We are going to get started to stay more or less on schedule. I'd like to take the opportunity to welcome Pat Gallagher, CEO, and Doug Howell, CFO of Arthur J. Gallagher.
Thank you, Meyer.
At this point in time, we've been spending a lot of time explaining to, let's say, non-insurance-focused people the difference between brokers and underwriters in terms of the implications of catastrophes, some of which are likely to be much worse than we've seen in a long time. As always, we welcome questions from the floor. I've got my list to start with. At any point in time, if there's something that you would like the Gallagher folks to amplify on, or if you've got a completely unrelated question, just let me know. We're more than happy to incorporate that. Let me start with sort of a basic question, and that is, on the second quarter call, Doug, you talked about margin-expanding technologies, that's my term, I don't think it's exactly yours, that are also translating into improved customer satisfaction.
Can you talk about the investments that you've made, and I know this goes back more than a year or two ago, that are creating that sort of double benefit?
Yeah, I think that in the conversation that we were having on the conference call is we were really referencing the fact that about 12 years ago, we made a committed decision in order to use service technologies that we could build or customize from existing software in order for us to move work around the world to lower-cost labor locations.
Right.
It was done in an effort at that time, really to improve the quality of the offering that we're providing. You have to remember that a significant portion of a broker's business is a service element that is after the sale. We had deployed substantial effort, money, and resources in order to do that. As a result of that, we now believe that our quality is second to none. We believe that we have turnaround times that are not seen. We can issue a certificate to a contractor as little as 10 minutes, 15 minutes, something like that. We've got our quality in terms of policy delivery, the timeliness of that.
That's what I was referring to, is that not only did we set out actually to improve our quality, and what it actually led to is lower cost, which has helped us dramatically improve our margin.
It's been one of my greatest learning experiences, is working with our offshore centers of excellence in India in particular. Just the whole concept of process improvement, managing to quality, and measuring that. I'll give you an example. I was at a conference similar to this, but it was all insurance agents. I asked the room, "How many of you can tell me what level of quality you have in your certificate of insurance issuance?" Not one hand goes up. I can tell you, and I can prove that we will issue certificates, as Doug said, within 15 minutes at a 99.9% level of accuracy. That's hugely important to our construction clients in particular.
How helpful is that in terms of attracting new clients, whether it's on the?
I haven't seen it be a key production point yet, Meyer. I do think it is going to be. One of the things we talk about is we go out and see our clients now and our prospects. We're not just talking about insurance. Insurance is important, no question about it, but there are whole other services and things that clients need to think through, like what's not insurable, right? Things like how important is the quality of your certificates. We refer to that as CORE360, which is really showing a client that, yes, insurance purchase is part of what we do, but all these other areas that you're touching and that you need some help on are areas that Gallagher excels. That'll help our organic growth.
Okay. Fantastic. Doug, you talked a little bit about investing in technologies and the high-touch component of brokerage even after the sale. That goes to the next question, which is we're seeing some major names in insurance invest in direct-to-consumer insurance distribution. How do you expect that to evolve over the next couple of years? What are the opportunities and challenges for Gallagher, and what are the associated investments that you're making now?
Well, first of all, we're watching probably 1,200 insurtech investments. There's firms out there that'll do that for you. I think in my own opinion, most of that money's going to be wasted in the short term. There will be disruptors that succeed. We'll be, with the domain knowledge we have, we are likely to be good partners for some of those people. In terms of direct purchasing or insurance being packaged into one product that's bought online, that's just not how the business works. It may happen that way on the very low end, where very small, what we call SME, small medium accounts, can have some activity along a GEICO road. The truth is, we are trusted advisors, and that's really where most of our business is. We do an awful lot of work in the middle market.
These are people that own businesses. They make their own decisions, they need help on how to put the insurance together. You get to an account that spends as little as $30,000 to 50,000. They're not trading with one insurance company. We'll piece the puzzle together for them. Workers' comp may be with this carrier, umbrella will be with this carrier, that's a big part of what we do. It's a big part of our value add.
