Good afternoon, and welcome to Arthur J. Gallagher & Co.’s Third Quarter 2020 Earnings Conference Call. 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 any time. Some of the comments made during this conference call, 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 risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary statement and risk factors contained in the company’s 10-K, 10-Q and 8-K filings for more detail on its forward-looking statements. In addition, for reconciliations of the non-GAAP measures discussed on this call as well as other information regarding these measures, please refer to the earnings release and other materials in the Investor Relations section of the company’s website. It is now my pleasure to introduce J. Patrick Gallagher, Chairman, President and CEO of Arthur J. Gallagher & Co. Mr. Gallagher, you may begin.

Thank you. Good afternoon. Thank you for joining us for our third quarter 2020 earnings call. Also on the call today is Doug Howell, our Chief Financial Officer; as well as the heads of our operating divisions. We delivered a very strong third quarter. Despite the current global health crisis and the related economic slowdown resulting from COVID-19, our teams continue to execute at the highest levels. While we continue to place health and safety first, we are selling new business, we are servicing and retaining our clients, we continue to look at merger and acquisition opportunities, and our bedrock culture keeps us working together even while physically apart. These are times when our global capabilities, niche expertise, and product specialists support our local professionals as they help our customers navigate these challenging times. I’d like to thank our 30,000-plus Gallagher professionals for their efforts and relentless focus on delivering the very best Insurance Brokerage, Consulting, and Risk Management services to our customers. That is the Gallagher way. Moving to our third quarter financial performance. We grew our combined Brokerage and Risk Management revenues in the third quarter organically and through mergers and acquisitions, and together with our expense control efforts, we delivered excellent growth in EBITDAC and net earnings. These results demonstrate our operating flexibility, which has enabled us to quickly adjust our expense base, optimize our workforce, and improve our productivity while also raising our quality. Let me break down our results further, starting with our brokerage segment. Reported revenue growth was a positive 8.3%. Of that, more than half, or 4.2%, was organic revenue growth. We did have some favorable timing; I’ll discuss that more in a minute. Net earnings margin was up 334 basis points, and adjusted EBITDAC margin expanded 632 basis points to 33.4%. Net earnings were up 37% and adjusted EBITDAC was up 32%, so another excellent quarter during a global pandemic - a fantastic job by the team. Let me walk you around the world and give you some sound bites about each of our brokerage units, and I’ll start with our P/C operations. In U.S. retail, another strong quarter with organic growth of about 4%. We saw solid new business and slightly better retention versus last year’s third quarter. Rate increases are more than offsetting exposure unit declines; midterm policy modifications, including full policy cancellations, are similar to prior year levels. In our U.S. wholesale operations, risk placement services, organic was 8%, and our open brokerage business even better than that, while our MGA program binding businesses returned to positive organic growth in the quarter. Hereto, rate increases are more than offsetting exposure unit declines. Moving to the UK, we experienced around 2% organic growth, with stronger growth in our London specialty business due to firmer pricing. In Australia and New Zealand combined, we also saw around 2% organic growth, with New Zealand slightly stronger than Australia. New business is down a touch in Australia and up in New Zealand. Rate increases there remain positive, but not enough to offset exposure decline. And finally, our Canadian retail operations posted organic growth of 8%, another terrific new business quarter, and stable client retention. So overall, our global P/C operations reported about 4% organic in the quarter, again, an excellent result in a difficult environment and on the higher end of our mid-September expectations. Moving to our employee benefit brokerage and consulting business, third quarter organic was positive 6%. This includes a large life insurance pension funding product sale that we expected to close in the fourth quarter. Otherwise, new consulting and special project work remains soft, while covered lives under employer-sponsored health plans continue to be more resilient than headline unemployment numbers. So when I combine P/C and benefits together, organic growth of 4.2%, and even allowing for the big benefits win, it was a great quarter. Looking forward to our fourth quarter: First, recall we had a terrific fourth quarter last year, over 6% organic growth, so we’re starting off with a tough comparison. Second, I just discussed some favorable timing here in the third quarter, so I don’t see us hitting 