Arthur J. Gallagher & Co. (AJG) 2006 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Arthur J. Gallagher & Co. second-quarter 2006 earnings conference call. (Operator Instructions).

It is important to note that some of the comments made by Arthur J. Gallagher & Co. today may constitute forward-looking statements within the meaning of the securities laws and are subject to certain factors and risks described in its filings with the Securities and Exchange Commission, which may cause actual results to differ materially from those expected.

It is now my pleasure to hand the floor over to your host, J. Patrick Gallagher, Jr., President and CEO of Arthur J. Gallagher & Co. Sir, the floor is yours.

Good morning, everyone, and welcome to our second-quarter conference call.

We're pleased to have you with us this morning.

Today, I am joined by Doug Howell, our Chief Financial Officer;

John Rosengren, our General Counsel; and a number of our business unit leaders.

As is our custom, I will make a few remarks.

Then, I will turn it over to Doug, who will make a few remarks, and we will get to questions and answers pretty quickly.

We're really, really pleased with our second-quarter results.

I think this quarter is a great testament to our Company's sales and marketing culture.

In our brokerage segment, even with the loss of our contingent income from 2005, we advanced our earnings.

Top-line growth of 13% is outstanding, especially in a softening market.

Normalized for the loss of contingents last year and a onetime pension gain, our pretax profit in this segment was up 72% and our margin expanded almost 6 full percentage points -- really a great effort by the team.

Organic growth of 9% in the brokerage segment and 10% in our risk management segment is of course a really, really strong result.

Now remember everyone listening that our second half is seasonally our largest half, so we do have a lot of work to do in the second half to maintain our momentum.

But we're very, very pleased with the quarter.

Our team is motivated.

Our new recruits over the last two years are accretive to our pretax, while still being slightly margin dilutive.

All-in-all, a great quarter.

I would like to address three additional areas.

First, let me talk about our brokerage segment.

The organization really hit on all cylinders in the brokerage segment in the second quarter.

Our retail brokerage arm, our wholesale brokerage arm, our benefits group and our London operations all contributed to our growth in the quarter.

Our niche-focused selling continues.

Our niches are growing faster than our general book of business, and we now have 75% of our retail revenue in 1 of our 25 managed niches.

We're now operating in a transparent world.

Our lost business has improved, while new business is strong.

I don't really understand how regulators can regulate with two different sets of rules.

But nonetheless, our team has shown an amazing resilience and clearly has adapted to the new way of doing business.

Our clients, by the way, like transparency.

Let me comment on the PC market.

The catastrophe property market is tighter than I can recall ever in my career.

We're working very hard to locate capacity for our clients.

On the other hand, every other line of coverage is softening.

In some instances, the renewal reductions can be dramatic.

We believe that underwriters are allocating more capacity to the other lines outside of the property lines, which is adding to the softening of rates.

Nonetheless, while there are industry reports that rates were off about 3% for the quarter, our book of business was essentially flat.

Let me touch secondly on the risk management segment.

Gallagher Bassett had a very strong top-line growth of 10% in the quarter.

GB's new business is really, really strong.

Our Australia and UK operations have grown significantly.

Our new business pipeline is very strong.

And already, we've received a bunch of orders for millions of dollars of new work starting 11/07.

With respect to Gallagher Bassett's renewal business, the renewal base has had very little claim count growth.

This is kind of unusual, especially when the US economy is strong.

But clients lost control, and automation efforts are having a significant impact on the number of claims that are arising.

Frankly, this is a very good thing for our clients.

GB's business is historically one that has grown at varying rates.

If you look at our 22 quarter spread at our website, you'll see that GB's growth is never just a smooth growth rate.

So we're very pleased to see double-digit top-line growth for the quarter, and our margin at 15% for the first six months is really right in the range that we would like to maintain.

So we believe we will continue to show good, solid growth for the year.

Thirdly, I want to talk about new hires and mergers.

I've already mentioned that our new hires are accretive.

Part of what we refer to as the soft market playbook is being very, very careful in adding to our headcount.

Having said that, we are always -- I mean always -- looking for new production talent.

We just couldn't be happier with the results of our new teammates.

As far as acquisitions go, we announced four acquisitions in the quarter and we have six year-to-date.

First, I want to welcome all our new partners, who I believe are listening this morning.

Welcome and we're pleased to have you aboard.

Secondly, I want to communicate that our merger and acquisition activity is up.

