Bank of America Merrill Lynch 2013 Insurance Conference

Feb 13, 2013

Slides

We're going to move on. Our next presenters are from Arthur J. Gallagher. I think also, in all the time that we've done this, you guys have been here, I think every year. I don't think you've- Probably more than 17. More than 17. I hate to admit. I think you've been here in some form all the time. We have Pat Gallagher, the CEO, and Doug Howell, CFO. I think, Pat, if I've got this right, you started at Gallagher in 1972? '74. 1970. Well, we looked up some numbers yesterday, and I think the industry surplus was less than $25 billion or around thereabout at that time. Now we have several companies that have surplus that's substantially more than that. I think Pat can offer an interesting perspective on the industry and how it's changed. Thank you, Allison. That's just a nice way for Allison to tell everybody that I'm old. Been here for 17 years and started in 1972. The truth is, I started with the company as a file boy and a runner in 1966 when we had 23 people. Yes, we've seen a lot of change, and we're very pleased to be here again. We have been coming to this conference since they started it, and we look forward to it every year. Thank you, Allison and Jay, for the chance to speak for the next few minutes about Arthur J. Gallagher & Co. Before we get into the particulars, obviously, I have to make a comment on forward-looking statements. Anyone who knows me in the room knows that it's very likely I will have some forward-looking statements, and there's absolutely no guarantee any of it comes true. You can spend some time reading this slide, or maybe I'll just explain it. Bottom line is that we do use numbers that are not GAAP numbers, but we do reconcile them for you. We think that the numbers that we put in the presentation are meaningful and will help you understand the company. Gallagher essentially is in two businesses. In many facets of these businesses, we're a brokerage operation. The brokerage segment, we arrange insurance programs across the entire spectrum of insurance, whether that's property casualty, whether it's wholesale, whether it's an MGA or program, or whether it's employee benefits, voluntary benefits, life benefits, whatever. Across the entire insurance spectrum, we essentially arrange insurance on behalf of our clients. As I said, retail and wholesale. Our risk management segment, which we think is a very unique offering, Gallagher Bassett Services, is about a quarter of our revenue, and this firm pays claims on a contract basis for large self-insured clients, as well as insurance carriers who have decided to outsource their work. We believe that we are the largest player in that business as an outside, independent claim-paying organization. We believe that we've got a very high level of quality, and that's been recognized in the market. If you take a look at the brokerage segment revenues, about 51% of it falls into the retail property casualty. We do an awful lot of risk management business, large accounts, but by item count, the largest part of our business is upper commercial middle market. We wholesale about 24% of our business. Wholesale is where we work with independent agents. We work with over 10,000 independent agents to help them place risk for their clients. We have a retail benefits presence that's about 25% of our business. 80% is in the U.S., 20% is international, and the international piece is growing very nicely for us. I'll touch on the Heath acquisition in a moment. In the risk management business, Gallagher Bassett Services, 68% of what we do is workers' compensation, 79% of our business is here in the United States, 27% is liability, and just a little bit over 5% is property. 21%, again, international. Very proud of the international growth. We've had substantial international growth, primarily in Australia and in the U.K., as well as some growth in Canada. 2012 was, by our thinking, really a good year. In the brokerage segment, adjusted revenues were up 18%, adjusted EBITAC was up 22%. Our organic growth moved from 2.8% to 4.4%, and our margin expanded about 70 basis points during the year as well. In the risk management segment, another good year. Adjusted revenues up 7%, adjusted EBITAC up 11%. We had organic growth of 5.7%, and we had a margin expansion to 16 points of margin. The way I look at the business and what we're trying to run is how they do on a combined basis. Adjusted revenues up 15% to $2.4 billion. Put that in perspective, we did our first billion in revenue in 2002. It took us nine years to get to the second billion, and we're nicely on our way to the third billion as we speak. Adjusted EBITAC was up 20%. Organic growth for both enterprises together was almost 5%, 4.7%. Margins improved slightly during the year as well. At the same time, our corporate segment, those of you that follow the company will recognize that in 2009, we embarked on a tax advantage strategy that will kick off a substantial amount of after-tax cash flow, which we intend to use to buy insurance brokers. That strategy began to really show through in 2012, which we're pleased with. Guidance for this year is to expect after-tax somewhere between $75 and $90 million from these efforts. Cash and dividends, we've been a solid dividend player since the time we came public. We believe in sharing with our owners the success of the company as we build out that success. The cash that we've generated over the last three years has gone from $264 million