There's an awareness, I guess, among clients that there are things that they know they don't know.
This is what I like about commercial middle market. Our clients know how badly they need insurance, this week is another great example, as was last week in Houston, they know they don't know anything about it.
Right.
That's the trusted advisor role that we take, which is what leads to us really, if you will, having a very captive relationship with those clients. Which is why our retention is something north of 94%.
That's fantastic. I don't know if this is a related question, but it's a concern that I have. We've been in the soft commercial market for a while. No idea what the current hurricanes imply for reinsurance or for property. Setting that aside, one of the more consistent responses among the insurance carriers is to look to control or cut back on their expenses. Does that provide any challenges to Gallagher in terms of your interactions with these more cost-conscious carriers? Is there an opportunity to provide more services that, let's say, the smaller regional brokers that are the bulk of your competition can't produce or can't provide?
It provides a lot of opportunity. First of all, we have great and deep relations with most of our trading partner companies. If you look at our mission statement, we actually have it lined up intentionally that our stakeholders are basically our customers, our people, our carriers, and then the shareholders because we need the carriers. They take risk, and we don't. The other thing, too, is I kind of dispute the fact that I would even call this a soft market. If you go back to my startup in the 1970s, when a hard market hit in 1974, 1975, prices were jumping 25%-50%, insurance was basically being canceled, and people were going nuts. It happened again in 1984. It happened again in 2001. Since about 2005, rates go up 1% in this line, they go down 3% in that line.
If you look at that trend line, it's been pretty flat. Yes, things can soften on workers' compensation in a state where maybe the law has been changed. Maybe it'll soften a bit around directors and officers, but it's not this whole market sweeping up and down. In every quarter, I make comments about that on our conference call. This is really a great market for customers. I'll go to sales meetings, and there will always be a story of somebody who got a 15%-20% reduction. Well, you know what? When I look at the account, they deserve it. That's not the story that's happening day in and day out. What's happening is rates are essentially kind of flattish to down a little bit. Well, that's not a bad environment for clients.
It's not a good environment for brokers or insurers when prices are coming down 15%. All through the 1990s, that was a very extended soft market. Prices were being cut 10%-15% per year, I kept thinking if there was an insurance company that would go broke, the rest might get the message. You want to go back and look at a graveyard of companies, look at the 1990s. I think it's a pretty stable market.
Okay. Fantastic.
It gives us great opportunities for our clients.
That is a little more positive than the message that we've been hearing. There's also the compounding impact, you had the compounding impact last time, too.
We'll take the term that you used in terms of the overall stable environment. You're certainly not getting a tailwind in terms of revenues. Is that a motivator for some smaller brokers to consider selling themselves?
I think there's lots of things that motivate the smaller brokers to sell themselves. First of all is capabilities. Right now we know when we compete, we compete 90% of the time with someone who's smaller than we are. I believe that we should win 98% of those opportunities. We don't, why is that? Well, maybe we didn't have the best price, or maybe we didn't have the right carrier. By and large, we're pretty good at that. Typically, it's the relationship.
Typically, we can't get that person to make the move to fire the other broker.
Right.
The simple fact is, in our verticals in particular, we are so strong that our smaller competitors are looking at that and saying, "Those resources are going to someday really make a difference, I'm not going to win this battle just over relationship." There is motivation there. There's also motivation for many of the people that own these agencies are baby boomers. It's their biggest asset, at some point, they want to capitalize that.
Yeah.
I would say the third factor is a growth issue for them. Maybe that's a distant third, fourth, or fifth. I think the capabilities that we bring, because we'll be better together, they know that. Most of the acquisitions that we look at are people that want to stay in the business for three, four, seven, 10, 15 years. As a result of that, they're not just looking to dump their agency to us and run. We wouldn't buy something like that.
Right.
As a result of that, they're seeing better together as the primary driver.
