Arthur J. Gallagher & Co. (AJG) Earnings Call Transcript & Summary

Good morning. Welcome to Arthur J. Gallagher & Company's Quarterly Investor Meeting with Management. [Operator Instructions] Today's call is being recorded. If you have any objections, you may disconnect at this time. Some of the comments made during this investor meeting, including answers given in response to questions, may constitute forward-looking statements within the meaning of the securities laws. The company undertakes no obligation to update these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. Please refer to the information concerning forward-looking statements and Risk Factors sections contained in the company's most recent earnings release and Form 10-K and 10-Q filings for more details on such risks and uncertainties. In addition, for reconciliations of the non-GAAP measures discussed during this meeting, please refer to our most recent earnings press release and other materials in the Investor Relations section of the company's website. It is now my pleasure to introduce J. Patrick Gallagher, Jr., Chairman and CEO of Arthur J. Gallagher & Company. Mr. Gallagher, you may begin.

Good morning, everyone, and thanks for joining our investor meeting today. These quarterly meetings provide our leaders an opportunity to update the investment community about our recent performance and get insights into our operations outside of the hectic earnings season. Let me walk you through the agenda for today's meeting. I'll start at a high level and cover Gallagher's strategy and competitive positioning, including the recent acquisition of AssuredPartners. I'll also comment on the current insurance market backdrop, the economy and organic. Then you will hear from other members of the management team, including our business leaders. Each will speak for about 10 minutes providing background information, insights into various markets and cover relevant growth and operating initiatives. We will also give you some indications on how they are seeing organic growth for the third quarter. Then Doug Howell, our CFO, will pull the comments together and provide you with a more detailed third quarter and full year outlook. Our prepared remarks should last an hour. After that, we will open up the line to the group dialed in for questions and answers. Okay. Let me start with some comments on AssuredPartners. I'm absolutely ecstatic about the acquisition and even more convinced today that this will be a home run for Gallagher, AssuredPartners, our clients and our carrier partners. Our new AP colleagues are top notch and a great cultural fit. Following the mid-August close, the team is pivoting from integration planning to execution. Our first course of action is to get our new colleagues from AssuredPartners access to what I call, the candy store. This includes our data and analytics offerings, our global niche expert network, many proprietary insurance products and increased coordination with our wholesale and reinsurance operations. We've also begun the workaround system conversions, which is a key focus of our retail integration efforts over the coming months. With all the work we've done, we are now confident that we are likely to see even more synergies, both revenue and expense combined, than the $160 million we estimated in December of last year. Doug will provide you with more details around this good news during his comments. Moving back to my high-level strategy comments. Let me start by describing our 4 key shareholder value creation objectives. Number one, grow organically. Number two, grow through mergers and acquisitions. Number three, increase our productivity and raise our quality. Number four, maintain and promote our culture. This strategy has been tested throughout economic cycles, interest rate cycles, employment cycles and pricing cycles, and there are no plans to alter our objectives or our operating strategy. Looking ahead, we see enormous revenue growth opportunities, further improvements in productivity and quality and a continued focus on our bedrock Gallagher culture. I believe we are very well positioned to deliver against our 4 key objectives, grow our revenue and EBITDAC in the double digits and produce strong shareholder returns. Let me dive deeper into revenue growth, starting with organic. Gallagher has client capabilities in approximately 130 countries, around 70,000 employees, and the ability to provide professional advice and solutions across insurance, reinsurance, human capital and claims management. We have a recognized global brand, industry-leading talent, deep expertise across product and geography and a consistent approach to sales and client service. As I look around the world across industry verticals and product offerings, the future organic growth opportunity for Gallagher remains immense, and that's because insurance touches just about everything in our daily lives. It's the oxygen of commerce. Whether you're buying a home or driving a car, you're an owner of a local flower shop, a restaurateur or a patron or transporting goods across land, sea or air, you need insurance. And the market today is large and growing. The Swiss Re Institute estimates there is more than $7 trillion of annual insurance premiums globally, $4 trillion alone in non-life premium, and global non-life premiums are growing annually due to economic expansion, emerging risks and exposures, increasing insurance demand and new coverages purchased by those that already buy insurance. I believe Gallagher can grow in just about any environment, and the team will lay out why we believe we can compete, win and grow faster than the industry. We are also growing our total revenue and creating long-term value for shareholders through mergers and acquisitions. Since the beginning of 2020, we've acquired around $6 billion of pro forma annualized revenues and the opportunity for future growth through M&A remains massive. That's because insurance distribution continues to be very, very fragmented around the globe. It's estimated there are tens of thousands of agencies and brokerage firms across our 5 major geographies, including 30,000 in the U.S. alone according to a leading consulting firm. Most of these firms have less than $25 million in annual revenue. Our family owned and have salespeople and colleagues with strong roots in their local communities. So when they sell to Gallagher, not only do we get revenue and profit, more importantly, we get new talented, really talented entrepreneurs, their brains and capabilities. These new merger partners get immediate access to all of our tools and capabilities overnight from our niche experts, our extensive data and analytics, our thought leadership, our brand and our Centers of Excellence. This creates immediate value for the current clients, gives them a terrific story for prospects and provides more career opportunities for their employees. The ultimate winners in our merger activity are the clients. They get deeper insights and advice on top of better service. So far this year, we have completed around 35 mergers with around $3.5 billion of estimated annualized revenue. Our global pipeline of opportunities with term sheets signed delivered or being prepared includes nearly 40 potential mergers with about $500 million of annualized revenue. So the pipeline remains strong and full of tuck-in merger and acquisition opportunities around the globe that can contribute to our long-term strategic growth. The third piece of our shareholder value creation strategy is to increase productivity and raise our quality. We have developed a cohesive sales and service organization, utilizing standardized processes and common systems, which allows us to leverage the incredible amount of data that we have. You'll hear from our leaders that the value we provide to clients today is increasing as we use our data and technology to build innovative tools, deliver unique insights and deliver and develop new products. We are constantly looking for new ways to utilize our Gallagher Centers of Excellence. Our 15,000-person insurance services operation has been built over the last 2 decades and handles many of our back office and client servicing tasks. And with the robust platform built, I believe we can more quickly embrace digitalization, implement AI and find ways to further automate various service and support functions throughout our businesses. As we look across Gallagher, we remain confident there are further margin expansion opportunities within our Brokerage and Risk Management segments over the long run, despite our long history of operational excellence. And what I believe is our biggest differentiator, our secret sauce, and that is our bedrock culture. It's a culture of empathy, ethics and doing what's best for clients guided by the Gallagher Way. It's a culture that is thriving today and one that will thrive for many years to come. Okay, moving to an overview of the insurance market, a few observations from a global perspective. Overall, we continue to view the global P/C insurance market as rational. Carriers are generating good returns, driven by interest income and improving personal lines and commercial property underwriting results, offset somewhat by certain casualty classes. Likewise, we are seeing more carrier competition across property and continued caution within casualty lines, and this more nuanced view of the market is driven by the level of insights the carriers have about their business today. They know what products and geographies are generating appropriate returns and areas that need to be re-underwritten or repriced to improve profitability. With that said, so far in the third quarter, global renewal premium changes, which includes both rate and exposure by line of business are as follows: property, down 5%; casualty lines, up 7% overall, including general liability, up 4%; commercial auto, up 5%; and umbrella, up 9%; package, up 6%; D&O, down 2%; workers' comp, up about 1 point; personal lines, up 6%. Breaking down renewal premiums by client size, we continue to see significant differences. For clients generating less than $250,000 of revenue, renewal premiums are up 3%. For clients generating more than $250,000, renewal premiums were down 1%. It's important to note the renewal premium changes excluding property are seeing global renewal premium increases in the 4% to 6% range, regardless of account size, which is similar to what we have seen for the past few years. Now, good accounts will get some premium relief. However, accounts with poor loss experience are likely to see greater increases. As for the reinsurance market, not much activity to report following midyear renewals. The Gallagher Re team had some great meetings with reinsurance buyers and sellers at the reinsurance rendezvous a little more than a week ago. Overall, the reinsurance industry remains healthy with more than adequate capacity to meet expected demand from reinsurance buyers. Today's environment is the ideal market for us to show our expertise, product knowledge and data-driven capabilities. Our talented team can help clients navigate market complexities while finding the best coverage. Moving to our view of economic conditions. The data points we typically track and discuss aren't indicating a broad slowdown. First, our daily revenue indications from audits, endorsements and cancellations, although insurance activity is down a touch from last year, we are still seeing midterm policy adjustments in positive territory, indicating continued solid business activity. Second, while the number of U.S. jobs added this past month came in below expectations, the number of job openings is still ahead of the number of people looking for work. With that said, health care costs continue to trend higher due to innovative medical treatments and drug costs. So employers are still looking for cost-effective ways to support their human capital objectives. These data points indicate economic backdrop that is still favorable for our businesses. So against the still favorable macro backdrop, growing demand for insurance solutions and continued strong net new business spread, there hasn't been much change over the past 7 weeks to our organic outlook for full year '25 in either the Brokerage or Risk Management segments. Doug will, of course, provide you with greater detail in his comments. Okay, to close, let me give you some quick soundbites of what you'll hear from the team today. Mike Pesch will tell you our Americas retail and Specialty businesses are posting strong performance. Renewal premium increases continue, business activity remains solid and new business spread remains favorable. Patrick Gallagher will tell you our international retail and London specialty operations are performing quite well, retail renewal premium changes vary by geography, and our London specialty business continues to show strong performance. Tom Gallagher will tell you that our reinsurance unit has been a great performer this year and is well positioned for future growth. He'll also provide comments on our global merger and acquisition strategy. Then Bill Ziebell will walk you through our employee benefits and HR consulting business. He will highlight a stable macro backdrop and favorable net new business trends driven by continued demand for our services. Scott Hudson will tell you our third-party claims administration business. We're seeing good growth driven by our specialization, technology and the ability to drive superior outcomes. Then our CFO, Doug Howell, will bring it all together and tell you what we think this means financially for third quarter and full year '25. I'll stop now and turn it over to Mike Pesch, who's going to discuss our P/C brokerage operations across the Americas. Mike?