to $358 million. We've maintained a less than a 50% payout over the last couple of years, and we feel we have excellent coverage of the dividend as it stands today. Indicated dividend was increased at our last board meeting to $1.40 for the year. Proud of the fact that since we've come public, Gallagher, as a dividend payer, has averaged over that period of time a 15% average increase in the dividend that we pay to our shareholders. We think that if you take a look at the returns in our industry, we're one of the leading returns in the industry over the last 10 years, five years, two years, and a good portion of that return has, of course, come from the dividend that we share with owners. At the very same time, we have added debt to our structure over the years. We will add another $200 million in debt this year, we maintain a very solid and conservative balance sheet. About 1.4x adjusted EBITDAC in debt. We've got plenty of room. We are very cautious about debt. Doug likes to say, and I like to copy him, that debt is a lot like hell. It's really easy to get into. It's just the toughest heck to get out. We put debt in the structure. We'll use more cash in acquisitions this year, we're cautious about debt as we continue to go forward. I think what most people are interested in is the environment as we find it today as it relates to the brokerage business. I'm going to spend the lion's share of my time on those topics. What does it feel like to us from the economy, from the carrier's position, and what's happening with rates? Very unusual time when I talk about rates. I had a chance to ask Allison in the hall before we came in, did she ever think in her career of analyzing insurance companies that we'd see balance sheets as strong as they are today and rates actually moving up? Her answer was no. She didn't think that. We are in fact seeing that, which is very interesting to me. We're cautiously optimistic about the economy. 2013 feels to myself and my team a lot like 2012 did. We're not seeing a lot of adding of employees with our clients, but we are feeling the clients' businesses getting a little bit better. Anecdotally, I'll give you an example. I've got a friend that's a construction company owner. The Great Recession took him from doing about $100 million of total billings in a year to more like $25 million or $30 million. He really saw a tremendous decrease. Did the things he had to do to cut back, did the things he had to do to survive, and now looks like he's going to see maybe $40 million to $50 million of construction opportunity for the year. That's kind of what we're hearing out there. If you look at the slide in the bottom right-hand corner, you'll see a green dot. What that slide basically talks about is business confidence. We did see a fall off in business confidence among our clients in the fourth quarter this year. I can tell you there was nervousness, lack of clarity around what's going to happen with the fiscal cliff. This green dot is January, same study, same survey. We're feeling that as well. As I said, we're not seeing people add a lot of headcount, which would be a really great indicator for us because as you all know, all insurance is predicated on exposure units, and if you add people, you add payroll. If you add payroll, you add cars. If you add cars, you have to add workers, you have to add shifts. That all bodes very well for us. What I would just say is that we feel like we're seeing positive audits coming through to our clients and somewhat of an improved economic position. This is very interesting to me. What you've got for the first time are firming rates when yet there's ample capacity. This is my fourth cycle, and I've never seen this before. Typically, a cycle turns, and we've got other slides on this, when insurance companies really feel that their balance sheet is woefully inadequate, rates are inadequate, they're in real trouble, and there's a bit of panic in the market. Clients get cut out of their insurance. They can't buy the insurance they want. Rates are going up like crazy, and we, as an industry, look really bad and completely stupid because we do this for two and a half, three years, and then we start to cut rates again. Balance sheets get replenished, and that makes sense financially. This time, what we're seeing, strong statutory surplus but no investment yield. An inflation in loss costs of anywhere from 4%-7% that the carriers are extremely cognizant of. This is the first time in my experience where when I sit with insurance company CEOs and they tell me that they're getting 4%, 5%, 6%, 7% rate, then I go to a production meeting in one of our offices, our producers tell me that they're having to sell 4%, 5%, 6%, 7%, and 8% rate increases. If they take the client out for competition, they won't necessarily move it for less. Completely different than the dynamic in the middle of the 1990s, and one that bodes extremely well for us. What's going on here is a dynamic with this investment world that if you go all the way back to 1979, if you had 100% combined, you'd have a 16% ROE. Today, 100% in most lines would get you less than 8% ROE. You have a host of insurance company managements that absolutely get this. They see it, and they know it, supported by IT systems that tell them every day what's going on. What we're seeing is rate change that has actually strengthened over the last four quarters and is continuing as we get into January. If you take a look at the commercial P&C pricing, it's pretty