. It's been a very, very effective year for them.

And then the third thing that they're doing right now is they're building out a fact facility that is a global fact facility that rather than sitting off to the side is central to what we're offering to each of our reinsurance clients. And we have great expectation that this will pay real dividends in 2026 and beyond.

Great. Thanks. Bill, do you want to hit on some of your initiatives?

Sure. Earlier, I mentioned something we use a lot, data driving decisions, and we have a lot of data in the benefit space a lot. First, we break our data down into 4 big buckets here. One is about knowing your people at census, compensation, where they live, what kind of things are they looking for. Then we get into knowing your plan design. Is your plan design meeting the needs of your employee population? Can they afford to go to the doctor, things of that nature? And maybe we ought to have a different plan for different employees in the organization and so forth. And the plan design is huge because it gets into how are we going to help that employer save money or do better to attract employees.

Utilization, claims are keen in our world here on medical. What is going on with your claims? So if you get to be self-insured or even experience rated on fully insured, we have access to claims. And we typically like to put that into a data warehouse and then we download the data warehouse into our Drive mechanisms, and we are able to go into and say, figure out what are driving these costs. The largest component of cost drivers in the U.S. today continues to be cancer -- and that cancers, and then we also have neonatal. So those are really big deals there.

But we look at whether the employer has populations of high users of needs, things like dialysis or musculoskeletal and things of that [ nature ]. And then we start looking at what's available in the communities that -- where they're employed. If it's a single location or multisided, we want to see where they -- if they have opportunities for carving out.

So the opportunities is the fourth bucket here, where can we get better care at lower cost for that employee population for what's driving their costs. So these are the things we do when we look at data and really helping the employer understand not only how the plan design works and if it's being used and what's driving those costs and then give them some solutions to help them keep those costs down. I mentioned a couple of them.

We also look at some of the point solutions out there that are popping up. There's hundreds of these out there. We track the quality, the outcomes and the costs. And we try to recommend certain handfuls that can help with things like mental health or fertility, things of that nature that the employee population needs. So this keeps our teams pretty busy. We have a lot of data, and it's really helping our clients make really good decisions to help mitigate cost increases.

I mentioned the drugs before as well, pharmaceutical, GLP-1s, all types of things. We help them figure out what should be on their formulary, where they should be getting those costs from -- or sorry, where they should be purchasing those from. We save our clients a lot of money every year by doing an RFP for PBMs. And it's increasing in velocity. More and more people want to do that, carving it out from the traditional insurance carrier. But the employers are also -- sorry, the PBMs are really -- my bad. PBMs have a lot of -- what I'm trying to get to -- a lot of opportunity for us to save money there.

There's a lot of -- it's not just about doing a bid, it's about the language and the contracts. People that are in our pharmacy practice came from the PBM industry. So it's really digging into those contracts, getting best languages for our clients, the employers to keep those costs down. And we literally save millions for our clients every year with this practice as well. So a lot going on there.

We've mentioned the organic initiatives. We do a lot with thought leadership. It's our practitioners, what are we seeing out there? Our marketing team takes it out. We do campaigns, seminars, and that really helps get our clients to understand that we can help them as we're going out there talking to them. It's really hard to differentiate a benefit broker from another. But when you come in with insights on things that they're dealing with, it helps us to win new business that way as well. So those are the things we're doing.

Great. Thanks, Bill. Scott, you mentioned the insurance care opportunity being one of the fastest-growing pieces right now. Do you want to maybe highlight that a little bit more.

Happy to. So just a little bit of context. If you go back a decade, the majority of Gallagher Bassett's business was with large self-insureds. And I remember having a conversation with Pat Gallagher in my early days, it's like if we really want to grow and continue to grow over -- in the coming years, where we've got to go is where all the claims are, and that's with the carriers. And at that time and probably even to this day, probably less than 10% of claims in the U.S. are handled outside the carriers. So that's where our growth prospects are.

So we turned our attention to the carriers. It basically said, we've got the requisite of expertise to be your outsourced partner in the claims business. We've made actually some great strides. We've got probably $200 million to $300 million to $400 million worth of business in that area today. And the conversation will take on a number of different -- from a number of different perspectives.

A lot of times, these carriers today are facing a decision to replace their claims system. That could be tens, if not hundreds of millions of dollars to do that. Guys, why do that? Come to us, we'll provide you that capability in terms of the technological services and the people themselves.

The other thing is just look at our breadth of expertise. We can bring claims handling depth and expertise probably much more so than you would be able to do it internally. And people are finding challenges just keeping claims adjusters on staff, alleviate that burden, bring it to us. And at the same time, we will customize that offering, so it looks just like it would if it was housed inside your own organization. We'll pick up the phone and answer it as though we're working for the carrier. So it still looks exactly like you. And we've had great success in doing it. I think that we're still at the very, very early stages. And I think the potential in that particular segment of our business is quite large as we look to the future.

Good. Good. So I do want to sort of pull the group and get your thoughts about fourth quarter organic and what you're feeling for next year. But before I do, I just want to mention, you probably have already likely seen this, we've added a new page to the CFO commentary document, Page 8.

It's based on feedback, I guess, we've been receiving from the investment community as we talk about these large lumpy life sales or accounting noise from 606, et cetera. And so this page tries to actually levelize for that, so you can actually try to analyze the underlying organic trends of our business. So with that said, maybe I'll go down the row here and maybe talk about what you're seeing for fourth quarter and full year '26.

Yes. So for the fourth quarter for the Americas retail P&C, we believe 5% is what we will hit, and we think 5% for calendar year 2026. For the specialty business, we believe 5% organic in the fourth quarter and 6% for full year 2026.

So for U.K. and EMEA, we think 6% for the fourth quarter and 5% for 2026, so pretty consistent. For Asia Pac, we think we'll be about flat in the fourth quarter, cleaned up a little bit in Asia. So we're looking at 3% for 2026.

And Tom, reinsurance?

Reinsurance, as I said before, has had a great year this year. It will be 10% up in Q4, and we expect today that we'll be able to drive about 10% in 2026.

Bill?

Yes, I think Q4 for us looks about 2% organic, but 4% next year, a little bit better.

Scott?

7% and 7%, I would say around 7% for the fourth quarter, and the business looks strong, and we anticipate right in that range for next year as well.

Great. Thanks. So that -- I guess, if you're looking at that same page, that rolls up to about 5% overall in the fourth quarter and 6% for full year 2026.

Doug, do you want to have any comments on that?

Sure. Thanks for let me borrow your mic for a second. Yes, I think that maybe now is a good time to talk about Page 8. We heard you loud and clear. We think that it's a lot easier for you to understand what's going on in our underlying organic growth when we laid on a table. Admittedly, we're giving this to you all in words in the past, but a picture paints a thousand words, and I think this is completely understandable why we were hearing from you about, can you lay this out and table so that we can see what's going on with your underlying growth.

We have split the table into 2 parts. The upper part is what we'd like to refer to as kind of the noise that happens. We have lumpy live sales, and then we also have changes in our deferred revenue assumptions that we -- when we go through our annual reviews on that, that can bring some noise to it.

What I found interesting when we put this table together is that when you round the whole percentages, there really -- it shows you that the noise is not all that frequent. It's not all that significant. So admittedly, maybe in the past, we are devoting more words to these items than they were really causing the noise to see. But there are a few quarters where there's some items that you should -- that you can see coming there.

The bottom part of that table is really what I think that you were plumbing for. And you were trying to see what's the underlying organic growth for each of these divisions around the world. We've given it to you. You heard the guys talk about it today, and it shows you the health of our business. So when we sit here and say that we have -- that we're looking at the fourth quarter and next year, you can see here that the business when we say that is performing a lot -- next year looks a lot like this year, it's fairly consistent when you come across.

The guys highlighted some of the differences and what we've done to -- like, for instance, in APAC, we'll have a better year there because of our Asia operations. So we hope that this table gives you -- shows you the substance of what's going on in our business, and it pulls out the noise. When we get to our January earnings call, we will make sure you have all the information that you need in order to see the underlying performance versus some of the noise that might pop up because of the lumpy life sales or for the change in deferred revenue accounts.

So we hope this table helps. You asked for it. We've given it to you. We can take more input on it, but we thought today was a good day for us to show that to you and roll it out so you can get an understanding of what's going on in the business on the underlying organic.

Thanks. So maybe we'll open it up for Q&A now on organic. We have 5, 10 minutes. So anyone have any questions? There will be mics coming around.

Yaron Kinar with Mizuho. For as long as I remember, you've been talking about when you go and compete, 90% of the time you're competing against smaller businesses. At the same time, we are seeing some of the global brokers moving down market. How is it that we're still that 90% with that move? When do you expect maybe to see that 90% to start creeping down? And when you do run up against some of those global competitors or some of those larger PE sponsored roll-ups, how do you compete against them? How well do you do relative to that other 90% of the time?

Sure. Mike and Patrick, do you guys may want to tag team that one?

Yes. I mean -- okay. So let me answer the back half of your question first, how we compete against maybe some of the PE roll-ups that are now of significant size. We've learned a lot in joining forces with AP. There were a lot of things that they were endeavoring to do. And I think you've heard from Doug and Pat and myself even over this period of time that we were courting AP that they remind us of who we were about 10 or 12 years ago, and how they utilize their data and how they bring things to market and the investments they made.

I think that's pretty common when you look at some of the other PE roll-ups. They haven't used their free cash to invest back into the business in the same way that we have. And so I do think that, that -- and we always talk about building the moat, either we can build that moat between our competitors, whether they're smaller competitors or PE-backed competitors or even the likes of Marsh, Aon and Willis as comparably sized competitors.

And I'll tell you, it is always a bit of an arms race when you think about any investments you make into your company relative to data and analytics or otherwise. I'm really proud of our team. We were recognized by Lloyd's for Gallagher Drive. We look at and hear from consultants that look at all of our competitors and how we differentiate ourselves at the point of sale through technology. And we stand at the very head of the class in most key areas.

And so look, it's our job to continue to build that moat. Quite frankly, I'm not really concerned whether it's 90% of the time we compete against someone who's smaller or 60% of the time we compete against someone smaller because I think we can go toe-to-toe with anybody. And we're building the moat to do so, if that answers your question.

So when I say 90%, I mean every time we compete not against Marsh or Aon. So it's just Marsh or Aon that are bigger than us. And frankly, I expect to outpace them in the middle market. So I think it will hold at 90%.

Next question? Josh.

Josh Shanker, Bank of America, and I'm certainly not asking you to comment on a competitor's acquisition. But just style-wise, a very small competitor of yours, Baldwin acquired this business CAC recently. And I'm not so familiar with all these acquisition targets, but they described CAC as having pulled off some miraculous abilities to compete with Marsh and Aon and presumably Gallagher. And here's a small company that's able to do it in a very small way. They may be overstating the case to some extent.

But when we hear about smaller insurance agencies and brokerages that have the capability of developing a competitive offering, it seems strange with all your capabilities that anyone could, in 10 years, really create a business from scratch that could do such things. Is it possible to create a business from scratch that can compete with Gallagher, that can compete with Marsh? Aon? Just some thoughts there.

Yes. Of course, I mean, CAC is a great business, but CAC gets a start from JLT. So they're the leaders of that business were started as the U.S. build-out of JLT. They came here, JLT sold to Marsh, then you've got some people that are really talented people looking for a home, and they chose to do that home at CAC with Cobbs Allen, which was a local Birmingham broker. They pulled together some really solid niche talent.

So when I say that data and analytics is #2, it is still the person at the point of sale that really knows energy, really knows marine, that sets people apart. And if you can pull together teams that are really good in certain sectors, you're going to have outsized growth. I think CAC on top of Baldwin as the specialty component with Baldwin being the middle market and small business, it's a great acquisition for both of them.

And this is the best industry in the world. There's lots of opportunities as we've seen from the Main Street broker indicator to pulling together a really strong team of private equity people in New York. If you can do the niches really well, you can escalate yourself in this business, but that doesn't come into our market share. It just means there's other good competition that would have been JLT or would have been Marsh and now it's CAC, Baldwin.

How do we tie that back to ourselves, though? If you think about what we're doing and the muscle that we build every single day. For Gallagher, I said that when we were a very small company prior to when we went public, we were always punching above the way. And there are those people out there that can do that. But today, it's all the tools that we have that takes the wonder away from the transaction.

What we're really good at in our industry is telling stories. What we're really trying to do right now is to take that storytelling out and give facts, give information coming from our data that says, here's what's actually happening inside of the industry in our business right now. While they've got very good talent inside of CAC that can compete in energy space, in construction, in certain industries. The next generation of buyer inside of those companies could be looking for facts. They just don't have the depth of information.