Thanks, Pat, and good morning, everyone. I'm Mike Pesch, the leader of our property casualty business in the Americas. Today, I plan to cover 3 topics. First, I'll provide an overview of our retail operations in the U.S. and Canada and our U.S. wholesale operations, known as Risk Placement Services. I'll then briefly touch on our other specialty businesses and our operations in the Caribbean and Latin America. Second, I'll discuss current insurance market conditions. And third, I'll give you some early indications of how the third quarter of 2025 is playing out thus far. Before I begin, let me also welcome our new AP colleagues. Echoing Pat's comments, I believe the combination will provide tremendous value for our clients, trading partners and our colleagues. Moving to an overview of our retail P/C brokerage operations across the Americas. In total, more than $3 billion of revenue as of the end of 2024. Our most mature Americas operation is in the U.S. During 2024, our U.S. retail P/C operations generated $2.6 billion of revenue, which when combined with AssuredPartners and Woodruff Sawyer, would increase to more than $4 billion on an annualized run rate basis. We placed around $20 billion of U.S. premium in 2024 and more than $30 billion of premium when you include AP. In Latin America and the Caribbean, we generate around $150 million of revenue across 15 countries and have more than 1,700 employees. Moving to Canada. We are a top 5 commercial lines broker with clients in all 10 provinces and 3 territories. Here, we generate nearly $300 million in annual revenue through about 1,500 employees. Our Americas retail businesses have many common characteristics, and we serve and compete for clients of all sizes, from large risk management clients to small commercial lines and also high net worth personal lines customers. With that said, most of our clients spend between $100,000 and $2.5 million on their annual insurance premiums. That translates into roughly $10,000 to $250,000 of annual commission and fee revenue to Gallagher. We find these middle market clients very attractive, and that's because businesses of this size typically have complex insurance needs, yet they don't have a dedicated risk management professional on their staff. Thus, they rely on our experts to identify and evaluate risk on their behalf and, of course, find the right markets to place their insurance coverage. Essentially, our experts become the client's risk management department, which embeds Gallagher inside their business. This knowledge-driven approach is the foundation of our global client value proposition, CORE360, which focuses on the most important drivers of our clients' total cost of risk. The risk management advice and solutions we provide to clients is bolstered by our various niche practice groups. These subject matter specialists have deep insights into various product and industry verticals. By leveraging these specialists, we can better identify and understand the risk characteristics of our customers. And these industry-focused professionals work side by side with our producers in the field, making sure we are addressing the unique various industries that we are facing. We also have hundreds of professionals working with clients to develop safety protocols and risk management programs while also assisting in claims resolution and advocating on behalf of our clients. So through our focused risk management advice, differentiated coverages and products and claims resolution advocates, we have a fantastic offering, which I believe is an advantage when competing against the tens of thousands of brokers across the Americas. Pat says, join us, and the next day, our decades of work and hundreds and hundreds of millions of dollars investments are yours. That's what our new AP producers are getting, and we can deliver that to other merger partners as well. Moving on to our Americas specialty businesses, which collectively generated around $1.3 billion of revenue during 2024. There are a few different pieces here, so let me break down the business further. The largest piece is Risk Placement Services or RPS, which generated approximately $800 million of revenue in 2024. Founded in the late '90s, RPS is one of the largest wholesale brokers in the U.S. and includes our open brokerage programs, binding an MGU businesses. Here, we are engaging with our 13,000-plus retail clients constantly providing data and analytics, innovative and differentiated products and access to markets and insurance solutions that align with their clients' needs. The remaining $500 million of revenue is split amongst various specialty operations, including ARTEX, our alternative risk solutions, captive management and iOS administration services business. It also includes our Affinity business, where we offer specialized insurance solutions for over 300 national associations and Affinity groups. And finally, we have our Risk Program Administration business, where we offer a wide range of services for risk pools, including public, private faith-based and nonprofit clients. Now the addition of AssuredPartners wholesale specialty operations should push our total specialty revenues to nearly $2 billion on an annualized run rate big business, further bolstering our risk pool administration programs and binding businesses. Moving on to my second topic, insurance market trends across the Americas. Starting with U.S. retail, our customers continue to experience renewal premium increases. That's both rate and exposure combined across most lines of insurance. So far, in the third quarter, renewal premium change is up around 2%. That's a bit below where we were seeing during the first quarter and higher than second quarter's renewal premium change. There's been much discussion on property renewal premium moderation, which is being felt mostly by our larger clients. Casualty lines, on the other hand, continue to show increases concentrated in auto and umbrella, and these increases are more uniformed by client size. That said, we are seeing in many cases where there are some potential price savings available. Clients are increasing their coverage levels. Let me give you some more flavor by line of business. Property is down 5%. Commercial auto is up 5%. General liability is also up 7%. And umbrella is up 9%. Workers' compensation is up around 2%, while cyber and D&O are flat to down 1 point. Moving to Canada, renewal premium changes are about flat. Property is down middle single digits, while casualty increases are in the low single digits. Moving to the U.S. wholesale market environment. Through the first 2 months of the quarter, our data is showing renewal premium increases of around 3%. Property renewal premiums are down 6%. General liability is up around 5%, Umbrella up 9%. Commercial auto is up 10%. Most other lines outside of D&O are up low single digits. So across the Americas, we continue to see rational carrier behavior with pricing differentiation driven by client loss experience. Good accounts get some premium relief in property and other lines. However, accounts with poor experience are seeing greater increases. This is the ideal market for us to show our expertise, product knowledge and data-driven capabilities. Every client is different, and we can help each one of our clients get the right coverage at the most optimal pricing by line of business for their risk profile. That's our job as brokers and I believe we have the most talented team in the industry. And finally, I'll conclude with some thoughts on the third quarter. Through the first 2 months, we are seeing continued renewal premium increases, positive net new business spread and no significant impact from year-over-year changes in mid-term policy adjustments, including audits, policy endorsements and cancellations. So based on what we are seeing thus far, we think third quarter organic will be high single digit in specialty, around 6% in U.S. retail and low single digits in Canada. Looking ahead, I remain excited about our long-term prospects. We have solutions, sales, talent, data-driven insights and a client-first culture, which puts us in a position to constantly win. Okay, I'll stop now and turn it over to Patrick Gallagher, who will discuss the remainder of our major property casualty retail operations in addition to London Specialty. Patrick?

Thanks, Mike, and good morning, everyone. This is Patrick Gallagher, and my comments today will focus on our retail P&C units in the U.K., Australia and New Zealand, in addition to our London specialty business. Similar to Mike, I plan to cover 3 topics. First, I'll dimension each of these businesses. Second, I'll discuss the P&C insurance environment in each geography. And then I'll finish up with some comments on what we are seeing thus far in the third quarter. Starting with our international retail businesses. We operate in approximately 60 countries globally and have client capabilities in another 70 countries. Mike just covered Canada, Latin America and the Caribbean. So let me focus on our other large international retail operations in the U.K., Australia and New Zealand. Combined, these geographies finished 2024 with around $1.5 billion in revenue, placing around $9 billion of premium on behalf of clients. Breaking these operations down further, we are 1 of the 5 largest U.K. retail brokers, generating more than $800 million of annual revenue across approximately 100 locations. I'd also like to extend a warm welcome to our roughly 1,000 U.K. and Ireland AssuredPartners colleagues officially joining us a few weeks ago. In Australia, we are also a top 5 broker and have one of the leading commercial retail brokerage firms in New Zealand. Combined, Australia and New Zealand generate more than $600 million of revenue annually through 80 different locations. You heard Mike talk about our Americas retail sweet spot in the middle to upper middle market, and our customers in international geographies are similar in complexity to these clients. We also provide brokerage services to large account risk management business, smaller commercial enterprises and high net worth personal lines clients. So similar customers with similar insurance and risk management needs. Accordingly, our sales approach and tools mirror that of the Americas. That was built by design over the last decade. Today, we have a truly unified global go-to-market playbook. Let me give you a few examples. First, CORE360, which Mike covered. While we introduced CORE360 around a decade ago as our U.S. go-to-market strategy, it is now the centerpiece of our global value proposition. It forms the foundation of our risk management discussions with clients and prospects of any size anywhere around the world. Second, our niche practice groups that cut across industry or product, many of them have been organized at the global level, allowing clients across geographies to benefit from our deep knowledge and expertise. Examples of our global niches include energy, real estate, hospitality and marine. Third is our data and analytics platform, Gallagher Drive. Here, we are able to provide prospects and clients' insurance trends of other Gallagher clients from around the globe. This includes what lines of coverage are being purchased, limits ultimately being bound as well as potential catastrophe exposure and claims forecasts. The platform further differentiates us versus the competition with producer utilization of Drive continuing to increase. We also have SmartMarket, which has evolved into a global offering across our various global retail platforms. SmartMarket is being utilized by most of our large trading partners. And finally, our Gallagher Go mobile app. Here, you can access your insurance account 24/7 to manage locations, vehicles, drivers and other insurance-related content. So our retail platforms utilize the same sales techniques, tools and data and analytics. They also rely heavily on our Gallagher Center of Excellence for large portions of their client servicing efforts, too. Sticking with our Center of Excellence, our nearly 2 decades of working standardizing our processes and unifying our systems around the globe have equipped us to better harness the power of technology and AI. We are still in the early innings of our journey utilizing AI. The first group of tasks include policy checking and the issue of certificates of insurance. With these efficiencies gained, we are able to redeploy resources for sales enablement and renewal support. So we have an exhaustive list of resources that attract top talent and merger partners. It puts us in a great spot competitively, and when considering we are competing with someone smaller than us around 90% of the time, these local brokers just can't match the insights service, technology or tools we provide. Now shifting to London specialty. Our leading franchise has roots dating back to the mid-70s. Here, we tend to focus on larger commercial clients and also support retail agents and brokers around the world, place specialty insurance solutions across 6 main trading divisions: aerospace, marine, financial lines, construction, energy and property. Our 1,200 colleagues generate more than $700 million of annual revenue and place more than $6 billion of premium annually. London specialty growth has been very strong in recent years, and we still have many exciting growth opportunities. Let me provide you with a few of our priorities. First, we continue to invest in and further deepen our niches and specialisms. We are constantly looking to expand our capabilities, market relationships and product offerings that align with client need, including financial lines, cyber and energy. Second, we are looking to onboard and develop new talent. This includes seasoned producers that will add to our expertise across our 6 specialty trading units. We also continue to develop our own. Through our summer internship program and our graduate program called Gallagher Futures. Third is the utilization of SmartMarket. It's an important platform that provides information to carriers and allows us to trade more efficiently for the benefit of our clients. Specialty carriers are looking for ways to grow in classes of business they find attractive. So I believe there will be a lot of carrier appetite in the second half of '25 and into '26 for SmartMarket. Now moving to my comments on the insurance market. Let me discuss what we are seeing so far in the first 2 months of the third quarter. Starting with retail. In the U.K., renewal premium changes, both rate and exposure combined, are increasing 2%. Property is up 2%. Commercial auto and general liability are up 4%. Package is up 3%. Professional lines is down 3%, and most other lines are flattish. Renewal premiums in Australia are down about 1%. Property lines are down single digits, while most casualty lines are up low single digits, while professional lines are flat. New Zealand's renewal premiums are down 3%. Property and D&O are down mid-single digits, while most other lines are flat to down slightly. Within the London specialty market, we continue to see growing competition across property lines. However, carriers overall are maintaining their underwriting discipline in our view. Clients are leveraging improved pricing in certain classes to reduce their deductibles, push for better terms and conditions and potentially buy more cover. Specialty carriers remain cautious on U.S. casualty classes and continue to watch for clues of changes in loss cost trends. However, there hasn't been a significant shift higher in pricing for this business. So across the London specialty market, we see renewal premiums as flat to modestly lower. Pulling it all together, I see third quarter organic for our U.K., Australia and New Zealand retail as well as our London specialty units combined in the mid-single digits. So these businesses are continuing their solid performance, and we remain excited about '25 and beyond. Okay. I'll stop now and turn it over to Tom Gallagher, who's going to discuss our reinsurance operations and global M&A strategy. Tom?