interesting dynamic. That dynamic is basically cutting rates for the last nine years and finally beginning to see a little bit of an uptick. The question all of us have to ask is, will this continue? It seems to me, as I talk to insurance company trading partners, that they're serious and that the rate environment will continue. A classic hard market, as I told you before, is filled with panic. This is a firming market. It is not a classic hard market. We are not having to sell 50%, 60%, 70%, 100% rate increases. We are not out telling our clients that we can't get them insurance. They can get the coverage. Business is moving in an orderly fashion, and as I said, there's adequate capacity. We are seeing carriers hold firm to the request for moderate price increases. In the workers' compensation line, those increases are more substantial. That's a line of business across all of the United States that needs repair. I have to be clear about this with our people and with our clients. I think this is a better environment for our clients. We don't do well when we have to go out and tell them that their insurance program is completely dislocated, and that we can't get them the cover that they need. Prices go through the roof in a typical hard market, then after the prices start to come down, you got angry clients that have been jacked by premiums that they couldn't afford. I think it's better for the carriers if they can maintain this discipline. Over time, they will be able to exceed loss cost inflation, and I do believe they'll repair their ROEs. It's clearly a great environment for brokers, which is why I really want it to continue. We've grown the business, I think, extremely well, for the better part of our time being a public company. Became public in 1984, we raised $11 million. We finished that year with about a $50 million market cap. 28 years later, we're about a $2.4 billion company. We've got about a $4.7, $4.8 billion market cap. I think the thing that's fun about our enterprise and about our team is I think if you stopped any of our people in their tracks, they would tell you that we're just getting started, that we've got unbelievable opportunities to continue to expand our business, to grow the value for our shareholders, and to build out an unbelievable career for our people. Every day, we focus on four things, I'll take you for a walk around the puzzle. We're focused on organic growth, mergers and acquisitions, productivity and quality, and maintaining what we believe is the secret sauce, which is a very, very unique Gallagher culture. What do we do to drive organic growth? Well, first of all, we grow our own. We'll have 150 to 200 kids in our internship program this summer. I'm extremely proud of that. We're bringing young people into the business. You'd be astounded how quickly they can actually be accretive. These young folks become seasoned professionals before most of us could even believe it. We also hire experienced teams. We believe we're a great place to work, and we're looking at the best teams every place across the world, every single day, trying to convince them that they should ply their trade at Gallagher. We're very niche-focused. If you think about vertical purchasing, if you think about the fact that we know industries, we bring a value to our clients, which is a lot more than placing insurance. It's a value to help them grow their business. We provide our sales force with great tools to continue to build their business. We put in salesforce.com, we've invested in Richardson training, and we emphasize that we want to cross-sell our clients for our clients' benefits within our own organization. As I said, we do all the types of insurance that you can imagine. We believe clients should do as much of that with Gallagher as possible. We work very, very hard to make sure that our compensation with our carrier partners is appropriate, we see our opportunities on an organic basis to grow nicely internationally. I'm going to give you just a simplified view of what happens in terms of organic growth. Typically, an operation will bill about 10% of their trailing revenue, that stands true if it's a $10 million shop, it works if it's a $5 million shop. We lose, on average, 4%-6%, averages out about 5%. If we get about a 2% rate impact, which last year was about 1%, we get a little bit of growth in exposures, you could see a nice uplift in organic, at the same time, you'll see that we are paid to mitigate that. What we call it is clients opting in and clients opting out. If you take a 10% increase to a client who's just coming through suffering a deep recession, they're likely to say, "No way. I'm not paying 10% more. I'm paying what I spent last year." They'll opt out of some coverages, or they'll take a higher deductible, we'll do our job to help them balance their spend versus what the rate environment is. You've got some on the green side that help us grow organically. You got some on the red side that say, "This is going to decrease our organic growth." One of the things that we're probably as good at as anybody in the market is the fourth bullet point in the red box. We're very, very good at helping upper middle market clients move into various self-insurance arrangements, whether that's group captives, a line of coverage or whatever. That's a long-term strength of our company. Our sales culture has outperformed the rate environment, literally every year if you go all the way back to 2001. What this slide indicates is the CIAB's quarterly