Arthur J. Gallagher & Co. (AJG) 2025 Q4 法說會逐字稿

Good afternoon, and welcome to Arthur J. Gallagher & Company's fourth-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 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 of Arthur J. Gallagher & Company. 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 for you today is Doug Howell, our CFO, and other members of the management team.

We had an excellent fourth quarter and a terrific year. Our two-pronged 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 EBITDAC 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 EBITDAC margin was 32.2% and ahead of our expectation with underlying margin expansion of 50 basis points.

Let me provide you with some insights behind our Brokerage segment organic. America's retail PC organic was up 5%, UK and EMEA up 7%, APAC up 3%, Specialty and Wholesale up -- US wholesale up 7%, reinsurance of 8%, and benefits of 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. Fourth-quarter 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%. Casualty lines, which includes general liability, commercial auto, and umbrella, up 5%. Overall, with US casualty lines, up 7%, package up 3%, D&O down 1 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 US wind season, there was plenty of reinsurance capacity to support client demand.

The property reinsurance market 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 clients. 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 remained very cautious of US-focused casualty risks. 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 purchased reinsurance programs at 1/1, we believe it is likely that some carriers will explore buying additional protection to further reduce earnings volatility or support growth throughout 2026.

Moving to employee benefits. 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 employers to help them implement innovative solutions such as telemedicine 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 resilient US labor market so we're expecting another strong year of growth.

Moving to some comments on our customers' business activity. Our proprietary data, which has been a valuable indicator of the economy, continues to show solid client business activity. Fourth-quarter revenue indications from audits, endorsements, and cancellations remain nicely positive and were more favorable compared to both fourth quarter 2024 and third quarter 2025.

And through the first three weeks of January, these favorable trends continue. We're watching our customers' business activity daily, and we're just not seeing signs of economic weakness. Regardless of market and economic conditions, I believe we are very well-positioned to grow. Our global resources, data analytics, expertise and unique product offerings put us in a spot to compete 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 excellent 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 EBITDAC margin was 21.6%, a bit better than our December expectations. Looking ahead, we see full-year '26 margins in the 21% to 22% range.

Shifting to mergers and acquisitions, starting with some comments on assured partners. We are already seeing a lot of success with the AP team leveraging our products, data 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 US 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 seven new mergers representing around $145 million of estimated 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 entrepreneurs looking to grow their business, add more value to their current clients' and further advance their employees' careers. Our M&A strategy is about being better together so that one plus one can equal three, four, or even five.

Shifting to -- today, our pipeline is showing more than 40 term sheets signed or being prepared, representing around $350 million of annualized revenue. Good firms always have a choice. 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 EBITDAC, and more than $3.5 billion in acquired 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 post 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 then, we've received really positive feedback from the investment community for levelizing for the 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% in this quarter and 6% for the year.

Flipping to page 5 of the earnings release to the Brokerage segment adjusted EBITDAC came 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 buy assured partners, 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 margins when I get to page 8 of the CFO commentary document because this headline noise will happen in the first and second quarter of '26 again.

Sticking on page 5. Fourth-quarter risk management segment organic growth was 7% right in line with our December expectations. That 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 looked 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 and banking clean energy and acquisition lines, all were very close to the midpoint of our December expectations. The adjusted corporate line was a couple pennies less than our midpoint estimate, partly due to a non-cash unrealized FX remeasurement loss and a small tax item.

Also, while we adjusted out, we substantially completed the wind-down and annuitization of our long-ago frozen pension plan. Creates a non-cash GAAP expense here in the fourth quarter, and will again in Q1 '26, but those reversed through OCI, so it nets to zero. But more importantly, we hit the market just right and didn't have to inject any 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 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 from FX and the forecasted depreciation and earn-out payable expense.

Turning to page 6 (sic - page 4) of the CFO commentary document. This page breaks down 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 four things.

First, it removes the quarterly comparability impact caused by the large live sales. And second, it removes the comparability impact caused by deferred revenue estimates. These two items were causing a lot of quarterly noise. But as we said in December and you can see here, they are really a no-nevermind on a full-year basis. Third thing this view does is it shows you the quarterly seasonality of our business. And fourth, it gives you organic growth and another level down in the table.

Two call-outs on this page. 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%. That would be another fantastic year.