We believe we offer a great option to entrepreneurs, who are interested in tapping into the depth of resources we provide, to help them to continue to grow their business.

Acquisitions will continue to be a very big part of our growth story.

As the summer winds down, our internship program will come to a close.

This summer, we had 150 young men and women take part in our program.

The quality of these young people is really outstanding.

Seeing just how much they've learned about our business in a brief number of weeks in the summer is amazing.

Our hope is that we will recruit a number of these young people over the next six months.

So we're very pleased with the quarter, but we all understand that the second quarter is not a year.

The second half of the year is our largest revenue and earnings half, so growth over a larger base is going to present a greater challenge.

But our team is focused.

We're selling an awful lot of new business and working very hard for our clients.

We do look forward to the rest of the year.

Doug, you have some comments?

Yes.

Good morning, everyone.

It's nice to kick off today's call with solid results in our core brokerage and risk management business.

Today, I have five comments.

And as a reminder, we have a 22-quarter spread on our website, and we'll file our 10-Q later this week.

My first comment is another reminder that our brokerage business is seasonal, and the ban on retail contingent commission simply magnifies the seasonality in our first and second-quarter numbers.

We're hopeful that the information we provide in our earnings release gives you the insight you need when you are doing your quarterly estimates.

Second, some comments related to our cash.

During the quarter, we used about $12 million to repurchase shares, 29 million to pay dividends, about 10 million for CapEx and about 25 million in acquisitions and earn-outs.

Please note that we did go into the banks for about $35 million in June here in the US to cover the seasonality I just discussed.

I expect that we'll pay this back by the end of the third quarter.

Third, I have several points related to our tax rate.

I'm sure you have read both the 8-K we filed on June 14 and yesterday's earnings release.

So let me just pick out some key information from those releases.

In mid-June, we found a window where oil prices were below $70 per barrel, so we bought a hedge that allowed us to restart our two syn/coal plants that generate substantially all of Gallagher's tax credits and also allows us to continue to operate the three plants that generate pretax revenues.

As a result, we are estimating a corporate-wide effective tax rate for the full year 2006 of about 30%.

But I'm sure that you have seen that we booked an effective tax rate of around 40% for our brokerage and risk management segment.

This is because we are now allocating all tax credits generated to the financial services segment.

Prior-year amounts have been reclassified to conform with this current year allocation method.

Stated another way, we are now reflecting our segment income tax rate as if those segments were filing separate income tax returns and historical results have been reclassified to make the current year information comparable.

Before I leave this point, let me caution that Gallagher's overall tax rate is still highly dependent on average oil prices for calendar year 2006.

For the first and second quarter, we estimate there will be about a 53% phase-out of our tax credit.

But as soon as I say that please note, there is some congressional action still floating around that might lead to some relief from this phase-out role.

In the end, it's simply not possible to predict future oil prices or the outcome of congressional activity.

For my fourth point, I want to briefly mention our expense initiatives around the Company.

We saw the benefit of these initiatives in our risk management segment last year, and we're beginning to see the positive impact of these in the brokerage segment this year.

Our initial work has been around sourcing our consumables, communication costs and more recently our leased real estate properties.

Most of our sourcing is done, and we've continued to make good progress on our real estate project.

While we haven't taken as many lease restructuring charges thus far, we're still seeing some early savings on new and renewal leases as we meet our targeted real estate utilization rates.

Okay, as a wrap-up for my final comment, let me say how pleased we are to see our results improve as a result of dedication and hard work.

While the Company was dealing with what I consider to be a lot of non-core static issues over the last couple years, Gallagher's service teams are giving great service to our clients and you can see the results.

Okay, Pat, those are my comments.

Back to you.

Toni, let's move to questions and answers.

(Operator Instructions).

Dan Johnson, Citadel Investment Group.

A couple questions if you would.

You mentioned GB's margins on a half-year basis.

And it sounded like you thought that the half-year number is I think you said around 15% --

That's right.

-- were probably better go forward than what was actually reported in the second quarter or in the first quarter alone?

This is Doug.

What we do is we typically say that -- we have said this for a while -- that we want GB's margins to be somewhere between 15 and 17%.

And we've talked privately to individuals and over these conference calls and basically said, you can't run this business at too high a margin because you'll get out ahead of your service quality.

We think that the 15 to 17% that they posted for the first half of the year is right where they need to be.

Obviously, you always have the CFO asking for higher margins.

