Good morning, welcome to Arthur J. Gallagher & Co.'s Quarterly Investor Meeting with Management. Participants have been placed on a listen-only mode. Your lines will be open for questions following the presentation. Today's call is being recorded. If you have any objections, you may disconnect at this time. Some of the comments made during this investor meeting, including answers given in response to questions, may constitute forward-looking statements within the meaning of the securities laws.
These forward-looking statements are subject to certain risks and uncertainties discussed during this meeting or described in the company's most recent earnings release and Form 10-K and 10-Q filings. Actual results may differ materially from those discussed today, and the company undertakes no obligation to update these statements. It is now my pleasure to introduce J. Patrick Gallagher, Jr., Chairman, President, and CEO of Arthur J. Gallagher & Co. Mr. Gallagher, you may begin.
Good morning, everyone, and thanks for joining our quarterly investor meeting. These quarterly events provide an opportunity for the management team to tell the Gallagher story, dive deeper into our different businesses, and give some more recent data points on our business performance. Let me walk you through the format for today's meeting. I'll begin with some prepared remarks covering current insurance market conditions and provide some high-level indications on our Q1 and full year expectations.
Our business leaders will speak for five to seven minutes each, providing background information on our global business, insights into their respective markets, and cover relevant operating initiatives. Our leaders will also give you some indications on how the first two months of the quarter have played out thus far. Doug Howell, our CFO, will close out the prepared comments with some financial commentary.
Our prepared remarks should last around an hour. After that, we will open the line to the group dialed in for Q&A. Moving to an overview of the market backdrop. The global P&C insurance market overall continues to look a lot like 2022, meaning it is firm to hardish in nearly every line, and we continue to see price increases. Sure, there are a couple lines such as public company D&O, where it's down a bit. Again, we were seeing that too in 2022, no real change in the market. The labor market remains extremely tight. U.S. businesses added more than 800,000 jobs in the first two months of the year, and there are still more than 10 million job openings. We are not seeing any meaningful economic slowdown within our data.
Rather, claim counts, which are typically tied to business activity, are increasing year-over-year, and our daily revenue indications related to policy endorsements and audits are showing year-over-year growth through the first two months of 2023. Fourth, yesterday we did a poll of our U.S. field leaders asking them if they are hearing concerns from their clients about the banking situation, both directly to their own cash balances and indirectly related to their future business outlook.
There were next to no replies of any concern. Might be early, we are not hearing any noteworthy concerns. That said, this might naturally cause business owners and managers to lean even harder on our experts to help them understand the risk, strategies to mitigate risk, and products available to transfer risk. I think our talented professionals are extremely well positioned to deliver on that front.
Shifting to the insurance, pricing environment and our expectations for the Q1 brokerage segment organic, starting with the primary PC insurance market. Renewal premiums continue to increase across nearly all of our major geographies and product lines around the globe. Through the first two months of the Q1, renewal premiums, that's both rate and exposure combined, are up more than 8%. That's consistent with Q1 last year at 8.4% and the 8%-10% renewal premium change we have been reporting throughout 2022. I mentioned public D&O. Important to note that while rates are down a bit, that is being offset on an aggregate basis by accelerating property renewal premium increases. Our customers' business activities remain strong, and we are seeing net additions to coverage through midterm endorsements.
The favorable trend of higher midterm policy endorsements, audits, and cancellations has continued through the first two months of 2023. It's a tough environment for our primary insurance risk-bearing partners. They are grappling with social inflation, increases in property claim frequency, and replacement cost inflation, all of which are large unknowns and have the potential to reduce underwriting profitability. That's before any impact from reinsurance conditions, where most lines are seeing firming or hardening conditions, further pressuring profitability on the primary carriers. We aren't seeing and don't expect a meaningful slowdown in primary rate increases. On the benefits side, the U.S. labor market remains tight and proving very resilient despite actions from the Federal Reserve. While expectations for the labor market to loosen a bit, there are still nearly two job openings for every person unemployed and looking for work.
It appears the labor market imbalances are likely to persist, maintaining the favorable market backdrop for our benefits business. As we progress through 2023, we expect strong demand for our consulting services as employers look to attract, retain, and motivate their workforce. Increasing global renewal premiums, a tight labor market, strong business activity, and increasing claim counts and rising severity, there should be robust demand for our expertise, products, and solutions. As we sit here today, it is looking like we might deliver Q1 brokerage segment organic in the 8%-9% range. That's right in line with our full year guidance range of 7%-9%. With new business and still rising claim counts, it looks like our risk management business could post Q1 organic of about 12%, better than our late January expectation.
That level of organic in both our core businesses would be fantastic. Moving to mergers and acquisitions. Gallagher is a great place for entrepreneurial owners looking to grow their business. We can help merger partners grow more quickly through expertise, wider variety of products, and improved service, all while providing a platform to help further advance their employees' careers. Our branch managers and regional leaders help to identify potential merger partners. We also have a growing staff dedicated to finding M&A opportunities. There remains strong competition from both strategic buyers and private equity, although we are seeing some early signs of a mood shift away from PE. When I look at our tuck-in M&A pipeline today, we have nearly 40 term sheets signed or being prepared, representing about $300 million of annualized revenues.
We know we're not going to close all these, but we do believe we'll get our fair share. Turning to a quick comment on culture. I'm proud to announce that earlier this week, Gallagher was recognized as the world's most ethical company for 2023. It's the thirteenth time we've received the award, and this year we are again the only insurance broker recognized out of the 135 honorees. This recognition directly reflects our commitment to doing what's right by our clients, communities, and our people. It's the Gallagher way and what continues to set us apart. I'd like to thank our more than 43,000 colleagues for all they do to make Gallagher such a special organization and one of the world's most ethical companies. Let me give you some quick sound bites on what you'll hear from the team today.
Mike Pesch will tell you our U.S. retail PC business is performing well. Net new recurring business production is a bit better than last year, while we are experiencing a lower volume of non-recurring transactional business. At the same time, renewal premium changes are in mid to high single digits and midterm policy adjustments are trending higher year-over-year. Patrick Gallagher will tell you our non-U.S. retail PC operations are performing exceedingly well. Excellent new business production, improving retention, renewal premium increases in the high single digits, a small tailwind from positive midterm policy adjustments and other endorsements. Joel Cavaness will tell you his wholesale brokerage businesses are expecting strong Q1 performance. Open brokerage renewal premium increases are nicely in the teens, while binding renewal premiums are up in the high single digits.
Tom Gallagher will tell you that our specialty PC and reinsurance units are also performing extremely well. Q1 organic growth is excellent in the double digits. Reinsurance pricing has moved higher, mostly in cat-exposed treaties, while our aviation and construction teams are seeing a nice uptick in growth from new business and exposures. You will hear about our employee benefits and HR consulting business from Bill Ziebell. He will tell you new business and retention trends within our core health and benefits businesses are strong, while demand for our consulting practice remains excellent. He will also give you an update on our announced agreement to purchase Buck. Scott Hudson will tell you our third-party claims administration business, Gallagher Bassett, is expecting another fantastic organic quarter due to new business, stable retention, and rising claim counts.
Our CFO, Doug Howell, will bring it all together and tell you what we think this means financially for our Q1 and full year 2023 results. I believe we are executing extremely well on our strategic priorities and are well positioned to deliver another quarter and year of excellent financial performance. I'll stop now and turn it over to Mike Pesch, who's going to discuss our U.S. retail PC brokerage operations. Mike?
Thanks, Pat, and good morning, everyone. I'm Mike Pesch, and I lead our U.S. retail property and casualty brokerage business. My prepared remarks this morning will touch on three topics. First, I'll provide an overview of our U.S. retail PC business. Second, I'll discuss current insurance market conditions in the U.S. And third, I'll give you some early indications of how the Q1 of 2023 is shaping up so far. Starting with an overview of our U.S. retail operations. In 2022, we generated more than $2.1 billion of revenue, making us the third-largest PC retail broker in the country, according to Business Insurance. We place more than $15 billion of premium annually and have around 8,500 employees, including more than 2,200 in our centers of excellence.
Our U.S. retail business serves clients of all sizes, small, medium, and large, but we are more concentrated in the middle to upper middle market. These types of clients' insurance programs are typically between $100,000 and $2.5 million of premium, which translates into roughly $10,000-$250,000 of annual revenue to Gallagher. We also have a meaningful and growing large account client list and a formidable small commercial, personal lines, and affinity customer base as well. While we touch clients of all sizes, we find the middle and upper middle market particularly attractive, and that's because these clients typically don't have a dedicated risk management professional, but have more complex insurance needs. They rely on our experts to identify, evaluate, and manage risk across their enterprises, and we find the right markets to place insurance coverage on their behalf.
That aligns very well with our client value proposition called CORE360°. CORE360° focuses on the six key cost drivers of the total cost of risk for risk management programs. This approach resonates with clients looking for risk management and insurance solutions and embeds Gallagher inside our clients' business. Our ability to analyze the key cost drivers is strengthened by our niche practice groups. Over 30 niches are different product and industry verticals where we have subject matter experts with specialized knowledge and deep insights.
Leveraging these practice groups, we better understand the unique risk characteristics of different businesses and can tailor products and services to those industries. Our niche leaders work together with our producers in the field, making sure we are identifying and addressing the distinct risks that those industries are facing through focused offerings and coverages. Take cyber coverage, for example.
We have over 20 cyber coverage team members, including claim professionals, policy language experts, and placement specialists that work hand in glove with our producers to ensure the cyber coverage purchased captures the specific exposure that clients may have. We believe this tailored approach to risk management and insurance procurement is a competitive advantage, benefiting client retention and new business growth, and ultimately translates into organic growth over the long run. Additionally, our industry experts, thought leadership, online tools, and web-based industry discussions continue to generate new client leads and revenue opportunities. Through early March, we have hosted nearly 30 webinars this year. This includes our CORE360° Insights series in partnership with RIMS and various other webinars on topics such as managing weather and supply chain risk to food and agricultural exposures, all of which are available on demand.
We are continuously adding relevant and timely content to our website, including our CORE360° FlashCast, condensed webinars on various industry-related items. We are able to deliver this thought leadership to clients with a click of a mouse, so our clients and prospects have the ability to tap into our network of experts 24 hours a day, seven days a week. Anytime a client or prospect engages with any of our online content, our producers are notified.
On the technology front, on top of enhancements to SmartMarket and Gallagher Drive, we have launched Gallagher Submit. It's our online client renewal platform. Here we are harnessing technology to reduce the friction in the renewal process for clients and making it easier for our carrier partners to consume the information. A lot of exciting things going on in U.S. Retail. Moving on to mergers and acquisitions.
We have a proven long-term track record of successful tuck-in M&A. This approach continues to be an important part of our shareholder value creation strategy. Typically, we are targeting firms generating less than $10 million of annualized revenues and look for teams that share our company's values around client service and ethics. Entrepreneurs that want to be with Gallagher for the long term know how to grow their business and are already operating at attractive margins.