So when you turn to page 5 in the Corporate segment, just two small items. Our full-year '26 estimate is unchanged from six 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, and we'll update you during our March IR Day.

Turning to page 6, the investment income (sic - interest income) table. Three comments here. First, our '26 forecasts reflect current FX rates and changes in fiduciary cash balances. Second, our forward estimates continue to assume two 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 funds 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 pretty close to our December estimate. Looking forward, the pinkish columns 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 you how we view AP. Now, it includes third- and 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, while 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 the '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 an 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 three things in there. This table reflects the midpoint of our estimates and does not include any revenue or expense synergies. The non-cash figures shown on this page, which reflect depreciation and earn-out payable, are included within our estimates 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 a little 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 margins. In the past, I've done a bridge in my verbal comments to get you past the noise from the impact of FX, changes in interest income, income from cash we're holding on assured partners, 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've 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 our costs. The lower table gets you started on modeling '26. Blue section first level sets '25 by removing the investment income on funds we were holding to buy AssuredPartners and also resets for estimated FX at current 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 for what we see today. The punchline is nothing has changed since our December IR Day, and we still 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'll also see that we've added a line called unknown M&A with no estimate provided. This is more of a placeholder for you to just think about other factors that could impact margin comparability.

All right, let's go to page 9 to our tax credit carry forward page. At December 31, we had $713 million of tax credit carry forwards. and you'll see the footnote there that says that we have another $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 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 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 two years, we might have close to $10 billion to fund M&A before using any stock at attractive multiples.

And this was an important point. While we talk about organic a lot, it's worth a reminder that our M&A strategy creates immediate shareholder 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 revenues, adjusted EBITDAC 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) Rob Cox, Goldman Sachs.

Hey, thanks. Good afternoon.

Hey, Rob.

Hey, 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, is 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 practices are our largest practice, and as you know, we emphasize our vertical capabilities at every production opportunity. We have very strong vertical capabilities that about 90% of our new production around the United States, actually around the world, falls into those niches.

As Doug made 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's focused on data centers, as we are as well. We have the ecosystem to do the job for 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 Leader's Edge, which is the broker's magazine, about all the things that we're pulling together in that ecosystem to be able to take advantage of that opportunity.

And a great bit of that opportunity is just 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.

Thank you. That's helpful. And I just had a follow-up on casualty 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. I'm just curious if you think that's a trend. I know there's been some companies out there talking about loss trend behaving a little bit better 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 softening. There's no question about it.

I think that casualty is still got a heavy 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 year's reserves. And so I'm not seeing the same kind of activity there that we see on the property side at all.

Yeah, Rob, if I read across my page on casualty renewals, maybe at '22 or at 8.4%, and '23 is somewhere between 8.4% and 8.7%, '24 was 8.5%, this year is 8.1%. So I mean, 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 naturally pushing casualty rates higher, like Pat said, on some and all of them that you 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.

Appreciate that. Thank you.

Andrew Kligerman, TD Cowen.

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

Well, I think, yeah, I'm happy to talk about that. I'm very pleased about the fact that just our retention of producers is 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 recruited, through 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 brokerage firm 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 retention rates remain strong.

Do we ever get poached? Of course we do. And I think that there are right ways to hire people, and 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 recruit 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 capabilities with headcount from acquisitions.

As well, let me mention, let's not forget, about 600 young people in our internship every single year. We'll recruit a 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 naïve to the fact that there are people in the 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.

Yeah, just on a number basis. Percentage of producer retention is exactly dead flat. It's been that way since I've got us here going back to 2019, and it's dead flat on it. So we're not having any real change in our producer retention statistic.

And also, you're right at the nub of it. This still is a business that needs producers to grow 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 to maintain. We wake up every day. We work on it. We also invest a ton of money in sales tools, illustratively.

Within two weeks, our cutting-edge Gallagher Drive program, which is the digital experience that our producers can use 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 at the 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 headlines that 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 going to lose a few people that can't see that, but we haven't seen any change in our retention.

I'd reemphasize the culture. Every chance I get an opportunity to talk about the culture, I do. 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 and risk management 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 around 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 just want to layer on to the last question, AssuredPartners, I'm assuming that AssuredPartners is aligned with everything you just answered in my first question. Retention is very similar, right?