Thanks, Patrick, and good morning to everyone joining us on the call. Today, my comments will focus on our global reinsurance brokerage operation, Gallagher Re. And then I'll pivot to discuss our global M&A strategy in more detail. Starting with an overview of Gallagher Re. Gallagher Re is the third largest reinsurance broker in the world and was formed through the combination of our 2013 start-up, Capsicum Re, and the purchase of WTW's treaty reinsurance business in December of 2021. We finished '24 with about $1.2 billion of revenue, most of which comes in the first half of the year given the timing of our major reinsurance renewals. We strive to be the go-to reinsurance broker that can advise clients globally regardless of location and size, utilizing deep expertise and our analytic capabilities. Our 3,200 reinsurance professionals provide advice, modeling, strategy and placement expertise on a wide range of offerings, including treaty reinsurance, facultative reinsurance and other risk transfer products to nearly 1,000 underwriting enterprises around the globe. 2025 thus far has been a great year for the business, including double-digit organic growth, continued tuck-in M&A activity, further investments in talent, including treaty and facultative capabilities, and we see many attractive and exciting growth opportunities ahead. Let me provide you with some examples. First, we are broadening our product offerings, including solutions across life and health, marine and energy, programs, cyber and property. Second, we are leaning into the strength of our global footprint. This includes growing our client base in existing geographies while engaging with opportunities and winning new clients across Asia, Europe, Latin America and the Caribbean. Third, we are investing heavily in new talent. We're targeting those same products and geographies mentioned earlier, and we see the opportunity to add seasoned production talent that bring experience and expertise in the reinsurance market. We are also leveraging the Gallagher internship program to replenish new talent across our global operations. And fourth, we are identifying and executing on cross-divisional opportunities. Working together is ingrained in our culture, so I believe we are well positioned to leverage existing Gallagher relationships, whether through Gallagher Bassett, our retail business or our MGA and programs operations. Next, let me provide some comments on the reinsurance market environment from midyear renewals. Property renewals favored reinsurance buyers, particularly on cat-related risks, and more coverage being purchased somewhat offset the pricing declines. The casualty reinsurance market continued to reflect concerns over prior year loss development and rising loss trends. Pricing was flat to modestly higher overall, while terms and conditions were broadly unchanged. Those interested in more detailed commentary on midyear renewals can find our first view market report on our website. As Pat mentioned, the Gallagher Re team has had very productive meetings in Monte Carlo. The reinsurance market is posturing for property cat price declines at 1:1. If there is limited to average hurricane activity in the U.S., that's despite the significant first half '25 wildfire driven catastrophe losses because of solid underwriting results and increasing reinsurance capital. When it comes to U.S. casualty, there seems to be a little more capacity optimism than there has been. With reinsurance carriers acknowledging significant rate increases and re-underwriting from the primary insurance carriers. With that said, any risk with U.S. casualty exposure is being scrutinized heavily. We believe client differentiation and data transparency will likely be the key to a successful renewal. So it looks like clients will have more than adequate capacity at the upcoming 1/1 renewals across both property and casualty lines. However, a lot can happen over the next 3 months, particularly as we remain in the depths of the U.S. wind season. Regardless of how the market environment unfolds in the near term, Gallagher Re will continue to perform very, very well into 2026. Shifting to our global M&A strategy. Across our businesses, there remain a tremendous opportunity to grow through mergers. That growth shows up initially as acquired revenue and then helps fuel our future organic growth. According to one of the leading industry consulting firm, there are upwards of 30,000 insurance agencies and brokerage firms in the U.S. alone, and we think there could be another 30,000 or so across our major operating geographies. Most of these firms are smaller, family owned and operated. We believe we are a natural home for these entrepreneurs who are looking to add additional value to their current clients, grow their business and help further advance their employees' careers. M&A for Gallagher is about being better together for the benefit of our clients, where 1 plus 1 can absolutely equal more than 2. Merger partners bring us expertise, market insights, creative thinking and relationships. We get their brands, and that makes Gallagher better. And we have many exciting tools and capabilities to offer our merger partners, including top-notch industry-leading expertise through our various niche practice groups, access to our data and analytics platform, Gallagher Drive, increased breadth of risk management solutions in retail, wholesale, benefits, alternative markets and reinsurance. Fantastic relationships with our carrier partners, including unique product offerings, a more efficient back and middle office through our Gallagher Center of Excellence and a recognized brand name. We are our merger partners' ultimate and final home. They won't have to ever change their name again. They won't be flipped. They won't have to stop investing in the business or make drastic expense cuts to pay rising debt costs. And if they get equity in the business, they notice the exact same type as all other employees and the management team here. Merger partners immediately get our operating playbook, knowledge and allow them to bring more value to their clients, from clients renewing through Gallagher submit to utilizing Gallagher's drive -- to utilizing Gallagher Drive clients like me to compare their insurance program against other Gallagher clients to the quick turnaround time of the certificate of insurance and the accuracy of insurance policies and many, many more. As an owner, you have a choice to make. Get all of Gallagher's capabilities overnight by joining us. Otherwise, you can hope that your clients don't demand it or spend numerous years and lots of money and energy building out your own capabilities. More and more owners are recognizing this, and that is why our deal sheet and pipeline sheet continue to be so robust. So we're confident of our proven M&A strategy. We are sure that it will continue to deliver excellent results and returns for our merger partners, our clients and for our shareholders. Okay. Now I'll turn it over to Bill Ziebell, who's going to discuss our benefits brokerage and HR consulting operations, known as Gallagher Benefit Services. Bill?

Thanks, Tom, and good morning, everyone. I am Bill Ziebell, and I lead our employee benefits and HR consulting business, Gallagher Benefit Services, also known as GBS. My comments today will cover 3 topics. First, I'll provide an overview of GBS. Second, I'll give you some insights into the health and benefits market, our client value proposition and our execution strategies. And I'll conclude with some observations from the first 2 months of the third quarter. Before I dive into my business comments, I, too, would like to welcome all of our new benefits colleagues joining us from AP. You are going to love being part of Gallagher. Okay, to the business overview. GBS was started in the U.S. during the mid-70s and expanded internationally in 2010, starting with the United Kingdom, Canada 2 years later, Australia in 2017, and New Zealand earlier this year. Today, we have significant scale and expertise across services focused on an employer's most pressing needs, including talent, benefits and financial well-being. GBS was the fourth largest benefits broker and HR consultant in the world at the end of 2024, generating around $2.2 billion of annual revenue. And with the addition of AP, our run rate annualized revenue will grow to approximately $2.8 billion. The U.S. remains our largest geography and represents approximately 90% of annual revenues, inclusive of AP, while the remaining 10% or so is predominantly from the U.K., Canada and Australia. Our producers help businesses address their human capital needs by providing solutions and access to a wide range of employee benefits products. These include traditional group insurance coverages such as medical, dental, vision, disability and life. We also have access to various voluntary products that employers can offer to their employees. In addition, we advise on employer benefit plan design, provide financial projections of benefit plans and can also suggest potential cost saving strategies. These offerings combined represent more than 2/3 of our annual run rate revenue. The remainder of our revenue comes from retirement services, compensation advice, executive life HR consulting and other similar offerings that help employers address their human capital strategy outside of health and benefits. Many times, we are competing against local or regional benefit firms that don't have the product breadth or expertise that we have. With that said, we serve clients of all sizes, including large jumbo accounts and provide an alternative to some of our bigger competitors. We also can leverage our multinational consulting business where we can help employers with operations outside of our core geographies. Before diving into some of our growth initiatives, let me talk about Gallagher People's strategy, our client value proposition. It's the approach our professionals take when developing a total rewards strategy that employers can use to attract, engage and retain talent while simultaneously managing costs. There are many employee benefits and rewards outside of compensation and medical coverage. For example, employers can enhance financial well-being through defined contribution plans or offer physical and emotional health products. Our bespoke and tailored approach helps clients achieve their human capital goals. Overall, the macro environment is supportive of growth. Within the U.S., the labor market remains resilient. The number of open jobs has remained above $7 million over the past year, which is well above the number of unemployed people looking for work. With that said, we are seeing more employers focus on employee retention than strategies to attract new talent. And while talent remains the top priority for most organizations, we are hearing from employers that managing rising medical cost is becoming increasingly important. Some employers are looking for ways to support their human capital objectives while managing continued medical cost inflation. These are issues that our professionals are helping them navigate. A few thoughts on health care cost trends in 2025 and into 2026. We are forecasting medical cost to increase in the high single digits over the near term, driven by health care -- health provider consolidation and hospital workforce shortages with self-funded health plans expected to see the highest increase in over a decade. For pharmacy costs, we're expecting trends into the low double digits due to higher utilization of higher-cost drugs, including GLP-1s. And for stop loss, all of these trends are magnified, making medical cost inflation in the mid-teens or higher. The elevated health program price increases are likely here to stay for the near to intermediate term. But remember, our job is to help mitigate these increases through program design and various point solutions and services. A compelling strategy we are taking with prospects is using Gallagher Drive, our data and analytics platform. We have clients provide us information about their current employee population and benefit programs, and we leverage our experts and proprietary data to provide recommended program design and coverage changes. Many times, our experts can find savings while maintaining or even enhancing coverage. So we are using data-driven insights to further separate ourselves from the competition across our HR and benefits platform. We are also differentiating Gallagher from the competition by showcasing our expertise through webinars, thought leadership and various online and print content. We have hosted webinars this year covering topics like HR compliance updates, pension plan derisking, weight loss drugs, employee retention and many others. These online events are on top of the thought leadership pieces we are publishing on a regular basis and drive ongoing engagement with our customers and prospects. Shifting to some comments on July and August. During the first 2 months of the quarter, we saw favorable new business spread within our core U.S. and health benefits. Continued strong demand for our individual products in retirement consulting offerings, offset by more muted demand for our consulting services and solid growth in our international operations. When I combine what we are seeing across our global business, third quarter organic is running in the low single digits. Looking ahead, I believe we are positioned for continued growth. Our experts are delivering on our people strategy value proposition. And when combined with our thought leadership, expert insights, leading tools and products, we believe we can help clients navigate their most important HR and benefit needs. Okay. I'll stop now and turn it over to Scott Hudson, who's going to discuss our Risk Management segment for Gallagher Bassett. Scott?