Many of our merger partners are the result of relationships formed at the local branch level and have been developed over time. We know the owners well, have seen how they compete, and have a good understanding of their culture. During 2022, we completed 14 mergers and have a really nice pipeline of opportunities across the country. I think 2023 will be another successful year for us.
Moving on to my second topic, the U.S. retail insurance pricing. overall, the pricing environment market conditions continue to be challenging for many of our customers. Depending on line of business, renewal premium increases are entering their third or fourth year, thus far here in the Q1, renewal premium changes, that's both rate and exposure combined, are up more than 7%. That's below full year 2022 levels on the surface due to premium decreases in D&O and a higher proportion of workers' compensation business in the first two months of the year. It's offset somewhat by double-digit premium increases in property and general liability. Adjusted for our full-year business mix, the renewal premium increases are fairly consistent with prior year. Although we are seeing more good accounts get some premium relief, accounts with poor experience are seeing greater increases.
Overall, though, we just are not seeing a significant change in the pricing environment. Looking ahead, we believe the pricing environment will be broadly stable, with continued increases due to the impact of inflation, current macro uncertainty, and increasing reinsurance costs. Our challenging outlook for our clients continues. Remember, though, our job as brokers is to help our clients find the best coverage while mitigating price increases to ensure their risk management program fits their budget. I believe we have the best team in the industry. Finally, I'll conclude with some thoughts on what we are seeing so far in the Q1.
Through the first two months, we are seeing mid to high single-digit renewal premium increases, net new recurring business production better than 2022 levels, continued tough comparisons due to less transaction-related business from IPOs and M&As, and year-over-year tailwinds from midterm policy adjustments, including higher audit premiums and positive policy endorsements. Based on what we're seeing thus far in our Q1 business mix, we think organic will be somewhere around 6%-7%. The business is well positioned for future growth. With our differentiated client value proposition CORE360°, combined with our outstanding client service and data-driven insights, we are consistently in a position to win. I am very bullish about our near and longer-term prospects. I'll stop now and turn it over to Patrick Gallagher, who is going to discuss our international property casualty retail operations. Patrick?
Thanks, Mike. Good morning to everyone on the call. This is Patrick Gallagher. I lead our Americas Retail Property Casualty Brokerage business. Mike did a great job addressing our U.S. Retail P&C business. My comments will focus on Canada, South America, and also touch on a portion of Tom's world. That is his retail P&C units in the U.K., Australia, and New Zealand. We've grouped these together today because so much of what we are doing in the U.S. is being done in our retail P&C units around the world. It also lets Tom focus on specialty and reinsurance today. During my comments, I plan to first dimension our international businesses and provide some comments on each of our main geographies. Second, discuss the P&C pricing environment outside of the U.S.
I'll finish up with some comments on what we are seeing thus far in the Q1. Starting with an overview of the international retail businesses, we finished 2022 with more than $1.5 billion in revenues, placing more than $8 billion of premium on behalf of clients. We operate in about 60 countries globally. However, our business is predominantly Canada, the U.K., Australia, and New Zealand. Like in the U.S., our sweet spot is middle to upper middle market clients.
With that said, we serve a wide range of large account risk management business, smaller businesses, high net worth personal lines, and affinity clients. Let me break down our revenues by geography. First, our U.K. retail business generates more than $600 million of annual revenue. We are a top five U.K. retail broker and have more than 75 offices across the country.
Within Canada, we operate in eight of the 10 provinces and generate about CAD 300 million of annual revenue. In New Zealand, we are one of the leading retail brokers in the country. In Australia we are a top five broker. In these two countries combined, we have around AUD 500 million of revenue annually and nearly 100 different locations. Our approach to international business and strategy mirrors that of the U.S. A few examples of this. First, CORE360°. While initially introduced as our U.S. go-to-market strategy and approach to risk management, CORE360° is our global retail value proposition now. It's the foundation of our discussions with clients regarding their risk management programs. Second, our niche practice groups.
Many of these experts are organized and utilized at a global level, including energy, real estate, hospitality, and marine to allow clients of all sizes around the world to benefit from our deep industry knowledge and expertise. Moving to SmartMarket, like many of our enterprise-wide tools and platforms, it too was originally developed in the U.S. Today, SmartMarket is being utilized by carriers in Canada, Australia, and the U.K. We have about 20 non-U.S. markets using the platform, and we expect that number to increase over the next 12 months.
Finally, our data and analytics platform, Gallagher Drive, is further differentiating and distancing ourselves from our competition. Insights we are able to provide clients and prospects include purchasing behavior trends of other Gallagher clients, including what coverage lines and limits ultimately being bought, as well as potential catastrophe exposure and claims forecasts.
Every day, more and more of our clients and prospects are asking for data-driven insights, and we are seeing increased utilization by our producer population around the globe. Our global strategy is cohesive, which allows us to develop a product, a process, or a client service offering and deliver it anywhere across our footprint. It's a key differentiator over the smaller brokers. If you remember, 90% of the time, we are competing against a local or regional broker. They just can't match our offerings, expertise, or the service we provide. Moving to mergers and acquisitions, our entrepreneurial spirit and sales culture, combined with our systems, tools, data, analytics, niche experts, superior carrier relationships, continue to make Gallagher a merger partner of choice for entrepreneurs all around the world.
Joining forces with Gallagher allows these owners to take their firms to the next level, grow their book of business, and give their employees a great career path. During 2022, we completed nine international mergers, including the U.K., Canada, Ireland, and Australia. These continue to expand our geographic footprint and deepen our expertise. For example, in December of last year, we acquired Aviation Insurance Australia, a nice specialist retail broker focused on the aviation and aerospace industry. That same month, we also acquired a Brazilian retail broker, Interbrok, which expands our commercial and personal insurance presence throughout Brazil. Another great example is our acquisition of INNOVU in June of 2022, which provided our first on-the-ground retail insurance presence in Ireland, a great geography to broaden our middle market offerings.
That merger was then followed by our acquisition of Doyle Mahon, also based in Ireland, which added to our capabilities, including our agricultural sector expertise. With the combination of Gallagher's cohesive global strategy and outstanding carrier relationships, we believe we will be better together. Looking forward to our pipeline of opportunities remains very robust and continues to grow. Moving to my comments on the insurance pricing environment, let me walk you around the world and discuss what we are seeing in January and February. In the U.K., renewal premium changes, both rate and exposure combined, is increasing more than 9%.
Leading the way in double digits is property and package and general liability, while professional indemnity is up around 3%. Canada renewal premiums are up about 7% overall, with general liability and package up high single digits and auto-related coverage, covers up low single digits. Renewal premiums in Australia are up 8%. We are seeing double-digit increases across most lines of business, while D&O and transportation are up middle single digits. New Zealand renewal premium change is nearly 11%, and most lines are seeing increases around that level. Let me finish up with some additional observations from the first two months of the year. First, new business production remains excellent and is up over 2022 levels in Canada. Second, retention trends remain very strong, with most major geographies better than 2022 levels.
Third, we continue to see a small tailwind from positive midterm policy adjustments and other endorsements. Pulling it all together, I believe our international retail organic will be around 9% for the Q1. Our international retail brokerage businesses continue to perform extremely well, and we remain very excited about 2023 and beyond. Okay, I'll stop now and turn it over to Joel Cavaness, who is going to discuss our domestic wholesale brokerage operations known as Risk Placement Services. Joel?
Thanks, Patrick. Good morning, everyone. I'm Joel Cavaness, and I lead Risk Placement Services or RPS for short. RPS is our U.S. property casualty wholesale intermediary. Following the same cadence as Mike and Patrick, my comments this morning will focus on three topics. First, I'll begin by providing an overview of RPS. Second, I'll give some comments on the market and pricing environmental wholesale space. Third, I'll wrap up with some observations related to the first two months of the year. RPS was founded in 1997 and has grown to be the fourth largest wholesale broker in the U.S. We have about 2,700 colleagues around and $600 million in annual revenue. We place around $5 billion of premium on behalf of our clients.
As a wholesaler, our customers are independent agents and brokers that need specialized capabilities, unique or differentiated products, and access to our carrier relationships. About three-fourths of our business comes from agents and brokers that are unrelated to Gallagher. RPS offers solutions to our clients via three main businesses: open brokerage, MGA programs, and standard lines aggregation. Let me describe briefly each one. Within open brokerage, we support retail brokers with access to specialty products. We find coverage and negotiate with insurance carriers on behalf of that retailer and their client. The coverages we deal with tend to be very specialized and can range from hard-to-place property to complex casualty lines. Placements in open brokerage tend to involve multiple carriers and layers to fill out a particular program. Next is our MGA and program business.
Here we underwrite, price, bind, collect premium, and issue policies on behalf of our insurance companies. It is important to note in this business that we don't take any of the underwriting risk. We have around 40 programs spanning across both commercial and personal lines coverages. Our commercial programs range from food delivery to coverage for amateur sports organizations to country clubs. Our personal lines programs include insurance coverage for non-standard auto, manufactured homes, and other low-value dwellings.
Our third business is standard lines aggregation. Here we provide retail agents access to admitted products from insurance carriers that they don't already have a relationship with. For example, a smaller agency might not have a direct appointment with a certain carrier. However, that agency can still access that carrier's products through us, so it allows a smaller agency more insurance options for its customers.
We compete against a wide range of wholesalers, MGAs, and program managers, clients tend to choose RPS because of our quick turnaround times, our ease of doing business, our product breadth, and the strength of our carrier relationships. Ultimately, our goal is to be recognized as a leader in the intermediary market by providing a wide range of products and services across a very broad distribution platform. Mike told you that the U.S. retail property casualty market remains challenging for most lines of business. A challenging admitted market is typically a growth tailwind for RPS since retailers need our help to place coverage. One of the ways we help our retailers find coverage is through our growing e-commerce business.
Here we have built a platform where our retail customers can access more than 30 distinct specialty products on their computer or mobile device, and we continue to add products, including three new transportation-based coverages and one new cyber product market already this year. You also heard Mike and Patrick talk about our SmartMarket platform. This platform is also being utilized by a number of excess and surplus lines carriers that we trade with.
We currently have eight insurers using the platform, two of which were added over the last three months, and we think that we could add several more over the course of 2023. Our strategy to become increasingly digital is positioning us as an even more attractive partner for many of our retailers. I'll shift now to mergers and acquisitions. RPS is also an experienced and seasoned acquirer.
We have completed more than 30 acquisitions over the past decade, including four last year, and one already this year. Our merger strategy emphasizes cultural fit, expertise, and new product offerings. We see a decent number of open brokerage wholesale opportunities. However, we do believe that many of these businesses can be replicated with seasoned producer hires. We tend to be more interested in the MGA and program space. Merger partners are drawn to RPS because of our culture, the investments we make in both people and data, and our wide-reaching network of retailers. Given Gallagher's presence in both the retail and wholesale insurance markets, we tend to be very successful on opportunities that have dual retail and wholesale elements. Our M&A pipeline today remains very strong.
