Arthur J. Gallagher & Company (AJG) — Q4 2022 Earnings Call Transcript

Thank you. Good afternoon, and thank you for joining us for our fourth quarter '22 earnings call. On the call with me today is Doug Howell, our Chief Financial Officer, as well as the heads of our operating divisions. We had a terrific finish to cap off an excellent year. During the quarter, for our combined Brokerage and Risk Management segments, we posted 16% growth in revenue, 11.7% organic growth. GAAP earnings per share of $0.83, adjusted earnings per share of $1.86, up 24% year-over-year, reported net earnings margin of 9%, adjusted EBITDAC margin of 29.6%, up 120 basis points. We also completed 17 mergers totaling more than $140 million of estimated annualized revenues in addition to announcing our agreement to acquire Buck, another fantastic quarter by the team and our best fourth quarter in decades. Let me give you some more detail on our fourth quarter performance, starting with our Brokerage segment. Reported revenue growth was 16%. Organic was 11%. Doug will explain it does include a point from our Annual 606 review, Brokerage organic and double digits is outstanding. Acquisition rollover revenues were $107 million, and our adjusted EBITDAC margin was 31.3%, up 120 basis points and in line with our December IR Day expectations, another excellent quarter for the brokerage team. Focusing on the Brokerage segment organic, let me walk you around the world and provide some more detailed commentary starting with our P/C operations. Our U.S. retail business posted 8% organic, our new business was a bit better than last year offset somewhat by less nonrecurring business, client retention and the combined impact of rate and exposure were both similar to last year's fourth quarter. Risk Placement Services, our U.S. wholesale operations, posted organic above 9%. This includes more than 12% organic and open brokerage and about 7% organic in our MGA programs and binding businesses. New business was strong and retention was consistent with last year's fourth quarter. Shifting to outside the U.S. Our U.K. businesses, both retail and specialty combined posted organic of 17% benefiting from excellent new business production, strong retention and the continued impact of renewal premium increases. Australia and New Zealand combined, organic was 12%. Net new versus loss business was consistent with last year and renewal premium increases were above fourth quarter '21 levels. Canada was up nearly 9% organically, reflecting solid new business and retention. Moving to our employee benefit brokerage and consulting business. Organic was 3%, consistent with our December IR Day expectations. New business was similar to last year's fourth quarter and retention remained excellent. And finally, to reinsurance. Our legacy reinsurance operations crushed it with some hard-earned new business wins and quarterly organic well into double digits. And recall that December was the first month our newly acquired reinsurance operations were included in organic. And while off a very small revenue base, they too had spectacular organic growth for the month. So combined, Gallagher Re team continues to deliver outstanding results. So again, Brokerage segment, all in organic double digits. And with our outstanding fourth quarter finish, full year organic came in at 9.7%. That's our best full year Brokerage segment organic performance in decades and even more impressive when you consider we grew on top of the 8% organic we posted in '21. Next, let me give you some thoughts on the current P/C market environment starting in the primary insurance market. Overall, global fourth quarter renewal premiums, that's both rate and exposure combined, were up more than 9% that's consistent with the 8% to 10% renewal premium change we have been reporting throughout '22. Fourth quarter renewal premium changes by line of business were broadly consistent with the first 3 quarters of '22 with 1 exception, which is D&O. D&O continues to be the one area where rates are flat to down slightly, but in some cases, our customers are using the weaker pricing to purchase more limit. Exposures also continue to be consistent with the first 3 quarters of '22, indicating continued strength in our customers' business activity. In fact, fourth quarter midterm policy endorsements, audits and cancellations were better than fourth quarter '21 levels. Looking ahead, these trends appear to be holding. Thus far in January, midterm policy endorsements and audit adjustments are trending higher than last year's level and global renewal premium increases are consistent with the fourth quarter. But remember, our job is to help clients mitigate premium increases and provide an appropriate level of risk transfer that fits their budgets. Shifting to reinsurance and the important January 1 renewals. As we discussed in our 1st View Market report published earlier this