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Good afternoon and welcome to Arthur J. Gallagher and Company's Fourth Quarter 2024 Earnings Conference Call. Participants have been placed on listen-only mode. Your lines will be open for questions following the presentation. Today's call is being recorded. If you have any objections, you may disconnect at this time. Some of the comments made during this conference call, including answers given in response to questions, may constitute follow-looking statements within the meaning of the security 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 to 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 & Company. Mr. Gallagher, you may begin.

Thank you very much. Good afternoon and thank you for joining us for our fourth quarter 2024 earnings call. On the call with me today is Doug Howell, our CFO, other members of the management team, and the heads of our operating divisions. Before I get to my comments about our financial results, I'd like to acknowledge the tragic wildfires in California. Our heartfelt thoughts are with all those impacted, including our own Gallagher colleagues. Our Company and industry have such an important role and responsibility, helping families, businesses, and communities rebuild and restore their lives. And like many times before, Gallagher and the industry will rise to the occasion. Okay, on to my comments regarding our financial performance. We had an excellent fourth quarter. For our combined brokerage and risk management segments, we posted 12% growth in revenue, our 16th consecutive quarter of double-digit revenue growth, 7% organic growth, reported net earnings margin of 13.5%, adjusted EBITDA growth of 17%, and adjusted EBITDAC margin of 31.4%, up 145 basis points year-over-year. GAAP earnings per share of $1.56, and adjusted earnings per share of $2.51, up 15% year-over-year. The December capital raise for the acquisition of AssuredPartners creates some noise in these headline numbers, so I will peel back the impact in his comments. Regardless, another fantastic quarter to close out another terrific year by our team. Moving to results on a segment basis, starting with the brokerage segment. Reported revenue growth was 12%. Organic growth was 7.1%. Base commission and fees were 7.8% in line with our expectations, which got offset a bit by slightly lower contingents. Adjusted EBITDAC margin expanded 168 basis points to 33.1%, which includes interest income related to funds raised for the acquisition of AssuredPartners. Excluding that interest income, margin expansion was 109 basis points. Let me give some insights behind our brokerage segment organic. With our P/C retail operations, we delivered 6% organic overall. The U.K., Australia, and New