We have time for 2 more questions and we're running a little bit behind. We'll have more time at the end.

It's Alex Scott from Barclays. I was just hoping you could comment a bit on the assumption changes and just what those are, if they have any impact on the way revenue will come in over the next couple of years?

All right. So the question is on the top part of the Page 8, I think, Alex, what you're asking about. So what happens is with ASC 606 accounting, you have to measure your service delivery speed and then you have to defer revenues because if you're not servicing 100% of that policy placement on that date, you have to defer revenues going forward. And we spent a lot of time talking about it since this new accounting was put in, I don't know, 8 years ago, it creates some noise.

The punchline is, is that every year, we've been improving our service, so as a result of that, there are some times where we can recognize some additional income because our service delivery becomes faster. That's going to happen again this year. There is no question we're knee deep in this, where our service delivery is improving. I don't think it's going to improve at the same rate as it did last year based on our early look. So it's creating a difficult compare. So this is more of a 2024 issue than it is a '25. But if I've got to grow over that number last year, it's a tougher grow over.

So it's purely accounting. It has nothing to do with how much we sell, how much we lose, what's going on with rates, but my service delivery as it's improving can be less in this year than it was last year. And that's what I'm early on, I'm seeing that. We look at this once a year primarily, and that's where we are in the quarter. So last year, we got a little bit of a benefit. This year, I don't know if we're going to get as much benefit. So it produces a headwind.

But again, it's accounting noise. It clouds the underlying performance of the business. Nothing for the folks here at all to even consider. We spend a lot of time in our management meetings ignore that number, go out, sell more insurance, retain your clients, bring value. The accounting is what it is. So I don't know if that helps, Alex or not.

Great. Maybe one last question. We'll have time at the end for another one or more questions. Rob?

Rob Cox, Goldman Sachs. Tom, a question for you on reinsurance. You talked about a number of things helping the business there, alternative capital, the new facultative facility. I'm assuming you don't think the industry is going to grow 10% in this question, but could you just maybe give us some more color on how you think -- how we bridge the gap between what the industry is going to grow next year and what Gallagher is going to grow? And should we be thinking about a different quarterly cadence this year given the 20% reinsurance brokerage comp in the first quarter?

So I'll let Doug talk about how the revenue phases in, in terms of the growth. We feel very good about the 10% as we come into next year because on a weighted basis, our new business opportunities are stronger than they were this year. But we're also fighting a headwind. We know that. We're fighting the fact that cat property is coming off, and it's coming off pretty significantly during the last quarter of this year.

So carriers wait to determine when they want to go in. We're seeing rate adjusted or risk-adjusted down more than 10%. And so in our entire process of going through the budget, we think about where we are in terms of new business that we've got booked, the new business that we've got coming in the pipeline and what the weight is, we feel very good about the numbers that we're looking at for 2026.

All right. Well, maybe we'll take a 5-minute break. Like I said, we'll have additional time at the end of this -- the next session for Q&A. So we'll take a 5-minute break, and we'll resume in call it, 9:40. Thanks.

[Break]

All right. Are we back on the webcast?

You may proceed.

All right. So welcome back, everyone, from the break. We're going to go on to the second of the 2 topics, talk about M&A and how that drives shareholder value, how it's differentiated strategy for us.

I mean Pat hit it on the front end. There's 60,000 or so brokerage firms across sort of our key markets of the U.S., Canada, U.K., Australia and New Zealand that we think we can potentially execute on or has the potential opportunity for a tuck-in type of deal over the long run. So maybe let's first lay out our strategy in terms of how we think about M&A and the tuck-ins that we're looking at.

Tom, do you want to hit that?

Sure. I'd be happy to. We've been doing tuck-in acquisitions since we went public back in the '80s, and it's been an incredibly, incredibly important part of who we are and what we're about. When you think about our process, and as Ray said, there are 60,000 agencies around the world, 30,000 of those are in the United States alone. And then there are 30,000 that we kind of believe exists around the rest of the world.

And during the last 30 years of being publicly traded, almost 40 years now publicly traded, it is 40 years of being publicly traded now. We have used that as a tool to help continue to buy the brains and the expertise in various practice groups globally. We're targeting businesses that are less than $10 million of revenue typically.

We will do those larger acquisitions every single year. There'll be 1 or 2 or 3 that are big. But for the most part, we're targeting smaller operations. The reason why we're targeting those is because we know we can understand who they are, what they're about very quickly and very easily. When you think about an agency, if I walk in the front door, I know whether or not this is a business that is committed to the clients, committed to the team, and that's what we're looking for is a culture that fits with ours.

They also have to be doing better than just running a family. They've got to be running a good business. That means that they're growing, but they've got organic growth year in, year out. They might have a specialism. Then on top of that, they know how to make money.

Mike, do you want to maybe hit on the U.S. opportunity?

Yes. I think Tom said it, I mean, look, we're -- we measure by culture first, right? Let's get the culture part right. I think what you heard from Pat as well, I think there's sort of a differentiation in the M&A field right now and someone mentioned PE acquirers, and there's still a market for that. We've made it very clear to folks that engage with us in an M&A conversation that things will change, but they're going to change for the better, and they're going to change to improve not only what your folks do every single day, make them more effective and efficient, but improve the experience for your customer, and that's what they all care about.

And so we think that narrative is now becoming more favorable to a lot of acquisition targets, the 30,000 that Tom mentioned, they see that, yes, if they change, they can get access to really unique things, the Gallagher Drive platform I talked about and the AP reaction to that, having all of their information now live on Gallagher Drive.

So I think from our standpoint, we're as bullish as we've ever been about the M&A environment, not only between that $5 million to $20 million size agency that needs a perpetuation plan, but also ones that are larger than that, that also have perpetuation challenges but want capabilities and expertise that they just can't build on their own at their size.

Anything different about outside the U.S. or the opportunity, Pat?

I don't think so. I think the insurance brokerage marketplace outside of the United States is equally fragmented. If you probably combine Canada, U.K., Australia, New Zealand and maybe a little Lat Am, call it 30,000 other agents and brokers out there that are available for potential acquisitions. So we're still looking for the same thing, the entrepreneurial spirit, the culture and looking to take the next big step, but I think there's equal fragmentation and equal opportunity outside of the U.S.

Great. And Mike, you brought up Accretive in that piece, the specialty piece of AP. What about in terms of just the specialty business outside of AP? And sort of what are you guys looking for from the M&A side?

Yes. So our specialty business, which is inclusive of RPS, ARTEX, our affinity business, our program and pool administration business. We've been an active acquirer since 2010, over 40 mergers and acquisitions during that time frame. And when we look at the landscape of opportunities, this industry always fascinates me.

The 2 individuals that start a very unique program that build it out, build the distribution chain, those are perfect for what we've built within specialty in our program business to add on. And so we're actively out there talking to those folks. It doesn't just have to be an open wholesale. It can be in a very bespoke solution-oriented program that they want a wider distribution channel. And now with $4.5 billion in revenue, 2,000 producers on the retail side in the U.S., we have that distribution channel. We have that access to the customer that they're hungry for. So I'm as bullish about our specialty business as I am about our retail business.

Great. And Tom, maybe outside of the core geographies that we've talked about, what does the opportunity set look like?

The opportunities are tremendous for us outside of them. It really important. A lot of people come up and ask me, what's going on in Europe? When are you going to be in Europe? When we find the right partner, we're going to be in Europe. We're not in a hurry. There have been plenty of opportunities for us to just go in and buy, but we're absolutely trying to stick to what we do incredibly well, and that is make certain that we know them, make certain that we know the culture that they run a good business.

One of the ways that we do that is we work with our specialty team in the U.K. Business trades, as you know, throughout the world and it comes into London. If they want to think about becoming a merger partner to us, trading with us is a very good way for us to get to know each other.

On top of that, we run our own global network called Gallagher Global Network, really fascinating name. And what we try to do is we try to make certain that they all support our business in geographies that we are not in. And so we get to know each other very well over a period of time. We host meetings annually and get them to spend time with us and talk about the trade that we can develop altogether. What a great way to get to know people.

And Bill, what about the benefits side of the M&A strategy?

Yes, very similar to what you've heard. Since 2010, we've had over 200 mergers at GBS and a big part of that is in the benefit space. We're also looking for other business lines. Remember, anchoring back to how do we help the employer. And so when you think about the benefit space, but there's also the financial business lines, we think there's a big opportunity out there for defined contribution and wealth. Most of those are combined these days. And our clients are asking us to help them with financial well-being more than ever before.

Historically, going back -- let's say, 10 years ago, the value proposition was funds, fees, fiduciary, 3Fs for retirement plan. Now they want financial well-being as well. And so the combination of education, but also bringing in financial planners for their employees is in demand. So we see that as being a real big opportunity for us to grow. We'll always look for opportunities in the talent space as well if it's strategic recurring revenue and things of that nature, but lots of opportunity in every country that we're working in.

Perfect. Scott, do you want to talk about M&A opportunities?

Yes. We're not quite as acquisitive as the brokerage business. And I think primarily because there just aren't as many opportunities for us to buy good quality organizations. If you've been watching us over the last couple of years, we actually have made a number of very targeted purchases. And what they are enabling us to do is expand our -- either geographic reach or it adds specialty capabilities into our services that we're providing across the clients, whether it's the carriers, or the large self-insureds.

A couple of notable acquisitions recently. We just did one last month that we announced in the safety space, Safe T Professionals. So that -- as I mentioned in the construction space, we're building up that capability. So that was very targeted. Earlier this year, we bought W K Webster. That got us into the marine and cargo space, something that we didn't have capabilities in. They actually have a global footprint. So we're kind of in all corners of the globe instantaneously. A year prior to that, we acquired MPMG, My Plan Manager Group down in Australia that got us into the disability claim handling space.

So fairly targeted. And I wouldn't expect that you would see -- we're not in the game just to add volume. It's adding capabilities and in particular, specialized capabilities.

Great. Thanks, Scott. I guess what do we typically hear from merger partners is why they're choosing Gallagher to part -- I don't know, Patrick, do you have any thoughts or experience on that?

Sure. So number one, frankly, is that we're a broker run by brokers, not a broker run by bankers. So everybody who's sitting up here and everybody who's in a senior leadership role in the United States and the U.K. grew up doing this business. And so we empathize and can put ourselves in the shoes of these people that are trying to take the next step and they like that.

The second one is, obviously, they want the opportunity to write any account of any complexity anywhere in the world. So if you're sitting there as a $10 million broker in Green Bay, you've probably got some specialism, maybe it's foundries or manufacturing, but you have friends that are real estate people that are banks, that are construction and you want the opportunity to go and write those accounts and so you can write those accounts now.

Don't forget all the digital and data and analytics stuff that we're putting in front of them that they look at, they know they want, but they can't make that investment in that. And therefore, they're looking at off-the-shelf opportunities to try and say that they can, but they can't. So they want to get into the next generation of insurance broking. The global footprint plus the footprint of all our different ancillary businesses.

So the fact that we are global, the fact that we have a wholesaler, the fact that we have the data out of Gallagher Bassett and handle claims, the fact that we have captive businesses, the fact that we're informed by the reinsurance community, that is very appetizing to the potential merger partner.

I would add in our advancements in the Centers of Excellence, I know managing and handling the back office of an insurance broker, if you can do it better, faster with better quality and efficiency, people can't invest in that on their own. The vendors for that, that are in India trying to serve is not the same as owning your own Centers of Excellence and doing it the right way every time.

And then I'd say more outside of the U.S., but increasingly in the U.S., too, through our marketing brand. Our brand is getting stronger with potential customers. They see that. And they see if they're walking in as the Jones agency, it's not as powerful as walking in as Gallagher, the global brand that we become.

Anything to add on the specialty side, Mike, in terms of M&A?

Yes. I think everything Patrick said around data and information. But I would say, look, our organization, the way it's been set up is a structural gift, having a retail distribution, having a wholesale and specialty distribution, having a third-party administrator, having access to the reinsurance marketplace, alternative markets in our captive operations. There's not another broker out there that has a structure like that.

So when you talk to in the specialty area, how can I grow faster if I join Gallagher? Well, you've got -- I mentioned, how can we build that moat? Well, we've got the retail distribution with 2,000 producers out there from a retail perspective. We've got the data and analytics. We're talking at the break about active downloads of claim information from our portfolio, being able to use that to create bespoke solutions in the most narrow vertical that we possibly can using our specialty business to build it.