4% again. But thus far in October, P/C retentions, new business, full policy cancellations, and other midterm policy adjustments are in line to slightly better than the third quarter, so perhaps we can read nicely in the 2% to 3% range. That would deliver a full-year 2020 around 3% organic, which will be a great year in this environment. While there is still a lot of economic and governmental uncertainty, which makes forecasting organic growth a challenge, we can control what we spend. We’ve demonstrated over the last seven months that we can execute on our cost containment playbook that makes us highly confident we can deliver another quarter and full year of really strong EBITDAC growth. Now let me give you an update on the P/C rate environment. Rates again continued to move higher around the globe during the third quarter. Globally, rates are up nearly 7% with tighter terms and conditions and increasingly restrained capacity. By geography, Canada has seen the greatest rate increases, up more than 9%; the U.S. is up about 8%; followed by the UK, including London specialty at about 6%; and Australia and New Zealand, around 3%. By line of business, property remains the strongest, up 12%; next is professional liability, up over 10%; other casualty lines are up 5% to 10%, with umbrella rate increases at least twice that level; and workers’ compensation is flat. While P/C rates are moving higher, the total amount of premium increases our clients are paying is more modest. This is a result of reduced exposure units, higher deductibles, lower limits, and clients opting out of certain coverages. Looking forward, October results are already indicating continued increases during the fourth quarter, and the carriers in the face of catastrophe, the pandemic, rising casualty loss costs, and low investment returns are making a case for firm rates to persist. But remember, that’s where we excel. Our job is to make sure our clients get a well-structured insurance program at a fair price. Regardless, it is certainly a more difficult market today than last quarter, and we are seeing some pockets of a hard market in certain lines and geographies. I see that continuing into 2021, and next year, organic growth should be better than what we are seeing this year. Moving on to mergers and acquisitions. We completed five brokerage mergers during the third quarter at fair multiples. I’d like to thank all of our new partners for joining us, and I extend a very warm welcome to our growing Gallagher family of professionals. As I look at our M&A pipeline, we have more than 40 term sheets signed or being prepared, representing around $350 million of annualized revenues, and our pipeline continues to grow. Difficult market conditions in the pandemic are further highlighting the need for expertise and data-driven tools. Our platform is an excellent fit for entrepreneurs looking to support their current clients, use our tools and data to grow their businesses, and advance their employees’ careers. Right now, it feels like it will be a more active finish to the year as merger prospects have concerns over possible 2021 tax changes. Next, I’d like to move to our risk management segment, Gallagher Bassett. Third quarter organic revenue declined by 5.3%, which was a bit better than what we said at our September IR day. This is a really nice sequential improvement from our second quarter organic decline of nearly 10%. Our risk management team also did a fantastic job managing its workforce and controlling costs, delivering third quarter adjusted EBITDAC higher than last year by $1 million. Looking forward, we are seeing October claim counts trending similar to September. While we have experienced a steady climb out of the second quarter bottom, many clients are still operating at partial capacity, and claims counts have not yet fully rebounded to last year’s levels. So we’re seeing fourth quarter organic revenues in our Risk Management segment slightly better than the third quarter. And just like our Brokerage segment, we expect to grow our EBITDAC again in the fourth quarter due to expense savings. That means we should deliver on our goal of full year 2020 adjusted EBITDAC coming in better than 2019. That’s just an amazing job by the team. Before I pass it to Doug, I’ll finish with some comments on our bedrock culture. Despite the pandemic challenges, our global colleagues continue to deliver the very best service, expertise, and advice to our clients. I believe it’s our unique Gallagher culture that is guiding our team through these challenging times. Specifically, I’m reminded of tenet number 20 of the Gallagher way: we run to our clients’ problems, not away from them. Since my grandfather started the company more than 90 years ago, our people have been solving problems and working hard for clients in both easier and more difficult times. And I can tell you this about our culture: it will guide us through the global pandemic, hurricanes, wildfires, and any other obstacles in front of us. Throughout Gallagher’s history, we have emerged as a better, more cohesive company. I believe we will emerge from today’s difficult environment stronger than ever. Okay. I’ll stop now and turn it over to Doug.