Very stable, coming aboard, 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 the field, visited offices, did town hall meetings. We attended their sales meeting in Indianapolis before the close and met over 1,000 people there. And we've had six sessions in Rolling 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 applies.

In fact, the nice thing about AP is that still all these toys are now new things still, they're shiny objects. And it kind of builds a lot of excitement and 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. 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 five trucks and he or she is trying to make sure people are on the job and someone got sick and they're replacing that person, but they've got a commitment to build this building by a certain date, do 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 advisor is more important today because of AI than it was before AI because everybody's confused, because AI tells 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.

Yeah, I'll turn it another way on it. 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 put it out there and then 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, remember, onboarding a customer is different than servicing a customer, too. So it might tell you what the best product to buy is. Let's just say that works. But then you've 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 will have a serious issue in their bar or restaurant and then AI is going to tell AIG to pay the claim.

It just doesn't work that way. There's going to have to be an adjuster there. There's going to have to be a counselor called the producer that helps them understand how the claims are paid. Maybe they can put some policies on the books, but the service load that will come along with that.

Now, 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's got a long way to go if you don't have a customer service 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 on the claims adjusting side and 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 three or four of us in the industry that are going to be able to devote the money into this that will actually deliver benefits. So it's a terrific tool. It's not a replacement for production. It'll 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.

Thanks for the helpful insights.

Mike Zaremski, BMO Capital Markets.

Hey, great, good evening. 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, do we need 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, unless you want to think it's worth helping us here.

Yeah, I think maybe since this is more of an annual impact, but this quarterly impact is the bigger thing. Maybe we do take it offline.

But maybe the punchline on this, as we think about all this change from the life sales and then 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 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 to $25 million of EBITDAC.

So on $4.8 billion of EBITDAC this 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 that in a bucket, tried to exclude it from our organic growth because it was clouding the true underlying organic growth of 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 all nets down to a very small number.

Okay, understood. Thank you. 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 industry's 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 decouples 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 that dynamic still hold or is there any nuances to kind of given it's a tale of two markets, property versus casualty as we think about '26 and further?

I'm going to try to get my 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 on 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 the market where people like ourselves counsel our clients on 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, and 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 I think 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, casually, 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 three or four years, came down quickly. Capital flowed into those rates three or four 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 part of that product, shows you what managed care has done for the line. And then you have casually, 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 helped. I was just trying to see if maybe this cycle could play out differently, but it sounds like it'll be similar to the past.

It will play out differently because you've got to look at the individual lines. So every quarter we report, pay attention to what we're seeing in casualty, what we're seeing in comp, and property, and sometimes the property will break between the cat-exposed property and just general property, and we'll break that out when that happens.

Yeah. We tend to talk a lot about cat property rates, but if you throw it all in a bucket with all the other property rates, and let's not discount the impact of fire and convective 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 was happening and when carriers didn't have the deep insights into their lost cost trends as they do now, you had a little more volatility. I believe that 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. You can see what other services you get from Gallagher. You get more from Gallagher. So I think that our customers will be wise. They'll opt back in for more coverage, and that will stump the decrease a little bit in property rate declines.

Elyse Greenspan, Wells Fargo.

Hi, thanks. Good evening. My first question is on margin. I know, Doug, you went through the new page in your CFO commentary. It seems like the margin, if I add up the pieces, is around 60 basis points in '26, appreciate 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, I'm pretty sure you could always come into play, but is it right to think that just 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?

Yeah, 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 4%, and then you go up 5%, 6%, or 7%, you get more margins.

The other thing, too, is that I think you'll really see We're going to have noise in the first two quarters of next year because of the lost interest income on funds we're 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 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 and did we get better because of Legacy Gallagher? Did we get better because of Legacy AP coming together?

So your question about looking out for '27, the numbers there get you to a pretty good spot. But just remember, there could be another $100 million, $120 million of cost savings that we get out throughout '27 so that by the time we get to early '28, were kind of at that $260 million to $280 million additional profits or additional EBITDAC.

So you're looking at it the right way. Your rent collection is that. We still see that this is the same environment that we can improve margins starting at 4%.

So in answer to your question, I think it's yes to your question. But with all that background, I think that we've got two 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.