Thanks, Pat, and hello, everyone. Today I'll quickly recap some sound bites from our quarter and replay our early thoughts on 2025, most of which Pat just touched on, then use the rest of my time to unpack the impact of the AssuredPartners financing activities on our results during the quarter. Then I'll wrap up my prepared remarks with my usual comments on cash, M&A, and capital management. Okay, highlights from our fourth quarter that you'll see in our earnings release. Terrific base commission and fee organic growth of 7.8%, solid supplemental growth of 4.7%, and while contingents went backwards a bit this quarter, we don't see that as a trend by any means. As I look to 2025 brokerage organic, Pat relayed that we're in a favorable environment with rates still needing to increase to cover higher loss costs, trillions of global premiums growing and inflating, and our sales and service offerings outpacing our competitors, which should increase both new business and our retentions. So as we sit here today, we still believe our full year 25 brokerage segment organic growth should be in that 6% to 8% range. That's unchanged from what we said in October. As for brokerage margins, a little noise on page 5 of the earnings release. Please see the footnote. You'll read that the margin was aided by about $20 million of interest income earned on cash we're holding to close AssuredPartners. Adjusting for that, our margins would have been 32.5%, up 109 basis points over last year. That's nicely above our October expectation of margin expansion in the 90 to 100 basis point range. Looking ahead to 25, we are still viewing margin expansion like we have, like we've said many times before. We see margin expansion starting around full year organic growth of 4%. At 6%, maybe we could see 50 basis points, and at 8%, perhaps 100 basis points of expansion. Of course, those ranges can then be impacted by changes to interest income on our fiduciary assets, and then the rolling impact of M&A. By our March IR date, maybe we'll have a better read on where interest rates might go, and also the impact of Assured rolling into our numbers. But at this time, we don't see either having a significant impact on those ranges. So, really no change to how we're thinking about margins in 2025. As for risk management, another solid quarter posting 6% organic. Admittedly, a couple million dollars below our October expectations, all stemming from a smaller quarter of construction consulting revenues in the Northeast that can be just a little bit lumpy. So, adjusted margin expansion of 20.6% in the quarter was also in line with our October expectations. And then looking forward, we're seeing full year 25 organic also in that 6% to 8% range, with margins again around 20.5% for the year. So, a great quarter and full year by both our brokerage and risk management teams, and both have a strong outlook for 25. Turning to page 6 of the earnings release and the corporate segment shortcut table. For the interest and banking line, we are a bit better than our October forecast because we just were not into our line as much as we thought at that time. For the adjusted acquisition lines for M&A and clean energy, both were close to our October expectations. Then, when you look at the corporate line of the corporate segment, that was better than our expectation due to unrealized non-cash foreign exchange remeasurement income, which was partially offset by a return to actual tax catch-up of about $4 million. So, let's move from our earnings release to the CFO commentary document that we post on our IR website. First, an overarching statement. Please take some time to read any headers or footnotes throughout this document to understand what information has or hasn't been updated for the AssuredPartners deal. So, let's move to page 3 for our modeling helpers. Across the board, fourth quarter 24 actual numbers were fairly close to what we provided back in October. As for 25, we provided a first look of what we forecast. Again, none of these numbers include any impact from AssuredPartners. Turning to Page 4, a first look at our corporate segment outlook for full year 25. The only impact of Assured is found in the interest and banking line. It includes additional interest expense from the $5 billion debt raise. Flipping to Page 5 of the CFO commentary document to our tax credit carry forwards. As of year end, about $770 million that will be used over the next few years. So, still a nice sweetener to fund future M&A. We would not expect those numbers to move much because of the assured financing or the roll-in of assured's taxable income. That's because of the interest shield and also the amortization of the $5 billion deferred tax asset that we'll get with AssuredPartners. That should save us about $1.4 billion of taxes over the coming years. Flipping over to Page 6, the investment income table. This table includes an assumption of two 25 basis point rate cuts in 25. It includes interest income from cash we're holding to pay for Assured, assuming a late March close. But it does not include interest income from Assured's fiduciary assets after closing. When you shift down on page 6 to the rollover revenue table, the pinkish columns to the right include estimated revenues for brokerage M&A that we closed through yesterday. And below that table, we've added a separate section for AssuredPartners' revenues. Again, assuming a late March close, which of course is highly dependent on regulatory approvals. Then, just a reminder, you also need to make a pick for other future M&A. And then further down on that page, you'll see the risk management segment rollover revenues for 25 are expected to be approximately $5 million for each of the first two quarters. All right, moving to Page 7. This is a new page to help you see the impact of the assured partners' financing on our fourth quarter 24 revenues, EBITDAC, net earnings, and EPS by segment. The three items just to keep in mind. There was additional incremental interest income on the cash that we were holding to fund the acquisition. There was additional interest expense we incurred on the newly issued $5 billion worth of debt. And then the additional shares outstanding from the December equity offering. You'll see that for fourth quarter, it all nets out to nearly nothing, but it does cause a little noise in our numbers. Also, the callout box on the right of that page provides some information on shares outstanding because of the assured partners' equity rates for our first quarter. This includes the full impact of the shares we issued in December and the exercise of the green shoe in early January. Finally, if you flip to Page 8, you'll see that this page is just a repeat of what we provided in the December Assured presentation for ease of reference. There's no new news on this page. Finally, let's move to cash, capital management, and M&A funding. Available cash on hand at December 31st was more than $14 billion, of which approximately $13.5 billion will be used to fund AssuredPartners. Since year end, we received another $1.3 billion as the underwriters exercised the green shoe. So, considering this and our strong expected free cash flow, we are in an excellent position to fund our M&A pipeline of opportunities. Here in 25, it's looking like we could have $3.5 billion to fund future M&A. Then it jumps up to nearly $5 billion in 26, all while maintaining a solid investment grade rating. So, an excellent quarter and an excellent year to have in the books. As I reflect on 24, I have to say that we had a pretty terrific year. For the combined brokerage and risk management segments, we posted adjusted revenue growth of 14%, organic of 7.6%, overall margin expansion of 94 basis points, and most importantly, we grew our EBITDAC 18%. Those are terrific numbers and reflect what Pat said. That's our unstoppable culture. So, those are my comments. Back to you, Pat.

Thanks, Doug. Rob, you want to open it up for questions?

Sure, Mr. Gallagher. We'll now open the call for questions. [Operator Instructions]. Now, our first question comes from the line of Mike

First question is surrounding the cadence of organic growth next year. Loud and clear, 6-8, no change. I guess, yes, for both segments. I guess I'm more specifically focused on the brokerage segment. But in terms of the cadence or seasonality, anything you'd like to call out? Two of your peers called out kind of weaker seasonality in 1Q. We do know that reinsurance is overweight in the beginning of the year, too, and maybe downwards pricing there could cause some year-over-year tougher comps.