With that said, we continue to be very selective with the firms that we pursue on the program side, looking for differentiated, well-established, and mature programs. Moving on to the domestic wholesale rate environment, the E&S market has shown strong growth over the past two years, including 25% growth in premium in '21, and '22 growth should be similar, leading to a full year E&S industry premium surpassing $100 billion. In fact, a recent S&P report estimated that nearly 9% of the total U.S. P&C premium are in the E&S market today. That's more than double from just a few years ago. That's driven by risks leaving the admitted market, including personal lines, combined with strong exposure growth and of course, rate increases. We expect this high level of premium growth to continue.
Through the first two months of the year, our data is showing open brokerage renewal premium increases of more than 13%. That includes property increases north of 20% and double-digit increases in lines like umbrella and professional lines, of course, excluding D&O. Despite insurers getting multiple years of rate increases, most of our carrier partners are still unwilling to deploy large limits on any one risk. Thus, complex insurance towers, particularly Southeast property, are extremely difficult to place.
We're also seeing large renewal premium increases across our homeowners and auto programs. Homeowners business in the Southeast is particularly challenging, as already tight insurance capacity is further restrained by rising reinsurance costs and reduced competition as certain carriers are no longer writing new business. Moving to our binding operations, we're seeing about an 8% renewal premium changes so far in the quarter.
That's above full year 2022 renewal increases as property and general liability and package renewal premiums increase all move higher. Needless to say, the market remains difficult. Let me finish with a few more data points from January and February. First, new business production remains strong, and it's very consistent with the prior year. Second, client retention overall is also consistent with open brokerage above and binding just a bit below last year. Mid-term policy adjustments, including policy endorsements and audits, are both trending better than last year's levels.
Bringing it all together, it kind of feels like Q1 organic for RPS will be around 7%. While the E&S market remains challenging for our clients, demand for our services is strong. Our product offerings continue to grow, and our relationships with our carrier partners remain excellent. I believe we're in a great position to deliver another great year at RPS. With that, I'll stop now, and I'll turn it over to Tom Gallagher, who's gonna discuss our London specialty and global reinsurance operations. Tom?
Thanks, Joel. Good morning to everyone joining us on the call. This is Tom Gallagher, and I lead our global property casualty brokerage business. My comments today will focus on the London specialty and reinsurance brokerage operations of Gallagher. First, I'll quickly dimension these two businesses. Second, I'll touch on some operational priorities and M&A, and then I'll finish with some comments on the pricing environment and provide an early look at Q1 organic. Starting with an overview of the London specialty and reinsurance businesses, we finished 2022 with approximately $1.4 billion in revenue across these two operations, including nearly $900 million of revenue within Gallagher Re. Our leading London specialty broker has roots dating back to the mid-1970s and has grown to be one of the largest specialty brokers in the London market.
We currently have 1,000 colleagues, which help in the placement of more than $5.5 billion in premium annually, split about 50/50 between the Lloyd's market and company carrier markets. About a third of the specialty business is North American risk, while another 25% comes from the U.K. and the remainder from countries around the globe.
Relative to our global retail operations, here we tend to focus on larger commercial clients and also support retail agents and brokers around the world find specialty insurance solutions across six main divisions: Aerospace, marine, financial lines, construction, energy, and property. Moving to Gallagher Re, our reinsurance brokerage business, which was formed through the combination of our 2013 startup, Capsicum Re, and the purchase of WTW's treaty reinsurance business. Today, Gallagher Re operates in more than 70 offices across 31 countries and is the third-largest reinsurance broker in the world.
Our 2,700 colleagues provide a wide range of risk transfer products and services to more than 750 underwriting enterprises around the globe. You may have also seen the news that James Kent is taking on a new role at Gallagher, CEO of Insurance Strategic Relationships. James will be working with me and Doug on two fronts. First, further connecting our major strategic partners to all parts of Gallagher.
Second, the development of our risk capital advisory group, which will help connect carriers seeking alternative sources of risk finance and investors seeking to access insurance risk. This new role highlights the importance of our carrier relationships, the upside we see from connecting Gallagher across divisions, and the future intersection between insurance risk and the capital markets. James has done an incredible job since he took the role of CEO at Willis Re in 2017.
He has delivered on every measure and created a blueprint for the future success of Gallagher Re. James will do a seamless and orderly handoff to Tom Wakefield, our current U.K. reinsurance leader, who will lead the global reinsurance business following James' promotion. James, thank you for all you have done and for taking on this new, exciting role. Looking forward, I see many exciting opportunities in specialty and reinsurance and have a number of growth-oriented initiatives. A few to note. Piloting our SmartMarket services with 2nd carriers in the London specialty market and expanding to a 3rd carrier in the near future. We are looking to add our robust list of niches and specialisms, including adding products such as mortgage and cyber, while also expanding our facultative reinsurance offerings.
Three, we're adding new talent to further expand or deepen our expertise across our six specialty trading units, including leveraging our graduate program, Gallagher Futures. four, working on capitalizing on opportunities created through Gallagher Bassett, our retail operations, or our global MGA and programs operations. Moving to mergers and acquisitions. We are consistently looking for potential merger opportunities across all of our businesses, and specialty and reinsurance are no different. The list of attractive opportunities in this market is more limited than on the retail side. However, we have completed a couple of mergers over the past few months. On the specialty side, we acquired Another Day in August of last year, a risk management consulting firm focused on larger corporate clients. More recently, Gallagher Re acquired Bay Risk Services to expand our global programs practice.
Looking forward, we continue to talk with a number of firms and have a nice pipeline of targeted opportunities. Moving to my comments on the market environment, starting with reinsurance. We discussed on our last earnings call the January 1st renewal season was late, complex, and saw significant price increases across property cat, particularly peak zone risks. Casualty reinsurance was up in the single to low double-digit range for most programs, while terms and conditions were more stable. For specialty lines, 1/1 renewals were challenging due to ongoing coverage issues within strikes, riots, and civil commotion and war-related lines as a result of the conflict in Ukraine. While there hasn't been many reinsurance program renewals since the beginning of the year, here are a few current market observations.
First, demand for reinsurance coverage has remained consistent and has not declined in response to rising treaty price increases, which has been witnessed in past prior market cycles. Second, within property cat, reinsurers appear to be steadfast in their mission to increase cedant attachment points and avoid lower loss layers that are more exposed to claim frequency. Third, the recent legislation in Florida could stimulate new reinsurance capacity in the future. However, it is likely that many reinsurers will wait until the Florida market has been validated by improved loss experience. We are seeing similar trends hold from what we were seeing in the Q4 of 2022 and during January 2023 renewals, with most global reinsurance lines continuing to harden, not soften. These challenging reinsurance market conditions will no doubt put pressure on the primary market during 2023.
Shifting to London specialty, premiums continue to increase across most lines of cover, excluding D&O, the result of rate increases and supplemented in many cases by growing exposures, both exposure units and values. Renewal premiums are increasing for most aviation-related covers, benefiting from the growing number of flights and passengers traveling. Any risk with war exposure is seeing significant rate increases, perhaps even up to 100%. Public D&O risks are seeing premium decreases. Professional indemnity and cyber renewal premiums continued to move higher, but not at the same levels we have seen in prior years. Construction and energy-related renewal premium increases range from a low single-digit to low teens increases. Encouragingly, we are seeing an uptick in the number of construction projects, which is a positive trend for future premium growth, especially as insured values also increase.
Property, similar to reinsurance, continues to see the largest price increases, particularly for U.S. cat-exposed risks. Overall, I'd tag the premium increases somewhere in the upper single digits, which is consistent with what we are seeing in the 4th quarter. Our London specialty and reinsurance brokerage businesses continue to perform extremely well and see these two-operations 1st quarter organic somewhere in the low teens. Longer term, I remain bullish on our prospects due to our people, market position, and outstanding carrier relationships. I'll stop now and 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. Good morning, everyone. I'm Bill Ziebell, and I lead Gallagher Benefit Services, our employee benefit brokerage and HR consulting business. My prepared remarks today will cover four topics. I'll first provide an overview of Gallagher Benefit Services or GBS for short. I'll then give you an update on our execution strategies, provide a few sound bites on our agreement to acquire Buck, and finally, I'll offer some early takeaways from the Q1. Starting with an overview of the business. GBS began in the mid-'70s and last year generated more than $1.5 billion of annual revenue. Today, GBS is the fourth-largest benefits broker and HR consultant in the world, with around 4,800 employees.
By revenue, the United States is our largest geography and represents about 90% of our annual revenues generated from about 100 locations, with the remaining predominantly the U.K. and Canada, and to a lesser extent, Australia. Our producers sell traditional group health insurance products, including medical, dental, vision, and voluntary products that employers typically offer to their employees. We also advise and provide recommendations on employer benefit plan design, financial projections of the plan, and potential cost-saving strategies. These products and services combined represent about 70% of our annual revenue. The remaining 30% of our annual revenue comes from HR and compensation consulting, executive life, retirement, and other services that help employers address their human capital needs and organizational well-being. Our typical clients are middle-market businesses, which we define as having somewhere between 100 and 5,000 employees.
Most of the time, we are competing against smaller, local, or regional benefit firms. However, we also serve many larger clients, providing a fresh alternative to some of our well-known competitors, and also have a top-tier small group benefit business. Mike and Patrick talked about our retail P&C client value proposition, CORE360°. GBS provides a client-centric value proposition called Gallagher Better Works. Through Gallagher Better Works, our professionals explore and examine the most important initiatives and strategies that employers can utilize to attract, engage, and retain talent while simultaneously managing costs. From enhancing financial well-being, making investments in physical and emotional health, to competitive compensation plans, our professionals explore a wide range of employee rewards and benefits, and the solutions we recommend are tailored to align with our clients' unique needs of their ongoing human capital strategy.
The labor market remains extremely tight, and the war for talent remains front and center. For example, the U.S. unemployment rate is near pre-pandemic levels, and U.S. job openings are pushing 11 million, still nearly double the 5.9 million people unemployed looking for work. In our most recent benefit benchmarking survey, participants ranked attracting and retaining talent as their top priority, followed by prioritizing cost containment. With wages continuing to rise, many businesses are experiencing employee cost pressure, so providing strategies to navigate these human capital crosscurrents is paramount to most businesses. Our holistic approach through Gallagher Better Works positions us to help our clients attract new talent and drive costs out of their benefit plans. Outside of producer-generated client meetings, our thematic webinars and thought leadership are driving engagement with our clients and prospects.
Far this year, we have hosted at least one webinar per week. These include topics ranging from compliance updates to our retirement plan think tank to broader cost containment strategies. We've also had tremendous success with our Women Leadership Webinar Series, a diverse panel of female leaders touching on a variety of topics from emotionally intelligent leadership to how to advocate for your time and owning your growth. This series has already generated hundreds of leads and meeting requests from prospects.
