Douglas Howell: I think what we said is that over the next five or seven years, we’ll need twice as many people there as we have there now. I think what’s really exciting about all the work that we’ve done for almost two decades there now has put us in a position of being so standardized in many of the processes that we do. We now have the opportunity to unleash AI on that because that’s already done. We have made that investment. And now what we can do is deploy AI against it. And, look, those folks, if you’re going to hire twice as many folks, they’re going to end up with better jobs over there because they’re going to be using AI. So, our colleagues there are going to be well rewarded by deploying that technology into it. So, we are really fired up about it.
J. Patrick Gallagher: Yeah. Let me hit a couple of other items. Why would we need to double our employee count there because we’re going to double the business. And that’s going to lead to plenty of opportunities there. Secondly, and I think this is a hugely important point. Standardizing a Brokerage business from an agency system through the operating processes to things like issuing certificates of insurance is a [indiscernible]. It takes four, five years to bang it through. I’ve done it. It’s a headache. We’re there. We don’t need to do it. We don’t need to sell it. It’s standard operating procedure. When you join us, you know that in your due diligence, you come aboard, you plan the effort to change into our agency system and you get rewarded for it by virtue of the data and analytics we can provide you to go out and sell. We don’t need to sell our team on that. We don’t need to prove it to them. We did that 15 years ago.
Michael Zaremski: Thank you.
Operator: Thank you. Our next question is coming from David Motemaden with Evercore ISI. Please state your question.
David Motemaden: Hey, good evening.
J. Patrick Gallagher: Hi, Dave.
David Motemaden: I just had a question on — just on — it looks like there was a little bit of favorable timing during the quarter on incentive compensation expenses that helped the margin in Brokerage. Was that a big help? And is that something that you guys have sort of baked into the first quarter of ’24, just that timing coming through?
Douglas Howell: Well, first of all, we talked about that, I think, back in our April or June call that we were probably a little further ahead at that point of the year and our incentive comp accruals. So that’s been contemplated in our guidance of margin expansion since way back then. So that — I would say there’s no new news of what we were expecting in December versus what we delivered this quarter. And what’s the impact of it? It’s not a point. I mean, so it’s not a big number.
David Motemaden: Got it. Understood. And then I just wanted to come back to the 7% to 9% Brokerage organic for 2024 and sort of level set in terms of what you guys are thinking on the exposure growth side, the range of outcomes that you guys are considering within that 7% to 9%.
Douglas Howell: All right. So I think when you break down our organic, we usually have more net new versus lost is probably 3% to 4% on that. When you get some rate in there, probably, we’re at that 2 points and maybe there’s 2 points of it, that’s 2 or 3 points that’s exposure unit growth. I don’t — we’re going to have more lift next year from new versus lost probably proportionately. So, if you break down 9%, it might be a third, a third, a third. If you break down 7%, it’s probably half rate — excuse me, mostly new business and then exposure unit growth again.
David Motemaden: Got it. Understood. Thank you.
J. Patrick Gallagher: Thanks, David.
Operator: Our next question is coming from Gregory Peters with Raymond James. Please state your question.
Gregory Peters: Good evening, everyone. I guess I’m going to the new table that you added to the CFO Commentary, which we appreciate, which is the interest income, premium finance revenues and other income. And could you give us some perspective, because ever since mid-December, when the Fed changed their perspective on what’s going to happen with rates, there’s obviously some mechanics we’re trying to calculate on what might happen with that line depending on what the Fed does with interest rates? So maybe there’s some benchmarks you can provide for us that will help us sort of map out what we think might happen there.
Douglas Howell: All right. So you got the rate sensitivity and you’ve got the amount of cash that we have on our balance sheet, that’s not only ours, but our clients, okay? So, first and foremost, it’s both the rate that we’re earning and then it’s the — on what we’re earning that on. Second of all, you’ve got the dynamic. You mentioned the Fed. The U.S. portion of that interest income is only about 45% of the numbers. So it’s actually more heavily weighted to internationally, and you would expect that with kind of large reinsurance balances in some of the large specialty businesses that we have in the U.K. So you got to separate your thinking on that. The other thing, too, is that you’ve got the growth as it grew this year, it was not only because of rate that was going up, but it was also because of the way the reinsurance receivables migrated from Willis’ books onto our books during the transition services agreement.
So you got that dynamic in it. I think what you’re trying to plumb for is how sensitive is that number to rate changes. I would say that it’s price-sensitive $5 million per rate cut that the Fed does in the U.S. per year. So if there’s 4 points in, there’s $20 million — four cuts that might be $20 million. Again, that’s just answering your question about the Fed. How the other central banks, what they do with their policy next year, I just don’t have that number right off the top of my head. But when you asked about the Fed, think about it as $5 million per cut.