Doug's absolutely right about that. One of the first criteria of us doing an acquisition is you've got to be successful. If you don't know how to run a good agency and make money for yourself and your family, you're not going to do it for us. His comment is exactly right. You don't need to sell. You've got a great business. Your friends that are owning $5 million agencies are making a lot of money if they do it right. You don't need to sell. The question then becomes, are we stronger together than we are separate? Would that be better for your people and your clients? When we get people to answer that yes, as Doug said, it's very important for us to have them stay.
I certainly take your point. The truth is, I've had a lot of investor meetings over the last 15 years, and a lot of people say, "If I could do it again, I would go into insurance brokerage." None of them have said, "If I could do it again, I would be an actuary.
Any of them said sell-side analyst?
Even fewer. I'm looking for people. Here's one of my theories, and people will disagree with this, and I'm interested in your take. Whether it's reflected in pricing or other issues, there are probably more insurance companies out there than are necessary for an effective, efficient, and a competitive marketplace. Is that a fair observation? If it's true, it would translate into maybe more pricing pressure than is ideal. It also creates more expense for the brokers that have to maintain relationships and transactional capabilities with 2,000 insurance carriers instead of 1,500, or whatever the right number is. How do you think about that? Is there an efficiency improvement opportunity for a broker in terms of saying, "We're not going to shortchange our clients.
We'll maintain a robust level of competitors, but we still have at some point in time the diminishing marginal returns that are a problem.
I think there's no doubt about it. We find that the deeper and larger our relationships are with our preferred underwriting partners, the better we are at solving problems for our clients. When you spread the book of business to 1,500 or 2,000 companies and you have a problem, you get a problem on the other end where somebody doesn't answer the phone. We do, in fact, look at our carriers on a tier 1, 2, or 3 basis, and we say, "Look, where it's appropriate for the client, we're better off trading with these folks here because every time we get a problem, we are able to sit down and work it out." That's usually a claim problem that a client needs to have solved.
Is there an active panel consolidation strategy? The terminology is probably not good, but
I wouldn't say there's a panel consolidation strategy, but yes, there is a strategy afoot to say we have special relationships with this dozen to two dozen markets that really provide great service to our clients. What else can we do to build that relationship?
Many times those carriers also that we have a deeper relationship with will actually provide special endorsements to our clients that they can only get by using a Gallagher broker.
That's something that we really bring tremendous value. It works really well for the customers for us to have that deeper relationship, not only on the sales side of it, but especially on the claims side. When they have a problem, they'll pick up the phone and help our clients out to get that claim paid faster, and that's a big value to the customers.
Yeah. I always view that as one of the key organic growth contributors is that you can get better deals from carriers for your clients than maybe a smaller broker without the same size and scope. Again, I want to make sure that if anyone in the room has a question to ask, just signal and let me know. My sense is that Gallagher investors are not looking for a transformative acquisition at this point in time. I think it's fair to say that you are the biggest broker in the world that doesn't have a full complement of consulting capabilities alongside, right? In the aftermath of the Willis Towers Watson consolidation. That hasn't appeared to be a problem, but how do you think about that in terms of the next five years or 10 years? Do you need to have a wider array of consulting capabilities?
I think the answer is, first of all, we do view ourselves as consultative. We look at ourselves as the risk management consultant for our clients in the brokerage world, and when it comes to benefits, we consult around the whole human capital experience. We do view ourselves as consultants, but we like the position we're in. We like being focused on the human side of things and the risk management side of things, and I don't see a transformation to just general business consulting.
Okay. Doesn't look like there's a shortage of brokerage acquisitions around the world either.
Our pipeline is significant. The pipeline is fantastic. If you were number 100 on Business Insurance's list this last July, did $26 million of revenue. Bobby Reagan, who I trust his numbers, he's a consultant banker in our industry, believes there are 39,000 agents and brokers, firms, not people, firms in America.
That's higher than the last number I heard. I think it was like 35.