Let me go back to that. Let me start with the end of that. There have been some price changes on the reinsurance, but our customers are buying more reinsurance. So when you look at the total spend for us that our customers are spending, we're really not seeing a decrease, and like Pat said in his comments, we had a terrific new business quarter also. Going back to the first part of your question, yes, reinsurance is typically stronger in the first quarter, and so you could see some seasonality of better organic growth in the first quarter than what develops out for the rest of the year. I'll study in a little bit about that, as we do have a substantial amount of our health and medical benefits that renew in the first quarter that mitigate maybe a higher reinsurance on it. And then throughout the year, our retail is performing well. Our wholesale seems to be getting stronger and stronger. Our programs are doing well. But, yes, you would see a little seasonality because of reinsurance in the first quarter and our organic growth.

Okay, got it. So you're saying actually it could be higher, not lower, even if reinsurance pricing is down? Okay.

I'll have a chance to talk to you again on our March IR day, and we should have a better feel of the seasonality for that, too.

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

Yes, your recollection is correct, and I think that if you go back, I don't know, 10 years ago when we went through our exercise in consolidating bank accounts from around the world, this would be obviously mostly in the U.S. We did have some good success of picking up more fiduciary cash into our accounts, and I think that would be invested. So we do see that as an opportunity that we'll be better together on that metric. So, yes, there should be versus their run rate, I'm guessing together we'll be better on that going forward.

Doug, is there just any, is that kind of a one-year process, or that kind of takes many years?

Listen, in 18 months we shouldn't be talking about it anymore, so I think we'd get it done. Hopefully faster.

The next question is from the line of Gregory Peters with Raymond James. Please proceed with your question.

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

Well, first of all, Greg its Pat, we reached out to thousands of clients already to make sure that they had the knowledge of how to file claims and what have you, how to get a hold of us if they're having difficulty in filing those claims. We are presently tracking, I forget the exact number today, but we have hundreds of claims that we're helping our clients with already. I think that you've got a situation that is going to continue to unfold for us. We're a big player in California. We're a big player in Los Angeles. Not huge in personal lines there, but it's going to keep us incredibly busy for a number of months. And then in terms of the impact of that, luckily, again, we've been able to stay in touch with our people. We have had our folks in some instances were evacuated. We did not lose anybody and don't have many of our folks that have lost any of their homes. So I think we'll be well in a strong place to help our clients, but I can't give you much more than that right now in terms of how it's going to impact our day-to-day activities out there.

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

Yes, great question, Greg. Thanks for asking. Like I said, I ended in my comments. This isn't a trend, and what you said there is right. We would expect it to bounce back up again. Frankly, it's simply because as we get the final year and loss ratio estimates in from the carriers, they're coming in just a little bit higher than what maybe we had been anticipating throughout the year. And to put this in context, we see this as about maybe a $7 million shortfall to what we were thinking back in October. Two-thirds of it is spread across hundreds of contracts. And so if the loss ratios are ticking up just a little bit, that probably costs us $4 million of it. And then another third is we had about three contracts and programs in Canada that just really kind of came in here in January with really not very great results. But if you look at it on an annual basis, when you combine supplements and contingents, I think if I do the math here, mentally I think it's about 8%, even with the small blip in the fourth quarter. So it's still a terrific year. But I wouldn't over-read that there's some systemic shift in what contingents and supplementals are going to be going forward. So I would expect those numbers to grow over the blip this year considerably.

Just a clarification on that answer, Doug, is there a specific line of business? Is there across a broader business set?

It's across the line, Greg. I wouldn't say there's anything there. We have hundreds of these contracts, and we get a lot of this information coming in here right around the first week or two of January.

Thank you for your answers.

I guess another way of saying it, on a $600 million number, only to have maybe $3 or $4 million of what I would say loss ratio, I think our picks have been pretty good throughout the year.

I would say so.

Our next question comes from the line of Andrew Kligerman with TD Securities. Please proceed with your question.