Thanks. And then my second question, I guess, goes back to organic and maybe a slight follow-up on Mike's question. So you guys changed the definition to tie to what you outlined in December. But I think the two pieces, the life and the revenue assumption changes, probably would have been a negative 3% in the fourth quarter, which feels large, I guess it would have been kind of net breakeven in the other three quarters.

So it feels like from what you said, Doug, it's like $25 million of EBITDAC. 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 of what you guys had guided in December. And I guess, even if these things bounce back, right, they'll stay in the core commissions and fees and be backed out. And there shouldn't be that big of, I guess, overall EPS and revenue noise.

Yeah, let me see if I can unpack 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 0% to 1%. And then the deferred revenue came in at negative 2% versus a negative 1% to 2%. So 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 proactively 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 process. It takes a long time. There's lots of surveys. You'd spread that, the 1% for the full year across four 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? 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% range for 2026, 6% for '25 in total. So you have to think about this as a quarterly discussion, not an annual one.

Okay, thank you. That's helpful.

Tracy Benguigui, Wolfe Research.

Thank you. Good evening. Sticking with organic revenue, there were some areas within Brokerage on the fourth quarter where you were ahead or below your plan, even though Investor Day was in late December. Can you add some color on your experience within specialty US wholesale, where you're somewhere ahead, and reinsurance, where you were behind?

And sticking with reinsurance, if you could add commentary on how 1/1 renewals may play into organic revenue for 2026.

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

I think you had another question about specialty that came in a couple points better. I think that 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 or $5 million of revenue or something like that.

So the degree of estimation risk around 1 percentage point on some of these is pretty small. I think notably, though, we thought we were going 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 is that the law of large numbers helps us get those numbers a little bit more accurate, so to speak.

And just to follow up as well, I think the 1/1 reinsurance renewals were a little bit worse than what was expected at Investor Day. So 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.

Yeah. I don't think market's softer, but I don't think our performance is weaker. People are opting in and buying some more coverage. I just want to make sure we said it right.

Okay. So that piece is helpful. You reiterated your 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 rises if you focus on real micro targets with less than $20 million of annual revenue. So that's just a lot of deals. The playbook is great, but I'm wondering how feasible it is to close on a large volume of deals. And if that doesn't transpire, 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 is I think a very unique opportunity as they begin to realize that they don't have the tools, they have one or two big accounts they want to take care of, and we're a great place to build their career, their family's career. And at 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 the big ones. And when you take that dry powder, having just spent $13.5 billion, and realize that there just aren't 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.

Yeah, let me give you some other stats. So you go back to 2014, we did a total of 59 deals in 2014 when we were half as big as we are. We can do acquisitions in Canada, in the UK, in every single line of business. So being able to do 60 deals, we did, what did I say, 59 in '14, we did 58 in '12, we did 46 in '18 and '19. So -- and these -- that doesn't include $1 million or $2 million, the smaller ones that we kind of talk about. These are just on the sheet that I have here, if anything. So I believe that we have substantial opportunity to continue to clip off 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 run 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.

Look at the numbers that are put out by, I can't do them off the top of my head to know what to have in front of me, but we're probably approaching over 900 acquisitions this year that have been announced. You can pick those up from MarshBerry and Optis Partners and others.

Very helpful. Thank you.

Gregory Peters, Raymond James.

Hey, good afternoon. So I ordinarily wouldn't do this, focusing on the fourth-quarter numbers, but I am getting some inbound emails 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, if they're doing the old definition or the new definition, the 5% looks great. We're just trying to -- and I know what is inside my numbers. I don't know what's inside the consensus, and maybe the consensus has different numbers.

I wouldn't ordinarily do this, guys, but I'm getting inbound emails 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 things on consensus. Let's start with EPS. Consensus, I think, was around and so forth. For Brokerage, we posted $2.69. For Brokerage, we posted $2.74. Risk Management was $21. We posted $22. And Corporate segment, the midpoint of what we told The Street was $56. I think the street may have had $55, and we were a couple pennies less than that.

So when it comes to EPS, I can comment on the consensus on it. When you look down 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 live sales and 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 while I'm talking. Maybe I can come back to that question. But I mean, if consensus listened, if the sell side looked at 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 unless I was getting questions.

