Gregory Peters: Excellent. Just a follow-up on that table for ’23. And what quarter did the services agreement with WTW shift? Because I assume that would have meant the change…
Douglas Howell: July 1.
Gregory Peters: July 1. So when we’re looking at the third quarter and fourth quarter, that’s more normalized under going forward operating conditions, correct?
Douglas Howell: That’s correct.
Gregory Peters: Thank you for that clarification.
Douglas Howell: Yes, it’s important for — yes, okay. You’ve got the premium finance just to make sure you know that there’s expenses associated with premium finance that’s down there. So that’s a spread business. But you get — gross is up. We get the revenues up above, and then we get the — we have the operating expenses and the interest costs down below in operational.
Gregory Peters: That’s excellent detail. I appreciate that. And then there’s a bigger picture question I have before I get there. I can’t — I’m hung up on the clean energy tax credit carryforward balance, which caught me by surprise going up. And I know there’s obviously a revised approach towards your tax credits here. But without getting into detailed commentary on the changes and the nuances and the tax, is it your expectation going forward that this — that you’re still going to be pulling down $150 million or more of tax credits from clean energy going forward? And then, is that $867 million just related to the clean energy? Or is there other things in that?
Douglas Howell: All right. So, two things. You can see on Page 5, we have reaffirmed that we think that there’d be about $150 million worth of utilization of that balance in ’24. And maybe when you get to ’25, ’26, ’27 is somewhere around $180 million of utilization in a year. So, you need to think about it coming in over the next four years. There is a very small other balance of credits in there that I would say is a rounding there, and it has to do with when we construct our home office building. But for all intents and purposes, consider these credits to be from our clean energy work.
Gregory Peters: Great. So, pivoting back to the bigger picture question is, I’m going to focus on reinsurance because last year was one of the most challenging reinsurance renewal periods in our lifetimes, and especially on the cat side, I should say. And clearly, based on your commentary and others, it seems like it’s going to be more normal this year. It seems like the lift you might get from the pricing or rate component is going to be a lot less this year than it was last year. So I don’t want to get too hung up on — and I realize casualty has its own cadence, but I was just curious about your response to that observation and how you think it might work with Gallagher?
J. Patrick Gallagher: Well, first of all, let me just say that when I look back, I can’t tell you how proud I am of the team. We came into a year, new to the organization, we’ve got some expertise for sure that got paid, but it was very difficult a year ago. And we basically, in a tough environment, took care of our clients. And I think that’s really — we learned a lot all of us from that. And then we come around to this year, yeah, the supply and demand balance was a little easier, but what you’ve got now is a group of our clients that, number one, the price is up, and number two, demand is up. So, you’ve got pricing not coming down and people looking and saying, “No, okay, it’s not as sloppy as it was a year ago, I’d like to get more of that.” And we saw a bunch of that at 1/1.
Remember, about 45% of our business is book 1/1. So, the year when it comes to cat property is pretty much in the bank. And it’s been a great year. Easier to place than last year, but as I said, demand up and pricing up. So, it still remains a very good market for us, and one in which there aren’t that many people, Greg, that can do what we do for our clients. And our larger competitors are very, very good. But it falls off pretty quick after us.
Gregory Peters: That’s right, all right, Thanks for the answers.
J. Patrick Gallagher: Thank you, Greg. Thanks for being with us.
Operator: Thank you. And our next question comes from the line of Andrew Kligerman with TD Cowen. Please proceed with your question.
Andrew Kligerman: Hey, thanks a lot, and good evening. I just want to clarify, Doug, when you were saying $5 million per rate cut, just define what you meant by rate cut? How much rate gets cut?
Douglas Howell: 25 basis points.
Andrew Kligerman: How many?
Douglas Howell: 25. They do at 25. I was referring to a rate cut of 25 basis points.
Andrew Kligerman: 25 bps. Perfect. Thank you. And then, with respect to Gallagher Re, could you talk a bit about how the cross-selling with Risk Management is playing in? Is that a big driver? And also, I understand you’re going to be moving into facultative reinsurance and — or maybe you’ve been doing that. What kind of tailwinds do those provide to 2024?
J. Patrick Gallagher: Well, I mean, first of all, I have to say that the reinsurance team has been incredibly pleased with and nicely surprised by the amount of interaction with our retail team around the world. And when we did the deal, we told the team and ourselves that we thought there was a considerable benefit from having both sides of the equation under one roof, and that is playing out over and over and over again. As you know, we’re very, very strong in our niche or niche marketing, and that’s a global play. And the capability to have the reinsurance perspective in those meetings, and then we’re the largest player in the pooling sector for public clients in the United States. We kind of thought we had that pretty well nailed.