Thanks, Pat, and hello, everyone. Like Pat said, another excellent quarter. I, too, would like to extend my appreciation to all of our Gallagher colleagues around the globe for the remarkable job you are doing in these challenging times, servicing our clients, generating new business, all the while executing our cost control playbook. Today, I’ll begin with some comments on organic growth and the interplay with our cost-saving initiatives. That seemed to get a lot of questions during our July earnings call and again during our September Investor Day call, so I’ll spend a little more time on that today. I will then provide a few observations from our CFO Commentary document and finish with some thoughts on M&A, cash, and liquidity. So, all right, let’s go to the earnings release, Page 4, to the brokerage organic table. Now, as Pat said, a great quarter with 4.2% all in organic growth, which equates to about $50 million of organic growth. Then, when you turn to Page 6 to the brokerage EBITDAC table, you see that we grew adjusted EBITDAC by $105 million this quarter. So how do we deliver that $105 million on $50 million of organic? First, about $13 million of EBITDAC came from M&A, net of divestitures. Next, a bit over $30 million came from that $50 million of organic growth. So that means we saved about $60 million from our cost control playbook. From a margin perspective, all in, we grew adjusted EBITDAC margin about 630 basis points. And then when you do the math, you’ll see that even without the additional expense savings, we expanded margin about 150 basis points, which is impressive in and by itself. In the Risk Management segment, it was a little easier to compute. Revenues were down about $10 million, but EBITDAC grew about $1 million, so cost savings were about $11 million. Combine both segments, you get about $70 million of cost savings, which is at the top end of our estimates provided during our September Investor Day and close to what we saved in the second quarter. Let me give you a breakdown of these savings: reduced travel, entertainment, and advertising, down about $26 million; reduced consulting and professional fees, down $15 million; reduced outside labor and other workforce actions, $14 million; reduced office supplies, consumables, and occupancy costs, about $11 million; and reduced employee benefit and medical plan costs about $4 million. Now, moving towards the fourth quarter, we’re starting to see a slight increase in our producers traveling more to see clients and prospects. We are executing on some targeted marketing and advertising programs, and our medical plan utilization continues to return to pre-pandemic levels. But even with that, we’re still seeing savings in that $65 million to $70 million range relative to last year, again, given pro forma effects from the roll-in mergers. Now moving to the CFO Commentary document we posted on our investor website. On Page 2, most of the items are consistent with what we provided to you during our September Investor Day. Then on Page 3, in total, the Corporate segment came in about $0.02 better than the midpoint of our September estimate. The interest and banking line was about $0.01 favorable, and the acquisition cost line was also slightly favorable. The corporate adjusted line is in line with our September midpoint, and you’ll also see we have a small adjustment for a one-time tax expense related to Brexit. We described that a little bit more in Footnote 6 on that same page. Then in terms of clean energy, the third quarter came in a bit better, and you’ll also see our fourth quarter estimate is also a bit better. On Page 4, you’ll see that we provided our first look at our 2021 estimates based on the preliminary forecasting from our utility partners. It looks like 2021 could be a lot like we’re seeing here this year. And then when you get back to Page 14 of the earnings release, you’ll see that we have about $1 billion of credit carryforwards on our balance sheet as of September 30. Remember, those credits are fully earned. And while we are using some currently, the big return comes between 2022 and, say, 2028, when we will use those credits and thereby harvest about $150 million to $200 million of annual cash. Sure, book or GAAP earnings of $60 million to $65 million will go away in 2022, but instead, we’ll have that $150 million to $200 million of cash earnings in those years. As for M&A: you heard Pat say, we have a really strong pipeline. I think there could be a flurry of activity between now and year-end, given what could happen with taxes. So we’re really well-positioned for that. We have more than $1.6 billion of liquidity, consisting of available cash on hand of nearly $550 million and more than $1 billion of borrowing power on our revolving credit facility. Okay. Those are my comments. Thanks to the team for another great quarter. I think we are well-positioned to pull off a terrific 2020. Back to you, Pat.