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

Yeah. That's fair. Can you go to the page 7, the AssuredPartners disclosure? As you were walking through that table, you said, hey, be careful about the third and fourth quarter of '26. What I'd like you to come back is re-explain that. One of the line items that caught my attention in there is if I look at the fourth-quarter '26 projected free tax income from AssuredPartners at $194 million down from the $201 million in the fourth quarter '25. I know there's a reason behind it, but you said some other comments were on this table, and I just wanted to go back and revisit that, please.

I got you, Greg. I understand. First, when you build your models, we think you should be adding in rollover revenues from back on page 6 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 AssuredPartners in our numbers for fourth quarter '25. So there is no rollover impact.

So if I would have changed this table to be a rollover revenue table, it would say rollover revenues are $880 million in the first quarter, $755 million 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?

So what we're trying to do is the pink 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 third quarter '25 and drop that into your models for the rollover impact of AssuredPartners. That doesn't have synergies in it. This is a midpoint of the range, so there could be some numbers around that that go one way or another.

We're doing our budgets of AssuredPartners here, and so it could change a little bit by quarter, but this gets you started as you're trying to project next year. I just was fearful you would add $775 million in the fourth quarter to

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

The 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 timing in that one, I wouldn't expect that timing to repeat when we get out to 2026. In a perfect world, it would say $201 million over there. It says $194 million versus $201 million, kind of the same number, but a fair question.

Thanks for your time.

Yeah, hope that helps. Hope it helps everyone.

Andrew Andersen, Jefferies.

Hey, thanks. 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 you 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 as we've been sitting here. It took nine months for us to get this approved to the DOJ. That freezes people in their behavior.

We've been together now, let's call it arguably five months now. I think the team's teams are starting to gel. They're starting to understand that they have a two-pronged growth objective as a branch manager. They've got to grow their branch organically, and then they've got to find good merger partners.

What I really love about it is we've got 300 more advocates out in the field right now looking for opportunities for deals. That will naturally improve our deal pipeline. 90% of our acquisitions are sourced at the local level. It's not like we've got a team of bird dogs that are running around trying to call on 400 opportunities.

But we've got 1,000 different branches around the world now, maybe more than that, that every day they're talking to their 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? Boy, I would think that a thousand 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 valuations are coming down and it takes a while for people to realize there's a new norm in that.

Thanks. And then just on that margin table, as you think about the AP synergies in '26, is that including both revenue? I guess, it's including both revenue and 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?

Actually, no. I think that they'll both be at a steady pace throughout the next two years and everything, but remember, revenue synergies could be from cross-sells. They could be trading with ourselves, wholesale, London markets doing that.

Joint selling could be some of the revenue. And then you got the carrier contract that still takes us a couple of years to get those rolled out and have the combined value proposition communicated with the carrier. probably not as fast as maybe you have in your mind, but I'm not in your mind. But I think expense and revenue synergies are going to grow kind of at equal pace over the next two years.

Thank you.

Alex Scott, Barclays.

Hi. I just wanted to go back to AssuredPartners and see if you could comment a bit about how they're gross coming in (inaudible) and so forth. But I'd just be interested if you talk about their organic growth and how that's progressing relative to your plans and what is sort of underlying and underpinning your estimates.

All right. So let's go back. When we bought AssuredPartners, we thought that they were running organic about 1 point, 1.5 points less than us. Terrific sales culture, terrific producers out there. And I'm seeing that still about the same. Therein lies 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 of their margins as we hit 2027 when they start being in 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, a wind behind their back, if you will, to go out and talk to people that maybe they didn't write before. Stories change. We've got more resources. Let me bring some in to see you. It's pretty exciting.

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

Yeah, they're coming down. I can't remember the last time I saw an ask for 16. These are over 10 on the nice tuck-in acquisitions, and you're down in that 12 to 13 times when you're talking about the bigger ones now.

Yeah. Okay. Thank you.

A heads up for everybody on the phone. This is a great call. We're going to try to answer the next five or six questions a little faster, just 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.

Paul Newsome, Piper Sandler.

I'll be good to just ask one question. And apologies if I missed it, but Brown & Brown was talking about movements from admitted and non-admitted. Any thoughts on if that's happening in a material way through your book as well?

It's not.

There you go, next question.

You said we're getting short, Paul. What can I do? I was trying to be funny here, Paul, but the fact is, no, we're not seeing a lot of that. We have the data on that. And the 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 a softening market.