These interactive web-based events are on top of the thought leadership that we are publishing on a regular basis. During 2023, we have released numerous reports focused on financial well-being, DE&I, and other organizational well-being themes across the U.S. and Canada. Another trend worth mentioning is the growing number of tech-enabled solutions to manage chronic conditions or provide access to healthcare services.
These solutions are intended to favorably impact medical costs and improve the member experience. GBS created a really slick tracking system to help our clients sort through the hundreds of point solutions and identify the ones that are effective and viable longer term. Leveraging the tracking system, we can more efficiently package traditional carrier programs and point solutions to help organizations meet their well-being goals. Whether it's engaging directly with our experts through our thought leadership, attending a web-based discussion, or designing bespoke benefits and HR solutions, we continue to separate and differentiate ourselves from the brokers and consultants we are competing with day in and day out. Turning to M&A, we are seasoned acquirers and are constantly searching for talented entrepreneurs that fit culturally and are looking to grow their operations.
Over the past five years, we have completed 50 mergers, including eight during 2022. Merger partners are typically drawn to GBS due to our global resources, innovative tools, specialized practice groups, niche experts, marketing initiatives, thought leadership, and technology. We have a very nice pipeline of opportunities around the globe and believe 2023 will be a successful year for our merger strategy. While on the subject of M&A, let me give you a few comments about the pending acquisition of Buck, a leading provider of retirement, HR, and employee benefits consulting, and administration services. This business should bring $280 million of estimated annualized revenue to Gallagher and should be somewhat evenly spread by quarter. However, the project revenue can be a bit lumpy.
More importantly, Buck has a very complimentary business profile focused on defined benefit services, where we are currently more defined contribution focused. The addition of Buck will also triple the size of our U.K. business and add to our upper middle market and large account relationships. We are very excited about Buck's proprietary benefits administration and employee engagement platform known as b-suite, and we think it will be a nice addition to our offerings to our current middle market clients. Needless to say, I'm looking forward to welcoming the more than 2,000 Buck employees during the Q2. Let me shift to some comments on January and February organic, starting with the U.S., which again represents about 90% of our annual revenues.
About 80% of our annual domestic revenues relate to typical coverages you get via your paycheck from your employer: medical, dental, vision, and voluntary insurance products. During the first two months of the year, we are seeing favorable new business and retention trends. Over the long term, more potential workers returning to labor force and more of these workers finding jobs is a positive for future revenue growth.
Moving to the remaining 20% of our U.S. revenues, this includes our fee for service, individual products, and retirement consulting businesses. Demand for our services and solutions is robust, given the complexity of today's hybrid work environment and the limited number of workers versus open jobs. It's driving employers of all sizes to engage with our fee for service and consulting practices as they prioritize strategies to retain, attract, and motivate their workforce.
Many of our practice groups continue to show growth in January and February. This includes our financial retirement services and our HR communications practice. We remain very encouraged by the activity, and our pipeline of future opportunities remain strong. Shifting gears to outside the U.S., which is again about 10% of our total revenues, we're seeing very strong growth in the U.K. and Australia, while Canada is a little bit more flattish.
When I combine what we're seeing across our global business, Q1 organic is running around 6%. Looking out further, I believe we have the products, solutions, and the very best people to help clients navigate their most pressing organizational well-being and human capital needs. I am very bullish on our future. Okay, I'll stop now and turn over to Scott Hudson, who's gonna discuss our risk management segment for Gallagher Bassett. Scott?
Thanks, Bill. Good morning, everyone. I'm Scott Hudson. I lead Gallagher Bassett, our third-party claims administration business. For those of you that are familiar with our financial reporting segments, it's our risk management segment. Today, my comments will cover three topics. I'll start by providing an overview of Gallagher Bassett or GB for short. I'll give some insights into what we're seeing in the Q1. I'll finish with a few comments on our long-term positioning. Gallagher Bassett was formed in 1962 by the Gallagher brothers and Sterling Bassett and has grown organically and through M&A. Last year, GB generated nearly $1.1 billion of annual revenue and is one of the world's largest P&C third-party claims administrators.
More than 80% of our revenue comes from our U.S. operations, with the remaining spread across Australia and to a lesser extent, the U.K. and Canada. We have more than 7,100 employees, most of whom work from home today. GB does not take underwriting risk, rather adjust claims for clients. In 2022, we closed nearly $1 million claims and paid out more than $12 billion on behalf of our clients. That level of annual claims paid would make us one of the 10 largest P&C insurance companies in the U.S.
More than 60% of our revenue is from workers' compensation claims. Another 30% or so comes from liability, and less than 10% relates to property. We are not storm or catastrophe loss adjusters. We also offer specialty products for various lines, such as medical malpractice, environmental, professional liability, products liability, and cyber.
We're continually growing our portfolio of services in an aim to capture the bulk of our clients' exposures. We segment our business by client type, and there are four different types. First, we have large commercial clients, typically Fortune 500 businesses. These clients have balance sheets that allow them to self-insure or have large deductible programs, so they take on a portion of their insurance risk and outsource the claim resolution process to us. This is our largest client segment. Second, the second type includes public sector clients, school districts, municipalities, state entities, and federal governments. For example, the Australian Workers Compensation Schemes fit into this segment. Third, we have group captive or alternative market clients. These insurance entities utilize our services for their claims infrastructure. Our fourth client segment is insurance carriers.
We currently have relationships with around 150 different carriers, both large and small, that are outsourcing a portion of their claims handling business to GB. We believe our largest value add is the ability to deliver clients superior outcomes through a combination of deep expertiseOutstanding service and solid execution. In certain cases, a superior outcome could mean the avoidance of loss, as well as the mitigation of loss resulting from risk management and risk management strategies. Our services can be highly customized to align with a client's expectations of a best outcome. Whether that be brand protection, ensuring customer loyalty, or back to work sooner or even brand protection, we tailor our offerings to add more value for our clients. That level of customization, combined with our size, scale, and technology, is also attractive to insurance carriers.
We believe about 10% of U.S. industry claims are currently handled outside of insurance carriers, so there's a large potential market for this service. With many carriers facing aging claim systems and recruitment challenges, outsourcing a portion of their claims handling can help alleviate these challenges for them. We have been discussing our carrier runoff capabilities with insurance carriers more and more. We're moving a large swatch of legacy claims to our platform can result in better outcomes and reduced expenses. For our commercial clients, we introduced an industry-specific product, an integrated end-to-end construction offering that provides services across the full cycle of loss. We're providing loss prevention strategies, including safety and training awareness programs, cultivated specifically for the construction sector. We can provide on-site safety professionals to monitor, manage, and advise on workplace safety in real time.
These services are on top of the more typical claims response, resolution and superior claim outcomes that GB can deliver. We're also seeing a lot of interest from prospects and are excited to expand into a few other industry verticals over time. The value we bring to clients is highlighted by the many accolades we receive related to our service and execution. For example, we've been named the TPA of the year numerous times at the annual Captive Review US Awards. For the fifth straight year, GB and our RMIS platform , Luminos, was ranked highest in the TPA category according to the 2022 RMIS Report . Moving to mergers and acquisitions, we too see M&A as an attractive way to expand our offerings and expertise.
With that said, the opportunity set of potential merger opportunities is much smaller than on the brokerage side, as the TPA industry is more consolidated. We have a straightforward M&A strategy, looking for potential partners that can help us deliver enhanced outcomes for our clients. That could be through a new product offering, a new capability, or providing deeper expertise. Ultimately, we're seeking out highly specialized and complementary claim adjusting and risk consulting entities, not just scale.
M&A for GB tends to be less frequent than on the brokerage side, and during 2022, we did complete one merger. As I sit here today, I believe we have a solid pipeline of potential opportunities. Shifting to the Q1, 2023, let me walk you through what we're seeing through February. First, client retention continues to be excellent and is a testament to our ability to derive superior outcomes.
Secondly, talking about new business. Following our outstanding 2022 that included a few new large client relationships in the carrier, large client, and public entity space, we're seeing new business opportunities continue in 2023 across all of our client segments. The increased shopping for TPA solutions is likely in response to rising cost pressures from both carriers and businesses. Superior outcomes are becoming even more important. Early indications from leveraging our reinsurance relationships have been encouraging. Third, core new claims arisings through January and February continue to see year-over-year increases across workers' comp, liability, and property. While claim counts aren't always tied directly to revenue, we continue to be pleased with the upward trend. Pulling it all together, we're seeing fantastic Q1 organic, somewhere around 12%, and adjusted EBITDAC margins around 19% for the quarter.
2023 appears to be off to a good start, and longer term, Gallagher Bassett remains very well positioned. We're investing in new claims resolution managers tools to enhance our services and developing new integrated industry solutions. We're expanding our specialty offerings to further align our services with new potential customers. At the same time, our proprietary tools and service-focused culture continues to keep client satisfaction at very high levels, and revenue retention remains very strong. I'm extremely excited about both our near-term and long-term prospects. Okay, I'll stop now and turn it over to our CFO, Doug Howell. Doug?
Thanks, Scott, and thanks to everyone for joining today. Here are the topics I'll cover today. First, I'll do a recap of the organic revenue comments from each of our business leaders and boil it down to what it means for our Q1. Next, I'll address how we're thinking about 23 margins. Third, I'll give you some sound bites from our updated CFO commentary document that we post on our website, and also give you a heads-up about an upcoming change to our cash flow and balance sheet presentations. I'll wrap it up with some comments on cash, M&A, and capital management. Okay, to the business unit organic revenue recap. Mike, Patrick, and Tom had favorable commentary on our global P&C retail reinsurance and London specialty brokerage operations. They continue to see strong new business production and stable retention.
Global renewal premium increases are trending similar to 22 and midyear or excuse me, midterm policy endorsements are higher than last year's levels. It feels like our global retail specialty P&C and reinsurance Q1 organic growth could come in somewhere around 10%. Joel is anticipating another solid quarter in our U.S. wholesale brokerage business. Open brokerage is showing mid-teens organic, while binding is up high single digits, but programs closer to flat. Combined, Joel's wholesaling unit's looking to grow about 7% organic in the Q1. Bill walked you through our employee benefits and HR consulting business. Health and welfare revenue growth is solid, and our consulting growth continues to be excellent. Bill's business is trending towards Q1 organic growth of around 6%.
When I pull all these comments together, it feels like brokerage segment Q1 organic could be between 8% and 9%, which would be just fantastic. As for our risk management segment, you heard Scott tell you that Q1 organic is shaping up to be around 12% due to new business and growing claim volumes. Let me now shift to the brokerage segment adjusted EBITAC margins. We are still comfortable with our January earnings call and December IR day commentary when we said, at 6% organic, we think we can deliver about 50 basis points of margin expansion for full year 2023. Just to clarify, that is before the impact of the Buck acquisition coming into our results, and remember, that business naturally runs lower margins and the potential margin tailwind from additional fiduciary investment income.