But we want to make sure we still give the quality service to our clients.

So I think for the year if they can come in between 15 and 17%, we will be pretty happy with that.

I think the problem is magnified by the fact that last year we told everybody that the margins were not sustainable at what we posted last year at this time.

But remember also, there was a onetime pension curtailment gain that went into that number too that fueled that margin last year.

Second question on the disclosure on the oil issue -- certainly appreciates the different price ranges you indicate there.

What happens if the oil average is actually above the $72?

Is the EPS -- is it sort of ratable going up, or is it sort of capped out for some reason at the $72 number?

No, the hedge is a collar.

So it's not like you have continued earnings on the hedge.

But also, you don't have the continued loss of tax credit.

So when you get to the 72 range, you have a go as [a bunker sale higher].

You remember, that's an average for the entire year not just for the rest of the year.

It will cause earnings to slip a little bit but not that much more.

The last question is the contingents for the quarter of just a little under 1 million.

Is that -- does that represent all the contingents including those that are within the 36-month window?

Or are those reported more in the commission line?

No, what you have there is that's only the retail contingent commissions that are in the 36-month window.

Bob Glasspiegel, Langen McAlenney.

The organic growth acceleration from Q1 to Q2, 4 to 9% in the brokerage unit, I was wondering if you could give us a little bit more amplification.

It sounds like you weren't getting much help from environment.

Are you starting to win more market share situations or what's exactly behind that?

Really what's driving the 9% is a number of things.

First of all, our lost business has improved.

When we came through the hard market, we had a couple of quarters that lost business really jumped.

We had, as I reported, buyers that were angry.

We've now -- a soft market, we've gotten our lost business to improve.

Secondly, we've had a continued very strong new business.

And as we've said, we typically do about 15% new business and we are right in line with that.

There were some operations last year that needed some remedial action and those operations are showing some improvement; that's helped.

Then our new hires have been -- have really done a very good job for us.

So if you take all of that and then look at the fact that our book of business -- and I'm not really sure why the CIAB is showing their survey of about a 3% rate decline.

In our situation anecdotally, we've got a lot of accounts that are going down big time.

But when we look at it from a macro position, our rate environment has been flat this quarter.

So you add those things all together, and you just have a really good result.

Staying on brokerage, the margin improved year-over-year even with the 9 million of adverse contingents.

It improved a lot more without them, as you reported.

Why shouldn't margins expand in the second half meaningfully?

Why shouldn't margins expand in the second half meaningfully?

Yes, what would be an impediment behind reporting sort of the good trend in Q2 and Q3 and Q4?

We are a seasonal company.

So historically, our margins have improved in the second half of the year.

And we have no reason to believe that seasonality won't repeat this year.

I wasn't talking sequentially.

I was talking more year-over-year.

I'm just saying year-over-year comparisons get a whole lot easier in the second half with the contingents sort of out of the compares.

Oh yes, right.

We wouldn't disagree with your statement.

But I would not sit there and tell you to model significant improvement margins in the second half.

How about a little bit of an improvement?

It's your model.

Do what you want.

Finally, what are the tax credits that will be running through quarterly earnings at this run rate of the facilities?

They'd be similar to what we saw in the first quarter.

Which was how much?

In the second quarter --

Second quarter.

I am sorry.

Which was how much exactly?

About 13 million.

For next year?

First of all, we're making no forecasts about what's going to happen for next year.

We'll have to look at where oil prices are.

We'll have to look at hedging alternatives.

We'll have to see what Congress is doing.

So I've got no guidance on that.

If nothing changed from where we are now, I mean what would be the drivers to change that 13 million run rate in a static environment?

If we didn't have a phase-out, the number would probably be a little bit higher than that.

If we had more of a phase-out, it would be a little bit lower than that.

Remember, we'd have to make a decision about whether we even burn next year if we can buy a hedge to protect ourselves from inflating oil prices.

We got the benefit this year of oil being down in the lower 60s at the beginning of the year.

So if we start the end of the year at a high 70s number the way we are right now -- mid to high 70s number -- it would probably be highly unlikely that we could buy an affordable hedge.

And it would probably be highly unlikely that we would burn in the plants.

[Brian V. Dirubio], US Trust Company.

A couple of questions for you.

Pat, where do we stand right now with getting the higher upfronts on your commission in lieu of the contingents?