38,100 of them or 900 of them, smaller than $26 million?
Right.
That's a fragmented industry that needs consolidation that will benefit the clients from it. Many of these firms are run by baby boomers. We're back to that whole virtual cycle.
Okay. Phenomenal. I want to talk about two issues that I think are on the back burner, or at least in terms of the public perception of Gallagher, just things that are percolating in the background. One, when the Heath Lambert acquisition was completed, that provided obviously a big U.K. platform, but some access to continental Europe. Second, you have Capsicum Re. It's not a top three global reinsurance broker, but you've got some significant leadership and capabilities in there. Can you give us an update in terms of those issues, in other words, non-English speaking expansion and reinsurance brokerage?
Sure. Well, first of all, we did not do the Heath Lambert acquisition to get into continental Europe.
Right.
We were looking to build a platform in the U.K. that would allow us to do in the U.K. what we've done so successfully in the U.S., which is bolt-on acquisitions. That's why we also did the transformational deals in New Zealand, Australia, and Canada. That's playing out exactly as we had hoped. Our pipeline is strong in each of those territories for acquisitions and their bolt-ons. We would not have been a credible buyer in any of those other countries if we hadn't gotten some scale. That's why our integration costs were high the last few years, and those integration costs are now essentially complete. We are, in fact, building a pipeline. It's working just exactly as we had hoped. The Capsicum situation was really an opportunistic move on our part.
We had a great leader in a guy by the name of Grahame Chilton, Chilly Chilton, who's had a terrific career in reinsurance and reinsurance broking. He wanted to start up with his partner, Rupert, we were able to give him the infrastructure necessary to be credible, he's done an incredible job. They've had a lot of success in growing the business at a level that, frankly, I haven't seen before us. It's done really well.
Okay.
I think internationally, outside of the countries we've mentioned, we actually have done a really good job getting toeholds in certain countries. Primarily, those toeholds are with brokers that we've traded with for a long time in London, and/or have a deep industry specialization that trades through London. Actually, what brought us to Australia many years ago was a broker in Perth, Australia, that traded with London on our energy and marine practice, that's what introduced us. As a result, we became familiar with them, then we took a larger stake in them with time. You'll see us do that in South America, maybe in certain spots in Asia. Typically, hat's what introduced us. As a result, we became familiar with them, then we took a larger stake in tour model there would be to buy maybe 25% initially, then maybe take it up to 65%. I don't see us really going to 100% ownership of those.
Again, the criteria is how are they trading together with our London operation?
Great. Your hand was up first.
I'm sorry. What was Grahame before he joined you guys?
He built Benfield.
Okay.
Sold it to Aon.
What is his sense, or do you have a sense of I think you said that pricing was not as soft as people think it is in the primary market, right?
Right.
Reinsurance, the sense is that it is a little softer. Is that?
I think that's accurate. It's also a little softer in the London market.
What do you think? I'm trying to figure out an event, given this is very topical right now clearly. What sort of event do you think would unpack the things that need to happen for alternative capital rethink, for pricing to harden? Certainly may be a capital event. From your seat, what would you have to see in terms of insured losses on events, Irma, Jose, Harvey, that sort of thing, to get to a rethink?
I don't have an actual number. I don't know a number I'd put on that. If it's anywhere near some of the top-end numbers that are just being bandied around with regard to Florida, it'll be a capital event.
The numbers I'm hearing are $130, $125.
I've heard those numbers. I've heard as high as $225.
Okay. All right.
On the insurance.
That would be a capital event-
True
in the industry. Who said 225, by the way?
I don't remember where I read that.
Okay.
Some online thing. I'm watching, I've got two apartments down there, and I plug into the machine about every two hours to just see if the thing's going to head out to the Atlantic for me.
Okay.
Right here, James.
Terrence, what do you think about, I think Jim and you kind of talked about new brokerage formation, because the tyranny is not only that just sort of other people want to get in the business, there's also, I think the tyranny, there's got to be some fallout for some of the PE-backed firms that have younger people that want to do something different or want to be in a different role.