So whether we're building it organically to build that moat out or acquiring it and give that party that we've acquired access to our distribution, access to our claims, third-party administration, access to our reinsurance capabilities, 1 plus 1 equals 4, 5 and 6. And so I'm extremely bullish about our opportunities because we have a great story to tell with everything we've built on top of the structural gift we have as an organization to be able to bring all those solutions to the point of sale.

That's the P&C angle. Bill, do you want to hit benefits in terms of why people want to join us?

Yes, very similar story, but something Tom said, I want to just emphasize again, we walk away from a lot of merger opportunities because the fit isn't there. Cultural fit is really, really important to us. Do they care about their clients? Do they care about their people? I look at somebody and I think about would I have this person over to my house for dinner. If I go, [ eh ], then I' probably not going to be a good fit at Gallagher.

I take that very seriously. And getting to know them and what their motivation, what they're trying to get done. And you'll find the folks who want to join GBS, it's really -- they're excited about all the talent we have. Some of them know people that work at GBS, and they know it's a great culture, and they have the tools and the resources. And they have those relationships that Patrick talked about, but just don't have the capability to go win that bigger opportunity.

And what's interesting, it's on the organic recruits as well. We recruit from all of our competitors, and we go after some of the big rainmakers, big books of business. And they're excited to get here and they find out they have the capabilities they were hoping would be there, but they're more available, more accessible. The culture is great because people are collaborative. We want to help them win. We're seeing that with AssuredPartners already. Our teams have organically gotten together and are working on prospects together and sharing ideas on how this thing works.

So the mergers that want to join us, they know us too. It isn't about the price on the agreement. It is about the fit. And the ones that do the best with us are the ones that want to continue to grow a professional organization. We love those kinds of folks and we go after them all day long.

Yes. And you brought up AssuredPartners again, but I don't know, Patrick, do you want to give us an update on how integration and other milestones are progressing at AP?

Sure. So obviously, a pretty big deal for us, but it's still -- when we talk culture, we mean it at Gallagher. And so first and foremost for us is getting them to understand the culture. Within about 60 days of that acquisition, 1 of the 5 to 6 senior executives were in 90% of their offices. So we went out on a charm offensive campaign. And we went to their house to find how they're doing things to be able to make sure that we understood their business and how they would fit into our culture. It was an absolute success. There was not one of us that came back from those trips going, "Oh, no, what did we buy in XYZ town." We came back and said, they're good people. They remind us of Gallagher 10 years ago. They're going to fit into the system. They're excited about being part of Gallagher.

At the same time, we then have started to invite them into our house. That's inviting them to see all the cool candy store tools that we're talking about right now. I basically got up in front of the Midwest region in the -- in the Western region last week. I said there's a couple of things that we want to do here. Number one, we want to make sure you know that we want you and that we're happy that we bought you.

Can you feel that? Can you feel that from the visits to your office? Can you feel that from the visit to our offices? If you've got that, then can you think of a couple of different things in the candy store that you can take back to each and every client of yours? Just 1, 2 things and say, hey, client, this deal is better for you because you are now going to get access to this.

And number three, can you actually feel that you're going to double the size of the book of business you personally have as a producer within AssuredPartners now that you're at Gallagher, where you can do things more efficiently, you can do things with better quality and you can do things on a grander scale. And I think from that, we call that the hearts and minds tour. We'll be done with that in the middle of January.

I think it's an unbelievably unique position to have the retailers again talking to the wholesalers, learning from the reinsurance. We had our people in from London. It was an unbelievable opportunity to get them culturally fit and have them understand the strategic advantage that they now have.

Then you get into operations. And so we've got 14 work streams. Everybody -- we have system conversions going on in 2026. We've got an HR work stream. We've got legal. We're going to be live on our HR system right now. Travel and entertainment, treasury will be on [ 1/1 ].

Look, we're acquirers. And in this position, AssuredPartners was going to either try and go public or sell to a public. We have a cruise ship that is exactly how our systems operate, and we do 70 to 80 acquisitions a year. We are just doing that with AssuredPartners on a grander scale of like 300 acquisitions over the course of the 1.5 years, and we know how to do them. Each work stream is working extremely well. Everything will come down to people, then technology, then the organizational structure, but we've already made great moves on the organizational structure. We feel like we are in a really good position to start 2026 and get through this integration as quickly and as fun as it should be.

Great. Mike, Bill, Tom, you've been in some of these meetings with the AP folks. Anything to add from your perspective?

Yes. I mean it's been an amazing experience. As Patrick put it, we look at, in essence, 300 unique acquisitions, and we're really good at those. We always say in our company, now 70,000 strong that we work really hard every day to make this company as small as possible. And everything Patrick spoke to is how you make the company as small as possible.

The way I look at it as well, not only just orientating them to what they have access to, but how are we measuring wins together. It's too bad, my daughter who was sitting in the back of the room. She's a producer here in New York. One of her wins this year was a win with an AP producer in Oregon. She was calling on a prospect in Oregon. They liked the Gallagher value proposition. AP, this is before we closed, was also calling on it. They chose Gallagher, but they said, now that you've closed, can I have some local representation, some boots on the ground in case something happens.

And so of course, in a typical Gallagher fashion, we share the account. The client gets the best of both worlds. They get the capabilities and expertise. They get the local boots on the ground and everyone wins. And we've got countless stories just in 90 days in how that's happened. So that tells me that we're making the company as small as possible because we're winning together. And that's the goal for 2026 on top of everything Patrick spoke of in terms of getting them on our system and getting them part of the Gallagher network.

Bill anything to add?

Yes. Similarly, going around with the hearts and minds, getting to know people, talking to them and so forth, they're so engaged and turned on by joining Gallagher. And you get to know what they're doing, and it sounds a lot of what we're trying to do as well in terms of take care of the client with the data. We went and visited an office in Maryland, where they have -- they call it a center of excellence. It's an onshore center of excellence that's all more about middle office. And they're able to be -- think about this, really smart people, data analysts and actuaries and compliance people working together as opposed to across a broad geography.

In the same office, they're brainstorming, whiteboarding and all this kind of good stuff. And we think we're going to be able to take an idea of like that from them and apply it to GBS as well, have pockets of these centers of excellence instead of trying to have an actuary or an underwriter in every office, really have a center of excellence onshore as well. We're still working with our Gallagher Center of Excellence offshore for the back office. But really I think we get a lot from that. There's some really amazing talent at AssuredPartners. I have really been impressed by the folks I've met there.

Great. Maybe we'll open up for Q&A on the M&A side. There's going to be mics coming around shortly.

Focusing on organic growth for acquisitions. A couple of Willis and Baldwin have both talked about their recent acquisitions being able to accelerate their organic growth fairly meaningfully in the coming year, even despite kind of the current market conditions. And then on the other hand, you've got Marsh, which just talked about kind of McGriff's organic kind of tempering a bit given the environment. Maybe you can talk about kind of what's Gallagher's experience with organic growth and acquisitions, especially if we can focus on AP. I know, Mike, you also touched on working with programs and SmartMarket initiatives, but if you could unpack that, that would be great.

Mike and Patrick?

Yes. I would say -- so from a retail perspective, that's why we're doing many of these meetings to give them access to a lot of these tools and resources right now. So as a retailer, what were the reasons why you weren't winning? Did you not have access to information? Did you not have access to specialization? So getting them connected with our people and our systems to be able to be out in front of their clients, selling CORE360 and all that comes with it.

What you were just talking about, though, is, to me, one of the most interesting things is just trading better together. That's why AP was so interesting to us. Quite frankly, it's why Woodruff was so interesting to us, because there's a lot of trade that goes into the London market on their book of business. There's a lot of opportunities with Accretive from a reinsurance perspective. Tom talked about their pipeline. Some of that pipeline includes the programs that Accretive had built or acquired over many, many years and how we can make a play for the reinsurance behind some of those programs that they already have.

How can we just trade better together? RPS had a trading relationship with AP, about $100 million to $150 million of premium, but we think that should be double or triple as we get them closer with our people, as our people surround them in their local offices, build that rapport and then narrow the field of wholesalers that they were trading at to our 5 approved wholesalers.

So there's some natural things from an organic perspective that we believe will come true through the acquisition not only of AP, but also Woodruff. But quite frankly, that's how we approach nearly every acquisition. We look at how do we speed up the retail organic by giving them tool and resources and then how do we come in behind with specialized program and resources that maybe they're trading with other wholesalers. And as we consolidate that, there'll be an inherent organic advantage. Does that make sense?

Mike talked about the opportunities, but -- and that's why we're doing the hearts and minds. You've got all these opportunities if their team sticks around and utilizes the tools that we've created, this is going to be an organic success.

If their people don't like working at Gallagher, that's going to be a problem as people start to -- the books of business are in the hands of the producers. So you got to make the producers stay. But if the producers stay and they use the candy store, it's going to be fantastic. And we're pretty darn sure that people at AssuredPartners like being at Gallagher, and that's not going to be a drain on us as we go through the '26 and '27, where it might be with some of the other deals.

Dave?

David Motemaden from Evercore ISI. Just on -- I think one of the interesting parts of AP was just a unique deal pipeline. Could you just help me think through like I think it was 90% of transactions that AP did, you guys did not see. So has that been incrementally additive to your pipeline for M&A as we go through next year? And then relatedly, I think you had also talked about putting AP business on those panels. Is there any way you could help us size the revenue opportunity from that? And if that will be included in Gallagher's organic? Or is that going to be included in inorganic through AP?

Why don't you take the panels?

Go ahead.

Go ahead, I'll take second part. Go ahead and do the first part of question and then I'll chime in on how we're going to go.

Yes. So I mean, I think your first question around the M&A pipeline that AP had built and ultimately combining their deal teams with our teams. You're exactly right. We told you, I think, 6 or 8 months ago that many of the acquisitions that they had done over their period of time since 2011, many of those we never saw. And so they were really good at getting into smaller geographies, Tier 2 and Tier 3 cities, and we believe that will continue going forward. That lull when the DOJ was doing their inquiry, they weren't really -- they weren't actively pursuing.

So we're in the process right now of revamping that and building that up. But make no mistake, we have a significant number of people across the country, including every one of our branch leaders that are out talking to independent agents and brokers every single day. So we do believe that, that pipeline will continue to increase throughout '26 and into '27.

On the panel side, yes, effective January 1, they'll receive the terms and conditions. They'll receive the compensation associated with that. And I'll let Doug speak to how we frame that from an organic perspective.

All right. Is this on?

All right. We can hear you.

All right. Can you hear me?

Yes.

All right. First and foremost, the way it will be accounted for is this. And let's go back to Haley's example. She places the business in conjunction with an AssuredPartners broker in the Northwest. Haley is in the New York office. Her portion of that sale, that new business sale will go into Gallagher's organic. If she commissioned shares with the producer in the Northwest, that would go into AssuredPartners books and records during the first 12 months and would never be accounted for as organic in the way we account for it. Inherently because we keep acquisitions out of our organic calculations for the first 12 months while they're part of us, we understate our organic growth and what you see on -- when we publish our numbers.

A different example might be is an AssuredPartners broker who has traditionally used wholesaler XYZ, they decide to use RPS. They pick up the phone, RPS places the wholesaler on it. RPS would get the organic growth for that, so that would be in our numbers. So trading across divisions would be counted as new business for our wholesaler. Same thing in the London market. That would go into our organic.

When you look at what's happening with AP, it's a different acquisition. It's much larger of scale. Our tuck-in strategy, we have found that how much does M&A -- so my answer on AP might be different than what we found in the past. We probably understate our organic growth by maybe 0.5 point, something like that in Gallagher's number because of this first year excitement wins that happened. It's hard to carve it out. It's hard to differentiate. But if it goes into different P&Ls, it naturally captures itself.

So what do we think is the opportunity for this for AP? When you look at what we expect for synergies on page -- I'll get to it when I have my comment when we recap AP, we're looking at $260 million to $280 million, I think, is what it says in there of synergies coming from AP. Some of that is revenue, but not very much. That's mostly a cost number. So I think I've answered the question, wouldn't technically go into organic in certain cases, will in other cases. But by and large, we have 1 year of wait until it starts rolling into our numbers.

Could I just make one more statement about the pipeline. So while Mike is right, there was a lull as you go from selling a company through the DOJ stuff. But remember this, inherent in the AP is very similar to what's been going on with Gallagher for a long time. The field is empowered to go find their friends down the street and do acquisitions in their local community, in their local state, in their region.