month, it was a very late and complex reinsurance renewal season. Not surprising, U.S. peak zone property cat reinsurance saw some of the largest price increases. But it's worth noting 4 additional trends within property cat: First, attachment points were raised broadly; second, reinsurers pushed to remove prepaid reinstatements from some contracts; third, reinsurers, in some cases, were able to reduce coverage to named perils only; and fourth, top layers of many programs saw the largest percentage increases as reinsurers sought to push up minimum premium rates. On the casualty side, prices were up in the single to low double-digit range for most programs, while terms and conditions were more stable. Despite the tough market backdrop of higher prices, lower capacity and tightening terms, the reinsurance team was able to deliver favorable outcomes for our clients. Looking forward, the challenging reinsurance market conditions will, no doubt, put pricing pressure on the primary market during '23, and that's on top of our primary carrier partners dealing with catastrophe losses in secondary perils, including convective storms, floods and wildfires, high replacement cost inflation from raw materials to shortages in labor, social inflation, combined with the easing of the judicial system law, escalating medical cost trends and ongoing geopolitical tensions. So there's good reason to expect continued price increases and cautious underwriting for the foreseeable future. And as I mentioned before, we are not seeing any signs of exposure contraction. Rather, it seems our clients' business activity remains unchanged from the past few quarters. Within our employee benefit brokerage and consulting business, the backdrop for '23 is also broadly favorable. Employers continue to add jobs and wages are growing. So demand for our services and offerings should remain robust. So as I sit here today, '23 could be another fantastic year with brokerage organic growth nicely in the 7% to 9% range. Moving on to mergers and acquisitions. We had a really active fourth quarter completing 17 new tuck-in brokerage mergers representing more than $140 million of estimated annual revenues. I'd like to thank all of our new partners for joining us and extend a very warm welcome to our growing Gallagher family of professionals. For the year, we completed 36 mergers, representing annualized revenue of about $250 million. Additionally, we announced an agreement to acquire Buck, a very complementary business providing retirement, HR and employee benefits consulting and administrative services with estimated annualized revenues of $280 million. We expect the transaction to close during the second quarter and look forward to welcoming our new colleagues. Moving to our merger and acquisition pipeline. We have nearly 45 term sheets signed or being prepared, representing more than $300 million of annualized revenue. We know not all of these will close. However, we believe we will get our fair share. And before I conclude my M&A comments, let me give you a quick recap on our reinsurance acquisition now that we have a full year in our books. We had a fantastic '22, thanks to strong client retention, the expansion of existing client relationships, some great new business wins and excellent growth in our pro rata business. The team is fully assimilated, is delivering for clients and there's a lot of momentum. I believe we're on track for an even better '23. Needless to say, reinsurance continues to be an exciting story. Moving on to our Risk Management segment, Gallagher Bassett. Fourth quarter organic growth was 15.6% as a strong finish to the quarter pushed organic above our mid-December expectation. Core new arising claims increased during the quarter, driven by recent new business wins and continued growth from existing clients. And fourth quarter adjusted EBITDAC margin was great at 19.3%. So putting it all together, Gallagher Bassett finished the year with an adjusted EBITDAC margin of 18.5% and 13.3% organic benefiting from increased claim activity coming out of the pandemic and some really nice new business wins. Looking forward, full year '23 organic should be pushing 10% and adjusted EBITDAC margins should be around 19%. That would be another fantastic year. And I'd like to conclude with some comments regarding our bedrock culture. It's a culture of teamwork, client service and excellence, captured and celebrated in the Gallagher way. It is the culture that drove full year '22 results for our combined Brokerage and Risk Management segments of 24% growth in adjusted revenues, 10% all-in organic, 25% growth in adjusted EBITDAC, adjusted EBITDAC margin in excess of 32% and 20% growth in adjusted EPS. We have a culture that our people believe in, embrace and live every day. It's a culture that will continue to drive us forward. That is the Gallagher way. Okay. I'll stop now and turn it over to Doug.