The beauty of our business is it's a lot like soccer. You need a pair of shorts and a ball, you're in the game. You got a license, you can put up a shingle. Again, I'll go back to Bobby Reagan's comments that, okay, maybe he's right, there's 39,000 of them, he says that over the last 15 years where he's consulted on acquisitions, that number hasn't diminished. For every one that sells, a new one starts. I don't know if he's 100% accurate on that, it feels like that to me because it's a very easy business to get into. It's an incredibly creative business. Of the 500 acquisitions we've done since 1986, there are no two that are exactly alike. Everybody has a twist on how they're helping their clients.
Everybody has a little bit different way to approach how they're going to sell. It's fascinating. It's really creative. We as an industry should be very proud of the fact that we are creatively solving problems in terms of trading risk for our clients.
Just to clarify one point that you made, though, the number of firms does seem to be staying constant. The market share gains that you and other consolidators have produced are very real. They're holding.
Oh, yeah.
So.
Oh, no doubt. Yeah.
The insurance marketplace, by one estimate, Hishin, we were looking at something the other day. On average, you have to create another Travelers every year or AIG every year in order to handle the new premium that's being developed around the globe. Just that in itself, it's an expanding industry.
Around the world. As a result of that, the growth that can happen, not only from just an expanding industry, but also just from taking market share, that will happen.
Okay. Let me stay on the topic of the M&A pipeline for a little while. Two questions. One, you talked about it being very robust, and I think we've seen steady activity. Does that vary by line of business capability, by geography? Second theoretical question, there's been some observations of higher price targets for acquisitions. That's attributed, I think, in many cases to PE firms that are looking to create these consolidated entities. I think it also, and maybe this is related, it makes sense. In an era of cheaper capital than we've had in the past, it might make sense to borrow and spend a little more because the cost of borrowing is lower.
Two things on that. First and foremost, in the space that we play, primarily in that $2 million to $6 million-$7 million revenue-type broker, pricing is up, but maybe in the depths of the Great Recession, we were paying 5.5 to 6 times, and we might be paying 7 to 8 now. There's a little bit. A lot of the bigger deals that are sold, you'll see headline numbers that might be 11, 12, even higher than that in some locations. That's typically not the space that we play. From Gallagher's standpoint, we're still seeing that people understand, and I keep saying better together because that's really what they're seeing. They see the capabilities are coming in. They want to join an organization where their employees can have a successful career, and they want to continue to work in the organization.
They feel that seven to eight times is a fair multiple. For the resources they bring to bear, that's still a really fair price in this market.
Let me give you my poster child for why this all works. We bought an agency in Des Moines, and the principal in Des Moines, great guy. Bought him, I'm going to say 15 years ago. We gave him cash, Gallagher stock, and
He was a good broker in Des Moines, but didn't have any of our commercial capabilities. Well, in that 15 years, his book of business has more than tripled, and his base compensation has more than tripled. The cash we gave him got his kids through college debt-free, and the stock we gave him has quintupled. He's a happy merger partner. Right? That's what we're saying to the folks that are joining us today is, okay, we'll negotiate the price along with an earn-out. If you're right, if you can really grow this thing to that level, I'm happy to pay the additional money three years from now. You've got the second bite on the apple that private equity promises if you just deliver, and by the way, that's you deliver.
You don't have to worry about the whole firm delivering, and you're not walking around with a for sale sign on your back. Being able to use our capabilities, stay in the game, be paid for what you hunt and bring into the tent, people like it. Okay. Implicit in what you're saying is that's how Underwood is still with you.
Right. Okay. We touched a little bit on pricing. There's also sort of the economic backdrop, modest, moderate growth, I think that's a fair characterization. How does that impact the growth potential specifically in risk management? You've got rising commercial auto rates. Maybe people want to retain more risk following workers' compensation. If you put all that together, what does that organic pipeline look like?