survey on what's happening with rates. That's the red line. The green line is what Gallagher's organic growth was in those given years. If you take a look at this, in my career, 2008, 2009, and 2010 were the only years I've ever seen where our organic revenue actually declined. It makes some sense when you take a look at the rate line. We were running up a down escalator. Throw the world's worst recession since 1929, I'm incredibly proud of how we did. We weathered that storm with a culture intact that was and is a sales culture, first and foremost. Nothing happens until someone rings the cash register, and our folks know that as well as anybody in the market. It's interesting that in this past year, the CIAB rate environment and our actual organic growth matched up for the first time since about 2003. We're good at organic growth. Mergers and acquisitions, our intention there is to find the best entrepreneurs in the business and attract them into our company. We were successful doing 60 deals last year, 33 of them in the benefits space. That's 60 entrepreneurs that built businesses that are successful because we're not interested in doing an acquisition with someone that's not successful. If they can't make money for their family, they won't make money for our shareholders. Those 60 chose Gallagher for all kinds of different reasons, and I'm extremely proud of that. What's going on in the marketplace? Busy slide. Let me take a moment on it. On the left, you've basically got supply, right? There's a vast pipeline. According to the Insurance Information Institute, there's $1.5 or $1.4 trillion of P&C premium floating around the globe that is spreading risk. Our entire enterprise probably touches no more than $40 billion. This is an incredibly fragmented business. There's about 18,000 agents and brokers in the U.S. alone, and most of them are run by baby boomers. They're my age. The runway's getting shorter. This is their largest asset. Something has to give. They can perpetuate down to their younger teammates. That goes on all the time, and they can be successful doing that, or they can look for an exit. On top of that, what they really need is our expertise. If you look at the green boxes, you've got seven operations within Gallagher. Inside of every green box are four to five regions or four to five operations that are active in the acquisition process. Most of these green boxes, the senior management of those operations, come to us through the merger process over the last 26 years. There's limited consolidators. If you count them, you can count us on one hand. What we're selling is, first and foremost, culture, a proven history of doing deals, that we will complete the deal, and an ability to integrate and help that person build their business. That's our secret. I'd like to sound smarter, but the fact is, we try to find people that love this business, want to stay in it, love to sell insurance, and that we like and will stay with us once they've come aboard. We think we're very good at that. The blue dots on this slide are where we are in the U.S., and the red dots are population centers of over 100,000 people where we do not have an operation, and we covet that geographic spread. We want to be represented there. Tremendous acquisition opportunity. If you take a look at where we trade globally through our Gallagher Global Network and through our London wholesaling operation, we're all over the world, giving us opportunities to work with organizations that are similar to us in culture, who over time will take equity positions and build out a presence, as we've done in the Caribbean, as we've done recently in Mexico, and as we've done quite successfully in Australia. The whole merger and acquisition opportunity for us continues to compound. Someone asked today whether 60 is a normal number. I don't think 60 will be a normal number going into 2013. I think we cleared the decks a little bit. I can tell you our pipeline is solid, and we offer a difference. We offer expertise. We offer a culture where they can ply their trade, where we have a brokerage operation that knows what we're doing for their clients. We've got good momentum in this business in terms of acquisition. You can see that over time, we've been able to ramp up. The Heath acquisition was our biggest deal that we did in the last couple of years, and you see that this slide is intended to show you how we're building out our business on a global basis. We're doing both MGAs as well as affinity group as well as regular P&C brokers. Let me give you a quick update on Heath, which was our largest acquisition ever, which is in the U.K. It's been an outstanding acquisition. We'll have two more quarters of integration costs, and then those integration costs will go away. We are on track to reap the profitability that we expected from this transaction, and this is a transaction that has allowed us now to be able to do bolt-on acquisitions in the U.K. where we did not have the platform to do that just 18 months ago. It's coming along as planned. Integration is good, and I'm really proud of the team that brought that one aboard and that has been continuing to build it out for us. Productivity and quality is something we focus on every single day. We know we can get better, we know we can be more productive, and we know we can build margin over the long haul. What we've done in terms of optimizing our quality over the last decade, I give Doug a lot of credit for this because he's brought a lot of