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

Here's the thing. I think that this business, if you recall, we can get some pretty large contracts that come in. It is a little bit more elephant hunting, so to speak. So this year, I think that we've got some nice new business in the pipeline coming into 25, and so I'd leave you to go back in the history of Gallagher Bassett and the risk management segment. We have periods like this where it will grow mid-single digit, something like that, and then they'll have a couple of nice large contracts. We still see that happening. Some of our government programs that we do down in Australia have some nice opportunity, and then more and more we're proving to the carriers left and right that we can actually deliver better claim outcomes on that business. And as a carrier decides to use us for their claims payment process on work comp and general liability, we're not storm chasers, remember, but it is a little bit more of a lumpy business as we get some pretty nice size.

I see. So like you never know, you could probably find another elephant this year, right?

Yes, that's right. Our process list is always filled with elephants. They're just hard to find every once in a while.

And then I'm just kind of curious about your operations in India, the Center for Excellence, where I think you have about 12,000 employees right now, and, as you look out through this year, do you need to add people, given the AssuredPartners transaction? Can you keep it steady? And, you know, is technology making it such that you really don't need to hire that much?

Well, I think you got both ends of that correct. We're going to be using technology quite a bit, and as we use technology that does make that group there much more efficient, and yet at the very same time our organic growth and our acquisition growth puts a lot more demand in the structure. And so at about 12,000 employees, I think that at this time next year you'll see us up additional thousands.

Yes, the other thing, too, to think about this, the value that it brings is when work goes into our service centers, remember those are our folks. They're not working for anybody else. They work for us. It causes standardization. It causes process improvement. I got to tell you, that gives us a head start by years and years when it comes to implementing technologies and AI into the work that's already been standardized. And truthfully, as we develop AI technologies that replace some of that work there, all of those folks have opportunities to, because our growth, they don't lose their jobs. It's just they move up higher in the value chain on it. And so it's really a juggernaut, in my opinion, in terms of our ability to offer some of the very best service in the world.

And unless you standardize that service, A, you can't automate it. But, B, when you do standardize it, it makes you better and better at the service for our clients. Just take certificates of insurance. We're going to issue three, four million of them pretty much error-free. There aren't any real brokers that can claim that.

I see. So maybe with the bottom-line takeaway is, you may add a thousand or two employees, but it's still scalable. You're still getting better margins from that. Is that the right final takeaway?

Yes, you're right on the money.

Thank you.

It won't surprise me that, like-for-like, in five years we've doubled that number.

Our next question is from the line of Elyse Greenspan with Wells Fargo. Please proceed with your question.

My first question is on the brokerage outlook for 25. So you reaffirmed the six to eight. I think when we last spoke in October, you said, maybe benefits is a five. Reinsurance is a nine. I want to confirm that's where you still see it. And then you also had said you would provide, I think, by line in a little bit more detail at the December day, right, which did not happen. Could you give us a sense even away from benefits and reinsurance, just how you see all your businesses trending organically in the 6% to 8% 25 brokerage guide?

I think, yes, confirming everything you've said. So I think Pat did a pretty good job in his script of telling you how those businesses are growing right now. I think those are good guesses for next year at this point.

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

So Elyse, this is Pat, I think that, first of all, we have to continue to operate these enterprises separately till we're closed. But we do know that there's very little overlap at all. And AssuredPartners has been very, very good at tuck-in acquisitions. And as you saw in our -- when we were making the announcement, there has not been that much overlap between things that we wanted to put on and things that they actually bought. So we view their pipeline is very, very accretive to what we're doing and not a lot of overlap. And I think that's going to be fantastic. They've got a great team doing this stuff. We're impressed with what we've seen and due diligence and the like as to what they've done, what they've bought and the pricing they're getting for that. And I think you will see us increase substantially the number of deals. Now, there's small deals. They're very good at tuck-in, bolt-ons and small, privately held firms in and about many of the parts of the country that we're not in.

And then the 1.3. Oh, sorry.

I'm sorry. Go ahead.

I was just going to say the 1.3 billion from the green shoe, right, that wasn't contemplated because the financing was there without it. So is that just extra cash that you have for the pipeline, the capital that Doug was talking about in his comments.

Yes, that's right.

Our next question is from the line of Mark Hughes with Truist Security. Please proceed with your questions.

Doug, the guidance you gave for the first quarter contribution from AssuredPartners. Is there any seasonality there or is that just the timing of the deal?

Right now, we've assumed that's just the timing of the deal. They will have some seasonality, especially in their benefit business. And then anything that might be a public entity type business might be skewed to July. So you'd see a little bit of seasonality. But what you see in there is a pure straight line assumption of it.