On the risk management segment, I think there's tremendous opportunities because I think that when customers show up, whether that customer is an individual self-insured company that has a large workers' comp risk profile, or if it's a carrier that does workers' comp, both of them are realizing that we're paying about $9 to 10 billion worth of claims on behalf of our customers. That would make us maybe the fifth to seventh largest insurance carrier in the U.S. when it comes to claims paid. The expertise that we bring to bear that bears out a better claim outcome, that yields a better claim outcome for our customers is undeniable. We can settle a claim better for a lower cost for our customers and get somebody back to work after a bad situation. Customers are waking up to that. They're realizing that there's opportunities.
The workers' comp space in the U.S. naturally contracts every year a little bit because we're a safer environment. As payrolls grow, it will grow, so we'll grow with our customers. There's fewer accidents per person, but more people working will lead to growth. As we move into doing more work for carriers, that's a tremendous growth opportunity for us. I see that business. The second thing is we're seeing that our customers that have workers' comp related type risks in Australia, in Asia, in the U.K., Canada, are pulling us into those countries and saying, "Do what you do in the U.S.," in those countries. We've done that, and then now we're picking up customers there. That business has tremendous growth opportunities as people will buy better claim outcomes, and we can deliver that to them. Okay.
What's the comparable number to the 39,000 in terms of other claims handling firms? It's a much smaller business. Much smaller universe. Yeah. I think that there's probably 10 sizable competitors out there that can offer something. You do have a lot of smaller TPAs that are providing claim service for one or two customers. No, we don't chase storm claims. That's not what we do. Right. They're out there, but by and large, the aggregate of those smaller ones wouldn't move the needle. They're acquisition opportunities because they might provide some specialties that we might need. I'll just make this up. For instance, if there's a claims specialist that specializes in eye injuries. That might be somebody that we're interested in acquiring because we can bring that in.
We can offer that service across the entire Gallagher Bassett footprint because they are the best when it comes to eye injuries. That would be an example.
Okay. Again, if there are questions, please don't hesitate to let me know.
On the risk management side, over the past, let's say, 10 years with the cat risks that you might be helping some of your clients with, have you seen terms and conditions kind of loosen in response to pricing, or maybe that coupled with some of the reinsurers capping their limits? Do you have any color on that?
I think terms and conditions clearly have loosened a bit. That'd be another definition of a softer market. I have not seen it in a way that would make you say, "Boy, that was a crazy thing." It's a competitive environment. You're talking about risk management accounts when you started off. Those are the larger accounts that do modify what they pay in premium by virtue of how much they're going to retain. When the markets get tough, they retain more. When markets get a little looser, they'll bring those retentions down, and they'll expand their coverage. That's a yin and a yang that goes on literally all the time in the marketplace. Did I answer your question?
Somewhat.
In terms of terms and conditions, I can't get specific with you, I'll give you an example. Most of your homeowners and people like that are not buying flood insurance in a place like Houston. Right? Most commercial accounts, if they had asked for it and if the broker was working with them, could have purchased it. After this event, is that necessarily going to be the case? Maybe not. You see some elasticity.
I'm talking you've seen both sides.
Primarily on the reinsurance. I'm just wondering, have you seen the reinsurers say, "We're going to maybe loosen this side up because we see the business, so we're going to cap our liability on the other side.
Yeah. They're watching their aggregates, sure. Yeah, on the aggregate side, I think, remember, a lot of times, most reinsurance written is the follow form of the primary. As a result of that, the real question is, what's the definition of a cat loss in particular? A facultative loss will follow form of the primary also. That's something that when you talk about terms and conditions, it's probably reflected mostly in the price on an individual per-risk basis.
Now, what you're going to find in the next month and a half is who did that well.
Right.
It's always after these storms we find out that the models didn't really hold up.
Clash cover, where you'd have two insurance companies or an insurance company on both sides of a loss. Sometimes you see that on the auto side. There'd be terms and conditions in that space. By and large, that's not a huge portion of the market.