attention to these things. We weren't controlling just even small things like spending on office supplies. We weren't controlling the real estate footprint that we had in the marketplace. About seven, eight years ago, we studied our real estate footprint, and we found out, lo and behold, we had 20% more space than we needed. That's a lot of growth space that we didn't need. We've been investing in all kinds of systems and efforts to get control of that, making sure that we do things more on a centralized basis, standardizing our processes and systems. That's ongoing today. Those investments continue. Using sourcing approach to being better buyers. It's had a huge impact on our margin. We've also built out our centers of excellence in India over the last seven years. It's been an incredible learning experience for me. We started by asking ourselves whether partners in India could help us check policies. We started with seven employees. Today, we have 1,500 people supporting our efforts in India, doing a vast array of services for us that have improved our quality substantially. We can prove that, increased our speed, and focused on our core. If you go back to 2004, just think about the investments we put into just IT. This was our IT infrastructure in 2004, email. Today, we put in a data warehouse. We've got document management in our offices. We've put in salesforce.com. We've put in a planning system. We've got a real estate leasing system. We've updated our email, we've done a whole new general ledger, and we've put in Oracle. It's a lot of work. We're investing. If you take a look at the current office activity that we've got, we're spending an awful lot of effort right now centralizing our agency management system. That's the system that our traders use in their offices to trade. We believe by the end of 2013 or halfway through 2014, we should be pretty well complete with that. That will give us one system on a national basis in the United States that we're trading from. Helps us further standardize and watch our costs. We're building out client communication tools from our data warehouse, et cetera. A lot of investment. We're watching this from a quality perspective, something I'm really proud of. We're starting to talk about the fact that we're going to high quality broker. We take a look at what we've done in terms of reducing delivery time of policies, how successful we've been at building out our capabilities to issue certificates. We'll issue over one million certificates of insurance from India this year, and our quality rate will be over 98%, a substantial improvement. What's happened is our margin has gone up and we've reduced at our operating expense ratio over time. We've built out quality and we're recognized for that quality. Never once did we take our eye off our single most important stakeholder, which is our client. What we do every day is we get up and think about our client first, and it shows in the awards and the recognition that we've been given, frankly, on a global basis, including Gallagher Bassett as an investor in people in the U.K., as well as Gallagher Bassett recognized by business insurance buyers, business insurance readers as the overall winner of the best small and mid-market TPA. We're very proud of that. We work hard to maintain a unique culture. People told us that the Gallagher difference could be something that would have to be lost at 500 people, certainly wouldn't last at 5,000 people, can't be there at 14,000 people. I spent my day in the New York office yesterday. It is clearly there in our offices around the world, which I do visit. Supported by a document that is familiar to all of us in the company called "The Gallagher Way," which my uncle wrote on the verge of us going public in 1984, that is still as viable today in terms of how we intend to treat our people and how we intend to operate our business as it was 28 years ago. Very proud of the fact that the Ethisphere Institute in 2012 named us one of the world's most ethical companies. There were literally over 1,000 applications for that recognition. There were very few that were granted the recognition, and we're extremely proud of that. We believe that ethical behavior and treating our clients and our employees ethically is at the core of being successful as a business. It's not a byproduct. It is at the core of being able to run a successful business. Just recently, we were recognized by Chief Executive Magazine as a place where we really spend time, effort, and believe in helping our people improve and to develop. We all spend personal time in developing our younger talent that's coming up behind us, some of whom are going to be just absolute barn burners for our industry. We surveyed our people and when it comes to culture, to find out really, how do you feel about things? I was very proud of these. We selected three to share with you. One of the questions is, when a customer is dissatisfied, I can usually correct the problem. Interestingly enough, our total population was substantially stronger in their affirmative answer to that than the upper quartile of their other customers. Our producers were even stronger in their belief in that than the regular population. How would you rate your unit as a place to work? Again, total population better than the quartile, the upper quartile of those that were also surveyed by this firm. Producers, again, very strong response. I can see myself working at Gallagher 12 months from now. Basically, the numbers come