When I break that down on a quarterly basis, recall that during the first few months of 2022, we were still in the Omicron portion of the pandemic, and thus travel and entertainment expenses weren't fully back to a more normalized level. Thus, we are expecting about 10-20 basis points of margin expansion for the Q1. When we would naturally post higher than that in the second and third and Q4 to get us back to that 50 basis points for full year margin expansion. As for risk management segment margins, you heard Scott say that we're still expecting to deliver margins around 19% for the Q1, and they should also be able to deliver at that level for full year. Now let's move to the CFO commentary document.
Starting on page three, here we have the usual brokerage and risk management segment modeling helpers. Looking down the right side of the page, the largest change versus six weeks ago comes from the dollar strengthening against all of our major currency. Per, please consider these updated EPS and revenue estimates as you update your models. It's also worth walking you through the steps on how to incorporate our FX impact into your estimates using our brokerage segment Q1 as an example. Here's how we would do it.
First, recast prior year revenues at current FX rates. You'll see that we are expecting a $40 million FX headwind to revenues during the Q1. Accordingly, you would reduce last year's commission and fee revenues by $40 million. Next, apply your organic pick to that recasted Q1 revenue. Q1 2022 revenue.
As I said in my earlier comments, we're expecting organic to be in that 8%-9% range for the 1st quarter. Finally, you'll need to add rollover revenues. You can find that from the top table on page six of the CFO commentary document. We are more than two months into the quarter, and we don't expect that $63 million roll-in revenue number to move much before quarter end. For the risk management segment, you can follow the same steps, but note there isn't much impact from rollover M&A revenues. One other item to highlight from page three, the brokerage segment tax rate. In January, we provided you with our initial estimate for our full year 2023 adjusted effective tax rate.
You'll see the 2023 estimated effective rate is up from last year due to an increase in the U.K. corporate statutory rate. Please double-check that that rate is used and reflected in your models as well. Let's flip to page four of the CFO commentary in the corporate segment outlook. Two updates to mention. First, you'll notice that our estimated interest and banking costs have increased. You'll read or maybe you've already seen that we closed a $950 million debt offering in early March through a mixture of 10 and 30-year senior notes. Taking that into consideration, and combined with our 10-year interest rate hedges, our net interest expense reflected on our GAAP financial statements will reflect an effective weighted average interest rate of 4.5%. That's a fantastic result in today's environment.
The second noteworthy change on this page is our corporate cost estimate for Q1 2023. We have refined our guidance to reflect that the expected tax benefit related to the vesting of restricted stock and exercising of stock options. We historically have recognized a larger tax benefit in the Q1 because our restricted stock grants have a mid-March vesting schedule, while our options grants also expire during the month of March. Turning to page five and the estimated cash flow benefit from our clean energy investment. At year-end 2022, we had $773 million of available tax credits. At the bottom of the reddish column, you'll see we expect to utilize about $180 million-$200 million of credits in 2023, and that should step up a bit in 2024 and each later year.
Remember, the multiyear benefit does not show up in our P&L, but rather as an operating cash flow boost that will help fund future M&A. That additional free cash flow could allow us to buy incremental recurring EBITDAC at a nice arbitrage to our current trading multiple. The math would suggest about $70 million of EBITDAC could be bought, assuming a 10-11 EBITDAC purchase price multiple. Let's flip to page six of the CFO Commentary Document and the M&A rollover revenue table. As I noted earlier, we're expecting about $63 million of rollover revenue in the Q1, please contemplate that in your models. It's probably worth a small pause here.
When we announced that the Buck acquisition might close in H1 of 2023, we probably should have been more cautious and just said in the Q2 of 2023. Most of our other deals close very quickly, but this one is taking more approval process time. Our best guess right now is to have it closed by May 1. This might be causing a difference in your modeled M&A rollover revenues, so it might be worth a recheck of your assumption. The other modeling heads up, and not really much of an issue this year because we have already done most of our borrowing for the year, but when you model future M&A, probably should be modeling incremental borrowing and interest expense if you're assuming we spend more than, say, $2 billion a year on M&A.
I'll try to include this as a standard reminder during our future IR days. Let me provide a quick overview of an upcoming change in our cash flow statement and balance sheet presentation. Starting in Q1 23, we will begin breaking out fiduciary balances on a separate line in our balance sheet. That line would include fiduciary cash and receivables or payables owed in a fiduciary capacity. On the balance sheet, we plan to label them fiduciary assets and fiduciary liabilities. Changes in these fiduciary asset and liability balances which have historically flowed through the operating section of our cash flow statement, will be moved to the financing section. You'll see a new line item in the financing section labeled Net Change in Fiduciary Assets and Liabilities.
We believe these changes will increase transparency, naturally we will recast prior periods for comparison purposes. For those of you that follow brokers, you'll see that our changes will be similar to how most other brokers are presenting these items. This shouldn't be something you're not familiar with. Let me finish up with my typical comments on cash, debt, and M&A. At the end of February, available cash on hand was around $500 million, which doesn't include our March second closing of the $950 million debt issuance.
Our current cash position, combined with strong expected cash flows and some modest incremental borrowing positions us very well to close approximately $3 billion of acquisitions here in 2023, which would include paying for Buck. Those are my prepared comments. It's shaping up to be an excellent start to the year. Great organic, a nice M&A pipeline, strong margins, and robust cash flow. I'm very bullish on 2023. Okay. I think, operator, we're ready to move to Q&A.
Thank you. The call is now open for questions. If you have a question, please pick up your handset and press star one on your telephone at this time. If you are on a speakerphone, please disable that function prior to pressing star one to ensure optimal sound quality. You may remove yourself from the queue at any point by pressing star two. Again, that's star one for questions. Our first questions come from the line of Elyse Greenspan with Wells Fargo. Please proceed with your questions.
Hi. Thanks. Good morning.
Morning, Elyse.
Good morning. My first question, I was hoping to just get a little bit, you know, just more color on reinsurance. It sounds like within specialty, you guys are expecting double-digit organic growth, I would expect that, you know, reinsurance is within that range. Can you just give us, you know, a little bit more color on what you're seeing within the reinsurance book, both to start the year and just expectations for the remainder of 2023?
Yeah, this is Pat. I'll start with what we're seeing from an operational standpoint and let Doug put some numbers around it. It's a great start to the year. As you know, as we finished last year, we talked about this at the Q1, but there was a very difficult close of the year in terms of getting deals done for our clients. We're incredibly proud of the fact that we got the deals done.
Not all the terms were what clients were hoping for, but it was a great start to the year from that perspective. A good chunk of our reinsurance revenue is booked in the Q1. From a standpoint of getting the job done for clients, adding new clients, keeping the clients we had, it was a very good start to the year. Doug, you wanna throw some numbers there?
Yeah. I think the reinsurance business is actually running in the Q1 very similar to the specialty business. I wouldn't say it's gonna move that estimate too terribly much. We had a terrific Q1. I would say it's about the same number at this point.
Thanks. You know, I remember on your Q3 earnings call, right, I think you were posed a question about an economic downturn and how that could impact your organic growth. I believe you said at the time that you'd be surprised, even in a downturn, if your organic revenue growth was, you know, less than 5%. Would that view still hold today?
Yeah. From what we're seeing right now, I'm seeing even less of a downturn possibility than we did back then.
Yeah, it's really amazing I love the fact that the data we could get, 'cause we look at it literally every day, every week. I will tell you that the middle market, privately held firms across America are doing extremely well. I think our data, quite frankly, is better than that which is coming out of Wall Street. We keep hearing from it, you know, we read all the same journals you do, and it's terrible layoffs. We look at our book of business. It's growth. Kind of a nice spot to be.
One last one on margin. Doug, I think you said, the guide is kind of ex-book and ex-fiduciary investment income. Would the tailwind of fiduciary investment income be better in your mind, relative to the headwind of the Buck deal?
Yes. How much more? I think we'll just have to see what that means with respect to our mid-year raise pool. By that time, I should know that in the next month or so.
Okay, thank you.
Thanks, Louise.
Thank you. Our next questions come from the line of Paul Newsome with Piper Sandler. Please proceed with your questions.
Good morning. Always glad to join you guys.
Morning, Paul.
I was actually hoping you could take a step back and talk about competition in the environment more broadly, and particularly how things may have changed over the last couple of years. I mean, with reinsurance, a move towards more, you know, more competitive with large account, is it still true that, you know, in general, that 90% of the competitors you're dealing with are pretty small or has the emergence of, you know, all these roll-ups from private equity and your movement into the larger account reinsurance business has changed that in a significant way?
Let's let Mike Pesch answer that. Mike?
Paul, I would say, you know, as far as competition, I would still say that most of the time when we compete, we're competing against someone who is smaller than us. Whether you classify that as private equity roll-ups, who are now getting bigger but still smaller than us or the local agent and broker, it's still 85%-90% of the time. What I will share with you is that as we look at our numbers, and we've looked at them over the last 10 years in terms of our takeaways on new business, our takeaways on new business now exceed 51% in terms of accounts that generate over $100,000 in compensation to us.
We're definitely leveraging the size and scope of the entity at his Gallagher and being able to compete confidently in that space. We feel very bullish on our ability to compete against our peer group that is of the same size or larger. I would still say day-to-day, day in and day out, when I look at our forward-looking prospect list and things of that nature, we're competing against folks that are smaller than us, and we feel very confident based on the value proposition that we put forward and the data and analytics that we have to provide those clients.
Let me make a quick comment on that as well. When you look at the private equity roll-up firms, they have revenues that are approaching the $1 billion-$2 billion level. What they're selling to the community that they're buying is, do nothing different. Stay where you are, keep your name, keep what you're doing, just send us the money. We're happy. We love the business. It's got a great renewal book. They are not competing in the vertical aspects that we build.
When they come and say, but we're a $1.5 billion revenue, we've got all these construction accounts. They're one-off accounts across the country. There's no coordination. They'll deny this, by the way. They'll argue with me. We see it on the street every day. They just aren't anywhere close to what we're doing when it comes to pulling our verticals together and competing with the smaller player.
Related question, are we seeing any change in the M&A market because of higher interest rates? It seems like there's been maybe a little bit fewer deals, but the high-quality deals are getting done, so the average valuations are about the same. I don't know if that's even true. You know, I guess we're expecting to have some impact given especially all the issues we've seen this last week. Curious if you're seeing anything on the margin yet from in the M&A environment because of higher interest rates.
Yeah. Paul, this is Mike Pesch again. Well, what I would say is, it might be a little too soon to tell. I think this will all start to play out. But the feedback that we're getting from many of the deal brokers, the MarshBerry, the Reagan of the world, is that a move and a flight to quality that is the strategic buyers like us, is starting to occur.
I think that has a lot to do with some of the PE roll-ups that are now having to look inwardly and make the changes that they've been delaying or just focus in on making their businesses more profitable, 'cause as Pat just said, many of them sold the idea of doing what you do and keep doing what you're doing and not the idea of making those tough calls and changes.
I feel very good about 2023 and even beyond that in terms of our ability to get more opportunities because we are a more stable and I think more attractive option for many of these buyers that have perpetuation challenges or sellers that have perpetuation challenges. They all are gonna have to do something with the asset that they've built up over many years. If the PE firms are slowing down or there's some sign that they're slowing down or looking inwardly, we make a very attractive option for them.