Thanks, Doug. And operator, I think we’re ready for questions.

Thank you. The call is now open for questions. Our first question is from Phil Stefano with Deutsche Bank. Please proceed with your question.

Yes, thanks. So I’ll start with a quick numbers question. The timing impact of the large life pension fund product. Did that have any margin bump to it in the quarter or any one-time impact there?

No more or less than any of our other business. That was in that $30 million. We had $50 million of organic growth. It included the one-time or the sale that we have there. And if you assume about 60 points of margin on that business, you get about $30 million. So no more or less than what the other business has.

Okay, got it. And so, Pat, I think it was in your initial comments you made the remark that next year organic should be better than we’re seeing this year play out. And I was hoping you could talk a little bit about the extent to which stimulus plays a role in that and how government support might be a moving mechanism or at least how you felt that impacted you through 2020 to use as a reference for us to contemplate in 2021?

Well, I think for sure, in 2020, in terms of a pressure release for our clients, as we got into the summer, it was huge. I mean, it just made a huge difference in terms of giving businesses an ability to keep their employees and to keep their businesses going. And quite honestly, to pay their insurance bills. So I do hope and do believe that stimulus will be brought about in the new year. And I think that, again, will be viewed as a very strong positive for the economy and for our individual businesses. I can’t put a specific number on that, Phil. But anything that keeps the economy chugging along, as you well know, our entire business is predicated on exposure units.

Yes. Okay. And the last one I got for you, and it’s an unfair question, so I apologize. But we are getting a lot of questions from our end about the concept of brokerage margin expansion and the extent to which expectations should be up, flat, or down for next year. And I mean, it’s something of a crystal ball question, depending on how the economy unfolds and such, but I know that this question is something that’s important to investors’ minds. So if you have any thoughts about how we should contemplate this, it would be appreciated.

All right. I don’t know if it’s an unfair question or not, but I don’t know if it’s an easy answer. So let me see if I can help you with that. Let’s take a couple of things that we know. First, as I said in my prepared remarks, we should be able to hold most of the expense savings that we’re seeing here in the third quarter when we hit our fourth quarter - in our fourth quarter right now. Then the next question is, let’s go out one more quarter, let’s say, to first quarter 2021. Absent a miracle, I just don’t see that quarter much different than what we’re seeing here in the fourth quarter. So let’s say that we can hold $60 million to $70 million of that, the savings that we’re seeing now. Let’s invest. Now you’ve got to jump way out to 2022. So let’s just go to 2022. I think that we’re turning the pandemic adversity into a real advantage for Gallagher. We’ve learned a lot in the short period about our business and how our clients are operating, so over the next 15 months, we believe a good portion of those savings that we’re seeing now could become permanent. So let’s call that half or $30 million. So that leaves really what happens in the second, third, and fourth quarters of 2021 to fill in. The answer to that, I believe, kind of lies somewhere in between. I should have a better answer when we get to our December Investor Day, but we’ll stick to the $60 million to $70 million or $65 million to $70 million. We’ll figure that out here over the next six weeks and have a better answer for you in December. Regardless, if you get out to 2022, we believe there could be over $100 million of savings, annualized savings, that we might not have realized by 2022 had there not been a pandemic. So it has pulled together our efforts to relook at our business and change some of the ways that we operate. So I hope that helps, it gets you part way. I don’t know if it’s a complete answer, but that’s what we know right now.

That’s better than I hoped for. Thank you. It’s perfect.

Thanks, Phil.

Our next question is from Elyse Greenspan with Wells Fargo. Please proceed with your question.

Hi, thanks. Good evening. My first question, I guess, kind of picking up on that margin question. So that helps us think through the expenses, but then the second portion, is that, Pat alluded to, organic revenue growth in 2021. He feels like it should be better than 2020, right, which you guys essentially end up at around 3%? And so this quarter, right, you saw about 150 basis points of margin improvement off of your organic revenue growth. So how do we think of that component of the margin, right? So you’re growing organically over 3% next year, what’s the component of underlying margin improvement that we should think about adding on to whatever expenses can be utilized?