Now, part of that is you're dealing here in a softening market with 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.

Fantastic. I'll let somebody else ask a question. Thanks, guys.

Mark Hughes, Truist Securities.

Yeah, thanks. Pat, you'd previously given pricing by customer size. Do you happen to 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 the large accounts and the small accounts is they're basically, you recall, we were seeing large accounts get a bit more discount as the market changed a bit, and now both big, medium, and small accounts, all three are getting about the same decreases. And increases, interestingly enough, on the casualty book.

Thank you.

David Motemaden, Evercore ISI.

Hey, thanks. Good evening. 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 you know 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 three years of this for the full years, it's 0% and 0% and 0% and 0%, 0%, and negative 1%. so doing a wholesale change in our process because of 1% chain. I understand the quarterly noise. And that's why we spent so much time on it in December. And we were talking about it beforehand. And we were 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 us a question about it. It would be so minor. And so I think that putting a new process in, of course, we'd take a look at it. But to have hundreds and hundreds of people update surveys and their time studies and everything, every three months. I think it adds a burden of cost that it's probably not worth it.

So I guess my ask for you is to try to look past the quarterly noise, look at an annual basis and say, we've done a good job of making sure that 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 a zero for 2026?

Well, I would actually like it to be a positive number next year as we improve our service quality. If we can improve it a little bit more next year. But we've done a really great job of getting our service to the point where we just don't make mistakes anymore. We provide certificates of insurance within 99.9% accuracy within 24 hours.

But years ago, that was taking a little bit longer, several days to do. And 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.

Thank you.

Meyer Shields, KBW.

Great. Thanks so much, and I'll try and be quick, too. To the extent that there is disruption in the London wholesaling market as one of the major players there builds a retail platform in the US, 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 operations. with customers that sell through that unnamed Houghton company and are looking for a new outlet for their wholesale placements.

Okay, perfect. That's what I wanted to know. Thank you.

Katie Sakys, Autonomous Research.

Hi, just one from me. I wanted to zoom in really quickly on the benefits brokerage and consulting outlook. It looks stable versus 2025 at 4%. Health inflation doesn't 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 unchanged this year?

You crackled at something there, about 37 words before you finish. Can you just ask the nub of the question again one more time? Because we just got a crackle from somewhere.

Yeah, 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 what you're thinking on keeping the 4% benefits brokerage organic growth rate stable?

Yeah, 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, it doesn't necessarily follow that like you would see in the P&C side.

But what it does do is it does cause, it does present many opportunities for more advisory projects. that come in as they see increasing medical costs, increasing premiums of how do they change their programs, how do they change their deductible, give us more pharmacy benefit review engagements. So we feel pretty good about the fact that as you have pressure on your labor force benefit costs, it leads to more opportunities for us to go in and consult and give some 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 I believe everyone is going to shop their employee benefits. I think everyone is fed up with health care cost inflation. And while they like the people they've been consulting with and it's a very sticky business, I think they're open to the kind of marketing 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 telemedicine, as I said in my prepared comments and what have you, that are different than what the small local broker.

When we closed on AP, what we found is we'd have over the last 20 years, most benefits and 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 truly separate benefits capability, separate benefits operation and company.

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 different 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.

Thank you very much for the color.

Ryan Tunis, Cantor Fitzgerald.

Hey, so yeah, we got the Super Bowl next weekend. So in the spirit of that, Doug, I'll put you on the spot a little bit here. (inaudible) helpful? A little bit confusing. Can you just give us an over, under, and 2026 EBITDAC margins, the way 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 EBITDAC margins are going to land for full year '26 and taking an over under?

And over under. It's a guess.

We're going to be over.

Over what? What number?

The numbers, 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, some upsides and synergies, and I think that our teams are going to be really focused on continuing to get better at everything.

Hey, Ryan, get Doug off the hot seat and call FanDuel, will you?

No. So, yeah, so like my follow-up, I've been wrecking my brain on the numbers, and I mean, Pat, you can help me, but should I give the 4.5 in [Seahawks]? What do you guys think?

4.5 in what?

Seahawks.

What? I made the point to the Seahawks. I don't know. Bears are out of it. We're not as focused on that as they should be.

All right, thanks, guys.

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. We're 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. We've got 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 investment community again in March during our Investor Day, and have 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.