Yeah, I would echo those comments. This is Bill. On the GBS side, across the platform, people are taking a real hard look at joining GBS versus, you know, one of the private equity players as well. 'Cause the resources, 'cause the stability.
Well, Paul, I'm not gonna mention any names of our competitors, but you read, you read what I read. You got people jumping in and out. Got one of our competitors fired their entire development team, their integration team, and turned around and reloaded two months later and said, "We're back." Now, if I'm selling my business, that is not what I'm looking for.
You know, one thing I would just add, you know, regarding Buck, they were previously owned by private equity. It sounds like they've done a pretty good job since they've owned them and so forth. When we went to start meeting with them and so forth, you know, really, I think they were all thinking they'd be sold to another private equity. Really, the team there was looking forward to a more forever home. The idea that being here with Gallagher long term for the rest of their careers was very attractive to their leadership, and we're getting a lot of very positive feedback from their people out there as well about joining Gallagher and knowing they'll have stability going forward.
Great. Thank you. Always very much appreciate the insights and help, guys.
Thanks, Paul.
Thank you. Our next question has come from the line of Greg Peters with Raymond James. Please proceed with your questions.
Good morning, Greg.
Hey, good morning. I guess I'll start off with my first question. It builds on, Pat, I guess one of your previous answers in the commentary from the management team. You talked about the business mix outlook comparing favorably to what we've been reading in the press, the business press, about the challenging economic conditions. Can you give us, in light of the bank failures, maybe, some ideas about your industry exposures, and I'm thinking to, you know, financial institutions to, you know, startups where there's cash flow issues. Just give us some perspective because the outlook that you're painting is certainly more favorable than what we're reading in the press.
Let me just give you I'll turn that to Mike Pesch in a second. Let me just give you an example of why I talk about being able to outstrip our smaller competitors. Within 24 hours of SVB's collapse, our people had already at my desk, set a list of all of our middle market bank clients around the country. Had that in 24 hours. Here's what it is and what kind of information we were peeling out quickly to them in terms of the impact that this may have on their D&O cover and those that are going through a renewal, the things that they should be concentrating on talking to the underwriting community about, which would include things that caused SVB trouble.
You talk about moving fast on a niche of business that was looking for help from their brokers, and we're there within literally 24 hours. You just can't do that as the Jones Insurance Agency in Schaumburg, Illinois. I'm sorry, you can handle the local bank's property and casualty while things are going great. When something like this happens, they're looking for some real expertise. With that, if you want to talk about the other individual niches and what we're seeing in terms of the economic growth, I'll throw it to Mike.
Yeah, you know, just to play off the FI space, I mean, that is one of those 30 niches that I spoke about earlier. The woman that leads that for us did an excellent job of not only coaching all of our folks in the field, putting out content that we could submit to our clients to make sure that they were aware of what options, what to do, a bit of a playbook on what may occur. As far as, you know, the downfield of that, you know, in terms of how it may impact our other clients, you know, we don't necessarily as insurance brokers get involved in the banking relationships that our customers have.
We're constantly reaching out that those communication pieces ultimately go to all of our customers to help them understand what options, what things they have to deal with, from a surety perspective to a D&O perspective. I, you know, I think it's probably too soon to tell maybe if there's any fallout to any of our specific mid-market customers. Again, the outreach is critical, and we're very active in doing that.
If I could add.
This is Bill.
Yeah, this is Bill Ziebell. Sorry. One of our former merger partners, who's now retired from our business, somehow found her way running a manufacturing plant up in the Northwest. She got there and was assessing what she was getting as an organization from her brokers and advisors, and just really was under impressed. She wanted to work with her team and so forth. She brought in the GBS retirement team, blew away the HR department, how much better they were on it.
She convinced them to bring in the P&C and the benefits broker from Gallagher. In fact, they were absolutely blown away by how much better we were. Mary is her name, in the note to me said, "You know, these smaller brokers just do not have the sophistication or tools that Gallagher has, and my team now knows that." It was a pretty exciting story.
Yeah. Greg, back also, we did a poll of our field about. I have to say I was impressed. Like I said, 24 hours, we had a pretty good list. The list that I have here in front of me barely fills up one page of the outreach that our clients have had. Half of that is about do we have exposure? As you know, we keep all of our fiduciary monies in government-backed securities, so that's not something that we've got an issue on in terms of our own situation. I was impressed with what our brokers are seeing and so knowledgeable about how this is having an impact with their client. It's telling me that they're with them day in, day out, helping their them understand the variety of risks that are facing them.
The preponderance of the questions from the clients have been, "What does this mean for my D&O premium?" On my sheet here, there's not a single client that looks like they're going to lose cash as a result of a bank failure. Right? That would be a client that's had money at an instable bank. They're already asking about what this means to their D&O premiums. They're smart. They know it's probably going to cause an increase. I think this is like Pat said in his script, our clients are gonna now look at risk maybe a little more cautiously as a result of this, and our folks are right there to help them manage that. What's happening with our customers?
Not much from what we can see, not much from what our brokers are telling us and our field management seeing, and also that they're smart, and they're concerned about what this means for their future cost of risk. Our folks will nail that.
If you go back, Greg, to your original question, you know, what are we seeing in our niches in terms of the economy? Hospitality is raging, transportation is fantastic, especially when it comes to aero. Our aero guys are crushing it in London. Interestingly enough, private equity continues to be a real focus for us, and there's even with interest rates, there's solid growth there as they start to look at their expense line. Most private equity firms have kind of left insurance to the local managers. Today, that's a bigger expense they're looking at. Environmental of course. Then you get to the D&O and the world of professional lines. All of those are showing growth. The middle market of the United States business is robust. We keep saying that, we keep seeing it, and it bears truth.
That was some thoughtful comments. Appreciate it. I guess I'm gonna pivot. In, you know, the comments around higher interest rates, and certainly, you know, the change in appetite on private equity-sponsored roll-ups. Do you, Doug, as a organization have had any change in perspective around debt leverage of Gallagher, you know, versus historical norms considering the higher interest costs that are going on? I guess in a parallel universe on M&A, is there an increased appetite to issue stock as part of the buyout arrangement, considering where interest costs are?
Well, first, we're ahead on our interest costs for quite a while. To me, it's more the spread that matters, and it is actually where the tenure is. In terms of our borrowing appetite, I don't see much change in that right now. Using stock, we'll always give stock to a merger partner that wants our stock. There are some times where we have to use stock because there's a tax deferral strategy on that we'll use some. Basically, we use free cash, then debt, and then equity. Our commitment is to always maintain a solid investment grade rating. I think we've got a little sleep cover in that rating right now, and I kinda like that, in today's environment, but I don't see a lot of change in terms of our capital structure thinking, Greg.
Okay. That makes sense. I guess the final minor question, it comes off your cash flow statement. You know, I was just looking at some of the line items that stick out to me. I guess the one that caught my attention the most from your year end's statements was just how CapEx has increased noticeably over the last three years. Can you give us some ideas of what's going on in your CapEx and what you're thinking about how that might look for 2023?
Yeah. I think what's causing noise in that, Greg, for you, we don't do this, we don't provide you an adjusted cash flow statement to remove the integration costs. You know, during pandemic, we reduced the costs during. Then we come out of the pandemic, and we have increased integration costs in CapEx. If we did an adjusted cash flow statement, you would see that it's pretty normal. As a matter of fact, so much of our spend in the past used to be on leasehold improvements in the international locations. You know, you get that paid by landlords now in the U.S. We're, you know, we're taking less office space along the way. Three things.
Less, lesser in the pandemic, more after the pandemic, primarily related to integration. Maybe just a longer-term trend that we're gonna be spending less on CapEx with respect to real estate. Don't forget, we used to buy software, capitalize it in an expense it. This is now with the software as a service is what we provide. I think I gave you a little vignette either in, probably in December, that as we toggle from buying software, capitalizing and depreciating it, now we pay for it, and that hits our operating expenses. This year, that's about a headwind of about 15 basis points on our margin expansion for the year, something like that. The insightful question, but explainable, but we're not really spending anything more than the trend would suggest other than integration. We don't.
Okay.
We don't-.
Can I just follow up on that? That helps, you know, tie up some loose ends for me. When you think about how you're budgeting out, is CapEx, you know, take out the noise of integration and all that, is CapEx as a % of revenue? Well how what kind of benchmark should we be using there? That, and that's my last question.
CapEx is probably running, I'm thinking about our capital plan going forward. It is not increasing at the same rate as our growth in total revenues. It might be increasing at the same rate as organic in our models, but not total revenues. That's where you get the leverage as we buy smaller tuck-in acquisitions. I'm sure there's a little integration that goes on with that, by and large, that gets expensed, not capitalized. It might grow more in line with organic than it does total revenues.
Got it. Makes sense. Thanks for the answers.
Thanks, Greg.
Thank you. Our next questions come from the line of Mike Zaremski with BMO Capital Markets. Please proceed with your questions.
Morning.
Hey, morning. Maybe some follow-ups. In Tom Gallagher's prepared remarks on reinsurance, he talked about a number of exciting initiatives regarding FAC, third party capital. I know I'm missing things. When I think about that, and there's definitely been some media articles in the distant past about maybe Willis having under invested a bit in its reinsurance segment versus peers, and maybe you disagree with that. Just curious if we should expect a need to, in the short run to, you know, to maybe take a step back on margins a bit in this part in order to fund longer term growth in these initiatives?
listen, Tom had to drop. He just sent me a text and said he's traveling. He dialed in for the first part. Tom had to drop. I'll take it when it comes to the investment side. We continue to invest in this business. The big thing is that we're migrating to a new IT system. When it comes to looking for investments in terms, we'll always look for producers. Anytime there's a producer that wants to come and be a part of us, we'll invest in producers. We're always invest in client capabilities and initiatives that show that, you know, keep us on the leading edge of our advisory capabilities. I don't see that at a different pace than is currently going on.
It's certainly at a bigger pace than what was happening when Willis was on the block in the acquisition or in the transaction with Aon. I would say where we are now is more normalized. Going in the future, I would say it would trend with what we would expect it to do going forward. We have the funds to be able to invest in that.
Okay. Okay, got it. maybe switching gears, curious, the Federal Trade Commission's the non-compete employment contract proposal they put out, I know the comment period's nearing an end. Is that something that's on your radar? Has Gallagher put in any comments?
Yes.
anything out there we should be thinking about?
Yes. In fact, we were asked to participate in the comment time. We did that. The Council of Insurance Agents & Brokers, of which we're a member, has been very, very clear with the FTC in terms of our view of that. We do view that as a negative in our world, in particular on small tuck-in acquisitions. One of the things that we're doing, of course, is taking new geographies on board with smaller players. We expect that when we buy that entrepreneur, that they give the rest of their career to Gallagher, and we capitalize that investment for them. Of course, we use non-competes. One of the things the FTC is saying is those non-competes would be allowed to continue as long as that person sold 25% of the equity.