So we have hunters not only at corporate that are out working with the consultants but -- and also calling on some of the top 150. But then we empower the head of our Missouri office to know every single person in Missouri. That is part of AP's DNA as well. So they maybe got their friends where the 90% of the deals that we didn't get. We got our friends. Now we both have friends, we'll be getting more deals.

Maybe time for one more question before we move on?

Charlie Lederer of BMO. Just on Pat's comments on keeping producers. So I think you put in the 10-Q that you granted about $315 million to AssuredPartners employees after the deal closed. How does that compare to what you initially expected? And are there any producers -- are there any producer retention stats you can share so far? Or how are you feeling about that?

Why don't you do the pool and then we can...

Right. So yes, the information in the financial statements is interesting. There were success bonuses that went into that number that was -- really came out of the GTCR money. We have to disclose it because it's ended up going to our employees. The pool that we gave away, right now, we touched about 600 different folks. We went name by name by name, and we found that for the folks that we are giving awards to, we are penetrated. We do -- we haven't had a lot of pushback in that. I think there's been a good recognition that we found the right folks inside of the organization.

The good thing about our model is it's not a onetime reload. We don't give you equity today, and that's it. The PE model is to load folks up and then wait 5 years and load folks up and then load folks 5 years. Folks that come into our LTIP plans get considered for additional equity every year. So we think that we've done a really good job of touching the right people, giving them the incentives that they have in order to be with us. These are 5-year restricted shares. So they've got to work for -- they've got to be with us for 5 years to get them, but it's valued at current dollar amounts. I think we're in pretty good shape.

And then when it comes to the retention, I'm not seeing anything of significance that shows that we have a departure or exit risk. In fact, I think the retention is better than ever before in AP. So I think that the message of more tools, capabilities and resources is not -- I'm not feeling the big pressure coming into my office as CFO saying, we need another pot of money to take care of folks.

I'll echo the fact that I don't feel like we have any other attrition that we wouldn't have had as Gallagher AP. I think the retention of our top people has been fantastic. I want to give a lot of credit to the team. We didn't just take the word for their senior leadership around who should get some money. We -- part of the hearts and minds in getting out to the field is taking our own pulse of who are the people that need to be retained because they are the type of people that are going to excel at Gallagher, and we don't want them at risk.

And I think our teams, both on the AP leadership side and the Gallagher side have done a really good job with a pot living within that pot to get it into the right people's hands. And maybe that's one of the reasons that the attrition is so good.

Yes. One other comment on that. There's a fairness prism that goes across the AP folks and the Gallagher folks. When we look at a producer, you take a $1 million producer in Des Moines, Iowa or $1 million branch manager in Kansas City, we have to look at our own folks in that area to find out, are we giving them equity that is consistent with what we're doing with our own folks. There is a big fairness prism that goes on here that just because they joined us recently, they shouldn't be penalized for what they should have in ownership in the company.

On the other hand, we shouldn't over reward folks that are coming in because our folks have been toiling with us for 20 years. And so we look at a fairness prism across organizations so that when these guys get together in Des Moines, Iowa, they are equal owners in Gallagher going one stock, one share, same valuation. This is something that was very important culturally for us is that the new folks get treated fairly with the folks that have been with us for a long time. So I just want to make sure you understand culturally, that is our guiding light on these things.

Great. Well, I think maybe we'll move to all of your prepared comments, Doug. So thanks, everyone, appreciate it.

All right. I'm going to switch over to the podium mic. I've got only a few minutes of comments here, but I think we've touched a lot of them along the way. A couple of things. Maybe I'll -- what I wanted to do is let's wrap up on growth a little bit just for a second. I think that, like I said earlier, that Page 8, a picture paints a thousand words on the organic. Please focus on the underlying organic growth. Happy to take more questions and comments on that as we improve that disclosure for you all.

I think one of the things that sometimes gets lost in this is we sit back and figure out what the challenges are for us and the opportunities. Next year, we're looking at total growth of over 20%. If you think about organic, we talked about that a lot. But with our M&A, the roll-in of AssuredPartners, Woodruff, the pipeline of small deals, we still prefer small tuck-in acquisitions.

The metric that was the most important with AssuredPartners is we didn't get a chance to look at 94% of their deals. Probably wouldn't have done the deal if we had been told no by 50% of those opportunities to join Gallagher initially. So we still look things forward. Over the next 24 months, we have $10 billion of free cash plus an additional level of debt without using stock, $10 billion to do M&A.

So the guys up here, they're on the hunt every day, but we don't have a quota for that. We're going to take our time. We're going to buy the ones that fit best with us. None of these guys have any type of incentive to throttle their revenue through mergers and acquisitions. So we have a disciplined approach to that, and we haven't lost our focus on it. Our roll-ins are still at a nice arbitrage to our trading multiple. There's no question about that. We're still around the 10x on the tuck-in acquisitions.

So I think the way I look at it, I think that we've got the next 2 or 3 years kind of in the bag for well into the double-digit total revenue growth. What does that mean? It gives us the opportunity. We didn't talk about it today. It gives us the opportunity to put that revenue over our industrial strength platforms, utilize our offshore centers of excellence, utilize our technology, utilize and deploy AI into that work. And so our chassis can hold significantly more revenue. As we come into 2026, looking at $15.5 billion, $16 billion worth of revenues, our chassis can double on that without burping in my opinion, they can ingest it.

I think that on the growth side, so we've got the two-pronged growth. Just one of the things that I want to do is I want to spend a second going over our margin expectations. We spend a lot of time every quarter, that we went through this bridge. And for those of you that had a chance to update your models, thank you very much for what we've provided. I'm not changing our margin guidance from anything I told you at the end of October. And I know that many of you will be busy here over the next couple of weeks. But let me go through that margin bridge so you can get this into your models as a helper.

First and foremost, the most important thing is we believe that our fourth quarter margin expansion, underlying margin expansion should be up 40 to 60 basis points, same as what we told you in October. We do have the roll-in impact of M&A and then the lost investment income because of holding so much cash for AP.

In October, we talked to you about that creates 3 margin headwinds. The roll-in impact of AssuredPartners is about 100 basis points. The roll-in of other M&A is about a 40 basis point headwind and then lesser investment income is about 40 basis points. So if you adjust the margin for last year's margin for FX, I believe that our fourth quarter margin, this is exactly what I told you in October, will come in at somewhere around 31.7% in the Brokerage segment, and that still feels right today. So just please, as I know this is the time of year when you update your models and take a look at it.

When I look out towards full year '26, we provided the '26 organic outlook on Page 8 of that table. What makes me feel good about that number? It is a ground-up approach. This is what the teams have rolled up factoring in all current market considerations, their outlook of what's happening with rates and exposure units, what's happening with cross-sell opportunities within ourselves, not including AssuredPartners.

So I think that the number that we're showing out for next year is a lot like this year, and I think it totals to about 7% for Gallagher Bassett, 5.5% for the brokerage segment. So if we post that, I would expect in '26, our underlying margin expansion to be in that 40 to 50 basis points if we post in that mid-5% range next year. So I feel good about our picks for organic next year. That's exactly what we put in our budget, and I think that we'll have margin expansion in that. We'll have the same headwinds from investment income and the roll-in impact from M&A, but I'll give you some of that information in January in the call.

And then for the Risk Management segment margin, I think we're going to be around 21% for the fourth quarter, and that we should be able to hit that for full year '26 also. So Gallagher Bassett continues to show consistent margins and in their organic environment shows some opportunity there.

We didn't spend a lot of time on it, but maybe it's worth it. We are -- in our DNA is to improve our service and quality. This is something we've been working on for 20 years. You heard us say that we've got 15,000, 16,000 folks in our offshore centers of excellence. That is a powerhouse. The only -- this is -- these are our employees. It's a powerhouse that allows us to continue to view that margin expansion is possible well into the future as we continue to build out that organization.

We're pretty excited about some of the AI outcomes that are happening. We're spending quite a bit of money on AI right now to deploy in our operations. So the early returns on that are exciting. It is working in certain cases, not every case, but I think that we stand in the best position to capitalize on that because we've spent 20 years standardizing and centralizing our work, and we can deploy AI across that standardized process, which will lead to better outcomes on that.

So with that said, if I'm going to flip through the CFO commentary document, as you do it, Page 3 on that document is our typical modeling helpers. There's not much change on this page relative to our October earnings call, other than we've updated amortization, depreciation, of course, FX, we always do that, too.

When you flip to Page 4, the reddish column is an update to our fourth quarter and full year '25 Corporate segment estimates. One tweak to mention is that our interest and banking costs, we're seeing a little less interest expense given the limited borrowing on our line of credit. So that -- you'll see that. And then we've added our first look for '26 in terms of what we think the Corporate segment should show. This is what we typically do this in December. In January, I'll give you more of the quarterly spreads on it. But I think you can see that this is our first look at '26.

Turning to Page 5. This is our tax credit carryforward -- we've also added -- so we've got a big number for our tax credit carryforwards. And then we also have added a footnote that we've got $1 billion of future tax benefits related to our purchase of AssuredPartners. We haven't talked about this very recently, but the punchline this as you're thinking about our free cash flows. Whenever you arrive at EBITDAC, take it about 10%, take it times 10%, and that's about our cash taxes paid globally. So as you're thinking about cash flows, our effective cash tax rate is about 10% of our EBITDAC. Just keep that, that's a metric we've been talking about for years, and that's still holding true.

Page 6 is a little noisy. We've updated our investment income table. You'll see the loss of the interest income that we earned on the cash that was sitting around for AssuredPartners. We did assume 2 further 25 basis point rate cuts next year on that page. And then -- those are the kind of the noise in those numbers there. If you get those up in your model, you'll be okay there.

When you move down on Page 6 to the Brokerage segment rollover acquired revenue table, we're only a couple of weeks left in the quarter. We don't expect that to change too terribly much in our fourth quarter estimate considering we've only got 2 weeks left. And then we do -- we have sold off some little businesses there. So take a look at that in our divestiture. And then Risk Management has about $20 million, you'll see that in the footnote of rollover revenues.

Next is Page 7. That's our outlook for AP. No changes from October. We feel comfortable with that. We think that we'll be at annualized run rate synergies of $160 million by the end of '26 and then in that $260 million to $280 million by early '28. I think when we get through the budget process, we'll probably have an update to that. You heard the guys talk about it. I think that we continue to see -- we become more and more bullish about the opportunities with AssuredPartners in terms of being better together, and that should lead to some even further opportunities on synergies.

And then let's say, I think that's pretty much we talked about Page 8 and answer some questions on that. So to me, I think we're going to have a terrific 2025. I think that we're in this -- is about a great position coming into a new year that I've seen the organization be in, in the 20-plus years that I've been there.

I think that -- to recap, you heard Pat start off, we toil in a massive industry that is growing almost as much as we are in size every year. We have no market share. We have unlimited opportunities for organic growth. We have 60,000 agents and brokers around the world that want to join -- that we'll have an opportunity to join forces with. They recognize the value proposition to be a part of us. That provides a great leverage -- the purchase to trading leverage on that arbitrage is -- continues to hold up well. And we continue to get better and better on our service offerings, I talked to you earlier about. So right now, I think that Gallagher is in a terrific position to win coming into 2026.

So those were my comments, Ray.

So maybe we'll just move to Q&A. Any final Q&A? I know there's quite a bit of questions that we didn't necessarily get to. I know Tracy, you've had your hand up for a while. So maybe we'll get to you first.

Tracy Benguigui, Wolfe Research. I'm going to go back to organic revenue since I didn't ask the question earlier. Baked into your 2026 organic revenue, how much pricing decreases are you baking in? And...

Almost exactly what we saw this year.

Okay. And because there's so much bifurcation between property and casualty, I'm wondering if there's any kind of difference between fees versus commissions for casualty or property?

Our fee -- I think our clients are recognizing the value we add. We have had some -- we're having good success of getting fee increases. So I think that's baked into this. This is an assumption. So again, our organic numbers for '26 reflect everything that we see today about what could happen in '26, assuming that '26 is a lot like this year.

We expect property to be down again, and that's coastal property. We expect homeowners to be up. We expect personal auto to be up. We expect casualty lines to continue to march north. I think that there's still -- there's a need for rate. So what we saw happening in rates in '25, we have reflected in our '26 estimates for organic.

So there's no difference in terms of our fee income renewals, et cetera, between property and casualty. I think that was part of your question.

David?

David Motemaden from Evercore ISI. Just a follow-up question on the group benefits, the benefits brokerage and consulting for Bill. Maybe -- so the 4% growth next year, consistent with 4% this year. Could you just talk about the moving pieces on just the employment side? We're seeing some headlines and obviously, payrolls today -- just slowing employment growth and how that might impact your business. I know health care inflation is still high, but that's been the case the last few years. It seems like the incremental trend is a little bit softer employment growth. So wondering how that bakes into your expectations?