Thanks, Bill, and good morning, everyone. I'm Scott Hudson, and I lead our third-party claims administration business, Gallagher Bassett. If you're familiar with our financial statement reporting, it is also known as the Risk Management segment. I'll cover 3 topics today. First, I'll provide an overview of Gallagher Bassett, or GB for short. Then I'll give some insight into what we're seeing so far during the third quarter. And I'll finish with some comments on how the business is being positioned for the long term. On to the business overview. GB was formed in the 1960s by the Gallagher Brothers at Sterling Bassett, and has grown into one of the world's largest P&C third-party claims administrators. GB finished 2025 with $1.5 billion of revenue, with more than 80% of that generated in the U.S. and the remaining 20% spread across Australia and to a lesser extent, the U.K. and Canada. We have more than 10,000 employees globally, and most of our claims resolution managers work from home. Our business revolves around adjusting and paying claims on behalf of our clients. So we do not take underwriting risk. In 2024, we closed more than 1.3 million claims and made around $17 billion of claim payments on behalf of our clients. That level of annual claim payments would put us close to 1 of the 5 largest P&C insurance companies in the U.S. Most of our third-party claim adjusting revenue is derived from servicing workers' compensation claims, while around 1/3 comes from liability claims and 5% relates to property. We also service a significant number of Australian disability claims following our late '23 acquisition of My Plan Manager Group. In this business, we closed nearly 5 million claims and paid out more than $3 billion during 2024. On top of this, we have numerous specialty product offerings, including medical malpractice, professional liability, environmental, product liability and cyber, to name just a few. When it comes to property, we focus on specialty classes and complex claims and are not large storm chasers or catastrophe loss adjusters. So across comp, liability, disability specialty and property classes, our suite of products and various offerings enables us to provide claim services for the majority of our clients' exposures. Moving on to our different business segments, which we define by client. First, our large commercial customers, Think Fortune 1000 businesses. These clients have balance sheets that allow them to have large deductible programs or self-insure, and they outsource the claims resolution process to us. This is our most mature and largest client segment. Second, our public sector clients. This includes municipalities, state entities, federal governments and school districts. Third, our group or alternative -- group captives or alternative market clients. These insurance entities utilize our services for the claims handling infrastructure. Our fourth and final client segment is insurance carriers. These are underwriting enterprises that choose to fully outsource or white label a portion of their claim handling operations with around 150 different carrier clients, even more when you include the Australian state work comp schemes. This continues to be the fastest-growing portion of our business today. Gallagher Bassett is one of the highest quality and scaled third-party claims administrators in the world. Customers tend to choose us because of our deep expertise, consistent execution and outstanding service, which leads to superior outcomes. Now a superior outcome in some cases could mean mitigating a loss or avoiding a loss altogether. A better outcome may also result from quicker return to work, more efficient medical delivery or greater employee satisfaction. We tailor our offerings to provide customized service and increased value for clients. If a client's objective is brand protection, customer loyalty or getting employees back to work sooner, we can adapt our services accordingly and execute because our claim resolution managers are organized around client and claim type. That's paramount for customization and quality. So we don't assign a resolution manager that handles slip and fall type claims to a large trucking loss, rather, our offerings are designed to align with client expectations of a best outcome. Our claim resolution managers also have access to proprietary tools and technology that we have developed and that are focused on what matters most to our clients. This includes using our data to guide decision-making throughout the life of the claim, performance benchmarking tools, analytical reports, easy access to claim and financial information and a simple process for the exchange of data and information. Our RMIS platform, LUMINOS, has been recognized as the best in our industry year after year, winning awards consistently. And like other parts of Gallagher, we continue to enhance and improve our systems and processes. We introduced machine learning and other -- we have introduced machine learning and other AI capabilities and believe our learnings have positioned us to further improve risk and claims management performance. A sizable and largely untapped market for our services are insurance carriers. Today, around 90% of our claims are still -- around 90% of U.S. claims are still handled by insurance carriers, and the opportunity outside the U.S. is also significant. Many underwriting enterprises are faced with aging claims systems and recruitment challenges. So outsourcing a portion of their claims handling can help them address both of these. Another potential compelling opportunity for insurance carriers is our specialist runoff claim capabilities. It allows underwriting enterprises to move a large group of legacy claims to our platform, which can result in better outcomes and reduced loss adjustment expenses as carriers reduce or eliminate claims infrastructure that is no longer needed. Moving to mergers and acquisitions. The TPA industry is much more consolidated than the highly fragmented brokerage market. So the opportunity set for mergers is smaller. With that said, over the past year, we have been successful in adding firms that expand our offerings and deepen our expertise. A couple of illustrations. First, our February acquisition of WK Webster, a marine and transit claims specialists. With operations across the U.S. the U.K., Europe and Asia, it expands our footprint and provides comprehensive services to insurers and self-insured corporations globally. Second, our late '24 acquisition of Cadence Law. Here, we added to our capabilities for commercial, financial and professional liability insurance across the U.K. So M&A is used as a strategic tool for GB. Today, we have an active pipeline of potential merger partners across all of our major geographies. Moving to some comments on the third quarter of 2025. Let me provide you with some data points on what we're seeing through August. First, client retention remains fantastic. We don't lose many customers due to our outstanding service, industry-leading tools and expertise. Second, new claims arising. We're not seeing much change in work comp claim trends, while general liability and property claim counts are up slightly. And third, our new business pipeline remains very strong. Our diverse offerings and value proposition of superior outcomes is very important as prospects react to cost pressures across their own businesses. Pulling it all together, we are expecting a solid third quarter, organic of about 7% and adjusted EBITDAC margin of around 20.5%. As we think about the full year, we still believe organic will be around the 6% to 8% range. with margins right around the 20.5% level. That would be another fantastic year. Looking ahead further, I believe the business is in fantastic shape. We continue to invest in new claims resolution managers and further training for our seasoned professionals. We're embracing new technology, including AI and machine learning, that further enhances and improves the claims experience. We're adding new services organically and through M&A, including our enhanced marine capabilities. We're also growing the breadth of our product and offerings. This includes our specialty insurance capabilities to cover more existing and new customer exposures. This is all backed by our efficient client-centric platform making us the provider of choice. And finally, our compassionate and client service-focused culture continues to drive high levels of client satisfaction. So as you can tell, I am very excited about our near- and long-term prospects. Okay. I'll stop now and turn it over to our CFO, Doug Howell. Doug?