across very, very strong. We're proud of that. We think that's important. We think we've got a fantastic team. We like the fact that they get up every day and come to ply their trade at Gallagher. We believe we've got a lot of momentum going into 2013. The things that we did well in 2012, the things that we invested in, we believe will in fact help us have a very successful 2013. I won't read all these to you. As you see, we closed 60 acquisitions. We expect $134 million to roll over. Nine of those deals were outside the U.S. I've mentioned the Heath Lambert activity. Our clean energy activity is really gaining traction and will provide significant after-tax earnings. We rolled out the first private health exchange that is going to be critical in our product offer to our clients. We consolidated our agency management systems, which I mentioned a minute ago. We took actions on a performance culling of 400 positions. We rolled out some additional client centric IT capabilities in Gallagher Bassett, and we sold and are ramped up for a very substantial Gallagher Bassett client in Australia. The simple question you got to ask when you come to a conference like this is the ultimate question, why invest? If you've got to make picks, which you have to make, why would you invest in Gallagher? The green line is our return to shareholders since January of 2000, and the yellow line is the S&P. Our job is to keep that return substantially ahead of the S&P and successful for our clients. We believe we've got the management team to do that. A very strong young group of people coming up behind myself and my age group, really proud of them. I think they're going to do fantastic stuff. They get the culture. They like the culture. They'll help us build the culture. Our organic growth, we believe will be second to none. We get out every day and get after getting new business, and we focus on maintaining the clients we've got. Our merger and acquisition engine is getting stronger. Our productivity and our quality, we believe is second to none. We have a strong balance sheet which we'll maintain. We pay a solid dividend, which we believe in. We're going to maintain a conservative debt position. We've got excellent returns, and we believe that, as I said at the beginning of my presentation, that we're just getting started. Allison and Jay, thank you for the opportunity to flap my gums about our company because there's nothing I enjoy more than that, and I'd be more than happy to have Doug and I take some questions. Your organic growth in 2012 was solid, especially towards the second half of the year. You look at that growth rate in the fourth quarter, I think it was about 5% for the brokerage business. As you look at 2013, how hard will it be for you guys to maintain that kind of growth given the environment, given everything you're working on? I'll answer it from one perspective and ask Doug to chime in another. The rate environment itself provided us about one percentage point of that organic growth last year. You're coming around with potentially a second cycle of those rate increases. You've raised deductibles, you've done some things that you can't do the second time around. If the rate environment does stay firm or even gets firmer, we'll benefit from that. If the economy doesn't stall, which it felt like it was chugging a bit in the fourth quarter, and I don't mean that as positive, and we get a little economic growth, that will help us. It comes down straight to just how we fight it out on the street. I can't predict quarter to quarter what we're going to have. That does vary from quarter to quarter. If we lose a big account, that really sucks some wind out of us. We write a big account, it really is exciting. You want to add to it? I think that's the right answer. I think that it feels a lot like 2012 right now, and I think there's sustainability with rate increases if the carriers keep that up. I believe that the economy is starting to show some recovery when we're sitting down and talking to the clients, I think that's a positive momentum for us. Gallagher Bassett sold a tremendous client down in Australia that that alone would provide 3% or 4% organic growth for them on top of, they did 5.7 last year. I think we've got good organic momentum coming to 2013 based on where we sit today. Not to mention a couple hundred new producers to the firm who came through the acquisition process. Question over there. Question over here? Yeah. If you look at the chart that you showed with the price declines that have occurred up to last year, and it doesn't jive with the statement that you made about the balance sheets being strong. No, the balance sheets were weak prior to the hard market in 2001. What happens is you wake up and you realize you don't have the capital and surplus you thought you had. Rates are woefully inadequate, and in 2001, after 9/11, we saw a typical hard market. Once balance sheets are replenished, that's when the rates start to come down. What we're seeing is, even though we've gone through eight or nine years of rate declines, there is no panic around balance sheets among our trading partners. Capacity continues to be strong. We can place the cover we need to place. It just is going to cost more money. I give a speech in a week's time to a bunch of RIMS potential clients and clients, one of the things I'm telling them is the first decision you've got to make is whether you shop or you don't shop, how the structure of your program's going to be. The last