Yes. You're asking about what we're seeing in terms of the growth for next year in terms of the unemployment or employment levels, that kind of thing?

Yes, what's baked in that for?

So majority of our revenue is not really based on commission, right? So when you think about property/casualty rates, and so forth, if it's hard, you have tailwinds, if it's soft, you have going up and down escalator. In our world, it's really more about the typical size of the employer, give or take what's happening in the employment side of things. So we negotiate our compensation usually on the front end, and we -- let's say, it's $100,000. And if they want us to make $100,000 to win the business, whether their employment goes up 10% or down 10%, we're making $100,000.

It does not go up or down based on the rates of medical either. Our job is to work on their behalf to find ways to save them and mitigate those increases. So what has happened this year has been a little bit of a tailwind on our talent business. That's the project-based work to help do compensation studies, that kind of thing, there's a little softness there. So when employment is growing, our talent business will grow as well. When it's a little softer, they're facing the down escalator. But that's a smaller piece of our overall revenue.

Katie Sakys, Autonomous Research. As we kind of look at the organic growth guides by business group, can you guys kind of talk about how AssuredPartners might be impacting that outlook once we hit the 12-month mark? And where you potentially see the most upside from each of those sub-businesses as we get towards the end of next year?

You hit that? I'll do it. All right. So first of all, nothing in these numbers from AssuredPartners on that page. AssuredPartners is running about where we are. Remember, when we bought AssuredPartners, this is a well -- this is a growth company. It's got great margins in it. So I think that in terms of us, our thesis was that they were running about 1 point less than us when we bought them, maybe a little bit less that we can move that up to be similar to us.

So I would think that it should -- you should see acceleration coming out of AssuredPartners as we start trading together. So if you're asking the longer-term thesis when we get into the fourth quarter of next year and we get into '27, I would say we will have substantial momentum by that time. And hopefully, that will have an opportunity. The bet is that we'll be better together, and you'll see maybe better outlook together in '27. So whatever we are going to be individually going into '27, I think we'll do better on it.

Andrew Andersen from Jefferies. Just on the 6% specialty organic growth, how are you kind of thinking about the E&S market within that? And I think earlier in the day, you were talking about building some more programs. What are kind of the offerings or services that the retail brokers are looking more of?

Yes. I would say when you break down the specialty into open wholesale, that's going to ebb and flow again with the hardness or softness in the market. So we're seeing the same trends from a property perspective as we are on the retail side and the same trends on the casualty side.

When you look at the program side of the business, that's where we see the most growth opportunity because we can, as I was talking about a little bit ago, we can now start to build out programs and facilities that cater specifically not only to the legacy Gallagher book of business, but also the AP business.

I also see, again, a big opportunity with the consolidation of wholesalers. AP, we believe, was trading with somewhere on the order of 80 to 100 different wholesalers. As we get that down to the 5 that we have approved, which we look at that literally every week. We have line of sight on the business. We have the data to support it.

We have people whose job it is specifically to go meet with those offices, meet with those producers and coach them through the process. This is something we did about 7, 8 years ago very successfully, but it is hand-to-hand combat. You've got to show them. You've got to connect the dots for them. You have to connect them with the right wholesaler in their space, in their geography, and we have the people that are doing that every single day.

So that is, I think, a huge opportunity not only for RPS, but also the 4 other approved wholesalers. And we renegotiated our contracts with those 4 outside wholesalers that will ultimately benefit not only legacy Gallagher, but it will benefit the AP book of business. So I see continued aggregation there. I think it's a win for the customer. We did this not with the idea of just squeezing it down to 5 wholesalers. We did it for business purposes. When you trade with 5 people, 5 entities and something were to go wrong, you can solve it quicker, faster, better for the customer. And so that's a huge piece of what we're going to accomplish in 2026.

Dominick Cioffi with Wells Fargo. Just a quick question related to the AP deal and the timing of synergies. So 2026 -- or by the end of 2026, $160 million of synergies expected. I was wondering if you can give a little bit more information on the timing of those synergies and if you expect anything in the fourth quarter?

I would not expect anything here in the fourth quarter when it comes to synergies. Okay. So -- and we come out for next year. This is a -- this -- I think you're going to start seeing synergies quickly in things like the back-office functions. I think it's easier for legal to get up and running together, finance to get up and running together, HR, you'll see those synergies.

As we roll on the -- each of the locations, that will be over an 18-month period. So 300 branches will roll on over an 18-month period, probably with the lion's share of that really, really the first momentum on that will be February or March when we start seeing the first ones, kind of coming on and starting to roll in. The revenue synergies, boy, wouldn't it be nice if that happen faster? We'll see it.

But the reason why we say $160 million, we'll hit that number of run rate savings by the end of 2026. And then another $100 million will happen fairly quickly thereafter. So this is an 18-month journey to harvest the synergies, harvest the working better together. So this isn't a 3- to 5- to 10-year type integration.

Alex Scott from Barclays again. I want to come back to just the pricing that's embedded in the organic. And I was wondering if you could give us a ballpark of what that was for this year? And I guess why would it stay flat when we just look and take a step back on some of the carriers. I mean we have nationwide carriers talking about 18% ROEs. I think a global reinsurer said almost like a 20% ROE or something they're going to get up to. It just seems too good to be true in terms of the returns for the carriers. So like why isn't there a demand for continued price reductions that would maybe be different than last year?

No, no. We have assumed that price reductions will be similar in '26 when we arrived at these numbers as we're seeing in '25. So we've assumed same level of down. We actually are seeing a bifurcated market. If you take out coastal property and you look at what's happening with casualty rates, we think that are we at a bottom for D&O? Are we seeing an uptick in workers' comp? Medical inflation is rampant. That will show up in rate.

I tend to be a little bit of a bear when it comes to the adequacy of pricing on any casualty line. I also believe that there are going to be -- we're going to be back on the replacement cost issue that we faced 2 years ago, that property values, the replacement cost of property values, we've kind of paused on that -- the stair stepping that the carriers were asking for more rate for replacement cost. So rates on coastal property might come off, same number. We've assumed that in our numbers. Casualty, I think there's still a march forward.

And I think that the replacement cost on the property has got to catch up to it. I just don't believe you can rebuild for the current pricing expectations. So we have assumed exactly the same deep cuts in property for '26 that we did in '25. And the rest of it, I mean, casualty has been going up 6%, 7% a year for the last 5 years. And I still think that everything we read and what we're seeing early on in the reinsurance pricing on casualty is that there's a need for more rate on casualty.

I'm Mark Hughes, Truist. The follow-up on your property. Pat, I think you had said on the third quarter call that with a clean storm season, maybe take another step down. Doug, you're talking about kind of steady coastal declines. I wonder if you could comment on that. And then just overall property, coastal is down, but it looks like fire and allied is still up. I mean, is property as a broad class? Is it up?

I'd say as a broad class, no, it's down. I'd say, but it's primarily driven by the cat side of it. But if you take the cat out and you look at then the individual accounts across the country that are in various areas, I don't know, Michael, what would you say? Would you say it kind of comes down to risk specific?

But in terms of the general outlook for next year, I'd say the continued competition is primarily in property. We had a great cat year. There just was no cat. There's a ton of ILS activity going on and a ton of ILS activity that occurred last year. And I think that you've got pressure there. You also have the comment that was made earlier on the kind of returns that these companies are getting and the fact that they do believe their rates are great and they're deploying that, yet Doug is right, casualty still is an issue. Comp is beginning to show some signs of wear and tear as well. So I think generally, overall, you got to look at property as the line that's going down.

I think there's an indicator in some of our businesses that are more property focused like Canada, Australia and New Zealand, where they don't have workers' compensation and liability rates aren't the same. You are seeing a tougher run on organic in those areas because they are so dependent 50%, 60% on property. So that would say it's not just cat, but it's not having the same rate decreases that cat are having.

Mike Zaremski from BMO. Question for Bill and the team on employee benefits. If we think back to this -- earlier this year, 1Q started out with tremendous organic growth. We've seen a bit of a decel throughout the year. And I know for the outlook, you're calling for an improvement back to more healthy levels next year. If you can talk through kind of what's been going on there.

I'm sorry, I wasn't sure I heard...

First, the decline throughout the year on organic it's the reality is you get it to some accounting seasonality.

There's definitely a lot of accounting seasonality. Half of our revenue renews on January 1. We sort of recognize half the revenue in the first quarter. And then as the year goes on, if you think about it -- let's say, we sold a business in July of the year before, and it's the January 1 renewal. That July business is now recognized in January of the next year.

So if we sell exactly the same amount as last year, we'll have 0 organic, right? So we have -- when you see the smaller organic in subsequent quarters, we're actually growing. And that's the thing to take away. It is the accounting noise that you're seeing. We have a very strong benefit team, and we're doing quite well.

Matthew Heimermann, Citi. In the first panel, there was a comment about digital tools and improving retention. I was wondering if we maybe take a tour of the business, and talk about some of the things that improve the stickiness of retention, whether it's digital tools, whether it's selling administrative platforms and employee benefits. And maybe dovetail that into how material of an opportunity with the size of AP, just some of those tools on the retention. And when you talk about accelerating organic growth, how much of a component that is?

Yes. I think if your question is from a digital perspective, I think we've shared with you in the past that we know statistically that when we have a digital engagement that our retention goes up anywhere from 1 to 3 points. And we're talking about going from 94%, 95% to 97%, 98%, not insignificant on a $4.5 billion business, but we're not talking about a broken retention. We're very good at keeping our clients happy and making sure they're well advised. So I'm not sure if that is where you were headed.

Well, I was wondering if you could give more proof points around that kind of leverage for tools because I would think on the employee benefits side, maybe it's -- you're not just placing, but you're doing services, enrollment, other things. I'm just curious if there's just across the business, those types of things, how they stack up. And then the AP question is really when you talk about momentum into 2027, how much of that is really gross growth versus retention improvements just improving the net?

Yes. We always look at new net of loss. So our goal is to make sure that our new net of lost that margin is increasing. So we'll look at the same thing with AP as we start to get them involved with many of these tools and resources.

One of the things I was going to say, and I think this ties into your question, about the market and whether it's property or casualty, every market creates an opportunity if you're a broker that has the tools and resources to build things, right? And I don't want to underemphasize the idea. So we just launched a 20% quota share product within RPS that can take any layer. It's underwriting agnostic. It's a follow form, and we already put it in place for one of our largest customers.

And so you think about that, and the -- this particular customer's exposure base had increased 20%, and their premium stayed flat. So now this isn't a big account. It's not a fee. The client was ecstatic, right? But it's also being placed through RPS. We're there, even though the retailer is on a fee, we're able to take commission as a wholesaler. So in every market, when it's soft in certain conditions, it empowers us, especially given our structure to be able to build programs quicker because the capacity is there. The reinsurance is behind it.

So the faster we can move through building out not only for legacy Gallagher, but for AP specific and then adding in the accretive business that falls into each one of the buckets of specialty and building out more facilities, you can outpace what the market is doing, and we believe we can if we continue to build facilities that solve problems for our customers with capacity that's in the marketplace and ties into every leg of the barstool from a Gallagher perspective.

And I think one of the questions was on benefits as well. So when you're thinking of Gallagher Go, think P&C, and that's something, as I said, that we started in the U.S. and then it gets legs and goes to Australia and the U.K. The U.K. has an unbelievable technology that we got through the Buck acquisition that we're now trying to take to Australia and the U.S. called Gallagher Guide.

And that is another digital interface with the customer that basically says to every employee, this is what your 401(k) looks like. This is what your benefits program looks like. So we are investing in that area as well as what we call Drive on the P&C side, which is an analysis of what you should buy, how much you should buy, who you should buy it from. There is a Drive component to Gallagher Benefit Services as well that's rolling out throughout 2026 and '27. And yes, that is the stuff that AP is super excited about. They come to the career fair or whatever we call it last week, the hearts and minds stuff in our home in Rolling Meadows. That's what they want to get their hands on. And then we have the stats that say those clients are stickier.

Let me add one other thing. I believe that the -- our effort to standardize and raise our quality, specifically using a lot of our centers of excellence, we now don't make mistakes and you lose customers by making mistakes. So we are going to issue $3 million, $4 million, $5 million certificates of insurance next year -- this year. And we know that we will issue those virtually 100% right and 100% within 24 hours.