Thanks, Scott, and hello, everyone. Today, my comments will come in 2 parts. First part is to provide some comments on Gallagher without AssuredPartners for the third and the fourth quarter. This portion will sound a lot like what we've been doing over -- during our historical earnings and IR day calls. The second part is to update our thinking on AssuredPartners valuation and accretion metrics and then provide some numbers for you to layer into Gallagher as you build your third and fourth quarter models. All right, to the business unit organic revenue recap, which again does not include AssuredPartners. Mike, Patrick and Tom all provided you with solid outlooks on our global P&C and reinsurance brokerage operations. Across each of these businesses, we continue to see a healthy spread between new and lost business. As for renewal premium changes captured within our data, we're seeing property lines lower year-over-year, yet we continue to see steady increases in casualty lines. This is consistent with what we have been discussing with you over the past few quarters. You also heard from the team that in many cases, clients are using potential property savings to opt in and buy more insurance. We are also seeing significant differences by client size. Renewal premium increases are stronger with small and midsized accounts compared to larger accounts. This trend is most apparent in property lines, while casualty increases are more uniform by client size. And as Pat noted in his comments, third quarter audits endorsements and cancellations are still trending nicely positive. So we continue to see a favorable economic backdrop. As we consider all of this information, it feels like our global P&C units combined might post third quarter organic somewhere around 6%. Next, Bill walked you through our employee benefits and HR consulting business. He has seen continued increases in medical cost trends and good demand for our offerings, which is supportive of ongoing organic growth. On the other hand, the possibility of future interest rate declines appear to be causing our clients to delay the finalization of certain large, lumpy life insurance contracts. Accordingly, we see third quarter organic in the low single digits within our global benefits operation. So when I combine P&C and benefits, it's looking like third quarter Brokerage segment organic growth will be around 5%. That's in line with the commentary we provided to you during our second quarter earnings call 7 weeks ago. Three quick reminders for you when you're modeling our '25 organic growth. First, just recall that first quarter '25 and, to a lesser extent, second quarter, that organic had favorable timing that will now flip the other way in the third and the fourth quarter. Second, the third quarter outlook that I just gave you does assume some of those large life cases closed. But that called out about $10 million of revenue and about $2 million -- about $2.5 million of EBITDAC that kind of hangs in the balance there. Third, it's time for our annual reminder. During our third and fourth quarters, we review our ASC 606 revenue deferral assumptions. Remember our dialogue around this. When we improve the speed of our post policy placement date activities, we realize revenue closer to the policy placement date. We had a bit of that in the third and fourth quarter '23 and '24 as we made terrific gains on our servicing efforts. Early indications from our '25 review that's ongoing are suggesting further improvement but perhaps at a slightly lower level compared to '23 and '24. It's still favorable, and the team is doing a great job, just not quite to the same level. Punchline here is it could create some accounting noise, but does not change our view of underlying organic growth. So that brings me back to what we're seeing. We believe rate increases in casualty should continue for the same reasons we've been highlighting for some time, including social inflation and the rising cost of nuclear verdicts, litigation funding and concerns around historical loss reserves. And while third quarter property rates are a bit better than second quarter so far, the future direction of property REITs remains a little hard to predict. So with first half organic above 7% and expected third quarter Brokerage segment of around 5%, we believe that we'll end '25 with full year organic growth somewhere around 6.5%, that would be another great year. As for margins, let me start by saying that we are still in an environment where we can expand full year underlying margins of about 60 to 100 basis points. Underlying margins exclude interest income from fiduciary and AP financing cash, and it also excludes the rolling impact of M&A, which might naturally run higher or lower margins. So there's still good news here on the margin front. As a reminder, first quarter headline margin expansion was 360 basis points, underlying that, that was about 120 basis points of expansion. Second quarter headline margin expansion was more than 380 points, including about 60 basis points of underlying expansion. Looking ahead, we estimate 50 basis points of underlying margin expansion in the third quarter and 50 to 70 basis points of expansion in the fourth quarter. If we were to deliver the second half margin expectation, that would put full year underlying margin expansion around 70 basis points. That would be a terrific year. All right. Now a reminder, for your models on top of what I just said to that, you still need to layer on the impact of interest income. I assume roll in M&A other than M&A -- excuse me, assume roll-in M&A other than AP, which might be a headwind of 10 to 20 basis points per quarter and then layer in an estimate for AP. We've provided our AP estimates in the CFO commentary, which I'll get to in a moment. As for the Risk Management segment organic, Scott just told you, third quarter organic likely to come in around 7%, and he's still expecting full year '25 organic to end up in that 6% to 8% range and margins around that 20.5% level. So I'll shift to the CFO commentary document that we posted on our Investor Relations website. Let's go to our usual Brokerage and Risk Management modeling helpers. But I also encourage you to read the headers and footnotes on each page, which explains what if any figures include or exclude the impact of AssuredPartners. Starting on Page 3, one comment here on foreign exchange relative to the end of July, the dollar has weakened, so please take a look at the updated revenue and EPS impacts that we provided here for the third and the fourth quarter. Flipping over to Page 4 and the corporate segment outlook. Just 2 simple items here to call out for the third quarter, interest and banking costs and the corporate expense lines. We've refined our estimates a bit by each of these by a couple of million dollars. When you flip over to Page 5. This page is showing our $680 million of tax credit carryforwards as of June 30. We expect to realize more about $180 million of cash flow benefit this year, more than $200 million in '26, and then much of the rest of it in 2027. After all these clean energy-related credits are fully utilized, we will still have more than a decade of benefit related to the $1 billion of tax assets we received in conjunction with the AssuredPartners acquisition. Again, this page is just a reminder that these tax benefits are a great cash flow sweetener that -- but they show up in our cash flow statement rather than in our P&L. So let's move to the top of Page 6 in our investment income table. We've updated our forecast to reflect current FX rates and changes in cash balance. Just 3 callouts here. First, our second half estimate takes into account yesterday's 25 basis point cut and an additional 25 basis point cut later in the year. Second, the table does not include interest income earned on any AP cash or AP fiduciary balances. We've included that on Page 7 that I'll cover in a minute. And then third, you'll see third quarter interest income associated with the AssuredPartners financing was updated given that we closed that on August 18. Let's stay on Page 6 and move down to the M&A rollover of revenues. The pink section excludes AssuredPartners and shows we are now expecting around $110 million of third quarter rollover revenue net of divestitures in our Brokerage segment, and about $12 million in our Risk Management segment. And don't forget, you'll need to make a pick for the remainder of '25 and full year '26. All right. Let's turn to Page 7. We've added this page to provide some comments on AssuredPartners. On the left-hand side of the page, the blue section, we provided an update, valuation, accretion and other metrics. The right side, the gray section, is just for convenience. It's just a reprint of the transaction terms that we -- at the time we announced the acquisition last December. I got to say, this transaction has really gotten better and better with time, and you'll see it here. A few things to highlight. First, AssuredPartners annualized revenue is more than $3 billion. That's a nice increase from the $2.9 billion and reflects about 5% organic growth for fourth quarter '24 and the first half of '25, and just a small amount of M&A. Second, when you look at the synergies. We expect to achieve annual run rate synergies of $160 million by late '26 and approximately $260 million to $280 million of annual run rate synergies by early '28. Third, the effective multiple paid for AP is now a little over 10x EBITDAC. That's about a turn better from when we announced the acquisition. That's due to the growth in EBITDA over the past few quarters, combined with a higher level of expected synergies. Fourth, we now expect EPS accretion relative to Gallagher's trailing 12-month adjusted non-GAAP EPS, excluding the impact of AP financing to about -- to be between 12% and 14%. Moving down the page, we're providing third quarter and fourth quarter '25 estimates, again, for AP. These income statement ranges should help you layer on the AP impact to Gallagher's pre AP results. And as I've said before, this is where we've included interest income on AP's cash and fiduciary cash. So a big thank you to all of our colleagues that joined us from AP. It's clear that the business you have built is top-notch. It's growing nicely, extremely profitable and there remains a significant amount of opportunities to drive more value for our clients, our combined organization and of course, for our shareholders. Before we close, let me finish with any typical comments on cash, debt and M&A. At the end of August, available cash on hand was around $700 million. We expect free cash flow generation to be strong over the coming months, and thus, we believe we're in a great position to fund around $7 billion of M&A opportunities through the end of '26 at multiples with a terrific arbitrage. So those are my prepared comments. We're executing our strategic priorities. We've got strong organic growth, a robust M&A pipeline. We're expanding underlying margins, and we've got an unstoppable culture. The team is energized to bring AP into the Gallagher family. It should be another terrific year. So operator, I think we're ready to move to Q&A.

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

My first question is just -- my first question is about the outlook for contingents. If there's no hurricanes this year, right, it's been pretty light or actually no losses so far. And was the benefit on contingents, would that be Q4? Or could that benefit Q3 as well? And then what are you embedding for contingents, I guess, from the absence of hurricanes within the organic guidance? Because I know organic, right, does include the contingent piece.

All right. A couple of things. I'll say right off the top of my head, I don't know the impact of hurricane-related contingents. But I will say, overall, the carriers are posting pretty good results, and I would think that our supplementals and contingents should reflect that.

Also, at least most of our cat exposed properties in the excess and surplus market, it's not with our contingent paying and supplemental paying carriers. So I think if bad hurricane season is not going to dent contingents very much at all.

Okay. And then my second question is on 2026. So I think on last quarter's earnings call, you guys said it felt a lot like this year. Right now, you fine-tune this year to 6.5% in the Brokerage business. Does that still feel like what you would think next year would come in at for brokerage organic?

Yes. Listen, I think it's a good point to make. And when we stood -- when we were talking to you in January, we thought we'd end up the year in that 6% to 8% range, and we're pretty comfortable about that for this year. We're getting ready to do our budget process right now. The team is taking a look at it. So I'll have a better answer for you when we speak again in October. But I'm feeling right now that '26 still can be a lot like '25, right? I think I'm pretty excited about the opportunities. And one thing about that, as we bring in our AssuredPartners colleagues, they're pretty fired up about having our tools and resources. I'm pretty excited about it. It won't necessarily show up in that organic number. But the fact is, I think we're going to get some nice underlying growth from AssuredPartners. And we'll try to give you those numbers about whether AssuredPartners is really growing. But look at it, they've been growing mid-single digits since we announced the deal in December. I gave you that. Their revenues are up from when we bought it. We feel bullish about next year about just being able to grow our total revenues, but AssuredPartners is doing pretty darn well right now.

We've done a remarkable job. I mean when I think about how it is to have a cloud hanging over to you, is the deal going to close? Rumor mills, is this like the Aon, Willis deal. What's going on? That can -- that water cooler talk can distract the whole team. And they've done a good job of keeping the activity to produce no business on the boil. I've just spent 9 -- I've had 9 visits in the last 2 weeks to branches, and I'm telling you the folks are excited to get out and get after it. And what we typically see when we do a smaller acquisition is that first year, we get a bit of an acquisition bump. There's accounts they couldn't write, but they know the people. These people have got a lot to go out and talk about. And remember, they really are 300 tuck-in acquisitions. So I feel really, really good about what it looks like in terms of their production next year. And a lot of hunger for our tools.

And then Pat, just one, or Pat -- or maybe this is more a Doug question. On AP, you guys gave updated synergies. Could you break that down between expense and revenue? And then I'm looking on the AP deal in the CFO commentary where you give EBITDAC, right, for Q3 and Q4 of this year. Does that assume some synergies start to come in? Or is that a pre-synergy figure?

I would say that has a minimum amount of synergies. It's going to take us a while for us to get after some of those opportunities. So I think by the time we get into late '26, we should be running a $160 million kind of run rate. Revenue probably of that number probably comprises half of it, and I think that expenses, just operating expenses, mostly in the areas of real estate, utilization of our sourcing programs, travel and everything, T&E is probably the other half of that. Ultimately, it probably goes more towards cost synergies will be much bigger than the revenue synergies out over 3 years in that number that we've seen. It's -- we're a little cautious on booking too much revenue synergies or promoting that too much. I think we'll get it. I think we'll get a lot more opportunities, but our numbers are pretty conservative on the revenue side.

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

I wanted to ask about AssuredPartners as well on -- just hoping for an update around thinking, excluding synergies over the next couple of years, the expectations on getting AssuredPartners' organic growth profile to look more like the legacy Gallagher. What are you guys thinking there? Do you think you can improve the organic growth?

No question about it. It's going to fall right in line with what we're doing here. These folks are really hungry for the tools. They're very good production people. They're very producer-centric organization, very much with what I grew up with. You get out, you get after it every day. And I've said this to you before, when I started, you took a name off a truck and cold called them. Well, we don't do it that way anymore. We go in with all kinds of information about the prospects, et cetera. This is the type of stuff that we'll be able to feed them and they're hungry for it, and I think you will definitely see the organic call right in line with the rest of Gallagher.

Got it. And just a follow-up on maybe just like the pressure from interest rates you're seeing. I think you guys had flagged the large life case timing as sort of a risk here in the third quarter. How do you see that playing out over the next several quarters? And are you also seeing any impacts from sort of the expectation that interest rates will drop in any other lines of business like construction?

Yes. Listen, I think lower interest rates is going to provide more exposure unit growth, and that will overshadow longer term any of kind of these pauses in certain interest-sensitive products. You brought up a life case, I think it's great to put it in perspective. A great outcome or a paused outcome, we're talking about $10 million to $20 million over the next couple of quarters that might contribute $2.5 million to $5 million, $6 million of EBITDA, that's kind of a -- it's more of an interesting point for an IR Day discussion. Just to give you some flavor on what's going on out there. But it really doesn't impact our EPS all that much or our revenues. If we think we're going to close the year somewhere around $12 billion in revenues, when we're talking about $20 million pretty small. But the interest sensitivity on that, our guys will work through that. Our customers will know sometimes things are -- you've got to make a decision. It's a little bit like home buying. You can't wait forever to buy a house for interest rates drop considerably, you got to buy the house and then you got to hope for a refinancing. And so I think some of these products, our guys will explain the value of getting it done by year-end versus waiting and vetting on it. So I would say it's more of an interesting point for an IR, but I don't know if it's something that I would be overly concerned about.