We've got about 20-plus companies that have agreed to enhanced commission arrangements both on our benefit side and our property casualty side.

That's the good news.

The bad news is we are having a tough time tracking it and getting it at the underwriting desk.

There's been a lack of communication in some instances between the CEO level management of the insurance companies and their underwriting desks out of the country.

So we're finding that when our people ask for it, sometimes they are being told I don't know what you're talking about.

And we will then call the home office, and they will call out to the field.

So we've got a good opportunity to pick up additional, which will by the way be disclosed upfront to our clients.

We've got a good opportunity to pick up additional revenue, but we are having a devil of a time actually getting it.

Pat, with the change by the State AG allowing you to accept the contingents on new acquisitions for 36 months, has that helped you in your M&A activity?

Yes, it has helped us a lot.

The reason is that while we do have enhanced commission arrangements when we can only accept them for a year and we would try to put together an earn-out for that seller, there is an element of risk.

And even if the contingent is only 50,000, $60,000, it -- at a multiple of 7 or 8 times pretax, that's a big chunk for a selling shareholder to put at risk.

Now remember, we always have priced contingents as a lower value income stream.

But nonetheless, what we're not allowed to do is to say, you can take your contingents to the entire earn-out period and then essentially the risk of whether or not together we can build the business falls on our shoulders and not yours.

So it's helped our acquisitions a lot.

Last question, Doug, for you -- where do we stand on the sale of the headquarters?

Still in process.

We've got two interested bidders right now.

I still think that it will be a third quarter, maybe slip into the first part of the fourth quarter-type event.

But I feel comfortable with it right now.

Jon Balkind, FPK.

Great job on costs this quarter.

Doug, I was wondering if you could sort of outline what you expect going forward from the different buckets you're targeting and with the sourcing done what did that come to in terms of overall cost saves?

I really don't -- I'm not dodging the question.

I really don't have those numbers.

I have some estimates, but I'd prefer not to throw them out in terms of what we expect -- of what we got in the past.

But I can say that in going forward, the biggest place we're going to pick up is on leased space initiatives and that depends on each lease.

Obviously, to get out of some of our poorly-constructed lease, you'd have to take a onetime charge on that but it saves you going forward.

And it just depends.

This is one of those things that it comes down to each local market of our 250 leases.

You've got to fight it out in the field on each one of those.

So I don't really have a number for you.

I wish I did but I don't and I haven't given one.

So I'm not going to guess right now.

Alison Jacobowitz, Merrill Lynch.

I've been bouncing around a lot of conference calls, so I'm sorry (multiple speakers) if you went through this already but I don't think I heard it.

If you did, just tell me and I will get it off-line.

But the new business, I was wondering if you went into characterizing sort of -- I don't know if you can -- but detailed maybe a little bit where it's coming from.

I was thinking about the nature of your peers, how they are competing these days.

Are you seeing any changes in best practices there?

No, I don't think so.

I think the interesting thing is that with this new transparency that we live under, our people have had to really change the way we go about selling and have had to explain that they will be transparent and what have you.

I think they've adapted that as a sales tool so that you go into a sales setting.

Remember, we do an awful lot of large accounts.

But by and large and by item count, our business is the commercial middle market business both on the benefits and the property casualty side.

So we are competing mostly with our local and regional competitors, who are private competitors who have changed nothing in the way they do business.

And by the way, they don't want to.

So I think that's actually helped us.

We offer a different proposition in the marketplace in many instances now.

We're using transparency as a tool.

I think that's good.

Competing with our larger competitors, it's very much business as usual.

We compete on the resources that we bring to the table, and I don't really see any major change there at all.

What about -- you talked about pricing and all that from the point of view of the carriers, are you seeing -- you said softening in all lines but the cat really.

Anything overly dramatic and noticeable that you would characterize as irrational or interesting from that point of view?

Anecdotally again -- and this is just my being in touch with the salespeople in the Company -- you are finding some -- this is typical in an early soft market -- some dramatic swings in pricing.

We have an account -- I won't mention names or even the industry -- we have an account that recently was priced -- we wrote the general liability for about $85,000.

And one of our competing quotes that we got on it was $450,000.

Now, 85,000 might be wrong and 450,000 might be wrong.

But boy, that's a big swing in terms of what the pricing should be.

Meyer Shields, Stifel Nicolaus.

I'm beating a dead horse a little bit here I think.

When you talk about the new recruit strategy paying off, are they bringing over accounts that they had at their previous firm?