Thanks, Pat, and hello, everyone. It’s been a fantastic fourth quarter to conclude another outstanding year. Today, I'll begin with our earnings release, highlighting organic margins and the Corporate segment shortcut table. Then, I'll go over our CFO commentary document, point out a few items for the next quarter, and provide a first look at our typical modeling helpers for 2023. I will conclude with some remarks on cash, M&A capacity, and capital management. Let’s move to Page 3 of the earnings release to look at the Brokerage segment organic table. The brokerage organic growth was 11%, which is above the anticipated 9% to 9.5% we discussed in December. There were two key factors for this increase. First, we had a robust finish in our P&C and reinsurance brokerage operations. Second, our annual update to the 606 assumptions added about 1 point to our headline organic. Remember, under ASC 606, we need to regularly update our assumptions related to the services rendered before and after placing an insurance policy. Based on our latest operational analysis, metrics, and studies, more services are being delivered during placement, and post-placement services are being managed more quickly in our lower-cost centers of excellence. This results in less deferred revenue, allowing us to recognize an additional $15 million in revenue for the quarter. While that amount is small compared to our total deferred revenue balance of nearly $435 million, it does boost our organic figure by an additional point. So, to summarize, our fourth quarter organic revenues, EBITDAC, and net earnings experienced a slight uplift, while the adjusted EBITDAC margin remained largely unchanged. Thus, we achieved 11% headline organic growth, 10% when controlling for 606, and 120 basis points of margin expansion, which is an excellent performance. Looking ahead to 2023, we are not observing any slowdown in our clients' business activity or signs of price moderation from the carriers. Furthermore, we still face inflation in loss costs and imbalances in the labor market. Coupled with our client-focused sales and service culture, we are projecting organic growth in the 7% to 9% range for 2023, consistent with what we shared during our December Investor Relations Day. The same applies to our margin outlook for 2023. We are confident in our December commentary, anticipating about a 50 basis point margin expansion at 6% organic growth. Additionally, fiduciary investment income could provide a margin boosting opportunity, provided there is not a significant increase in wage and cost inflation. One more thing to note for 2023 is our acquisition of Buck, which we announced on December 20. This business operates at an adjusted EBITDAC margin of around 20%, so please adjust your future M&A revenue predictions accordingly. Moving on to the Risk Management segment, the organic growth table shows 15.6% growth for the fourth quarter and full-year organic growth of over 13%. Some of this year's growth stems from clients regaining business activity as they recover from the pandemic. For 2023, we expect organic revenue to approach 10%. The Risk Management adjusted EBITDAC margin was 19.3% in the quarter and 18.5% for the full year. We are looking forward to a further increase in 2023 with margins around 19%, even as we continue to invest in enhancing client experience and improving analytics and tools for better claims outcomes. Another year of double-digit growth and margin expansion would be remarkable. Turning to Page 8 and the Corporate segment shortcut table, our adjusted results landed at the favorable end of our December Investor Relations Day forecast. You will also note two non-GAAP adjustments this quarter: $5 million in after-tax M&A transaction costs, primarily associated with Buck, and a $31 million after-tax gain from legal and tax matters. Now, let's shift to our CFO commentary document available on our Investor Relations website, starting on Page 3. Regarding the fourth quarter, most of the brokerage and risk management results align closely with our December estimates. On the right side of the page, we provide our initial look at 2023, highlighting a few key points: First, foreign exchange fluctuations due to last year’s midyear strengthening of the U.S. dollar may cause some volatility in how FX impacts our brokerage and risk management results in the first versus the second half of 2023. Please take these factors into account as you prepare your models. Second, regarding our adjusted tax rate, with the U.K. corporate tax rate increasing to 25% effective April 1, we're sharing our current estimate for the full-year 2023 tax rate. This will affect our Brokerage segment more than our Risk Management segment, given the size of our U.K. retail London specialty and reinsurance brokerage operations. Additionally, the left side of this page serves as a useful reference for selecting quarterly margins, considering our seasonal patterns. When you make your margin projections, recall that we were still in the Omicron phase of the pandemic during the first quarter of 2022, so we don’t expect as much margin growth in the first quarter compared to the second, third, and fourth quarters of 2023. Moving to Page 5, this page emphasizes the incremental cash flows from our clean energy investments in the coming years, which will be reflected in our cash flow statement, not the P&L. As of December 31, 2022, we have $773 million in available tax credits and anticipate using about $180 million to $200 million in 2023, with an increase in 2024 and beyond. This is a significant cash flow enhancement that will help finance our M&A activities. The calculations may suggest that an additional $773 million of free cash, along with another $70 million of recurring EBITDAC at a 10 to 11 times multiple, could create a favorable arbitrage for our current trading multiple. On Page 6, you’ll find the rollover revenue table. For the fourth quarter, rollover revenues exceeded our December guidance, primarily driven by reinsurance. In the last three weeks, cedents have finalized their 2022 accounts, and we have updated ceded premium figures, leading to additional commission revenue for the year. For clarity, almost all this upside is excluded from our organic results as it likely pertains to pre-December 1, 2022, which marked the one-year anniversary of the acquisition. Additionally, it should be noted that not all this revenue will add to the bottom line due to production and incentive compensation expenses associated with it. Still, it's great to see this increase. On Page 6, the bottom table shows our actual reinsurance acquisition results. In a transitional year, the team surpassed our pro forma expectations, which is impressive and a testament to their hard work. Finally, as we discuss cash, capital management, and future M&A prospects, we finished December 31 with about $325 million in available cash. Our current cash position, along with strong expected cash flows and incremental borrowing, puts us in a favorable position for upcoming M&A opportunities. We estimate needing around $3 billion to fund potential M&A in 2023, which will include the acquisition of Buck. Additionally, our Board of Directors recently approved a quarterly dividend increase of $0.04 per share, resulting in an annual payout of $2.20 per share, representing a 7.8% increase from 2022. With a strong organic outlook, margin expansion potential, and a growing M&A pipeline, I believe we are exceptionally well positioned for another great year in 2023. I want to thank the entire Gallagher team for another excellent quarter and outstanding year. Back to you, Pat.