I think that you’ll see - if we hit 3% of organic growth next year, absent all these savings, there’s a 0.5 point to 3.25 point of margin expansion in that 3% number next year. If it’s 4%, maybe we get back closer to a full point, which isn’t all that dissimilar to what we were running pre-pandemic. Now if you draw a line between 2017, we are marching up in margin every year. And you draw that line out to 2022, whatever you would have gotten in 2022, add another $100 million, $120 million of savings to that, and you’ll get pretty close to where we think the margin would be in 2022. So our march forward hasn’t changed on the base organic piece.

Was there anything though then that was one-off that you saw 150 basis points this quarter? I mean, obviously, there could be quarterly seasonality on, I guess, 4% organic growth or 3% ex the one-time item?

Well, I think when we’re at 4.2% organic this quarter, I think we would see over 1 point of margin expansion. That’s probably not out of whack for other quarters in the past where it’s 4.2%, but nothing that really pops out at me. We did have some headcount savings in there. Our hiring hasn’t been as robust as it has in the past. Raises have been deferred a little bit though. That might influence a little bit, but there’s nothing one-off in there that I would point to.

Okay, that’s helpful. Then a couple of questions on M&A. The first one, I believe at your last IR Day, you alluded to some modestly larger deals, I want to say in the $25 million range, that you thought could come to fruition. By looking at the activity this quarter, that hasn’t happened. So are those some of the deals, I guess, that you guys alluded to that maybe could come to fruition in the fourth quarter as deals get done in advance of potential tax changes?

That’s right. There are two nice $25 million revenue acquisitions that we’re nearly done with due diligence on. We’ve had Board approval on it, and we hope to get them wrapped up between now and the end of the year.

Okay. And then my last question. So as we think about larger M&A, it’s been a few years since Gallagher expanded internationally in Australia, New Zealand, Canada, and the UK. And so if you guys are going to consider another larger transaction, Doug, you alluded to the debt capacity as well as cash that you have. If there is a sizable deal in the market that perhaps you chose to use more of your equity than you have in recent times, would there be certain metrics, be it revenue, earnings accretion, or something that you guys would be looking for, if it was a more sizable transaction that potentially required the use of your own equity?

Yes. We do the traditional review of that to make sure that it wasn’t dilutive and that there were synergies that we could take out of it. But really, to be honest, Elyse, we like our tuck-in merger strategy. This is our opportunity to pick every single one that wants to join the family. We have that. We have fair multiples on those that we’re paying for them. We integrate much better into one another. We like our small tuck-in strategy at this point, and there’s lots and lots of opportunities for that, so.

I think that’s a key point, Elyse. This is Pat. When you look at the top 100 in the business insurance in the United States alone, that doesn’t recognize the rest of the world, you still have another 19,000 to 25,000, maybe even 30,000 firms out there that are not in that top 100. And a good portion of those are still owned by baby boomers. So our - the opportunity to do these tuck-ins is just way, way greater than the large play.

Okay, thank you. I appreciate all the colors. Thanks, guys.

Thanks, Elyse.

Thanks, Elyse.

Our next question is from Greg Peters with Raymond James. Please proceed with your question.

Good afternoon. Just a couple of follow-on questions. If you were pointing to, I think, Page 5 or 6 of your press release - 6, where you go through the adjusted EBITDAC margin. And I think through the nine months, Doug, you reported a 33.6% EBITDAC margin on an adjusted basis. And I know you’re doing a good job chronicling how much of the savings are going to – should extend themselves beyond just the opportunity you’ve had this year. At what point do you hit that threshold where you can’t grow margins because you have to invest in the business? Or put it another way, at some point, you can’t turn this into a 50% margin business, or maybe you can; you just haven’t mapped it out for us yet.