Often in situations, the team of producers that's tied up does not own 25%. I could go on and on and on. We're on it. We're part of the comment section. We think the FTC is clearly in an overreach position, and we are gonna support the CIAB and the Chamber of Commerce's litigation.
Yeah, Mike, just to clarify one thing, you do realize that it's a non-compete issue, but non-solicits and non-poaching a client is still inhibited. You still have an agreement that restricts non-solicit, non-poaching. What this means is a person could go down the street, open up a new business, but they still can't target our employees nor our clients. Now, it creates an additional burden of proof that they actually consciously went out and solicited employees and solicited clients for, you know, from us. It creates a bigger hurdle, but there still are barriers that you can't just sell your business and then go poach the employees and the clients later.
What it really does, it's gonna put pressure on multiples of the family-owned agencies that can't be bound by a non-compete because they're not, or that it will reduce the value of the agency. If we can't get comfortable with the non-compete arrangement on it will diminish their value when we look at paying a multiple for them. Second of all, it will change how we look at earn-outs if it happens. Is it longer? Is it more based on an earn-out and client retention? Is it a pay as you go type, you sell your agency, and we'll just pay a piece of whatever sticks over seven or 10 years instead of paying it up front?
There are ways around this, but it really comes down to that the, all the small family-owned brokers should be up in arms about this because this does diminish their value when they go to sell for us. It's, we're looking at it very hard.
Okay. I appreciate it. One last, I guess two quick follow-ups, hopefully to your comments, Doug. Multiples you mentioned a couple of times. Are you guys surprised multiples don't seem to be moving south given where interest rates are? Then you mentioned earn-out too, Doug, separate question. Can you just remind us on the Willis potential $750 million earn-out, when how that is gonna be accrued and what the timeframe is? Thank you.
First of all, let's address the Willis earn-out. We accrued that towards the ultimate payout over the period, and I believe that we measure based off of the end of 2024, and we pay in 2025. We'll look at how much revenue we have at the end of 2024, and then we'll have an obligation of up to another $750 million payout as a result of that earn-out. In terms of the multiples that are paid, rising interest rates, and I'm not talking about risk return additional expectations on equity. Rising interest rates probably reduce the multiple that a PE firm can pay by two times and still deliver the same returns to the investors on that.
You got to bring it back two times, which is really if they're paying 13, 14, 15 times, we're talking about, let's say, you know, we're talking about 15% difference. What it does do, though, is it creates a substantial uncertainty that that debt will be at that level for a long time in the future. You can't count on, you know, to roll the debt at or get new debt at similar rates because there's instability there. It also opens a dialogue with us. We'll see more opportunities of this because this is now a discussion point, whereas before, when money was free, the risk associated with selling to a PE was not something that was really a point that we could combat against. Now we can.
Interesting. Thank you.
Thanks, Mike.
Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next questions come from the line of Derek Han with KBW. Please proceed with your questions.
Good morning. Thank you. My first question is on risk management. I think Scott talked about kind of leveraging reinsurance relationships, as kind of boosting new business opportunities. Can you just talk about how much that contributed to the 12% organic growth that's expected this quarter? How you think about it, Rev, this year as well?
Yeah, Derek. I guess what I would say it's very early days. We've seen nice, you know, good dialogue with our reinsurance colleagues. We've pursued opportunities jointly. It's not having a material effect at the moment on any new opportunities. In particular, where we're seeing it is with carrier prospects, a lot of smaller ones that they do business with, that they brought us in on. It's not a significant contributor to the to any of the organic growth at the moment. I think longer term, the prospects look very good.
Got it. That's helpful. Then my second question is broadly on the brokerage organic growth. You still have healthy clients, good pricing, and it looks like there's accelerating pricing on the property and D&O side, potentially on, for D&O. Does that mean in the H2 you feel easier comps on the D&O side, maybe you could be closer to 8%-9% organic in the H2? How should we kind of think about that?
Well, our full year, we see 7%-9% now. You know, that's where we are. I feel a little more confident in that that range as we get through the first couple of months of the year. You know, there are some hard compares at the back half of the year. Bill Dobell 's business had some really nice larger kind of wins. I think we talked about that in the second or Q3 there.
Going over the top of those will be, well, you know, we'll pose some challenges there. It might be a little too early to call that based on what we're seeing in the rate. I still go back to the statement that we've said through the last year and a half. There isn't anything getting cheaper out there when it comes to risk, guys. There's nothing getting cheaper.
Well, I think that's a really good point. There's nothing getting cheaper. You see the absolute bombshell settlements that these carriers are going to pay in the casualty world. Where these judgments are coming from, none of us in this business can even get it. We can't get close to it. The world's just getting riskier every single day. You know, a slip and fall broken wrist used to be, let's take them to the hospital, fix the wrist, give them free hamburgers, and see them later. That ain't the way it is today.
Okay. Thank you very much.
Thank you. Our next questions come from the line of Robert Cox with Goldman Sachs. Please proceed with your questions.
Hi. Thanks. Good morning. I was just wondering, you know, to what extent, if any, you're seeing pressure on commissions in property exposed business and wholesale and specialty, specifically given the several years of rate increases you mentioned earlier on the call.
Yeah. Rob, there's still a cavernous. I mean, it is really more incidental than it is broad-based. you know, there are a few, larger MGAs that provide, you know, large capacity through, who've gotten sweet for their reinsurance. A little bit of that trickles down, but broad-based. Let's, you know, talk about, you know, what really matters. What really matters, we're not seeing it. you know, We are working our butts off, on behalf of our clients, and we continue to get paid for that. We're not seeing a, I hate to use the word wholesale since I'm in the wholesale business, but we're not seeing a wholesale move, in pressure for our commissions.
Got it. Thank you. Maybe just a second question, related to the encouraging data that Tom was mentioning around construction projects. just curious to get more color on that and interested if you're seeing that same dynamic in the United States.
Yeah. Rob, this is Mike Pesch. We have been seeing a lot, larger construction projects, stadiums that are getting built or are planning to get built. We have a deep expertise in that particular area. That area started rebounding in the Q4 of last year in terms of the large projects. We have a very sophisticated OSIP and CSIP team that tackles those projects for our folks in the field. We are seeing a bit of a rebound in that heading into 2023. You know, construction costs are increasing just like anything else. That complements the potential need for maybe going the OSIP or CSIP route. Yeah, I would say overall, I'm fairly bullish on where those projects are headed and our ability to handle them.
Yeah. Rob, don't forget too, is that what we're, you know, the infrastructure and jobs bill that was passed, I don't know if that was the end of 2021. I'm a little weak on that, exactly when it passed, but that it takes a while for that to get through the system. There's $1 trillion just in the U.S. alone that's gonna go into infrastructure to build out. That just didn't start all of a sudden overnight. It's not like we went out. With a shortage of labor in the U.S. on some of these positions, that could be $1 trillion of spend that happens over a nice three or four or five-year period to give us some nice tailwinds on that.
We got $1 trillion of spend, and I think that by some estimates, 3%-4% of that number goes to insurance on what an infrastructure bill happens. Sounds like a pretty big number coming into the insurance marketplace over the next three, four or five years.
Which back to an earlier question, this is Pat, you know, how does that shape up against the smaller broker that can do the job? If you wanna build a house, there's lots of brokers that can handle that. You wanna build an airport, you wanna build a stadium? Not so much.
Got it. That makes sense. Sounds like a big deal. Maybe just related, is that mostly business that you would expect to go to the E&S market?
No. I think it'll be just depends. I think there'll be towers on a lot of this, so it's gonna go in a lot of different places. You're gonna see it come into the US. It might go some to Bermuda, it might go to London. Our specialty business in London picks up a lot of the big risks that come out of the US there. You know, between our retailers going to the wholesalers, going to Bermuda, going to our specialty business, and then going out the back end on reinsurance, and then maybe Scott Hudson will pay some of the claims. You know, it's, they arise during that workers' comp, when the workers' comp claims happen.
Thanks for the color.
Thanks, Rob.
Thank you. Our next question has come from the line of Katie Sakys with Autonomous Research. Please proceed with your questions.
Hi. Thank you. Good morning.
Good morning.
Quick question for you guys on producer statistics. It looks like you ended the year with a net of 5,000 new employees. But I'm curious, you know, how agent hiring and retention has trended so far during the Q1, especially in light of continued wage inflation? Secondly, related, how long does it typically take, you know, a new broker to get up and running and start contributing to organic revenue growth and be margin accretive at Gallagher?
This is Mike Pesch, Katie. A couple questions there. You know, as far as the new brokers that we bring in, you know, we've brought back after the lull of the pandemic, our internship program, and it is now upwards of 500 young people that go through our program every single year. We're pretty excited about that. We think we're the best in the business at bringing those young people on board, training them, coaching them. You know, every one of them is gonna be slightly different, but there's anywhere from a two to five-year period before they really start to get their legs underneath them and tap into the resources and so forth, and the training that we're doing for them, where they're prepared to be in front of a client.
You stack 500 on top of 500 on top of 500, and we don't hire all of them. Let's just say we hire about 50% of them in any one given year. That creates a pretty significant pipeline organically to bring these young people up through the business. You know, as far as the other question about recruiting and the 5,000 people, I don't have the exact number on how many of those are producers that we bring on board. We have a program where we bring people on board who are out of industry, who might have an expertise in a specific industry, but not necessarily insurance expertise. That program has been working extremely well.
Been tracking it over the past five years, and they have significant pipelines as far as organically hiring from our competition. We do that, you know, very opportunistically and look at those various situations. I would say of the 5,000, maybe 10%-15% of them would go into the production ranks, with the remainder being in our supporting roles. As far as wage inflation there, we balance that out. We have another program that we've been running for many years where we bring again, young people into support roles, to fill those roles that we know we're going to need and train them up, make sure they're ready and able and equipped to tackle a book of business.
You know, a lot of those hires that you see that we bring on board are people that we're bringing in most cases at a lower starting salary point, but we feel very confident in our ability to train and coach them. We haven't really seen the wage inflation because we're pretty darn good at bringing in people and training them up, to get ready for those positions.
I'd also just add, Katie, when we do go off and we like to recruit from some of our competitors out there. Number one, most of our production rank growth comes from acquisitions as well. We get good, solid local producers that have existing books of business that are already validated. You hire an experienced producer in a major metropolitan area and bring them on following on to their non-compete or their non-solicitation, as Doug said, and that's a long road to profitability.
Thanks. Super, super helpful information. Maybe one quick follow-up. Can you give us any color on what hiring statistics currently look like in Gallagher Re following the reinsurance renewals at one-one? Are you guys seeing, like, any increased interest for brokers to move over to work with Gallagher Re after a tough one-one renewal?
Yeah, I think that it's fair to say that we're always looking and recruiting. Again, one of the things that the Willis people did that really made us like what we're seeing there, they did a good job of bringing young people in. We're adding fuel to that fire. In terms of seasoned professionals looking to jump, not so much.