That keeps a contractor from getting kicked off of a job. They got to approve their insurance, auto ID card issuance. Billing, when I got to Gallagher over 2 decades ago, we were sending out about 9 bills for every collection because we are constantly revising the bill. We don't do that now. We bill right the first time. Our write-offs on the difference between billing and what we owe to the carriers, the net amount last year, $137,000 of difference, and we're billing in this population, $60 billion of premium. So our error rate on bills just doesn't exist. Nothing works for a producer to lose an account because we screw up the service on the backside, to your point.

And then the real secret is Mike hit on it, our claim advocacy group, our claim concierge group, when -- how do you know you have great insurance? You don't until you have a loss. So if you don't have the covers that were provided through our Advantage product, 30 different endorsements on our liability program that give you insurance that no other product offers. So you got more coverage. And then if you have those that can help you get your claim pay, that's how you know you have great insurance. You got to service along the way, you got to improve.

I actually believe that we don't sell enough our service when we're out there in the field about how we don't make mistakes. That comes to bear when we're having that relationship. And then you tie folks in electronically or digitally, you don't make mistakes in the service. And then when they have a claim, you get it paid and you get it paid fairly. Those are how the service metrics come back to help us. And I -- our loss business is not a problem at all. We lose more customers because they just go out of business. That's the reason why. So I think that was part of your question. We measure this statistic on quality every single day.

Cave Montazeri from Deutsche Bank. On the M&A front, obviously, cultural fit is number one. But also, I'm assuming larger acquisitions, there's extra complexity, getting -- onboarding people, getting the data into your systems, et cetera. And you did mention your -- a couple of projects on the AI side you were working on. Do you think some of the new AI technology could help getting some of the data into your system in a more efficient manner? And would that make it more likely, all else equal, if you find the right cultural fit to do bigger acquisition because it will be "easier to integrate" now within your platform?

Well, listen, I'll say this. Sure, I think it will when we find the right one, but will it drive us to doing more? No. I mean that's -- you got to find the right ones before we do that. But the tools and capabilities that AI brings you in order to do diligence faster to be able to do contract review faster to do those things, it's there. But I think when it really comes -- the value comes from AI after we're together and we can deploy the AI into their daily operations is really where the value is.

Two questions that rose. One was how can 90% of your activity when it comes to competing still be against people who are smaller?

Well, because there's 30,000 agents and brokers out there and your question on doing larger deals, there's $13 billion agencies. #100 on Business Insurance's list last year, did $36 million in total revenue. There's 30,000 competitors in America. That's why we have no market share. We're toiling in a world that is still a cottage industry, which I believe is going to end over time, to your point.

I mean I think when you take a look at the capabilities, when you take a look at the need for data and analytics, even a middle market account will say to Patrick, Mike, Bill or whatever, why do I know I've got a good deal? What are people like me doing? When you can take literally billions of dollars of premium, sort through it by SIC code, by geography and say, people like you in the last month have renewed at X, the little guy doesn't have that.

And then to Doug's point, we bring them on. So right now, we've got $350 million of acquisition activity in revenue looking at us at this very moment under LOI. That's 40 deals. So you've got 10,000 of these that matter and you've got 20,000 that are still sitting there in the petri dish. So the acquisition activity will go on forever, but the big ones out there are just not that existent.

The same is true when you take a look at how can you compete 90% of the time with somebody who's smaller than you. Those 30,000 have the market. Now there's only 10,000 -- fortune 10,000 accounts, and there are millions and millions of insurance buyers in the world. That's why we compete 90% of the time with somebody who's smaller.

So do we have time for one more? Should we wrap it up? One more question...

We'll go to...

Just quickly -- David Motemaden, Evercore ISI. Just a question on data centers. Do you guys think you guys will be a winner in just the data center build-out, whether that's primary broking or reinsurance? And if yes, how? And I think Tom Gallagher mentioned a specialty practice group strategy do you have on for data centers as well?

Yes. So we've been looking at this pretty intently. What I can tell you today is that we're knee-deep in it. We are touching it in the London marketplace. We're touching it in Europe. We've had some very successful wins. Our strategy, though, when you think about many of our niche and verticals and our practice groups has been a very bespoke model, right? We want to bring the right people to the table who understand whether it's property, whether it's liability, whether it's environmental, whether it's cyber, it's critical for us to bring those right people together. So you'll see more of us corralling those people.

And by the way, some of those people are rather new to us. I was with our colleagues from Denver last week at our tour, and they were filling me in, specifically to your question, David, around what they're doing with data centers. They have a lot of large contractors. And what we know about the data centers and what are being built, some are being built by the names you would recognize, the Googles, the Metas, in some cases their owners, in some cases their tenants. They're being built by property owners. They're being built by private equity firms. They're being built by public universities.

We're the largest insurer of universities in the country. So as these projects come to bear, we will do a bespoke model. We'll bring the right talent to the table. We're already doing it both here in the United States and in Europe. It is a big opportunity. You talk about property. Those are big property risks. We do believe there's capacity in the marketplace to tackle these large risks, and we'll be involved every step of the way, but in a very bespoke targeted model.

Tracy Benguigui, Wolfe Research. I was going to ask an AI question and follow-up in a different direction. So definitely, the broker proposition -- value proposition is much better these days for carriers, if you remember back years ago, all the pushback and remuneration. But if you look fast forward, we get this question a lot. I have my personal view. Could you see disintermediation, particularly on the smaller accounts?

Well, I think you're going to see a lot of utilization of AI for all kinds of -- right now, you can go to ChatGPT and say, how does cyber insurance work? Who sells it? What's it cover and why? And you'll get a good answer. By the way, at the end of that answer -- now this is today's ChatGPT, we'll say you should talk to an insurance professional.

I don't think you're going to eliminate the need for human interface. And that's because people want insight. Now we'll see, but I had the very same question 25 years ago, the Internet is putting you out of business. You're done.

And the young man said, in fact, I'd buy all my insurance online. I said you buy all your insurance online. Yes, my homeowners, my auto, everything. So that's really interesting. How much uninsured, underinsured motors coverage do you buy? And he said, "Well, what's that?" I said, I'm not going to tell you. So now how much should you have? I don't know.

But I think it's more than that. When we see what we're doing with the data and analytics and the niches that we're in, when it really comes down to the end, and Mike just made the point on data centers, everybody is wild about data centers, right? But each one of them is a little different. I'm building it in this location, near this water with this owner for this reason. And it takes nuance. And I think that's never going to go away.

People want to talk to people about what they think. And I feel really strongly, when you take a look at our industry, things are only getting more complicated, not easier. And so it's not that easy to say -- and by the way, if I have 4 auto dealerships on all 4 corners owned by 4 separate families, their appetite for risk is different. Every one of them. I don't want to take that much risk on my open lot. I want to do this differently than that. That's the value that we add. And I don't think that's going to go away.

I think we're done with questions, Ray. Let me just make a few comments. And then -- first of all, thank you very much all of you for coming today. We really appreciate your attention and your time. Many of you, I know have followed us for many years, and we appreciate that.

I'd reiterate what I've said to many of you many, many times. We are really blessed. We work in the greatest business on the planet. One of the things I comment on all the time is we are not the grease of the axle that keeps the community, the commercial community working and lubricated. Insurance is the oxygen of commerce.

I can tell you from the Great Recession in '08 and '09, I can tell you from the pandemic, our clients will stop paying their people before they stop paying their insurance bill because once you stop buying your insurance, you're out. And every single time I ever gave a client an actual notice of cancellation that they couldn't pay their bill, 100% of the time, they went broke. That's how important our job is for those clients. And by the way, they get it. They understand most clients aren't big public companies with risk managers that can counsel on captives and ILS and the rest. These are people that own businesses that want to protect them. And I think we sit in a very, very unique position.

The thing that differentiates us more than all of the stuff that we talked about today is our culture. That's why the AP folks are staying. We're a broker run by brokers. We understand what it's like to take care of clients. They get that. And I think together, we're going to build a heck of an enterprise. It blows my mind to hear my CFO say that in the next year, we have $10 billion to deploy in acquisitions. That, to me, is just incredible. And I can tell you, we're just getting started.

So thanks for being with us today. Have a great holiday season. We really appreciate your time.

Good afternoon, and welcome to Arthur J. Gallagher & Company's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 meanings 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 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, Jr., Chairman and CEO of Arthur J. Gallagher & Company. Mr. Gallagher, you may begin.

Thank you. Good afternoon, everyone, and thank you for joining us for our third quarter '25 earnings call. On the call with me today is Doug Howell, our CFO, as well as members of the management team.

Before I start, I'd like to acknowledge the damage caused by Hurricane Melissa in the Caribbean. Our thoughts are with all those impacted, including our own Gallagher colleagues. Our team of experts have been mobilized and are on the ground helping our clients and colleagues.

Moving to our financial performance. We had a terrific and obviously very active third quarter. Our two-pronged revenue growth strategy, that's organic and M&A, delivered revenue growth of 20%. In fact, over the last 30 quarters, we've delivered double-digit top line growth 26 times. This is now our 19th straight quarter of double-digit growth. Clearly, our relentless client-centric, team-driven and welcoming culture is thriving. Underlying that headline revenue growth, we posted 4.8% organic, grew adjusted EBITDAC 22% and expanded adjusted EBITDAC margins by 26 basis points, demonstrating we are getting substantial benefits of scale and the value delivered by our strategy of constantly focusing on improving our productivity while delivering our high-quality services.

EPS for our combined Brokerage and Risk Management segments, we posted GAAP EPS of $1.76 and adjusted EPS of $2.87. That would have been $0.22 higher had we levelized for the intra-quarter revenue seasonality related to AssuredPartners that we closed on August 18. Doug will unpack this timing aberration in his comments.

The punchline is our business continues to shine and the early days of the AssuredPartners folks coming together with the Gallagher team is off to a terrific start. Already, we're selling together. We're showing that we are better by being together.

Moving to the results on a segment basis, starting with the Brokerage segment. Reported revenue growth was 22%. Organic growth was 4.5%. Relative to our September IR Day commentary, we did see a little pressure on contingents and a few large life insurance cases shifted out of the third quarter. Adjusted EBITDAC margin headline shows flat year-over-year at 33.5%. But when we exclude merger and acquisition, interest income, it shows underlying margin expansion of 60 basis points. Doug will give you a bridge from last year. That's terrific work by the team to stay vigilant in our relentless pursuit of being more productive every single day.

Let me provide you with some highlights behind our Brokerage segment organic. Within our retail operations, we delivered 5% organic overall within P&C with U.S. up more than 7%, international flat, driven by less renewal premium increases and lower contingents. Employee Benefits posted around 1% organic, driven by lower-than-expected large life cases.

Shifting to our wholesale and specialty businesses. In total, we delivered organic of 5% with the U.S. outperforming our international businesses slightly. As for reinsurance, it's a relatively small quarter and organic here was in the high single digits. And while not in our organic growth numbers, AP's third quarter organic was 5%. That really shows you that a terrific sales-driven culture is joining our team. So we continue to deliver organic growth across retail, wholesale and reinsurance.

Let me provide some thoughts on the P&C insurance pricing environment. Overall, global insurance renewal premium changes remain in positive territory, and we continue to see more carrier competition across property classes, particularly shared and layered programs and cat-exposed risks, resulting in renewal premium decreases. With that said, carriers continue to push for increases across most casualty classes, which are more than offsetting the property decreases.

Let me provide a further breakdown on our third quarter global insurance renewal premium changes, which includes both rate and exposure by line of business. Property down 5%; casualty lines up 6% overall, including general liability up 4%, commercial auto up 5% and umbrella up 8%; U.S. casualty lines are up 8%, and that increase has been consistent over the past 12 quarters, suggesting domestic carriers are recognizing continued pressure; package, up 5%; D&O down 2%, we think perhaps close to bottoming out; workers' comp up 1 point; and personal lines up 6%.

So while property is down 5%, many lines are still seeing increases. In fact, global renewal premium change, excluding property, remains around 4% with good accounts getting some premium relief and accounts with poor loss experience seeing greater increases. Looking at differences in renewal premium changes by client size, we continue to see some bifurcation. For middle market and smaller clients generating less than $250,000 of revenue, renewal premiums were up about 3%. For larger clients generating more than $250,000 of revenue, renewal premiums were down 1%. So many of the market trends that we have been highlighting for the past few quarters persist today.

As for the reinsurance market, a very small quarter for us. Looking towards January 1 renewals, the industry remains healthy. There's adequate capacity to meet expected demand. Property coverages continue to favor reinsurance buyers, while casualty reinsurance dynamics are more stable with continued caution for U.S. risks.