Or is this new business that they are generating -- new business to them?

Both.

When we recruit people that do not have a non-compete and have a book of business, they are able to bring those over by broker of record letter relatively quickly.

When we recruit people aboard that are working with one of our competitors that have enforceable non-competes, then they have to do it all on the backs of new business until their non-compete is -- in many instances non-piracy agreements -- come up.

In both instances in a soft market, you've got to be really, really careful.

And to your point, you've got to really anticipate what that revenue flow is going to look like.

Both parties have to have a pretty strong agreement as to how this thing is going to work out.

You watch it very closely.

And hopefully, you get the business that you are expecting to bring.

On a related note, you've talked for a few years about how you are getting increasing presence at the table for large accounts.

Have you practically seen any benefit in that strategy from Russia's turmoil and all the stuff that all of the brokers have been through lately?

Yes, but I would really caution the listeners on that one.

I think there was a lot of anticipation of great movements of large pieces of business around the market.

And we're not seeing that.

What we are seeing is that we are able to get to the table -- that a lot of accounts that maybe five years ago or even three years ago wouldn't get to the table -- and we're seeing that the buying community wants more -- on the large accounts side -- wants more than one brokerage relationship.

And so we will benefit from some of that.

Our D&O practice in particular has done extremely well over the last five years.

In many instances, that's the only line of coverage we will have for a large account.

So we are benefiting but I don't want to give the impression that there is a wholesale movement of business.

If I can use your phrase, you talked about a little bit of growth in the wholesale brokerage.

Can you talk about benefits to your reinsurance brokerage in the quarter?

Yes, Gallagher Re, as you know, is an area that we put a lot of focus and investment over the last 18 months.

We're getting some real traction there.

Our team I think is very coordinated now on a global basis, which was not the case just 15 months ago.

We think that over time, that's a business that we can make some serious inroads in.

Interesting fact about reinsurance is reinsurance brokering for the most part is a very, very high margin business.

We believe there will be opportunities over time to build that business at possibly margins that are not necessarily what our competitors presently reap.

And so we are recruiting.

We're doing well.

We've got a whole group of new people aboard, and we think we've got some great opportunities.

[Honey Sabad], Viking Global.

Doug, I wonder if you could just comment a bit more about the seasonality of the quarters with respect to the margins.

And Pat, also I was interested in your comment about the improvement in margin in the second half.

If I exclude the contingents, there was quite a big improvement in the first quarter and then a very big improvement in the second quarter.

Can you just comment why you then expect such an improvement going forward?

First and foremost, I think with respect to the seasonality, probably the best help that I can give you is to encourage you to go to our (technical difficulty) the 22-quarter spread out on the website.

You'll be able to see the emergence of the seasonality there pretty close.

So the margins -- the best place to look there is look what happens sequentially quarter-to-quarter on the 22-quarter spread -- is the best place to get that.

Historically, that would include the contingents though, right?

We've taken that -- I believe that we've taken that out.

And it's footnoted there that we have removed the contingent commission matters in doing the math there.

If not, they are laid out in there, so you can do it yourself.

Let's see.

Yes, we've excluded the contingents commissions, so those percentages you should be able to follow in that 22-quarter spread.

Yes, let me make a comment on that as well.

If you take a look at our 22-quarter spread, which I'm looking at, the margins in the third and fourth quarter do improve over the second and the first quarter.

What I was commenting on earlier is I would not want you to just model a sequential increase in those historical margins.

We had a very nice improvement in the second quarter.

It's seasonally a smaller quarter, so some revenue growth at 9% can have a very big impact on that.

Our new hires themselves really putting on some new business has a nice impact on that margin.

And their new business in the second -- in the third and fourth quarter will be less impactful because of the size of those quarters.

But the margin has historically been better in our third and fourth quarter.

One last comment -- Q4 last year had some big expenses in there.

Is that some -- or all of them refutable?

One of the problems of the 22-quarter spread is that the onetime items that we detail in the earnings release and the Q, we don't normalize for those.

We only normalize in the 22-quarter spread for the contingent commission-related matters.

So I would encourage you as you take a look at that to go back and look at the press releases for each of those quarters.

And we do a good job in the highlights section of showing you kind of the one-off items.

That should be able to help you levelize the margin a little bit.

Julie Ko, Philo Smith.

I'm wondering what you think is a -- just going forward, what we should think about as a sustainable organic growth rate within the brokerage business.