No, Greg. Listen, trees don’t grow to the moon. I think that there are plateaus when you reach them. I think when you get into that 30% to 32% type range as an annual margin in a brokerage segment across the globe, that’s a pretty fair margin to have. But scale does bring advantages. And this is a – the brokerage business is showing that size can be helpful, especially with size in the same fairway that you’re playing. If you can get more acquisitions that are right down the middle of the fairway, using the technologies that we’ve developed, using our offshore centers of excellence, and our centralization that we’ve worked on for 15 years, we think that there’s still terrific opportunity for us to roll in and have nice, steady margin improvement. If we’re growing over 3% or 4%, well, I think it can be - you can eke out a little margin just because of scale. And some of it depends on wage inflation, too. I mean we are a people company, and we are lucky that after the Great Recession, wage inflation remained in check. Perhaps here in the pandemic, we’ll keep wage inflation in check a little bit. But we are a people company, so raises are something that we want to give. And so - but if we can keep wage inflation in check, I think that you can eke out some margins.

Just as a follow-up to that comment, when do wage or salary increases typically happen for staff? Is that a beginning of the year event or midyear event? When does that generally hit?

Kind of late second quarter, early third quarter. It’s a little bit later this year. We’ll do that here in December.

Got it. In the balance sheet, I noticed that the premiums and fees receivable jumped up from year-end. And I’m just curious if you - if there’s anything in that increase that is troublesome or if that’s expected, on plan, or just some color behind that. Then, the numbers I’m looking at are, on the balance sheet, the 6,702.5 versus the 5,419.2.

Yes. Okay. Good question. First of all, we look at our cash receipts every day. We’re not having any slowdown at all from client premium payments coming in, so we don’t have a liquidity issue there. And again, I just looked at the report at 2:00 this afternoon, and our October is equal – since the pandemic, our cash flows have been equally, if not better than what they were in pre-pandemic times. So that isn’t it. We do have some – as we have a reinsurance operation, now you can get some significant reinsurance premiums that flow through that can cause some of that to be a little more volatile on that, but there is nothing there that I would indicate as at all indicative of any type of slowdown in payments by our customers in that.

So in other words, DSOs have remained fairly stable this year relative to the previous year?

Yes, that’s right.

Got it. I guess the final question, I know you’ve already provided a lot of commentary around M&A, but I can’t help myself but go back to that well. First of all, Pat, when you’re talking culture, I know it’s very important to you. Are you - when you’re looking at M&A opportunities, are you willing to consider M&A that has a slower organic growth profile? Or, put it another way, in terms of the deals that you’ve done in the last couple of years, have they boosted your - have they been a net gain to organic revenue on a consolidated basis? Or has it been neutral or been a headwind? Does that make sense?

Well, it certainly hasn’t been a headwind. And the nice thing about tuck-ins, Greg, is that if you get the right folks on, sometimes they can be terrifically accretive. But by and large, I think when you add all this, it’s probably right in line with the rest of our organization. And we’re seeing lots of opportunities, but again, you followed us for years. It’s not brain surgery; culture is absolutely critical. And I’d like to sound more sophisticated; we try to find people who care about their people, love this business, and run a good business. If they can’t make money for themselves, they’re not going to make money for us and our shareholders. But once they cross that hurdle, it’s really got to be about, are they going to fit culturally and are they going to really be able to take advantage of the things that we bring to the table? And I think you’ve heard me talk about this before. I tell them that when we bring them here to Rolling Meadows or they join one of our offices out there, we open the curtain and show them the candy store. And they’re like, 'Wow, I’ve got all this to work with now?' And when that happens, it opens up, in many instances, accounts that are local to them that we’re very strong in our local communities. We want to help them build that strength and get accounts that they never had a chance to touch because of their size are now open to them because really, there’s nothing that we can’t help them tackle. And frankly, that gets them excited. So for us, are they going to stay? Do they love selling insurance, which I know sounds crazy, but there are some of us that were born to do that? And the fact is those people end up being with us a long time, building great businesses, and having a great time doing it. It really does come down to cultural fit.

Right. Well, I know you’ve described it before. I don’t think you’ve used the word – the phrase candy store with me, but it doesn’t mean you haven’t used it before.

But you understood what I meant, right, Greg?

Absolutely.

There you go.

So the final piece on M&A, obviously, there’s a lot of stuff going around the election, anticipation of maybe a change in tax cuts in the - tax rates in the U.S., et cetera, that may lead to accelerating deal flow. Are you seeing any activity in Europe? Are you seeing any change in the flow of potential deals outside the U.S.?