Moving to Employee Benefits. We continue to see solid demand for talent retention strategies given the resilient U.S. labor market. Further, managing rising health insurance costs is becoming increasingly important for our clients as they deal with continued medical cost inflation. So we are engaging with employers to help them alleviate the pressure from rising medical and pharmaceutical costs.

Moving to some comments on our customers' business activity. While the U.S. government shutdown has halted economic data releases, our proprietary data, which has been an excellent indicator of the economy, continues to show solid client business activity. Third quarter revenue indications from audits, endorsements and cancellations remain nicely positive.

Interesting, through the first 3 weeks of October, our revenue indications are showing even more positive endorsements and lower cancellations than in September. So while we are watching our customers' business activity carefully, we are just not seeing signs of an economic downturn. Regardless of market and economic conditions, I believe we are very well positioned to grow. From our leading niche experts, vast proprietary data, award-winning analytics platform, extensive product offerings, outstanding service and global resources, this puts us in an enviable spot competitively. As we sit today, we are seeing Brokerage segment fourth quarter organic of around 5%, which would bring our full year organic to more than 6%.

Moving on to our Risk Management segment, Gallagher Bassett. Third quarter revenue growth was 8%, including organic of 6.7%. We saw strong new business revenue and excellent client retention in the third quarter and believe these favorable dynamics will continue through the end of the year. Accordingly, we expect about 7% organic growth in the fourth quarter. Third quarter adjusted EBITDAC margin was 21.8%, a bit better than our September expectations. Looking ahead, we see fourth quarter and full year margins around 21%, and that would be another great year for Gallagher Bassett.

Let me shift to mergers and acquisitions, starting with some comments on AssuredPartners. Since the mid-August close, dozens of Gallagher leaders and hundreds of others have been traveling to AP offices and hosting gatherings. We've been sharing our stories with thousands of our new colleagues and highlighting all the tools and expertise that is now at their fingertips. I, too, have attended many of these meetings and events. And I have to tell you, the level of excitement all of us have witnessed during these visits is literally palpable. We have shared a view that we will be better together. 1 plus 1 will be greater than 2, and there is immense value creation for our clients, carrier partners and shareholders.

Equally important, they know they are now home, and they are getting the resources they have desperately needed for years. For those that are ready to join the amazing Gallagher culture, I welcome you. Outside of AP, we completed 5 new mergers, representing around $40 million of estimated annualized revenue. This brings our year-to-date estimated annualized acquired revenue to more than $3.4 billion or 30% of full year '24 revenue. That is fantastic. And for those new partners joining us, I'd like to extend a very warm welcome.

Looking at our pipeline, we have about 35 term sheets signed or being prepared, representing around $400 million of annualized revenue. Good firms always have a choice and it would be terrific if they chose to partner with Gallagher.

I'll conclude my prepared remarks with some comments about our Bedrock Gallagher culture. As I am meeting with colleagues, both new and old across our global network, it's always impressive to me how quickly new employees and acquisition partners come together as part of the Gallagher family of professionals, how we embrace the Gallagher Way and enhance our offerings and services to clients. As tenant #24 of the Gallagher Way reminds us, we must continue to building a professional company together as a team. And I believe this spirit of teamwork and shared purpose is precisely what is driving our success today. That is the Gallagher Way.

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

Thanks, Pat, and hello, everyone. Today, let me first address the third quarter impact from rolling in revenues from AssuredPartners. So let's go to Page 7 of the CFO commentary document that we provide on our website.

Over the last 30 days, we finally got usable AP data down to the customer level detail. That gave us the policy inception data necessary to implement our 606 accounting and harmonize revenue accounting methods. First, it's important to note that the new detail did not change our annual view of revenue or EBITDAC. Second, however, it did reveal that AEP's business is much more seasonally skewed than we could previously estimate.

Two tables here on Page 7 help unpack this. The top table shows you the inter-quarter seasonality. It's easy to see first and fourth quarters have considerable seasonality, which you should consider when building your models. What this table doesn't show is the intra-quarter seasonality. So we've added the lower table. What this shows, while we owned AP for half the quarter, only about 40% of the policy inception dates were between August 18 and September 30. That produces an $80 million revenue difference to our September IR Day estimate where we used a 50% assumption because we owned it for half of the third quarter. That causes a $0.22 shortfall to our indicated September IR Day estimate. You'll see that in the yellow column in that table. It does impact some of my other commentary, but I'll highlight those throughout my remarks.

All right. With that said, let's go back to the earnings release, and let's go to Page 3. Brokerage segment organic growth of 4.5%. That's about $11 million of less revenues than our September IR Day thinking. Half of that relates to those lumpy life sales that didn't get closed. And we've talked about that, how that can impact organic a little bit from time to time. That cost us about 30 basis points of growth. The other half or so relates to contingents. While there is some geography with supplementals, we did have an unfavorable estimate change related to one of our international programs. That cost us about 20 basis points of growth relative to our expectations.

Looking forward to the fourth quarter, we see organic around 5%. A couple of items that influence our thinking when we make that estimate. First, as we discussed in our IR Day, we are in the midst of our annual update on 606 estimates. When all that settles, that could move that growth estimate 0.5 point either way. We know that's just accounting, but it can cause some noise. Second, always a little sensitive to the timing of those large life sales. If buyers believe rates may come down even more, they might push those into '26. That said, if we were to deliver fourth quarter organic around 5%, we would finish the year with organic above 6%. That would be a terrific year.

Flipping to Page 5 of the earnings release to the Brokerage segment adjusted EBITDAC table. Third quarter adjusted EBITDAC margin was 33.5%. That's flat year-over-year on the headline. But as I do each quarter, let me walk you through a bridge from last year. First, if you pull out last year's 2024 third quarter earnings release, you'd see we reported back then adjusted EBITDAC margin of 33.6%. Now adjusting that using current FX rate, and this quarter is about 10 basis points. So FX adjusted EBITDAC margin for third quarter '24 is about 33.5%.

From that starting point, the roll-in impact of M&A used about 200 basis points with more than 2/3 of that impact coming from the seasonality of AssuredPartners. Interest income, including the cash we are holding for the AP closing through mid-August, added about 140 basis points of margin. And most important, organic growth of 4.5% gave us about 60 basis points of margin expansion this quarter. This bridge helps you quickly see we continue to deliver terrific underlying margin expansion. As for fourth quarter, we don't see anything that causes us to change how we view underlying margin expansion potential. We still see terrific opportunities.

Sticking on Page 5, the Risk Management segment organic growth was 6.7%. That was in line with our expectations, and that resulted due to strong new business revenues and excellent retention. We expect favorable new business and retention again in the fourth quarter, so it's looking like another quarter of organic growth in the 6.5% to 7% range. Adjusted EBITDAC margin of 21.8% was better than our September IR Day expectations. And looking forward, we still see full year margins closer to 21%.

Let's turn now to Page 7 of the earnings release and the corporate segment shortcut table. Each of these adjusted lines came in close to the midpoint or just a bit better than our September IR Day expectations.

All right. Let's leave the earnings release and go back to the CFO commentary document. Starting on Page 3 with our modeling helpers. Most of the third quarter '25 actual numbers, which were given, excluding AP, were close to what we provided back in September. Looking forward, we are including AssuredPartners in our fourth quarter figures for depreciation, amortization and earn-out payable. Also, please always take a few minutes to look at the impact of FX as you refine your models.

Turning to Page 4 and the corporate segment outlook for the fourth quarter 2025, not much change here from our IR Day 6 weeks ago.

Flipping now to Page 5 to our tax credit carryforwards. Again, not much change from our IR Day. But as a reminder, it's a nice cash flow sweetener to fund future M&A that doesn't show up in our P&L, but rather via our cash flow statement.

Turning to Page 6, the investment income table. We've updated our forecast to reflect current FX rates and changes in fiduciary cash balances. These numbers assume one future 2-basis-point rate cut in December.

Shifting down to Page 6 to the rollover revenue table. The third quarter '25 column subtotal around $137 million before divestitures. That's pretty close to our September estimate. Looking forward, the pinkish columns to the right include estimated '25 and '26 revenues for brokerage M&A closed through yesterday, excluding AssuredPartners. And just a reminder, you always need to make a pick for future M&A.

Moving down the page, you'll see that we expect fourth quarter '25 Risk Management segment rollover revenues of about $16 million.

All right. Flipping next to Page 7, I hit on the major takeaways upfront in my comments, but heads up on a couple of items as you use this page to build your models. First, take a hard read through the footnotes. This table shows our midpoint estimates. It uses a placeholder assumption for growth and also does not include synergies. We still see annualized run rate synergies of $160 million by the end of '26 and $260 million to $280 million by early '28. And the second point, the noncash items that we show here, mostly depreciation and earn-out payable are also reflected in the Brokerage segment fourth quarter estimates on Page 3. So please don't double count those.

Moving to cash, capital management and M&A funding. When I look at available cash on hand plus future free cash flows plus investment-grade borrowings, over the next couple of years, it's looking like we might have $10 billion to fund M&A before using any stock, still at multiples with a terrific arbitrage.

So before we go to Q&A, a few sound bites on our 9-month combined brokerage and risk management adjusted results. Revenue up 17%, net earnings up 27%, EBITDAC up 25%, organic year-to-date at 6.6% and EBITDAC margin over 36%. Those are stellar results, and I see us finishing '25 strong and '26 is looking like another terrific year.

Okay. Back to you, Pat.

Thank you, Doug. Operator, if we can go to questions, please.

[Operator Instructions]

Our first question is from Elyse Greenspan with Wells Fargo.

My first question, I want to start on AssuredPartners. When we're thinking about, well, I guess, new business by AP, I'm assuming that, that's in the M&A line, but then what about synergies? Is that -- does that fall in the M&A line? Or is that something when they start coming online that will be included within organic revenue growth?

Well, the revenue synergies that we get out -- get from -- that goes into the AssuredPartners P&Ls will be given credit to them, not to us. If there is something that we would book, for instance, a broader base contingent commission or supplemental that impacts our books, that would go into the legacy Gallagher organic growth. So to a certain extent, if we pick up some more on the AssuredPartners book of business, that would not -- that would understate organic revenues. Does that help?

Yes, that does help. And then I guess -- I mean, I think in the past you guys have said that next year, right, feels a lot like this year. You just said that the full year is going to be, I think, just more than 6%. Based on how you guys are seeing everything today, is there more precise guidance just in terms of the organic outlook that you're looking at for 2026?

Yes. We're in the middle of our budget and planning process, but I still think we feel comfortable that next year -- '26 could look a lot like '25. We still believe that. Early indications that we're having terrific success in our Reinsurance business. We're having terrific success in our P&C businesses. So as a matter of fact, when you really pull back the organic growth in the P&C business, it's been pretty consistent over the last 5 to 7 quarters when you strip out property cat. So basically, our business are still running very similar and today is what we were seeing throughout the year. So that's what makes us feel comfortable that next year could be a lot like this year.

And then my last one is on M&A. When you guys talk about the pipeline, I'm assuming that's now like a combined Gallagher and AP pipeline? And how has -- now that you guys have closed on the AssuredPartners acquisition, how has, I guess, the M&A from their side of the house? How is it like added to the pipeline as well as just when you think out about kind of your bolt-on M&A over the course of like the next year or 2?

Elyse, give us a couple of weeks on that. I mean we just really got closed, and we're kind of getting around that. As I said, we've been doing a lot of visits. We're going to have most of their folks in the field come to the home office over the next 1.5 months or so. And that pipeline has not been yet put into our pipeline report. They did have a good pipeline. Things we're working along. And of course, we're going to bring them together with our M&A people. But I don't have a real good handle on that yet. We're hopeful that, that business and those opportunities will roll that over to us, but I haven't seen that yet.

Yes. One thing qualitatively on that is that what's happened is, as I sit down and talk to some of the branch managers that -- or agency presidents that have come over that have been merger partners and assured partners, I think a lot of them are frankly, we're kind of surprised that we'd be so interested in them. They're in smaller communities necessarily. Their books -- they're not quite as large. So I think it's opened up the eyes to -- of those 30,000 agents and brokers out there that of all sizes, we have an interest.

If you want to sell, you want to take care of your customers, you want to get better together, our doors are open for that M&A. So that's -- I think there's an awakening that we want good producers that want to produce some good agency leaders that want to stay on and be a part of the business. So I think that's going to lead for us getting more looks and more swings at the plate.

It will also take a little while recook, if that's the right word. People are naturally cautious. We're going down a discussion and track with AP. You've now gone a different direction with Gallagher. How are you feeling about that? Are you still wanting to put the recruiting press on me? Or are you feeling a little bit hesitant? I think people want to naturally watch that. I'm very hopeful that when it starts to cook, it should cook well for us. That's what I'm hoping.