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

Yes. On the Property business, sounds like property was a little bit better or not as bad in Q3. How much of your better renewal premium was just lower seasonality on 3Q renewals as opposed to some better pricing? That would be one question. And then secondly, where do you think property is going? Is there any -- was it shallowing through the quarter? Do you think it's kind of past the most negative points? Or can we see another dip down if there's no storm activity this year?

I think there's no question. You'll see another dip if there's no storm activity. And there's still capital flowing in to the excess and surplus cat property market. It surprises me, frankly, it's a black red bet in the casino with the roulette wheel, but if that's what we're going to do, ILS activities high, the cat bonds are up, and it is sort of flavor of the month. And as you know, well, Mark, one big storm, that whole thing will change any time.

Yes. Yes. How about commercial auto? Did you suggest there was a little more competition in that or more capacity in commercial auto?

No, that line is still a top line.

And it is seeing. If you -- I heard a new term this week, I had heard, which was there's nuclear verdicts and now there's thermonuclear verdicts. And the transportation line is one that seems to get hit with the thermal nuclear verdicts, which are those super huge losses. So we're not seeing a lot of decrease there.

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

I have a couple of questions for you. First of all, I want to get right after the meat and on Page 7, on the disclosures around the updated disclosures around AP. And I was wondering if you could give us some sort of flavor on the integration costs of $575 million, which is up from $500 million. And can you talk about what portion of that was stock grants? What portion of that relates to pure operational integration? And since you've increased the expense load, how do you expect those integration costs to -- the cadence of those costs over the next 3 years?

All right. So first of all, I think that when it comes to integration costs, half of it is workforce and retention related and half of it is really OpEx related that we're spending. So if you think about it, we're going to spend $300 million on trying to harvest $300 million worth of synergies. So I think that's kind of the way to think about it as you look at that. To me, it's a pretty good bet. If you can get a onetime return on the cost, it still seems like a pretty good opportunity. Remember, we're doing good at this. I think that this is what -- these are 300 tuck-in acquisitions that have some consolidated systems that will be very helpful. Admittedly, the process of going through the DOJ review of having to harness all that information to provide upwards of $10 million -- 10 million different documents and requests that we had to do during that 9-month period, we're a long way along on this. And I think that we're getting smarter about it. We're seeing the opportunities -- and I got to say there's -- this is playing out better than we thought. So yes, another $75 million, maybe split between comp and operating over a 3-year period. Yes, I like it because I like the fact that we're getting close to $300 million of synergies on that. So it's a pretty good bet to me.

Related to that, on the stock piece. So these PE-backed roll-ups when they buy out their partners do a combination of cash and stock. And we're hearing various levels of success on those stock awards that they were giving these PE partners. Then you come along and do this big transaction and you give out stock grant. So I'm trying to reconcile why you had to give out new stock grants, or walk me through the mechanics of your stock grants versus the stock grants that AP had in place for their partners, how that all works.

Well, listen, okay, that's kind of a detailed question. First of all, we give the folks restricted shares when they come in. So they get full value shares at today's amount, and they could watch it on the ticker today, just like you and I are doing it. So it's got a liquidity value to it that's pretty high. Second of all, the financement, as you said, the various levels of success of, I think, if I recall what you said on the PE, and I think you're seeing that right now. Those folks that sold into the PE firms 7 to 10 years ago, something like that, they're probably doing okay. If you sold to a PE firm right now, you better look darn hard at the stock that you have in your hand because it's more like an option from what we're seeing. Not all shares are equal and you got an option. So if that value of that franchise hasn't continued to go up, your options are worth buckets, right? So I think here, you're seeing the difference, and I love the way you said, there's various levels of success. When we're out there in the field right now, we're an open book on what value you're getting for your franchise. There's no hocus pocus here. It's full value Gallagher shares. And why did we give a few hundred million dollars out to our folks because we want them to be part of the team. They spent their live tolling, maybe they sold into a business, maybe they didn't get any value out of the AP -- out of the transaction. This is the right thing to do to put them on equal footing with our folks, so they have stock in their hands. So they get up every day and pull in the same orders with us just because it happened to work for AP in the past, they probably -- some did very well on it. I don't think all of them did.

I think both of you and Doug are hitting on a good point, Greg. There is a range of how successful people were. And we're not trying to match up for the people who didn't maybe make what they are hoping or whatever. But these folks also are very good at looking at future value and we want to get them on the train. And if you look at Gallagher retrospectively in a 10-year TSR basis, you're looking at a 700% gain. And they know that. These folks are smart about that. And so this is our opportunity to say, look, we're not telling you that wait 1 year, 2 years, 5 years and maybe you'll get to participate. We want you to get on this, as Doug said, we want you to get on the team now, and it's not meant to be billions and millions of dollars. It's, hey, you're on the team. Here's the deal. You've got restricted shares. It's full value. You can actually look at the ticker every day and know the value. It's not something that someday, maybe hopefully, it will be worth something. And we think that's a very good process of gluing people into our equity. We're very excited about it.

I just -- one other related topic. One of the PE-backed companies that's well known to everyone on the call and is out there, they're pursuing a strategy of entering the U.S. market by actually poaching teams from various brokers and they're going along offering big comp packages. So could you walk us through noncompetes and nonsolicits and what the risks are to the producers and retention in your organization as this continues to evolve?

Well, first of all, I think you're very familiar with noncompetes, nonsolicits, and we use nonsolicits, and they're stronger in some jurisdictions than others. We all understand that. But let's be very clear. We think that you're an adult, you signed it, you should live up to it. And if you don't, we're willing to litigate it. And if that is in a jurisdiction where the nonsolicit is not as strong, we do -- we will come after you if you steal one item of our confidential information. And nobody's ever smart enough to leave bare. They come in naked and they never leave naked, and we go after them and we win more than we lose. So that's just our experience, and I think the world knows that about us. Now by the same token, people -- this is -- people have the choice to move. And if you're not happy with us or where you are and you're willing to actually live up to your agreements, you can move. And there are people out in the marketplace that do offer alternative work environments. And some of those will be successful and some won't. I look at the financial side of it and what I'm quite surprised is how no one has ever really gotten the gauge when it comes to, it's not a good trade. I've got a $2 million book and X, Y, Z, says to me, bring in your $2 million and I'll hit you with a $2 million check, the first year that bills. Well, first of all, no one ever takes 100% of their book ever. It's more like 50, and if you're really good, 70. So okay, take your $2 million, just discount it to start with. Secondly, you get your check, that's all great. Now you got your $1 million, let's just work with $1 million, that's easy. You got to send $400,000 to Uncle Sam, you're left with $600,000 and you're selling insurance off a platform that gives you, as Doug said, [ buckets ] because you don't have any data, you got no analytics, you have no team backing up. And by the way, they all claim -- all these PE firms claim to have great verticals, that's [ buckets ] because they don't. So now when you compare it with being able to sell from our platform versus theirs and the long-term financial capability of participating in an employee stock purchase plan, getting RSUs and options in our long-term incentive plan and also doubling your book, you've taken a book that's less than you had, you started with -- you're going to make less money over a decade. I'm just surprised people aren't smarter about that. And I find myself, as you can tell, a little irritated by the PE firms that frankly get away with laying it out like it's a better arrangement because they know their line, I know their line, and the stupid producers don't.

Okay. Well, you definitely hit the over on the use of the word [ bucket ], so.

I don't even know if I used it right.

Doug hit it. I was like, that's a good word. I'm going to start to use that word.

Our next question is from the line of Alex Scott with Barclays.

This is Justin on for Alex. The first question I had was on insurance. I think Tom mentioned that you guys had double-digit organic growth thus far. I was wondering if this includes results up to August? And secondly, I think you also mentioned that sort of the white space opportunities with 30,000 agencies. I was under the impression that this was sort of largely contained within the retail brokerage side. But I was wondering if this is also an opportunity on the reinsurance brokerage side as well.

All right. Let me see if I can peel that apart. I think your first question is, is reinsurance growing at double digits? Yes, they are. And I would expect that to continue to go forward. The white space question and the 30,000, I think you have to ask that to me again, sorry.

Sure thing. So I think in the prepared remarks, Tom had mentioned the 30,000 agents -- independent agencies as well for reinsurance. I was just wondering if this is also an opportunity that you guys see in terms of tuck-in acquisitions on the reinsurance brokerage side?

I got it. I got your question. It's not as prolific as they have. We will pick up some nice teams from places that there might be a couple of boutique shop, it won't be -- and you might see more of that on the international scale where there's some smaller. But by and large, you need the tools and capabilities. Any good reinsurance broker, maybe a fact broker here or there that could be bought, but I think, by and large, it is not the acquisition machine that the retail space is.

This is Pat. I think what you're getting at is reinsurance is fragmented as the retail side, and the answer is no. Those 30,000 agents and brokers in the United States that are running firms, that's not people, those are firms, most of them have under $10 million of total revenue, and that is not mirrored in reinsurance.

Perfect. And I think the second question I had was just around the Gallagher Benefit Services. I just wanted to sort of triangulate sort of the low single-digit organic growth that you guys had put out against some of the pricing discussions. I understand there's a lot of things that you guys are doing to help save costs. But I was just wondering if you can kind of help me think through sort of on the one hand, we're seeing sort of continued high medical cost and pharmacy cost trends. And how we should think about sort of the organic growth trajectory.

So we're not connected to the inflation rate with medical costs and you don't really sell many commissioned products in the benefits world. This is predominantly consulting with clients on how to mitigate the cost increases that they're seeing in their benefits package and in assisting them and retaining and acquiring the best people for their business in the market. So you've got a different business here than P&C. You got to understand that.

Next question is from the line of David Motemaden with Evercore ISI.

I had a question just on some of these large life deals. And I guess it doesn't sound like it's a huge number, if I think about it on a full year basis, maybe $40 million to $60 million. But I'm wondering if there's -- if you guys think there's any pent-up demand there, any latent demand of these deals that could boost organic if we do get some rate cuts or more rate cuts? And is that -- are we talking like that could be like is it 0.5 point of organic growth upside for next year? Is it 1 point? Just sort of wondering if you guys could help me think through the sensitivity there.