bullet on those slides is, by the way, you're going to pay more money. It's just where the market is. For your company, how would you derive earnings growth factoring in the potential for earnings above organic growth prospects, given your ability to buy companies? Obviously, you can't budget that. No, we don't budget it. What's your sense in terms of what it could be on an additive basis over time, conservatively? Well, our goal, our stated goal is to, all our activity, all four of those activities, I'd like to be able to say that we're going to grow the business 15% a year in, year out. Some years we do, some years we don't. That's what we hold our operating people in the field accountable for. When we've got negative organic revenue in 2008, 2009 and 2010 or 2010, 2009, 2010, 2011, we didn't make it. Right? In an environment like today, with acquisition activity the way it is, hopefully we can make those goals. Norm? Hi, thanks. Maybe just a couple competitive landscape questions. Do you see any benefit of some of the larger brokers getting together, or is it still just sort of the big guy gobbling up the smaller mom-and-pop shop environment? Also, as sort of we're seeing a lot of consolidation in the industry, how do you keep your people in their seats as opposed to moving around to other competitors? I honestly believe, I'll answer your last question first. I honestly believe that if you're a production person in any part of the company in which we sell, if you're good, you will make more money at Gallagher. It's just, I honestly believe that. We will give you the tools, we will give you the training, we will give you the support. We have a culture that will put the best people at point of sale every single time we get a chance, whether they've got to travel from Calgary, Houston, Chicago, Miami, we will be there to try to make that sale. Then we'll be there to service that client with your help, and we'll actually pay you on a formula. People like to come to work there because it's a good environment, I think they stay there because they know they can make a lot of money as well. That's the producers. Keeping the rest of the population in their seats is about this whole culture thing that I talked about. Believe me, when I'm in an office, I'm not talking about producers now, I honestly believe that those people, if they chose, could get another job in our industry tomorrow. You raise a very good point. Why do you come here? This is where they want to apply their trade. This is where they want to be, to be the professionals that they are. The other question was on consolidation, I really don't know if large consolidation in the brokerage space makes all that much sense, to be perfectly honest with you. There have been some that have been successful in the past. Most rather have not been all that successful. I do see that the opportunities to gobble up the smaller players. That comes about for the reasons I mentioned in the presentation. First and foremost, they need expertise. They got to take care of their clients, and we're building expertise. Secondly, they've got to land their people as they get a little bit older in a place where they think they can be well taken care of. Thirdly, they've got to capitalize their life's work. They have options, by the way. There's not a huge number of consolidators, but there's options. The interesting thing about our companies, and I have great respect for my competitors, we all have different personalities. As you go through the process of sorting out who you're going to sell your business to, some will pick someone else and some will pick us, which is why every single quarter in my quarterly conference calls, I thank those people that have joined us because I know they have choices. The others are doing quite well consolidating as well. There's just so much supply out there. By the way, don't let me intimate in any way, shape, or form that we're not being picky. There's a lot of people that we say, "This isn't going to work. We're not going to get together with these folks." I think you'll see massive continued consolidation from the small end, because I think the dynamic just has to be there, and I don't know if you'll see any real consolidation at the top end. Maybe just one more on your usage of debt. I think the industry has proven to be a little bit divergent, but very supportive of pretty high debt levels. Maybe just getting your thoughts on why you prefer to keep sort of debt at a. The benefits of keeping your debt levels low versus levering up, and how you think about that. Well, I was raised in a pretty conservative family in the Midwest of this country, debt has always been something that we actually tried to avoid until we got to a certain size and level where in a capital planning exercise, we decided to put some debt in the structure, which Doug has led quite nicely. I will tell you, it still is an area of just wanting to be conservative. Debt is not a problem till it is. All of a sudden, when you need it, you can't get it. Once you're in it, you can't get out of it. We plan very carefully. I mean, Doug puts together a capital planning illustration that shows where every single tranche of debt is going to come due, and we don't ever want to be caught in a spot where we can't pay it. Frankly, I think, those people that lever up this business seven, eight, nine times, God bless them. I couldn't sleep. We done? Yeah. Thank you very much, everybody. We really appreciate you being here. Thank you