J. Patrick Gallagher, Jr.
Chairman of the Board and Chief Executive Officer at Arthur J. Gallagher & Co.
Thank you very much. Good afternoon, everyone, and thank you for joining us for our third quarter 2024 earnings call. On the call with me today is Doug Howellour, our CFO; other members of the management team and heads of our operating divisions.
Before I get to my comments about our financial results, I'd like to acknowledge the damage and devastation caused by the recent storms and floods. Our thoughts were those impacted by these events, including our own Gallagher colleagues. Our professionals are hard at work, helping clients sort through their coverages, file claims and ultimately get losses paid. I'm really honored to be part of a company and an industry with such an important responsibility, helping families, businesses and communities rebuild and restore their lives and that's a noble cause.
Okay. On to my comments regarding our financial performance. We had a great third quarter. For our combined brokerage and risk management segments, we posted 13% growth in revenue, 6% organic growth, which does not include interest income. Reported net earnings margin of 15.5%, adjusted EBITDAC margin of 31.9%, up a 123 basis-points year-over-year. GAAP earnings per share of $1.90 and adjusted earnings per share of $2.72, up 16% year-over-year. Another fantastic operating quarter by the team.
Moving to results on a segment basis, starting with the brokerage segment. Reported revenue growth was 13%. Organic growth was right in-line with our expectations at 6%, which as we forecasted reflects about a point of timing headwind from those large life cases we have highlighted over the past couple of quarters. Doug will provide you with some good news from October related to these sales in his remarks.
Adjusted EBITDAC margin expanded a 137 basis-points to 33.6%, which was better than our IR Day expectations. Let me give some insights behind our brokerage segment organic. Within our PC retail operations, we delivered 5% in the US and 7% outside the US. Internationally, Australia and New Zealand led the way with organic of more than 10%. The UK was up 6% and Canada was flattish. Our global employee benefit brokerage and consulting business posted organic of about 4% and a few points higher excluding the timing differences from the large life case sales. Shifting to our reinsurance, wholesale and specialty businesses, overall organic of 8%, so very strong growth, whether retail, wholesale or reinsurance.
Next, let me provide some thoughts on the PC insurance pricing environment, starting with the primary insurance market. Global third quarter renewal premiums, which include both rate and exposure were up 5% and little changed from the 6% we discussed at our September IR Day update a few weeks ago. Most lines and geographies had very similar renewal premium changes through all three months of the quarter with a couple of exceptions.
September casualty renewal increases outside the US were lower relative to July and August, driven by changes in business mix. Additionally, large account and E&S property renewal premium increases were a bit less in September than the first two months of the quarter. But neither of these appear to be a trend. Thus far in October, we are seeing large account property and international casualty renewal premium increases higher than September.
Breaking down third quarter renewal premium changes by a product line, we saw the following: property up 4%; general liability up 6%; commercial auto up 7%; umbrella up 10%; workers' comp up 2%; D&O down about 5%; cyber was flat and personal lines up a 11%. So overall, increases continued to be broad-based and rational in our view with carriers still cautious and pushing for rate where it's needed to generate an acceptable underwriting profit. We shine in this environment. Our job as brokers is to help clients find the best coverage while mitigating premium increases. So while not all of the increases ultimately show up in our organic, a rational market allows us to further differentiate ourselves with our leading tools, data and expertise.
Let me shift to the reinsurance market. The July 1st renewal season saw modest property price declines concentrated at the top-end of reinsurance towers, while casualty renewals saw terms and conditions tighten and some modest price increases concentrated in the US. Clearly, a lot has happened in the property market over the past month, which is now adding some complexity to January 1 property renewals. It's still early, but we now believe a flattish renewal is more likely than the downward pressure previously being discussed. And don't forget, US hurricane season is not over for another month.
For casualty risks, we believe reinsurance will remain cautious heading into next year, especially if there is more noise related to US reserve adequacy. We think differentiating underwriting practices will likely be the key to a successful renewal for clients. Overall, the reinsurance industry remains adequately capitalized and is likely to meet capacity demands at the upcoming January 1 renewals. We continue to believe Gallagher Re will perform very well in 2025 regardless of how the market environment unfolds in the near term.
Moving to some comments on our customers' business activity. Our daily revenue indications from audits, endorsements and cancellations were again in positive territory for the third quarter. While the amount of upward revenue adjustments isn't as much as 2023, they are running in line with 2022. So client business activity remains solid, and we are not seeing any signs of a meaningful global economic slowdown.
Within the US, the labor market is on solid footing. In fact, the number of open jobs increased in -- in August and remained well above the number of unemployed people looking for work. Overall, job growth, upward wage pressure and rising medical cost inflation continued to challenge employers looking for ways to grow their workforce and control their benefits costs.
Regardless of market or economic conditions, I believe we are well-positioned to take market share across our brokerage business. Remember, about 90% of the time, we are competing against the smaller local broker that cannot match our client value proposition, niche expertise, outstanding service and our extensive data and analytics offerings. Putting this all together, we continue to see full year 2024 brokerage organic around 7.5% and that would be another outstanding year.
Moving on to our Risk Management segment, Gallagher Bassett. Revenue growth was 12%, including organic of 6%. We continue to benefit from excellent client retention, increases in customer business activity, rising claim counts and new business wins. Adjusted EBITDAC margin was 20.8%, 35 basis points higher than last year and a bit above our September IR Day expectation. Looking ahead, we see organic in the fourth quarter around 7% and full year organic pushing 9%. Margins for fourth quarter and full year should be in the 20.5% range and that too would be another outstanding year.
Shifting to mergers and acquisitions. During the third quarter, we remained disciplined, completing four new mergers at fair prices, representing $47 million of estimated annualized revenue. For those new partners joining us, I'd like to extend a very warm welcome to the Gallagher family of professionals. Looking ahead, we have more than 100 mergers in our pipeline, representing approximately $1.5 billion of annualized revenue. Of these 100 potential partners, we have about 60 turn sheets signed or being prepared, representing around $700 million of annualized revenue. Good firms always have a choice, and it would be terrific if they chose to partner with Gallagher.
Let me conclude with some comments regarding our culture. As we passed our 40th anniversary as a public company, I believe our greatest differentiator continues to be our bedrock culture. It's a culture that runs towards problems, not away from them, a culture that supports one another and embraces teamwork, a culture that is grounded in the highest standards of moral and ethical behavior. It's a culture that will continue to guide our success for many years to come. Frankly, we love this business. We enjoy taking care of our customers and that is the Gallagher Way.
Okay, I'll stop now and turn it over to Doug. Doug?