And then, Pat, in the wholesale business, you gave the wholesale and reinsurance together. I think up 9%. Any detail you can provide on wholesale observations on the E&S market?

Let me take a look, Mark.

Yes, I think I've got that. I think that you've got to look at our U.K. specialty at maybe around 7%. You look at U.S. specialty, maybe on the 10%, re is pretty small in the quarter. It's just not a big quarter for us. So if you look at those two numbers, when we would get that maybe that gets us back to that that 9% number there.

The next question is from the line of David Motemaden with Evercore ISI. Please proceed with your question.

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

Yes, you're right. The base commission and fees at 7.8% percent. That business contingents and supplementals have been running kind of consistent with that together. So the difference of the $7 million, I'd put it up in the upper 7% range, somewhere pretty close to the base contingency. So you're right. You're spot on in your observation there.

Okay, great. Thanks for confirming. And then I wanted to follow up just on I guess I was surprised the RPC stayed at 5%. Just given the property price was flat versus up for last quarter. So I'm wondering if maybe it's mixed, but I'm wondering if there's anything else from sort of like an increased purchasing or buy up dynamic that you guys are observing as the property rates moderate here.

Well, we see that across that. Yes, I mean, we've always said it's been a long time. We've talked about this as rates are going up. Customers opt out of certain coverages. And that might be by raising deductibles or reducing limits on it. Sometimes they'll drop some coverages. So remember rates are still increasing. I think it's important for everybody to realize that kind of across the board, we're still in a rate increasing environment. They're buying more insurance. And reinsurance you're seeing that from the carriers that they're buying more. And then the customers, they are buying more coverage on it. So they'll opt in.

Insurance to value is a big deal. Much more pressure on insuring to value.

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

Well, listen, I think right now that, we said way back in October that, next year felt a lot like this year. And we're kind of in that mid-7% range somewhere this year. The range around it sitting and looking out over the next 11.5 months, I guess, that it's 6% to 8% is consistent, what we've said before. So we think we'd like to stick with that. I think our team's working pretty hard to always be better than the midpoint of the range, obviously. But the market's changing. We'll see what wildfires do. We'll see what casualty reserves will do. We're still digesting that. I will say on the wildfires, maybe you know this. I still don't know how the extra living expenses have been factored into the wildfire estimates for the cat loss on that. And then, you can't open up the news any day without somebody taking a casualty reserve strengthening. So those things, will cause carriers to take a really hard look at what they're doing with the rates. So within 2% is a pretty good guess as we look for the year. Isn't it nice being in that range versus years ago when we were pretty excited about 1% or 2% organic growth?

No, completely agree. Thank you.

Our next question is in the line of Katie Sakys with Autonomous Research. Please proceed with your question.

I guess my first question is, thinking about the last call, I think, Doug, you'd mentioned that you expect brokerage organic growth in 2025, split between the components to come from about half new business and then perhaps a quarter each to rate and exposure. Has your perspective on the components of that brokerage organic growth guide changed in the context of the AssuredPartners acquisition?

No. Pat summarized it pretty quickly. That's what we're still seeing happening right now.

Okay. Sounds good. And then, it looks like international retail brokerage growth kind of continues to cool off a little bit. How are you guys thinking about the environment for organic growth abroad this year versus what looks like perhaps a little bit more stable growth in the U.S.?

Katie, I think you got to really look at that by geography. I mean, there's parts of the world that are just really, really growing incredibly well. We set our board meeting and did a deep dive into some of our Latin American businesses, not huge in part of the whole overall enterprise, but incredibly nice growth there. And so there's -- it depends. Canada, a little bit of a slowdown this past quarter. We talked about that. But as you look across the whole patch, it's hard to put a finger on it, which is why we try to give you a guidance in terms of the overall how it should shake out. But we definitely have some geographies that are doing extremely well and just have continued future growth that is going to be fantastic.

Yes. Katie, one of the things I'm kind of looking at what we said this quarter versus what we said back in October. We didn't have an opportunity to update you in December. But U.K. retail especially is still in high single digits. We said that it was 6% percent before. U.K. retail, I think we said 8%, and this quarter we're saying closer to 9%. Canada, maybe the one that's poking its head out to you a little bit, we said is more flattish, and now we're down a point or so. And then Australia, New

Appreciate the additional color there. Thanks, guys.