So my first question is on the reinsurance market and the growth you saw there. It's obviously really strong end of the quarter. And I think you've talked about high single-digit growth there for 2023. So did the end of the year kind of change how you think about that level of growth? Or how should we be thinking that going into next year?

I think we are definitely going with some nice momentum. I wouldn't bank on some incremental big jump. But what I like about the momentum is when you come through a time like we did in this fourth quarter, it's interesting because you actually become much more valuable to your clients. And it's not an easy time when you're tussling back and forth with the cedents and the reinsurers trying to get these things done, terms are changing. Attachment levels are changing. But in the end, as I said in my prepared remarks, we got the placements made, and I think we are in a very strong position going forward, number one, with those clients, but also with the opportunity to pick up some new business.

Great. And then my second question within brokerage as well. I noticed the compensation ratio as a percentage of revenue dropped pretty materially. And I think you'd called out some back-office saves, lower benefit costs, offset by some hiring. Is there a way you can call out how much each of those had an impact? Or where I'm trying to go with the question is how much additional leverage do you have to kind of bring that lower in 2023?

Let me attempt to recall that from memory. I don't have the exact figures in front of me, but it seems the decrease was around 180 basis points. About one-third of that is due to the ongoing efficiencies we've achieved by shifting work to our lower-cost centers of excellence. We've also seen some gains in technology in that area, which have helped us enhance our workforce effectiveness without needing to add more headcount as a result of those technology investments. However, I'm currently unable to recall the details regarding the other one-third impact.

Got it. Is there any change to the compensation structure that you make in this market, too? I know there's some changes just, I guess, higher organic accounts, things like that.

No. We're pleased to pay our people for what they do. And we haven't messed with that compensation arrangement with our production force, in particular, in well over a decade.

I want to follow up on the almost 10% 2022 brokerage organic results. Would you mind giving us some more color as to how pricing and exposure and net new business drove that year-over-year acceleration in organic? And then from where you sit today, how do you see those drivers changing in 2023?

So are you asking for the quarter? Are you asking for the full year? Sorry, just so I've got the baseline.

Yes, yes, for the full year.

For the full year, right? So when I look at rate and exposure, as I did, our new business, we had a terrific new business here. So I'll say that our net new business spread was about 4 points and the rest of that is probably rate and exposure, remember between that. So maybe, again, you think about it, 1/3, 1/3, 1/3 net new business over loss business is 1/3, rate was 1/3 and exposure unit growth was 1/3.

Got it. Okay. And then as a quick follow-up, do you have any comments on the degree to which fiduciary investment income will impact margins next year, kind of thinking about that 50 bps of expansion on 6% organic, how much that move from fiduciary investment income?

I believe that if we achieve 6% organic growth, we can expect approximately 50 basis points of margin expansion. Investment income could enhance that to some degree. However, I currently do not have a clear understanding of the size of our hiring needs and raise pool for next year. We know our budget, so I cannot provide a specific figure at this time. If you can provide an estimate for next year's wage inflation to support our employees, I might be able to offer a more concrete number, but I don't think we're prepared to do that just yet. I should have more information to share in March.

I'm going to focus on the margin commentary. In your press releases on Page 4, you mentioned the operating expense ratio and some of the pressures related to it. With your guidance suggesting around 50 basis points of margin expansion for 6% organic growth, how should we view the factors impacting your capacity to expand margins? Additionally, regarding the margin expansion, could you clarify which business unit will contribute to this? Will it come from international operations or the employee benefits sector? Where do you anticipate the improvement will arise?