I'm not going to ask for names, the point that Pat just made I think is interesting. I interpret that as saying that you've seen differences in terms of what companies are willing to accept, whether they know it or not.
Sure, on the primary side, yeah.
Yeah. Sure. That's why it's a competitive market.
Okay. Excellent. Let me talk a little bit about employee benefits. We're in this sort of nowhere land, no man's land with where the U.S. healthcare system is going. You talk a lot about the initial Affordable Care Act being actually very good for Gallagher, even if it wasn't necessarily so positive for all of your clients. What's the current situation? It's a bad question because there is none.
Well, I mean, I think the thing is that I was against the Affordable Care Act, I got a little bit aggressive with our own employees and told them that, they pushed back. They did exactly what they should do. They said, "Hey, run an insurance broker and stay the hell out of politics." You know? I basically shut up. The Affordable Care Act was a terrific boon for Gallagher because it created so much confusion, it created so much need for compliance that we had to really be out working with every client. Just gave us all kinds of opportunities to touch point with the clients. Well, we have a similar situation today because clients want to know what if.
Congress is stuck in this place where the president and Congress can't agree on what modifications, I do believe that there are modifications to the original law that should be enacted. You don't know where it's going to go. Every client has a different set of circumstances, one of our jobs is to sit down and look at that with the client and say, "If it goes this way, here's what it looks like the impact will be on you. If it goes this way, this is what the impact looks like. Let's just be prepared." In the meantime, you have to deal with the steady-state situation, which is we're in a war for talent out there, every business needs to keep their people.
How expensive is that when you need to keep tabs on the current situation and a bunch of different scenarios?
It's expensive. We've got 32 people in our compliance department alone. Most of them are lawyers.
Okay.
That's the capabilities that we see, especially on the benefits side, the merger and acquisition opportunities on the benefits side is huge because smaller brokers have terrific relationships with their customers. They are trusted advisors to them. They also understand for them to go out and build a compliance department to interpret all these laws is very expensive and almost impossible for a small broker to do.
I tell people this all the time. I can tell when I'm meeting a merger potential on the benefits side if he or she has seen our compliance people before I saw them or not. Because when I see them before they've met the compliance people, they're cocky. "I got this ACA thing. I got this Affordable Care. It's not really a problem." After they see our compliance people, they're nervous.
Which is good.
Which is good.
Right.
Which helps us move that acquisition along. Complexity, change, turmoil helps our consulting efforts.
Okay. I've got one more question, but I did want to survey the room again to see if there's anyone else who wanted to jump in. I'll come to another area of legislative uncertainty, and that's with regard to tax reform. You've clearly got extensive investments that generate tax credits that have been sort of a phenomenal run over the long term. Are there any near-term concerns, and does it impact any other aspect of the business other than simply the investment?
Well, I think to frame the question is that we have four more years left on our clean energy investment program. At the end of 2021, we will no longer generate new tax credits, but we will have a substantial amount of tax credits that will run clearly into the late 2020s in terms of getting tax credits against our taxable income that will lower our cash taxes paid. What do I see going on in the industry right now? I still think that there is actually a belief that clean energy technologies bring value to society. I think that you're seeing the fact that we can bring clean energy to bear, that we can produce that the subsidization through a tax credit by the government is still favored at this point. Do I see tax change happening?
If you lower the rate and you lower the AMT, we'll still generate the same amount of additional cash benefit as a result of that. Lower rates, no AMT, I think that's good for everybody overall, but also it doesn't diminish the value of the tax credits that we've generated in the past, nor does it diminish the value of the tax credits we can generate going forward. Again, that program is pretty well done in another four years. We will have a nice glide ratio well into the late 2020s.
Okay. If there's nothing else from the floor, then please join me in thanking Pat and Doug for a very informative presentation.
Thank you very much.
Thanks.
Thank you.
Thank you.
Thank you.