The next question is from Meyer Shields with KBW. Please proceed with your question.

I like how everyone's claiming they're Canadian. Doug, you mentioned –

I'll tell you personally, Meyer.

Yes, I'll try not to. You mentioned, obviously accurately, that there's a ton of adverse development that we're seeing in general liability. And I was wondering whether there's any direct impact when you've got, I don't know, more frequent claims or more attorney involvement in terms of how Gallagher Bassett grows revenues.

Well, I mean, clearly claim activity helps this far. I mean, there's no question about it. But when it comes to severity, we don't participate in our clients up or down in terms of severity. We do everything we can to manage the final outcome, and we contend, and we believe we have the data and analytics to prove this, that if you hire Gallagher Bassett, your outcomes, meaning your final settlements, will be superior. And that does not mean that we're taking advantage of the claimant. That means that we're handling the claimants actually better than you see in the general market. So if you've got some severity out there, and that creates frequency, frequency definitely helps Gallagher Bassett. We get paid essentially on a per-claim basis, as does economic growth, because with economic growth comes more employment. And remember, most of Gallagher Bassett's revenues, a good portion of them, are workers' compensation driven.

Yes, I think one of the things, all of those forces actually should cause clients to look at Gallagher Bassett even more. The way we can do nurse case management, the way we have our managed care offering, the way that we can understand where there are opportunities to use different physicians. We also understand the attorneys, because we deal with them so often. When claims get more complicated, Gallagher Bassett actually can show more value to the customer. And I think that's the environment we're in. They're paying $12 billion, $13 billion, $14 billion of claims, and they get pretty good at that.

And remember, by and large, about $0.60 to $0.65 on every premium dollar turns into a claim. That's the function of the industry. We're seeing that, of course, in the West Coast. And so if you're going to have an impact on your costs, you better pay attention to that portion of the dollar that goes out the door in claims. Again, we think we do that at a level that's better than the competitors, both TPAs and carriers.

Okay. No, that's very helpful, very thorough. Switching gears, I'm just looking for an update on the multiples for M&A, because we've seen not only your acquisition of AssuredPartners, but a lot of the other big brokers out there have made big acquisitions. I don't know if that speeds up or decelerates competition for tuck-ins.

Well, this, of course, is all speculation on my part. But remember, and we try to share it pretty much every quarter, what we are buying at. And you're not seeing our tuck-in acquisitions and the activity that we do on our smaller deals anywhere near the treetop levels of multiples that have been running up over the years. I do think that the AssuredPartners acquisition, we have a very smart seller. I think we were an opportunistic buyer, and I definitely think there's a signal there.

Our next question is from the line of Rob Cox with Goldman Sachs. Please proceed with your question.

Hey, thanks. And I apologize for asking another question on brokerage organic. But when you consider the 6% to 8% organic growth range, could you give us some insight into what level of renewal premium change you're thinking about within that? Because I'm wondering if you're assuming sort of some of the acceleration that you think may be happening in the casualty market, or if you don't need that to achieve the 6 to 8.

Yes, I think that estimate is not assuming that there's tailwinds produced by the fires or the casualty strengthening. We kind of see that in the current environment we had. Like we said earlier, we think that net new business over loss will contribute about half of that number. We think that exposure will be about a quarter of it, and rate will be about a quarter of it. So there's not a big assumption for rates in here, nor is there a really big assumption for exposure unit growth. I mean, this is just what we're seeing in our net new business wins right now. We're showing pretty well out there in the field. And here, go back to what we said before. When there's not as much chaos in the market, we get to show our tools and capabilities shine brighter in those environments. Because when it's chaotic in the environment and customers are listening to big rate increases, they're just trying to get their insurance placed. They're already a bit stung by the fact that rates are up. We work very hard to keep those rates down for them. Now we'll be able to go in and show prospects, just in a level playing field here. When things aren't chaotic, you should be using our tools and capabilities to buy your insurance through us, or let us buy your insurance for you using our capabilities. So this is an environment where we believe our new business will shine. We think our service offering is getting better and better every day. We have insights into what clients might be a little shaky. Let's get out and talk to them and make sure that we get the renewal put to bed soon. So I think that this is an environment where I think that our folks can shine with the tools and capabilities that they have.