Right. A couple of things. The operating expense ratio increased in the fourth quarter compared to the fourth quarter of 2021, rising by about 30 to 40 basis points, with a specific increase of around 40 basis points. The details behind this increase primarily involve travel and entertainment costs, some consulting expenses, and investments in technology. I would estimate that approximately half of this rise is due to investments, while the other half relates to inflation affecting travel and consulting costs. As for the outlook for next year, we need to consider that the first quarter still fell within the Omicron phase of the pandemic, so we expect to see a slight uptick in travel and entertainment expenses during that time. However, we don't anticipate significant increases in the second, third, and fourth quarters. We are projecting a 50 basis point expansion for next year, with most of that expected to materialize in the latter three quarters rather than the first. Was there another part to your question, Greg?

It was just when I think about within the Brokerage business, the different business units, the employee benefits, the international the retail RPS, when you look at it that way, where do you think the opportunity is for margin expansion in the context of that 50 basis points or so guidance?

Yes, it's fairly consistent across all units; there isn't any particular one that stands out as a laggard.

Can you provide details on the revenue flow and margins for Buck consulting? Is there a specific trend in the first quarter regarding revenue or margins? Additionally, will this be included in the Brokerage segment?

Yes. So it will be part of our Brokerage segment and our Employee Benefit operation. Greg, we don't think we're going to close that in the first quarter. We think it's more of a second quarter close at this point. I don't really have a good quarterly spread that I would feel comfortable giving on the call today for that because we have to apply our study on conforming the accounting principles to theirs, and apply our 606 assumptions to it. So I need a little more time to work through that. And we just signed the deal 30 days ago, and I just need to until March to give you that quarterly spread.

We heard one of your peers discuss participants pushing back on capacity or trying to restructure commissions. I was wondering if you're experiencing something similar.

No.

Not really.

Not really.

We have definitely seen a change in the competitive environment vis-a-vis mergers and acquisitions in the last 60 days. I'm not going to sit here and say it's not still competitive, it is. But I would say that the number of bidders is reduced, and we are seeing maybe, what I would call, a more attentive seller to exactly who the buyer is, what the culture is, the strategic value of that buyer that maybe existed 12 months ago.

Yes, we usually see a little bit of an uptick in the fourth quarter as people push to get things done by the end of the year, sometimes that's driven by tax or other financial planning that the sellers want to get done. But if there is a noticeable change in the market. I would say that we feel very good about our pipeline right now. There are some names on there that are really nice to have looking at us. So a little bit of an uptick in the fourth quarter, naturally, change in market competitiveness a little bit. But I also think it's going to be pretty strong in the first couple of quarters of the year relative to what we saw this year, in particular.

Maybe sticking on the M&A point. You guys seem pretty optimistic with the pipeline, and you have announced a good number of deals of late. But if I look on the CFO commentary sheet, you also write the multiples you're seeing on deals went up 1x, right, 10 to 11x from 9 to 10, what are you seeing, I guess, in the market that's driving up multiples a little bit?

I think the current mix shows that we are seeing some high-performing names on the list where the growth factors are slightly larger than they have been in the past. However, I wouldn't overreact to this change in either direction.

And then with your margin guide for kind of the 50 to 60 basis points of expansion, are you assuming any wage inflation embedded within that guide?

Yes, we expect to provide raises this year similar to the last two years, and that is accounted for in our projections. Additionally, during the December Investor Relations Day, I mentioned that there could be around 10 to 15 basis points related to our shift towards Software as a Service, which might increase that to about 60 basis points. However, the accounting treatment of where those expenses are recorded does impact this slightly. I believe we discussed this in December as well.

And then on the reinsurance side, strong into the year, great rate increases we saw at January 1, but also we've seen higher retentions by primary companies. And I don't think we've really been in a similar environment, right, where you have 40% price increases with perhaps less premium to the market. So when you put that all together, does '23 feel like an environment where you could show double-digit organic growth within your reinsurance business?

Yes, I think we could.

My first question is on the U.K. retail and specialty organic of 17%. Obviously, very strong. And I was just wondering if you could talk a little bit about what's driving that growth.

Yes. As we said, a very, very strong new business in specialty with tenant rate increases. And as we've talked earlier, there were some term changes and the like. But also our aviation specialty team just crushed it this quarter in the U.K. And our retail operation across the United Kingdom did extremely well also. But I just think the whole London-based specialty team, reinsurance aviation just is set a phenomenal close to the year.