Our next question is from Andrew Kligerman with TD Securities.

So I just actually want to build on Elyse's question. The first one on the organic growth. I recently spoke with 2 competitors in the small to middle market brokerage area. And both of them kind of said, in this shallow pricing environment, 4% to 6% is a good organic run rate, that it's very doable and likely. How does that strike you? I mean does that feel like the strike zone as opposed to in the past, you were looking more at upper single digit just given the pricing environment?

Yes. I think if -- we stood on January 1, remember, we thought that we would be somewhere between 6% and 8%, and that's where we're going to fold out. The difference is on some of that is our reinsurance business, our international business. So I think that you've got a good nose into what might be Main Street U.S. retail. I think where we top up on that is because of our wholesale business that performs well, our programs. We've got that business, and then we've got our reinsurance business. So those are the things that make me feel being more on the upper end of that spectrum that range than within that range.

Got it. And then going back to M&As, and I get it's kind of too early to talk about AssuredPartners pipeline and so forth. But just in terms of A.J. Gallagher appetite, if a deal were to present -- a large deal were to come across here, your desks or if a deal outside of the United States that were large to come across your desks, would that be something you could do at this stage, just given the sheer size of AssuredPartners?

Absolutely, yes.

Our next question is from Gregory Peters with Raymond James.

I guess -- first of all, I appreciate the disclosure on Page 7 of your CFO commentary. And Doug, I think you mentioned or just reiterate it, the $160 million of synergies that's not in these estimates, you can confirm that. Is that -- can you talk about the geography of that? Is that going to be -- is that going to be in the operating expense? Or is that going to be revenue and operating expense? Or -- and I'm not asking to pinpoint by quarter, just ballpark where you think those synergies, how those are going to show up when we get to the year-end '26?

Yes, I think by the time you get into '26, it's easy for me to always say 1/3, 1/3, 1/3. We're going to get 1/3 for revenue uplift. We're going to get 1/3 because better -- coming together, we'll have some efficiencies in our workforce, and I think 1/3 of that will come from our operating expenses. The more exciting number really comes when you get to that as you start to push $300 million of synergies out over the next year, Really over the next 1.5 years after the end of '26. I think you're going to see terrific opportunities for us to deploy our technologies. The AI that we're working at right now.

Greg, you've been around the story a long time. We have spent 20 years transforming our business. We have capitalized on labor arbitrage. We've deployed technologies. It's just part of our DNA. You put that over our tracks, and you put that $3 billion over our proven places where we've been able to deliver efficiencies, productivity and raise quality, I think it's ripe for a tremendous, tremendous amount of better together even -- maybe even better than what we're saying right now.

I think the better together stuff, too, Greg -- this is Pat, is the whole revenue side of things. I think there's a lot more closeness in terms of what we're producing, and there's a lot more opportunity to trade together. They are clients of RPS, but not to the same extent nearly that our present platform does contribute to RPS. They've got a host of business, although they're a spread middle market broker, they do have a ton of business in the U.K.

We've identified literally millions of dollars of business opportunities to trade with ourselves there. And so just across the board, we've already produced $1 million of new accounts with them in 6 weeks, that are accounts we both mutually had in our prospect system. We went out together with our tools, their connections, our connections, they made it easy for that buyer to join us. There's literally thousands of those opportunities. So I think the trading better together is a real opportunity.

And in your answer, you mentioned that you're going to have -- the AP gets credit for in their book for their revenue synergies. And so it seems like you're keeping 2 books for the purposes of getting through the earn-out period. But am I to infer from your comments that you're going to be taking or trying to encourage the AP retail reps to use RPS as opposed to other sources. Is that going to help drive your wholesale organic. Or does that -- if something like that happens, is that going to AP book, and we don't see that manifest itself in terms of organic results for AJG? Does that make sense?

I'll let Doug comment on how we'll account for it. He's got that down, but let me tell you about the opportunity. As you know, probably about 5 or 6 years ago, we went through the arduous task of going out to our retailers and cutting back from probably 500 separate wholesalers being used across the entire platform in absolutely no coordinated way. And we moved that across to 4 specific strategic relationships, one of which was RPS, our owned wholesaler, recognizing that we needed others besides just ourselves.

That, I call it arduous because it was trench warfare and we got it done. And by the way, we did that to benefit our clients and improved it over and over again. Well, AP is just Gallagher 15 years ago. So we're going to have to go through that process, and we're not mandating the use RPS, but we will start the process in the new year of saying, look, there's basically 5 and that we'll add one to that and that will be it. And we're going to just keep pushing and pushing and pushing. And that, of course, does include what we would hope to be an outsourced -- an outsized opportunity for RPS. And Doug can talk about the accounting.

Yes. Greg, in that example, if we move it from wholesaler X, Y, Z to RPS, that would be considered organic growth in our legacy numbers. And we're talking about another 10 months of this, right, on that. So that would be legacy Gallagher organic growth. If we -- if they come on to a base commission schedule, where we were getting 16% commission and they were getting 14%, that extra 2% of that base commission would be credited to that AssuredPartners' historical branch.

Does that keep us from having to consolidate these businesses for purposes of that solely? No. There's a self-adjusting mechanism because it's going to go to the producer -- that extra compensation will go to the producer and for us to track the producer, whether they move from branch A to branch B., it's not going to produce any more difficulty. We're not keeping them separate from us. There is no earnout on AssuredPartners other than those that they bought were still on an earn-out. So we will have their earnouts, but those will go away in another 1.5 years too. So it's not going to put a burden and we're not doing anything to keep. We're trying to put everybody on the same system and get everybody in the same playbook as fast as possible.

I guess for the final sort of cleanup question just back to market conditions. There's a lot of rhetoric in the marketplace about where we are in the pricing cycle. And I noted your comments that you're seeing some continuing stability and especially your middle and small market exposures. But maybe you can -- Pat, you've been around, I don't know what number cycle you're on at this point in time, but there's a number of them. And I'm just curious how you think this is going to play out over the next 2 or 3 years because certainly, it seems like large account property is under a lot of pressure, and there are some other areas where there's pressure points?

Yes. I'd be glad to talk about that. I've done this in the past, Greg. So it's consistent with my previous comments. Surprising to me a couple of years ago when I was in London, we've just gotten done putting forward and selling 300% renewal increases on our public company D&O book. And I was with the FI team in London. They said, Pat, this thing is going to soften fast. And I'm like, how can that -- wait, how can that happen? D&O is going to start to drop down and so is cyber. And go, guys, you got to be kidding me.

And that started about 2.5 years ago and continues while at the same time, during that period, other lines were continuing to firm. So what I think we're seeing this time, which is different from the cycle in the late '80s into the '90s and different the cycle in 2005 is that there's less of all lines down, all lines up, which is why we try to give it in our prepared comments.

The property market clearly is in a good spot for clients. It's been a hard place for clients for the last number of years. They're getting some relief. That's a positive thing. When you take a look at the casualty market, isn't it interesting that we're still seeing rate increases there as they look to the tail on that stuff and realize they've got to adjust to it. So I do believe that you have cycles within the cycle, which is different than the past, and this is my fourth. It's different than I've seen in the past, and I think kind of makes sense.

So I think we're always one storm or one disaster away from a firming property market. Casualty takes a long time to sort of figure out. You don't know your cost of goods sold and it bleeds in, and then you've got ancillary lines like package and what have you. The interesting thing to me is that this is also bifurcated in a different way than it was in the past. Our large accounts are demanding discounts and they're getting bigger ones, makes some sense. They wield more premium. Smaller accounts, which were in the last cycles down as well, not so strong.

So we'll see how this all shakes out. But I think the dominant theme here is it's going to be cyclical, it is cyclical, but I think it will be by line and by results by line, cycles within the cycle.

Our next question is from Meyer Shields with KBW.

This is [indiscernible], on for Meyer. My first question is a follow-up on the pricing dynamics. We do see some deceleration in casualty, so 6% this quarter. Do you think the trend will continue to decelerate or stabilize from here? Just wondering like what is your expectation going forward?

So what you're saying -- let me make sure I understand the question. You're seeing a deceleration in the casualty pricing increases, not a decrease in casualty pricing? We're not seeing that. We disagree with that.

Yes. Listen, I think that on a quarter-by-quarter basis, you could get a little bit of mix difference that might cause us to look at. But let's face it. This thing is marching up at 6% to 8% a year, has been for 3 or 4 years. I don't think things are getting less risky out there. I think that the carriers are being smart by staying ahead of this and continue to march forward on the casualty pricing.

The other thing too is, remember, I know you're asking questions about rate. There's also exposure unit change underneath it. And then also our customers -- remember this. When rates are coming down, they opt-in for more insurance. They buy more insurance. When rates are going up, they opt out of it. So the actual -- we're actually seeing revenue increases in lines that are higher than what rate declines that we're seeing in it.

So the fact is people are buying more insurance within that line, i.e., more exposure. They dropped their deductibles, they raised their limits, so they're buying more. So the brokers will never show -- will never track 100% of rate because of this opt-in and opt-out. And we used to speak about that a lot 10 years ago. So it's not just rate, it's just what are our customers' budgets going to afford.

Now as our customers grow, we'll sell more insurance, too. A person has 100 trucks and they go to 105 trucks, they got to buy 5% more truck insurance.

Got it. My second question is kind of on the industry. So we noticed one broker continues to expand its wholesale operation in London and recently enters the U.S. retail market. Just wondering what's your take on this? And how does this impact that Gallagher?

Well, I'm not going to comment on our competitor strategy. Things are perfect for us.

Our next question is from Mark Hughes with Truist Securities.

The employee benefits, you had some slippage in a couple of large life cases. But as a general line of business, how do you see that shaping up for fourth quarter 2026?

Well, the fourth quarter is a time where we do a lot of our helping customers enrollment. We see that as pretty strong right now. I think that there's a lot of help as people are trying to change the dynamics. So we're helping folks on with that. I think that it gets into the executive comp lines where people are looking for their strategies coming into proxy season. And the base medical sales right now, too. I think that human resource leaders are waking up to the spiraling -- the increasing cost of medical inflation, both on utilization and then cost on the utilization.

So you're having a frequency that pop up. I think this is going to be a time where if you go back, I don't know x years ago, I think there's always a war for talent. But right now, I think human resource folks are really working hard on this escalating cost of medical inflation. That will put some opportunities into our books here in the fourth quarter, and I think it will keep us really busy next year.

Yes. How about new business. Pat, in your experience at this time in the cycle, things are a little -- understanding that casualty is still up and still is a tough market. Is it a little easier or harder or about the same to go out and get new business?

No, Mark, I think you're raising a good question. It's kind of an interesting time. First of all, it's nice in a time like this, you can deliver for your clients. So it's not -- we're not constrained by capacity in just about anyway. At the very same time, you have our littler competitors, and you'll recall that we compete 90% of time against smaller players. They can surprise us with a quote we didn't expect. You can end up sitting there and saying this is a great deal and someone will come in with something crazy.

At the same time, quite honestly, our clients are not happy. They've gone through 5 years of listening and listening to increases and what have you. We've been able to show them with our data and analytics, why it's happening, where it's happening, what to expect. But sometimes that local guy will get a shot at something and deliver a price, we've got to match or what have you. So I think that it's both a very good time for new business because our people that are aggressive on the phone out talking to people can really deliver. At the same time, we have to reemphasize and resell the existing book we have. And I think we're good at that. Overall, I think it's probably a positive for new logos, and it's probably less of a positive for top line revenue growth.

Our next question is from David Motemaden from Evercore ISI.

I had a question just on the property market. It was encouraging that RPC held in at down 5%. I think it was down 7% in the second quarter. Just given the light storm season, I'm just wondering how you're thinking about just the property market overall going forward, not only for the fourth quarter, but then also for next year?

I think the property market is going in a direction that makes some sense given the fact that they've got good results. The cat bond industry is doing well, record ILS activity. Reinsurers are making a good return on what they put at risk. I think there is more capacity available. I think there's continued pressure on the downside.

And that influences our pick. If it was down 5% to 7% this year and what we post this year. And next year, if it's down 5% to 7%, that's baked into our outlook for next year.

I will say this, David. I do not sense a dramatic decrease coming in the fashion of past cycles where all of a sudden you turn around, it's off 15%. I'm not sensing that at this point.

Got it. That's helpful. And so the sort of like a down 5% to 7% is embedded, Doug, and your early thoughts on next year looking similar to this year?