I would have killed in the past, as Doug alluded to, when we were talking about up one, up two, for a 5% premium rate growth as an environment. That would be nirvana 10 years ago. So I think it's a very strong place to be. Remember, our job is to mitigate that for our clients. But it's a great place for us to show exactly what Doug was saying, which is our capabilities. In particular in the areas of data and analytics, which I want to remind the listeners, you don't get a chance to listen to the smaller brokers that we're competing with on a quarterly basis. We're pulling away from them more and more with our capabilities. And clients, I'm talking middle market clients, very much appreciate the ability to sit and talk with them about people like you buy this, or you should have this type of limit, because in our data we see losses at this size. That capability is just getting more and more attention by the buying community, and it's differentiating us every single day to a greater level.

That makes sense. Thank you for all the color. Pivoting to reinsurance brokerage, I just wanted to ask, because I know your growth has been a good bit stronger than your two largest competitors in the reinsurance brokerage space for a number of years now. And Gallagher has a lower revenue base, but it doesn't seem like that would be the only driver of the outperformance. So I was hoping you could remind us what's driving Gallagher's ability to deliver what's been more like double-digit organic growth in reinsurance.

Well, I think that it's just blocking and tackling. I think one of the things that we've found there is it's a great sales team. They're backed up by terrific analytics, incredible capabilities in consulting on capital management, and there's no doubt being part of Gallagher has offered them some additional opportunities.

Yes. I think that as they team up with our wholesalers, our program folks, and our retailers, they get to see firsthand what's going on on the street. I think that helps them provide better insights to their primary carriers. And I think that we're doing a terrific job of making them an integrated part of us, not just a unit within the holding company structure.

Our next question is a follow-up from the line of Mike

Oh, great. My thoughts on reinsurance as well, just the strong results. Just curious, maybe a mix on reinsurance? Do you potentially have a greater mix towards casualty or specialty Europe-focused that could be helping the outlook, given casualty pricing is fixed already?

Yes. We have a terrific casualty bulk of business. North American casualty is a big part of our U.S. business. But we're probably a little underweighted on property, maybe, versus the others. So I think that's probably more casually weighted. I don't exactly understand their book of business, but I think that what our perception is that we're underweight on property.

And also, where's the pain right now if it was a reinsurance buyer? It's casually. We've talked about it in these calls, and there's no question about it. That's the area that's got some pain, and our team is really, really good at that.

Got it. Maybe since it's not 6.15, I'll sneak one last one in. Just curious, health inflation for employers, at least some of the stats we've seen, it's expected to rise 25 versus 24. Maybe you disagree with that. Does that provide any uplift to the organic for employee benefits? I know there's a lot of building blocks for employee benefits.

Every time we get -- we are clearly a leader in our capabilities to consult, manage, and place health and welfare. And it's a huge problem for employers. And it's going up, as it seems to never stop doing. And so, there's all kinds of tools that you need to have in your toolbox to handle that. And we're very, very good at that. And, by the way, we're extremely good at it in the commercial middle market, where I think there's maybe not as much competition, frankly.

Thank you. Our final question is from Alex Scott with Barclays. Please proceed with your question.

Thank you all. This is Justin on for Alex. Just kind of going back into the brokerage segment in the commercial middle market, just wanted to ask. I understand, it seems like 90% of the time you guys are competing against independent brokers. I was just curious, in light of sort of the large-scale acquisitions that's been taking place, whether or not you see sort of this, 90% number to dwindle over time. And just let me think about 25 and ahead.

Oh, the AssuredPartners people are competing with those same independents in communities that we're not in today, which is only going to increase. When you take a look at our at-bats, our number of at-bats are going to go up substantially because of AssuredPartners. And 100% of those at-bats, that's not true. Ninety-five percent of those at-bats are going to be against smaller players.

Yes, I think the fragmented market, there's 30,000 agents and brokers, and those are companies, not necessarily those with a brokerage license. So we're competing against the other 29,950 brokers that are out there. So, I mean, AssuredPartners will be absolutely there. It does help us go after those accounts that are in cities that we're not in. So we think it's a great one plus one can equal more than two for sure.

Sure thing. Thanks for the color.

Thanks, Justin. Thanks, Rob. I think we're ready to wrap up here, and I just have a quick comment, and that is thank you again for joining us this afternoon. As you all know now, we had a great fourth quarter to finish, an excellent year of financial performance. A huge thank you goes out from this table to our 56,000 colleagues around the globe. It's your creativity, expertise, and unwavering client focus that continue to set us apart. We look forward to speaking with the investment community at our mid-March IR Day and thank you all for being with us this evening.