Yes. And I’ll tell you why. It’s exactly what we told you in 14 when we did our transactions in the UK, Australia, and Canada, in particular, and now in Europe and Latin America. Once we’ve got a platform that gives people confidence that we’re really there to stay, then the smaller broker has something to look at that is not just getting a new name or changing where they send their reports, but they get the benefit of the fact that we’ve got scale, we’ve got brand recognition, and we have capabilities. So yes, our pipeline in the UK, our pipeline in Australia, Latin America, New Zealand, and Continental Europe are stronger than they’ve ever been.

Got it. Thank you for the answers.

Thanks, Greg.

And our next question is from Mike Zaremski with Credit Suisse. Please proceed with your question.

Hey, great. Maybe we could talk about Risk Management a little bit. I think from the prepared remarks, it sounded like claims counts were - are continuing to improve, but still down. Maybe you can put some numbers around work comp and GL. Are those still down kind of double digits year-over-year? What are you guys - any update on the outlook for the Risk Management segment? I mean margin improved more than what you thought, probably. Maybe can you talk about why margins improved more than expected as well?

Yes. I think the question is what type of claims? I think the more difficult claims that are rising, the kind of the churn business is still down maybe 20% to 30% on the small, but we don’t make a lot of money off of those anyway, so they’re kind of low margin. So that doesn’t hurt us so much. I think we have had a little bit of boost in settling claims that have risen because of COVID. And so our complicated claims, they’re still there. And so that has helped this business be more resilient. If you think about it, it might be more of a lost revenue story than it is a lost profit story as you can see by the margin. So the advantage we have is that we’ve held on pretty well, being only down 5% this quarter on a revenue basis. As we get a vaccine, as things start to improve, you will have that business come back in and hopefully be up nicely in the positive organic space next year.

Okay. Maybe stepping back and thinking about brokerage again, one of your competitors today I think kind of hinted at maybe pricing had reached a point that had reached its limit. At least, there’s definitely some businesses that are experiencing some fairly high double-digit rate increases. And I think that your competitor alluded to maybe the carriers have - some are getting enough freight and maybe we’re at peak freight. Any thoughts about kind of what you’re hearing and seeing from the carriers? And it feels like there’s some new capital coming into the space as well.

Well, there’s clearly new capital coming in, and I will tell you that there is zero interest from the people that - the partners we’re talking to at modifying rate increases at all. I mean they’re not getting any rate of return on new invested dollars. Social inflation is killing them. Lines of coverage that have been under attack for years while the market stayed soft are raising their - continuing to raise their head. This is - I see nothing in the way of softening or stopping the momentum. Now remember, again, we tried to give you some detail in our prepared remarks, workers’ compensation is about flat. They make good money on workers' comp. Workers' comp is competitive in the United States, and our clients benefit from that. And remember, our job is to make sure we do everything we can for our clients to make sure the hard market doesn’t cripple. So it’s not like I’m sitting here saying, 'Hey, this is - it’s getting harder by the minute.' But I can tell you, when you talk to the people that are the actual providers of capital, they’re not seeing light at the end of the tunnel being an indication that we’re back to softening, that’s for sure.

Okay. Great. And just lastly, just making sure, there’s nothing supplementals and contingents that was unusual this quarter?

No. No. Not this quarter. Not this year at all, as a matter of fact.

Thanks, Mike.

And we have reached the end of the question-and-answer session. And I will now return the call back over to Pat for any closing remarks.

Thank you very much. Let me give you just a quick comment. Again, thanks, everybody, for joining us this afternoon. We delivered an excellent quarter in first nine months of the year in the face of a difficult economic environment. And again, I’d like to thank our 32,000-plus Gallagher professionals for their relentless efforts and dedication. I remain confident that we can deliver another outstanding year of financial performance and successfully navigate these challenging times. Thank you, again, for being with us. We really appreciate it.

And this does conclude today’s conference call. You may disconnect your lines at this time. Thank you, and have a good day.