Got it. Let's think about this business. It's probably a $100 million revenue business for us, and it probably comes in chunks of $5 million per case, something like that. It is a terrific product. It really provides an opportunity for the right type of organization or enterprise in order to buy because it really helps them defuse their pension benefits and also helps them provide retention packages for executives if they're a not-for-profit type organization where you can't give them a stock. So it's a terrific product. It's lumpy. But again, it probably has more of -- you're going to feel the bumps more in our organic calculations than profitability. If you think about this, if the whole business is making us $25 million after of EBITDA a year, you're not going to see that when we're running $4 billion to $4.5 billion of EBITDAC in it. But it does pop up. If you have a $20 million change in 1 quarter year-over-year, it does impact, could impact organic growth by 1 point in the headline. And that's why we've talked openly about this for years, but it can impact it. But when I say that, that changes anything long term, I love the product. I think it's a terrific opportunity for us. Is it going to throttle our overall organic next year because it happens to be up 20% or 30% versus the rest of the business being up in that 6% range, it's not going to really have that much impact. So again, for an IR day, I just -- unpacking it a little bit because it does cause some bumps in the organic. And when you see the headline organic number, that's 25 basis points versus what we say here in the call, that's nothing I mean I guess the -- going to a decimal point on this, it kind of shows up there, but if you did it in the round numbers, it wouldn't show up. So that's the issue. But it is a terrific product. We think about it like a $100 million business for us.

Got it. Okay. That's helpful. And then maybe just on -- I'm wondered more about -- wondering more about just net new business and share gains that you guys have seen over the past couple of quarters, just as RPC has moderated. Are there any stats you guys could share with us in terms of how that's trended? Is that ticking up? Are you guys capturing more share in this type of environment that should be reflected in the organic numbers because I think that is a component when I sort of think about the drivers, nominal GDP pricing, like that is a decent size driver there, too, in terms of like net share gains. So I was hoping maybe you could talk about that.

Yes. Listen, we are a sales organization, so you get some bumps on a quarter or a monthly basis a little bit. But like I said in my prepared remarks -- comments, we're still seeing a healthy spread between new and lost business. And so I've always said that's like 3%, something like that. It hasn't changed that much. I'm starting to feel that the differentiation, as we get into a calmer rate environment, our folks are doing a much better job of demonstrating the value that we provide versus the competition. I believe that should help us with lost business. And let's be honest, most of the time when we lose something, we really don't get out brokered. What happens is they merge, they go out of business or whatever. The amount of out brokering is a smaller piece of that than just the overall nature of businesses coming and going. On the other hand, new business, I think, are where this is starting to show very well. And I think that's our strategic bet that we're going to say, you get more from Gallagher over the long term. And I think we're starting to see some of the early signs of that in a calm market. You can't see that when the market is chaotic.

I'd comment another, and I don't have the stats in front of me. We do look at it every month, though. What's interesting, David, is that our average account on the P/C side now and on the benefit side, both, and our new business is actually larger than what we've seen in the past. So if you looked across the renewal -- the new business book and said, gosh, last year, 10 years ago, average might be something like $25,000 or $30,000 in total revenue for that new business. We're seeing now that number creep up nicely in the triple numbers, $100,000, $125,000. And that shows you, I think, that we are gaining share. Now those are not coming from the Marsh and Aons. We still compete with those 2 about 10% of the time, maybe a little less. So what I believe is happening is we're taking share from the local agent in their largest accounts. So freeze that thought and then look at what we're doing in private client, regular personal lines and commercial small accounts, which we're now very focused on. And those are growing very nicely. Private clients, those accounts that would have more than $5,000 of commission as a private client are up about 25% year-to-date, driving a very, very nice margin. So you look at that and you go in small business, same thing. We've hubbed those. We have an approach that's really global on small business. So we're, I think, gaining share on every aspect of the market, but I can see it monthly in our sales force numbers on the large accounts we're writing.

It's interesting. As you think about share, though, I remember this, if you got $7 trillion of premium floating around the world, and we're touching $150 billion of it, plus or minus on that. So we have no market share globally. And if it grows 3% a year, you need a new Gallagher every year and more. So the fact is that taking share is kind of an interesting way to measure it. But if you say like-for-like, customer-for-customer, yes, we are taking share for this market is unstoppable in terms of its growth.

Well, and if you look at share another way, which leads me to this discussion of what are your strategies to grow your business, what are you trying to do. You heard me say this 1,000 times. We want to grow organically. We want to buy the best operations, become more productive, deliver higher level of quality to our clients and work hard on our culture. Our merger and acquisition activity is share, share purchase. And then, as I said, we tend to get a merger bump because they go out and write a few nice accounts that they couldn't write when they were independent. So I agree with Doug, the share is almost immeasurable because it's so big. But what there is to get, I think we're getting in those 2 ways: executing the strategy of buying the best brokers and at the same time, really pushing the pedal on organic.

You wouldn't see the volume of M&A opportunity, tuck-in M&A opportunities if they continue to compete with us day in and day out. They realize they need the resources.

The smart ones do.

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

First question is on organic and brokerage. When you kind of frame, '26 organic is potentially being similar to '25. I guess, one, would you expect reinsurance to stay as disproportionately strong? I know you guys have been doing a great job taking share there. And then also, would you expect the RPC levels? I know it's only one component, but would do you expect the RPC level trend line to continue kind of moving south of it?

Let me take the reinsurance and then we can talk about the second. But I think reinsurance is clearly a place where advice is critical and data analytics are absolutely critical, and I do suspect that we're going to continue to see share growth there. And I suspect that we're going to see continued revenue growth. Carriers are concentrating hard on producing new business. They're very sensitive to and very smart about cycles and what have you, and they want analytics around that, and there are very few of us that can actually deliver that. We've spent a ton of money since the acquisition of Willis Re a number of years ago on making sure that our platform there is, we believe, superior, and that gives us something more to say in the trade, and the carriers themselves, very, very sharp buyers who want very good advice. And then that allows them to balance their book of business in a way that in the past, they couldn't. So I think you're going to see continued growth there. And I think it will stay concentrated in the group of people that are able to provide it.

Yes. Let me hit the renewal premium change that we're seeing. It's pretty well flattened out from the decreases that we were seeing, let's say, as it came down from second quarter '23 down to fourth quarter '24. It's pretty flat right now. And I think if you take out property, renewal premium change is really in the 4% to 6% range for the last few years. So that's -- so we're seeing kind of a flattener market. That's why I say it's less chaotic. It was chaotic going up. It's a little chaotic coming down. I think it's important also to factor into the calculus that we're in an opt-in stage, and we've talked about this years that where people are opting in for more coverage. I forget what publication came out with they had done a survey about that buyer. People are using the savings to buy more insurance. And we're seeing that in the field at the desk where somebody is now opting in for those coverages that they opted out at. So if you go back 15 years ago, 20 years ago, we talked about opt in, opt out a lot. We haven't really talked about that much over the last couple of years, but we're in that phase where people are opting in, so exposure to buy more insurance, which means exposure growth is mitigating the decreases. You're seeing it in reinsurance. You're seeing it in our personal lines business. You're seeing it in our commercial lines. So we're in that phase now of opting in.

And also, let's remember, even with property included in the U.S. domestic environment, rates are up about 3% across all lines, which is a great environment compared to the past. I mean if you go back to '15, '16, we were starting to be really excited about flat.

Got it. That's helpful color. Switching gears, a couple of questions on M&A. Patrick Gallagher, Chief -- COO, talked about 30,000 brokers overseas, maybe up for grabs over -- in the coming decades. Sometimes we get asked about the TAM on international brokerage. I don't want to ask a question, you don't have the answer to the top of your fingertips. But like -- would it be 30,000 times like low millions of dollars of revenues for these brokers? Or is there like a -- is that a big TAM or a kind of a...

It's a good question. I think we believe that the rest of the world kind of mirrors the U.S. in terms of its distribution. I don't have that factually in front of me for detail. But if you take a look at the English-speaking world, we know that world very well. And sure enough, it mirrors exactly what we see in the United States. It's just small because they're smaller gross written premiums. So the U.K., Canada, Australia, New Zealand, our acquisition activity has been great. We've produced -- we've grown to be one of the top performers in each of those areas. Rest of Europe, we're a little underweight there. We see ourselves growing there by acquisition over time. So when we say 30,000, I think we're basically just saying, we know that's kind of the number in the U.S., we think the rest of the world mirrors that.

I got one other comment on that. As we look at our international brokers and our pipeline, if you look at the percentage of wallet that customers are buying insurance and most of these other jurisdictions, take the U.K. out of it, maybe Australia out of it. But by and large, people buy less insurance in other countries because they haven't caught the liability cancer yet. As they catch that, they're going to need to buy more insurance. I mean New Zealand, I don't know, we own a big -- 25%, 30% of that market and there's really no liability down there to cover down there. So once they unfortunately catch that contagion on that, they're going to have to be buying more insurance. As we look in Spain, I think the Spaniards buy 30% of the amount of insurance that Americans would or U.K. or Japanese would buy. So these are high-growth markets. So while the broker might not be quite as big on average, let's say, globally, on the size. The fact is the opportunity for growth there is compelling.

Going back to Doug's earlier comment. This is the one I just -- I love the most. According to Swiss Re, there's $7 trillion of premium. Okay, let's take Chinese auto out. They're not going to get any advice. Let's just say $5 trillion of that is advisable. Gallagher touched $150 billion of premium last year. The world is getting riskier regardless of what is going on with tariffs and the like, the international, the supply chains are all interconnected, ships have to sail to different ports, that advice is just becoming more and more important. It's not becoming less important. So with that, you're going to be looking to people that have the capability of offering the advice, and it ain't the little guy.

Helpful. And just lastly, just a point in on M&A. I noticed the divestitures number was somewhat material this quarter. You just did -- obviously, you're integrating a big acquisition. Should we be thinking that divestitures number is a number that could be slightly more material than it has been historically?

All right. Two things on the revenue. Here's the thing is I think it's going to be natural that we're going to have some businesses that might fit better elsewhere. We're not in the business of selling businesses. That's not who we are. We're not a portfolio swapping type organization. But from time to time, when we look at it, something can just be a really great piece of business, a great organization, but it can be distracted to the overall effort there. And it might have fit very well with us a long time ago. So there's going to be a big uptick in that note. You might see a little bit more frequency as we take a look at these things. But this was kind of a one-hit wonder type business that I think that would be better owned by somebody else.

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

I want to ask two quick questions. One, on the benefits consulting side, I totally get that it's sort of like -- I think that is a fee per head per month. Is there a sort of typical inflation rate associated with that fee?

That's not associated specifically with that, Meyer. We don't have a CPI adjustment built in our contracts.

We do have some contracts that have it, but the vast majority is more of a broker of record and we negotiate the fees on the front end. And from time to time, we get the opportunity to ask for a raise, things of that nature, but it's not built into our agreements by and large.