Great. Thanks so much.
Thanks, Katie.
Thank you. Our next question has come from the line of Yaron Kinar with Jefferies. Please proceed with your questions.
Good morning. Thanks for taking my questions. First one, just given Joel's commentary on the growing demand in the wholesale space and the kind of positive trajectory there, I guess shouldn't one also maybe expect a offset in the retail space where maybe you see some weakness because of capacity moving more to E&S? How do you think about that?
I mean, the E&S space is obviously well-capitalized. They provide really strong capacity. You know, obviously, their level of willing to take risk is very different than the admitted market. Of course, the flexibility of rate and form provides them the ability to be very nimble. You know, at one point in time, you know, the E&S market was kind of known more for stepping in when no one else would take a risk. Today, it's more mainstream, and they're well-capitalized, well-organized, and willing to take larger pieces of risk where maybe the admitted market due to rate filings and forms are not willing to do that.
We don't see, you know, any pullback in our ability to deploy the limits, so to speak, or capacity. Obviously, in their infrastructure, we have pulled back somewhat in the lines deployed, but there's enough capacity to fill deals that, you know, that are out there.
I'm not sure that's the question, Yaron. Were you asking whether or not the fact that the E&S market's growing, that our retailers business is depleting?
Yes, exactly. Why wouldn't one see some of that?
Because what you've got is it's the natural growth in premium and difficulty in placement that lets the E&S market grow. The first bucket that fills is the bucket of the regular retail admitted market where they can't play, which is an expanding universe, where they don't wanna play, they don't wanna change rate, they don't wanna chase form, or where they're getting killed by regulation, to be perfectly blunt. That's our overflow valve. You fill that bucket first, and then you go to E&S, and E&S is growing fast because those buckets are full.
Well, as you understand, you know, the retailers are still involved in every single transaction that we trade in.
Right. Every E&S transaction has a retailer involved.
Yeah, fair point. Okay.
I will say this, Yaron, this back to the point we made earlier that we keep making. Well over 50%, 60%, 70% of this market is controlled by those small brokers that Mike talked about early on. Most of the marketplace is held by brokers that do not do $5 million in revenue. How they navigate the E&S market, they go to wholesalers. I get that. That's not bad, but they don't know what they're doing.
This is Mike Teich. I can give you a real-life example that Joel and I are going through right now on a very large hospitality client, that is both a client of the retail and the wholesale business here at Gallagher. You know, when you think about does it weaken the retail placement? Well, no, actually. You know, having the two of us combined working together towards solving the client's problem, which is a capacity challenge for this particular customer, getting the limit that they need. In this particular case, the premiums are going up threefold. When you think about the retail and wholesale compensation, both are naturally going to lift.
When we need to reach out to wholesale, it's usually because we've got a capacity challenge and a premium challenge that lifts both boats. I don't consider it a weakness. I consider it a lever that we pull to solve a client need.
That's very helpful. I appreciate it. My second question, just going back to the expected margins for the Q1 of 2023 in the brokerage business. 10-20 basis points of margin improvement. I guess you're guiding 8%-9% of organic growth, so better than the 6% organic that would get you to 50 basis points for the year. Sounds like wage inflation you have under check. Fiduciary income is a greater good guy than initially expected. What other bad guys are there or headwinds are there that would not allow you to grow margins by more than 10-20 basis points in a quarter where you're generating 8%-9% organic?
Let's go through that. I don't see. We don't have a retention issue right now with our employee base. We're gonna give them all fair wages. We have for the last three years. Realize our raise pools the last two years were twice as big on a percentage then basis of payroll versus where they were in 18 and 19. We've done a really good job. I can't say that in 2020. It was about half as much as our pool. We've done a good job of recognize our employees, right? I think that's a direct contributor to the reason why we didn't have the Great Resignation. We're coming up to the middle part of this year. That's usually when we give our raises. We'll take a look at what the raise pool is.
It's a fair raise pool in the environment that we're seeing with respect to inflation and our success. The impediments to future margin expansion, I see very few, if any, that I can think of off the top of my head right now. What I do see is the opportunity to continue to invest, to continue to make our services better so that we win more at the point of sale. In answer to your question, we have the levers if we wanted to pull them to drop more to the bottom line. What we want to do is invest for our growth. If we can get through this year, and at the end of the year, we post nice solid 7%-9% organic growth.
We deliver a margin that's up just on a like for like basis, that's 50 basis points plus maybe a little more from investment income, but we give a little bit of that back because of the natural roll in of Buck. At the end of the year, we're going to be a franchise that's delivered a terrific organic growth, and our margins are already terrific. This is, in my opinion, it's the investment question that we probably should spend a little bit more time. If something happened tomorrow and we had to do what we did in COVID, there are $hundreds of millions that could be pulled out of this structure that is voluntary investment. This goes back a little bit to our competition with PE.
The more interest rates that they've got to pay, the less they can invest in their client capabilities. We just got done with a sales award meeting. We talked about that a lot. We're investing hundreds and hundreds of millions of dollars to make our clients have a better experience, a more valued product. We're investing it in our producers and our people. We're paying them well, and we already have almost top of the stack margins in this business. Shows you the advantage of scale. The efficiencies that we've done starting 18 years ago by establishing offshore centers of excellence are pushing 9,000 people now. This is a machine and a chassis that can hold substantially more opportunities in revenues.
I think that if the voluntary investment that you're kind of digging at a little bit, not digging in a bad way, but just trying to un-understand, $300 million-$400 million of what we're spending around here is making our client experience better.
Got it. Thank you. Can I just sneak one more in? D&O, we're clearly seeing some pressure on large commercial public D&O. Just given the market dynamics the last week, seems like there's more focus on maybe D&O claims coming from banks or financial institutions. Can you maybe describe the financial institutions D&O market?
I'll throw that to Mike after, you know, just it's early days, Yaron Kinar. I mean, we're not receiving calls from underwriters saying all submissions stop. Mike, you have any comment on that?
Yeah. I mean, I would say, Yaron, that I agree with Pat. It's a bit too soon. It's all on their radar, we've had direct communications with each and every one of them. They're all concerned about, you know, the pricing and limit and capacity that they'll have access to when their renewal comes up. We haven't had any one single carrier come out and declare that there's gonna be a rate revision as we head into some of these renewals. It's certainly gonna impact. I think what you'll find is it's gonna be, again, quality. They're gonna want more information. They're gonna wanna make sure that the FI that they're underwriting is well capitalized.
All the things that we do for them to position them well for a solid renewal, is that list probably get longer in the questions that they're going to ask. The strong financial institutions, the ones that have insulated themselves from some of these things, I believe will be just fine when it comes to the renewal process. We're gonna have to tackle that on the ones.
Did you see the same level of pricing pressure in financial institutions in recent months as you see in large commercial?
I wouldn't say so. I mean, I again, I wouldn't say that we over the last several months that we saw any change in appetite. You know, public D&O was, you know, as you saw over the last three years, was a roller coaster ride, right? Whether it was FI or any other, it was really challenging for our teams in the field. It got really soft, really fast. This sort of upward pressure, potential upward pressure, might get us back to somewhere where we were just a year and a half, two years ago. Again, it's way too soon to tell.
Yeah. Remember, this just happened a week ago.
Yeah.
It takes a while for the insurer. They got to see what their losses are. I don't even know if all the lawsuits have been filed yet.
No, they haven't.
There's a lot more to come.
Yeah.
Thanks, Yaron.
Thank you.
Thank you. Our next questions come from the line of Mike Zaremski with BMO Capital Markets. Please proceed with your questions.
Good morning, Mike.
Hey, morning, guys. Just a quick follow-up. Doug, I believe in your vignette, you mentioned programs closer to flat when you were talking about the wholesale segment. A clear wholesale growth is going to continue to be very healthy and strong. Just curious what any color around what's causing the programs to be flattish.
Sure. This is Joel Cavaness. Mike, I'll take that one. A couple things. One, in our programs, about half of it is workers' comp, which as you know through some of our commentary, comp is not only rising, in a rising rate environment today. That leads to part of that. The secondary part of that is obviously, in that program space and our obligation to our insurance companies are to make sure that we maintain and grow profitability. We're pretty selective in the program space, making sure that we're delivering that. Comp is really the bigger driver of that kind of flattish outlook.
Okay. Thank you. Have a good day.
Thank you. Our final questions come from the line of Greg Peters with Raymond James. Please proceed with your questions.
Great. Thanks for allowing me to ask a follow-up question. You know, I may have covered this in one of your previous meetings, but it's always something that's on the back of my mind when you talk about new business, and you talk about tough renewals. Can you give or remind me about the perspective of the time spent and expense associated with, you know, when you guys have to switch from one carrier to another carrier for your customers versus, you know, the retention? 'Cause it would seem like the work required for your force to switch carriers would be more intense than just a renewal with an existing carrier and how I should think about that in the context of, you know, margins, et cetera.
I don't know that. This is Mike Pesch. I don't know that it changes anything from a margin perspective. Your intuition is correct. I mean, certainly when we are marketing business and we market about, you know, our clients ask us to go to market about 30% of the time, you know. You know, those market, go-to-market strategies, especially in a hard market, the process starts a lot sooner. You know, the process of renewal usually spans about 120 days, but that can get even longer on a difficult renewal with tough claim experience and things of that nature. I wouldn't say to you that it creates any sort of pressure in terms of margin pressure.
We've got the right experts in place. That's where the team comes together when we have a challenging renewal, whether it's GGB and RPS or tapping into one of our experts in the field to help create a more favorable renewal term and condition for our client. Again, I don't see if your question was, is there direct margin pressure? No. Is there more work to be done? Of course, yes. If we're marketing more of our business because of market conditions or because of the complexity of the account or the industry, that does require more time, effort from the team in the field.
Yeah, I think I'd add to Mike's point. standard array of business, 30% of your business is being remarketed. When you get into a hard market, and you've got to go to all your resources to complete something, in that case, Greg, it costs more money.
Just, Pat, you threw out this 30% comment. Can you explain that?
Yeah. Mike just said about 30% of our renewals are asking or we are taking them out to market at any given time. That's a pretty static number. About 30% of your renewals are being marketed, and that is built into the ongoing margin we've got. Add to that a very difficult market where you got to go to a lot more resources, you can't get the thing placed, you're jumping around the wholesale market, that starts to push costs up. If you have that 30% jump to 50%, it's going to add to your cost.
Got it. Thanks for the clarification.
No problem. Thank you everybody for your questions. Let me just give you a few comments. again, thanks very much for joining us this morning. From my vantage point as the CEO, I believe the business is in excellent shape to grow organically through merger and acquisition and to expand margins. I believe we have the most talented colleagues in the industry. I'm very excited about our near-term and long-term prospects, and we look forward to speaking with you again during our Q1 earnings call at the end of April. Thank you everybody for being with us today. We appreciate it.
Thank you. This does conclude today's conference call. You may disconnect your lines at this time. Enjoy the rest of your day.