That's great. And just a question on the labor market. A number of companies are instituting layoffs. I'm just curious what type of unemployment rate is embedded in your organic guide of 7% to 9%. And if we did start to see some erosion there, at what point in the year do you think we would start to see that impact potentially in your organic growth?

Let me return to our prepared comments. It's quite interesting. First, we don't participate significantly in the high-tech Employee Benefit sector, and it isn't a major segment for us regarding the layoffs that have been highlighted in the news. As I mentioned in previous quarters, we're already being covered in those reports. We all see the same news. However, our middle market core business is performing extremely well. We're consistently reporting strong midterm endorsements and policy changes. Our renewals and audits indicate that our middle market retail property casualty benefits business is thriving. Truck counts are increasing, and our trucking business remains robust. Our workers' compensation renewals show that payrolls aren't declining. Of course, if there is a global recession, it may affect us, but currently, we are not witnessing that. So if you inquire about potential impacts on growth going forward this year, our current plans do not anticipate any recessionary pressures, although that could change.

This is Andrew on for Yaron. Just looking at headcount in Brokerage, it looks like there's been a pretty good pickup year-to-date and in the quarter specifically. Can we kind of talk about what's going on there? And roles you're hiring and the degree to which those hires have been reflected in organic yet?

Yes. A significant portion of those numbers is heavily influenced by our M&A program. As we finish the year strongly with M&A, these figures will appear in the December numbers and not in last year's December figures, which will also affect the quarter.

And I would want to comment on that as well. We are not undergoing an organic surge in new hiring. We have a very strong internship. We bring on a very strong number of young people every year. Of course, we're always looking for good solid production hires, but you are not seeing our organic headcount surge beyond the M&A activity that Doug just mentioned.

Great. And as we think about supplemental and contingent commissions, I suppose a part of that is based on underwriting profitability of those programs. So when you think about '23, is there kind of a loss trend that you bake into forward guidance there? Or maybe more broadly, what is your view on loss trends over the course of the next year?

Are you're talking about the carriers loss trends?

Yes, our contingents.

Right, that relates to the contingents.

Yes, contingents.

Another P&C CEO suggested he didn't see as much increase in property rates in the fourth quarter as you might have expected in light of the reinsurance market dynamics, but maybe that's something that builds up as the time goes by is the higher reinsurance rates do directly impact the carriers. Would you share that observation? Do you think property could get firmer on the primary level?

I think property could get a lot firmer. I would say in the fourth quarter, it was very firm, in particular, in anything that had to do with Coastal, any area that was exposed to wind and fire. This market in terms of property is very difficult as it exists. And, yes, the changes to reinsurance at 1/1 will filter additional pressure onto the retail buyer. And we are out early telling our retail buyers about this. And it is going to get more difficult in what is already a very extremely difficult situation.

Yes. If you think about our fourth quarter, Ian impacted us right at the beginning of the fourth quarter. There were replacements made in October and November that had not fully reflected the $70 billion loss.

Yes. Yes. And then, Pat, last quarter, you mentioned a potential spillover effect on casualty. I don't know whether you updated your commentary on that this quarter, but do you think the reinsurance market, how much of an impact, I think, it's having on casualty? Mark, I don't have a number on that yet. I just think that it's possible that in order to pay for some of these property increases, other lines are going to have to be tagged. And I think I'll be able to feel that since it maybe have a better number around that at the end of the first quarter. And I may be wrong on that. At this point, I'm not being told by our carriers that that's happening.

I just wanted to follow up on Elyse's question regarding the potential for double-digit growth in reinsurance. I'm curious if we should consider that achievable with the current capacity or if we might need additional capacity in the market to reach that goal.

I believe achieving that is possible with our current capacity. I was very pleased to hear from our reinsurance team that in late November and early December, they expressed concerns that some placements might not get completed, which would have been problematic for everyone involved. I'm truly proud of the team that worked hard to unite the programs for our clients as January began. Considering our existing capacity and the largest renewal season is now easing, I believe future increases could come from this capacity. That said, any additional capacity would certainly be appreciated, utilized quickly, and would contribute positively. Alright. Then let me just add a few comments as I wrap up. I want to thank you again for joining us this evening. Obviously, I'm very pleased with our '22 financial performance. I am still very excited about our future. I want to thank our clients for their continued trust, our 43,000-plus colleagues for their passion, hard work and dedication. And finally, I need to mention our carrier partners. They do play an integral role in meeting our clients' insurance and risk management needs. And we look forward to speaking with you all again at our March IR Day. So thank you for being with us, and we'll talk to you then.