The opportunity and benefits is to expand your consulting. So if you come in and you say, "I can help you with health and welfare. Hey, look at your 401(k) and retirement. What are we doing here?" That's where life insurance sense comes in. So when you're touching all of human capital, it's not just selling insurance on one thing or another. Voluntary benefits being another.

And one thing. It does -- inflation in the underlying cost does create more opportunities for our team to bring creative solutions to them that, in many cases, we can pass that incremental effort cost on to our clients and collect more revenues. So right now, if you think about what's going on with GPLs, if you think about other pharmacy benefits, when you look at retaining workforce needs, the placement of your health and welfare insurance is getting more complicated, and our guys do a pretty darn good job of going out there and asking for additional compensation as a result of revenues for us as a result of the additional workload that's on it.

Okay. No, that is tremendously helpful in terms of what I think about it. Second question because I've been struggling broadly with why the industry can't get ahead of commercial auto loss cost, and it's been basically a decade. Is there more of an affordability problem for, I don't know, trucking clients than clients in other industries with less wheels exposure?

I think there's definitely an affordability. I mean in terms of being able to afford their insurance.

Yes, that would be more of a constraint on rate increases than for other lines.

Yes, per rig, that's a big cost to these guys. You bet.

Yes, think about it, drive down your own freeways and what do you see on the billboards? Have you been in an auto accident? Have you've been hit by a truck? Or have you been -- call me, call me, call me. I mean, this is a place where I think that the litigation financing is huge. And I don't want to pretend to understand deeply how much money is financing there. But when you got somebody else that's financing your carrying cost, you're willing to fight a case for 3 years, and that's naturally going to cause costs, first of all, defense costs go up as well as the claim cost goes up.

I think that there's just -- that is an area where the nuclear verdicts have been pretty -- I mean, pretty prevalent. And the losses are tough. I mean, let's be honest. When you run over a family, it's not a little deal.

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

Excellent. Another bite at the apple. In Bill's comments, he talked about medical cost inflation. He said high single digits. He said the self-funded plans are actually higher. I'm curious why -- what's driving that? Is it the drugs that's driving? Usually, you think self-funded plans would have a lower medical cost inflation than traditional risk transfer.

To be clear, what I was saying is the stop-loss renewals are higher than the fully insured. Stop loss, the ACA eliminated lifetime maximum, things of that nature. We're seeing an increase in large claimants, in frequency and size. I think, $2 million, $3 million claims. They're way up. A lot of that driven by increase in cancers, other musculoskeletal problems. But then you add into the whole pharmaceutical expenses, there's a lot of new drugs coming out that are very expensive. And that follows the stop-loss carrier to often reimburse on those plans as well. So in many ways and most times, when you go self-funded, you will find a way to be more cost efficient. We have more levers when you do that. We can find point solutions. We can do a lot of things to help that employer manage those costs. But the stop loss rates are up -- going up because of all these big claims. Our job is to help them find the right market, but also find ways to mitigate those costs. We have a couple of things we're doing out there to help get some of the large claimants off of the health plan, finding better coverage maybe outside of the employer sponsored plan, things of that nature. But that is what our teams do every day. We work very hard to mitigate those costs.

Okay. And then in Patrick's comments, he talked about AI and technology and he -- and Patrick, you mentioned policy checking being performed by AI. If -- I thought you had a lot of that service being provided by the offshore Centers of Excellence for Gallagher. Are you replacing some of those responsibilities that were held in India and elsewhere by using technology now? Maybe you can provide some color on what your -- you meant by that statement.

Yes. No, we're not replacing them. We're just upskilling them. So people, 1,000 people that used to check policies where we can now embed AI into it, we might only need 200 people checking policies. But we really like our people in the Centers of Excellence, and they want to do more. One of the big things about the Centers of Excellence is the ambition level for a promotion. And so we're not reducing headcounts in low labor markets. We're just redeploying them to help with sales, help with service in the U.S., help with service in the U.K. So no, we're not reducing head count in the Centers of Excellence.

Greg, one of the things about that, and I've been involved with this since we started it 20 years ago with 10 people. We're now 15,000 people. But the beauty of it is you can't automate something until you standardize it. And so what we did in moving this work to our Centers of Excellence was standardize it. So a certificate of insurance, wherever you are in Gallagher, those people do it the way they do it in India. That allows you then to bring AI in and support them. If you're trying to take an unintegrated approach, if you're trying to say this acquisition and acquisition, do their own thing, forget it. They can't use the AI.

Yes. And our growth aspirations for what we can do there, these 800 people that Patrick referred to, just our growth will consume them. And so we bring them in. We train them up, they work only for us. They're amazing associates of us. I think we have more CPCU test takers in India right now than we do across the rest of the globe. This is a workforce that's a juggernaut. This is why we feel like more revenue over our tracks. And we talk a lot about organic. But the fact is I think we're going to grow our revenues this year, some place, total revenues will be pushing 30% on it. And I think when we look at it, the opportunity to put more -- we have an industrial strength chassis, and they put more revenues over it and redeploy the folks that are working on it here in the U.S. and U.K. and else place into higher-value jobs and to have that work done over in India. It's a real opportunity for us going forward. And you've been around the story for as long as the story has been going on that point, and we're seeing a lot of -- and then AI will just -- it will just take out the lower value work that they're doing, and they've learned insurance and they'll go on and do a higher value work on it.

And Pat, you said 15,000, that's what you -- the number you have. And what's the percentage of the total?

15 out of 70.

15 out of 70. Got it.

The next question is from the line of Elyse Greenspan, Wells Fargo.

I wanted to just come back to wholesale organic. I'm not sure if you guys gave the number for the quarter because I think maybe it was one specialty. Just give us a sense how the wholesale organic is trending? And if you could give some color on open brokerage binding and the NDA business, like how the Q3 is trending to date relative to the Q2?

Yes. Listen, I think it's a lot like Q2. We're kind of mid-single digits on that. Sometimes, if you want to include our specialty business in London, it's probably a little bit higher if you want to view that as wholesale, which kind of always falls between retail and wholesale, what type of businesses. But that business is healthy. You see the articles that are going on with the E&S market, and we're right there where we need to be in order to capitalize on the growth in that market. [indiscernible] of your question is mid- to high single digits, right? Sorry -- I'm just...

Got it, mid- to high single digits. And then you had said for the third quarter that there was maybe, right, with the brokerage guide, maybe $10 million from the large life deals. What about like within the Q4, right? What are you including within the Q4 organic embedded within the 6.5% full year guide for benefits for the large benefits contracts?

$10 million in the third quarter, I think I said to another question that it might be around same number, $10 million to $15 million in the fourth quarter. Yes. I may have strong on that point, so. Good clarification.

And then I was going to come back, Pat, to something, I guess, you will kind of just answer it in the prior question. But as we think about the Centers of Excellence in India, is using that on the AP business driving the synergies, the expense synergies that you guys outlined today? Or could that be help on the expense side, with just like the AP folks and your Centers of Excellence above the synergies that you've outlined?

Well, clearly, over time, and these things take time, they will use our Centers of Excellence. But they do have relationships presently with other outsourcing companies, and they run a very nice margin as it is. So I wouldn't look to the Centers of Excellence to be something that drives margin to some extent that is astronomical. But it will improve quality, and I believe that's a good sales tool as well. But I think we've got a pretty good hand on what we're looking at. I think Doug has been pretty transparent with what we're trying to generate in savings.

Yes. Let me just thought, one opposite. Next year, on an annual basis between us and AssuredPartners, we're hiring 2,000 people a year just to replace our turnover, across our businesses and APs business, it might be as high as 2,500 people a year. These folks that are coming from AP and the existing folks at Gallagher, if you think about it over the next 3 years attrition. So if work goes to India on the stuff that we do, we still -- of all the stuff we've been pushing in the India, we're still hiring 1,500 people a year organically in our business in these areas just in the U.S. on these specifically -- these specific divisions. So at least, we're going to have a lot of opportunity for these AP folks. I can speak for myself. They've got some terrific finance talent that I'm going to be able to use in my finance teams, IT, human resources, marketing and then you get into the middle office, they have some really, really good middle office customer service account executive folks that are really going to help us in our recruiting. It's hard to hire 1,700 people a year. And the fact is we now have another 11,000 associates that come to us that we're going to be able to look to those folks to fill these positions that actually come up. That will translate to more work going into offshore Centers of Excellence, right? And it really will be a huge quality improvement, too, because we build -- we don't have to retrain somebody. They already know insurance.

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

Mike, are you out there? Are you there?

Yes, I'm here. Sorry. final follow-up on the health care conversation, increasing costs, given we have the pleasure of having Bill on, and I'm not sure if Scott's still on. But we get asked whether the higher health care expense trend is impacting Gallagher's organic. There's a lot that goes into organic, but it doesn't appear that it's providing a boost when we take into account the lumpy life sales, and it's been related. It also -- is there any impact it's having on the organic in the -- in Scott's workers' comp business. It doesn't appear that the higher costs are moving into the comp market.

Mike, this is Scott. You're right. It's not moving the comp market. One of the things I talked about in the past is you've got the regulatory enforcement with the fee schedules that keep comp rates in line. We are seeing in a couple of jurisdictions where they've upped those but not significantly. And then if you look at our compensation, it's rarely tied to the price of the claim. Our fee structure is the way we're compensated, it is not directly connected to that. We're out there trying to work with our clients to mitigate the impact of that. And that's the value that we bring. And hopefully, if we bring great value, that will translate into just growth in the marketplace. But specifically, we're not seeing a lot nor is it directly impacting our revenue.

Yes. This is Bill. And back to the organic, we've grown that business pretty nicely. It's running very, very well. We've invested a lot into tools and resources. We've got some really smart people on the ground. The employers out there in the U.S. are a little strained these days when it comes to the concern of the economy, then you have the medical inflation eating into their profits as well. So there's a lot of hard work being done out there by Gallagher folks to help find savings for our clients and open doors for new opportunities. And I think -- the more we go forward into the rest of this year, more new opportunities will be opening up as open enrollment season and renewal season happens. I'm very bullish on our team. We have a lot of great talent, the amazing work they do pouring through contracts, finding savings for our clients that work is getting around, and I think you can see future growth for the benefits team going forward as well.

Thanks, Mike. Let me close just by saying thank you again for joining us this morning. We appreciate it. I think as you heard from the team today, Gallagher continues to execute. We're well positioned for continued long-term growth and we're very excited. We look forward to speaking with you again during our third quarter earnings call in October. Thank you, and have a great rest of the day.

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