What are you aiming for in terms of the mix between organic growth and growth through acquisitions?

Those are tough questions.

First of all, the acquisition pipeline and our acquisition activity is something that's very lumpy.

Two years ago, we did 20 deals.

This year so far, we've done 6.

Every deal is a sales process unto itself.

Our average merger acquisition probably comes in between 5 million and $10 million in total revenue.

And it's all really about the cultural fit, and the timing is based on when that entrepreneur is ready to sell.

So it's very difficult.

We don't give you any guidance in terms of the dollar amounts that we are trying to buy.

And frankly, we don't set just a dollar goal for ourselves of revenue because the whole deal is can we get good deals with good people?

As far as our organic growth goes, 9% for the quarter was really an outstanding result that reflected those things I mentioned earlier -- our lost business improving, strong new business continuing, fixing some operations and the like.

So I would not again -- I think that to give you an idea of what our target is would be difficult.

I would send you back to the 22-quarter spread at our website.

I think if you look at the organic growth rate in revenues in the brokerage segment, it's pretty interesting.

It gives you kind of a classic hard market/soft market scenario.

Then you are going to have to divine from there what you think we will do going forward.

Mark Dwelle, Ferris, Baker Watts.

My question relates to growth in fee revenue.

It's not new that that growth rate has been outpacing the overall growth rate.

I was wondering if you could comment on some trends there.

And then kind of as a related question -- when you think about organic growth, is that mainly coming from the commission side or from the fee side of the business?

We're happy as a broker to work either on a commission or a fee.

Historically, our fee income as a broker has been somewhere around 15% of our total brokerage revenue.

And we're seeing in this world of transparency more accounts just simply moving to a straight fee approach.

That's why that line is growing.

The clients are looking at it and saying -- well, if you're going to disclose all you are making -- and our people are saying -- why don't we just make this a fee approach -- and it seems to be a very palatable way for many more of our middle market clients to go.

And so, I think you will continue to see that.

I think you will continue to see fee income growing faster just because accounts are converting.

Then to bring that back to an organic growth rate, a lot of -- obviously over time, a lot of the organic growth rates sort of surfs with the general level of pricing in the market.

Is it hard to extract that type of fee growth to the extent that account chooses that option?

Go back to them after a year or two and say -- hey, we continue doing more for you; you should give us some more fee here.

I think that is a natural progression of how things could develop.

Number one, fee income is more stable.

Once you move an account to a fee, you basically are not tied to what happens to the premium.

That is a good thing in a softening market.

And over time, if we are asked to do more services for a client, I think it makes logical sense that we would ask them for a higher fee.

(Operator Instructions).

Adam Klauber, CCW.

Are you there, Adam?

Brian Dirubio, US Trust Company.

Actually, it was already answered.

Jon Balkind, FPK.

In terms of the organic growth by your businesses -- retail, wholesale, reinsurance -- were any of the areas showing disproportionately large growth?

No, I think really what was interesting this quarter and frankly this doesn't happen to us every quarter is that all of the various brokering operations were up for the quarter -- every single one of them.

So as you go -- as I go around the table and look at our business leaders, each one of them had a very good quarter and contributed to that result.

I think that's all the questions for today, so I would like to just make a few wrap-up comments.

This is not an easy market for us to grow in.

On the one hand, getting the necessary coverage for our wind-exposed clients is very, very difficult.

On the other hand, dealing with a softening market in all other coverage lines is equally challenging to our growth.

Yet, we believe -- and we've said this repeatedly -- that we have the strategies to grow regardless of the market.

We're very niche focused in our retail commercial selling.

We're growing our Gallagher Bassett and our Gallagher Bassett's operations.

We're growing our wholesale and reinsurance operations.

We're cross-selling across profit centers, recruiting new teams and individuals.

We're finding compatible mergers and acquisitions.

We're growing our own talent.

We're focusing very, very hard on executing our business plans.

And all of these things I think showed in the quarter and paid off for the Company.

Our people are energized.

We're having fun.

We're delivering results.

It's a whole different year than 2005.

Our culture, which we think is our real strategic advantage, remains strong.

So we're pleased with the quarter, and we look forward to the rest of the year.

We thank all of you for being with us this morning.

Thank you for your participation, ladies and gentlemen.

This does conclude today's teleconference.

You may disconnect your lines at this time and have a wonderful day.