Good morning and welcome to the Arthur J Gallagher & Company’s fourth quarter and year-end 2009 conference call. Participants have been placed on a listen-only mode. Your lines will be open for questions following the presentation. (Operator instructions) As a reminder, today’s call is being recorded. If you have any objections, you may disconnect at this 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 such as any guidance regarding future results. These forward-looking statements are subject to certain risks and uncertainties described in the company’s reports filed with the Securities and Exchange Commission. Actual results may differ materially from those discussed here today. It is now my pleasure to introduce to you Mr J Patrick Gallagher Jr, Chairman, President and CEO of Arthur J Gallagher & Company. Mr Gallagher, you may begin.

Thank you, Rob. Good morning everyone and welcome to our fourth quarter and year-end conference call. Thank you for being with us this morning, we appreciate it. I am joined this morning by Doug Howell, our Chief Financial Officer as well as the heads of our operating businesses. I will add some color to the quarter, give you kind of my perspective, Doug will add some thoughts and we will move to questions and answers. But first, I want to publicly welcome Scott Hudson to our team. I think all of you know that Scott became the President of Gallagher Bassett this month and we are glad he is aboard. We are looking forward to working together for a number of years ahead. Given the economic environment in 2009, I have to tell you I feel we had an excellent year. We grew EBITDA over $60 million or 17%. In fact, if we had a better economy I would be happy with 17% EBITDA growth. Coming into 2009, we knew we had incredibly strong headwinds. Premiums were dropping, our clients’ businesses were being stressed but we did the things we needed to do to thrive in the toughest environment I think I have seen in my career. So what did we do? If you look at page 2 of our press release, you will see we reduced our workforce, which was tough, but we did it, and at the same time we maintained our unique culture. We substantially cut operating cost by realizing the benefits of a lot of hard previous expense control work. We completed our largest acquisition ever. We brought in 250 new people all at the same time and we integrated them into our team. We successfully negotiated with our Attorney General in Illinois to get our…

Thanks Pat and good morning everyone. You heard Pat’s recap on 2009, which was an excellent year and some thoughts on the environment that we are operating in right now. So rather than reiterating that, I am going to give you some information to help you build your model. First, I will help you level set 2009 and second I will give you some flavor on 2010. Alright, let’s levelize the 2009 noise [ph]. This is an important exercise because it will also help you see the underlying quarterly seasonality in our numbers. First, let us go to page 6 of the earnings release and find the Brokerage segment investment income and other line. Recall that that line contains non-recurring gains from selling books of business. There are $11.6 million of gains in 2009, so when you remove that noise, it will leave investment income of about $1 million per quarter. Next go to page 3 of the earnings release, you will see in the Brokerage revenue reconciliation a line item called supplemental commission timing. We picked up $5.9 million of revenue in the fourth quarter 2009, that is a pretax number, that we would have normally received in the first quarter of 2010. So you probably should adjust that up for that item in your first quarter 2010 model because we got it early. Also on page 3 in the Brokerage EBITDA reconciliation, you will see that we had workforce reduction related charges in the compensation line totaling $5.5 million for the year of which $4 million came in the fourth quarter. We previously announced that charge will be taken in the third quarter earnings release. The remainder of the severance cost was split between the second and third quarters. While it is more of a net, you can…

Thank you Doug. Rob, we are ready to go to questions and hopefully some answers.

Thank you. The call is now open for questions. (Operator instructions) Our first question is coming from Bob Glasspiegel of Langen McAlenney. Please proceed with your question. Bob Glasspiegel – Langen McAlenney: Good morning gentlemen. I was wondering if you could on the Chem-Mod in the third quarter press release you highlighted some regulatory hurdles and IRS hurdles that were necessary, I did not see any reference to those in the fourth quarter. So can we infer that all systems go from a regulatory perspective?

Two things Bob, by the way, welcome back.

Good morning and welcome back. Bob Glasspiegel – Langen McAlenney: Thank you.

First and foremost, the IRS guidance did come out in the fourth quarter and we believe that the guidance is not negative to our position, so we feel good about that. Also with respect to regulatory permit, we operate under a temporary emissions regulatory permit until we prove over the next six months that the plants are doing what it says they are going to do. This is a regulatory item, not an IRS item. We believe that based on what we have seen so far, we should have no problems getting those permits, but it is a process that will take us six months. Bob Glasspiegel – Langen McAlenney: Okay. Are the operating expenses in the six months that will flow through the P&L?

No the income, expense and tax credits during these six months – because we can operate under the temporary permits. Bob Glasspiegel – Langen McAlenney: Okay is that sort of breakeven or loss or profit run rate before it gets broken up?

I think we will make money here over the next six months, I just do not know how much. If they run them for the next six months, if it was exactly running for the next six months, we would make half of the $40 million but they are going to turn the plants on, they will turn them off, they will operate depending on the difference between coal prices and natural gas prices because they could just place the coal in the burners with natural gas. So I just do not know where we will be in the next six months. Bob Glasspiegel – Langen McAlenney: And Q4, was it a loss?

We probably had about $2 million to $3 million of cost that went through the corporate segment related to getting these things up and running. Bob Glasspiegel – Langen McAlenney: Okay, second question, is it too early to indicate whether new management has a change in strategy for Risk Management segment?

No, it is not too early, Bob this is Pat, and we are seeing no change in strategy at the present time. That is one of the nice things I think for Scott coming aboard is he really has a good six months to get very knowledgeable with our clients and what it is that the value proposition will bring to them and at that point, I think, there will be a chance to talk strategy. Bob Glasspiegel – Langen McAlenney: We would love to hear from him.

We will give him a little more than a week Bob. Bob Glasspiegel – Langen McAlenney: Sounds good.

Also to just add on that Bob, if you really look at it, we have been trying to run that business at 15 points of EBITDA margin and this year they posted 14.9. So I think the team did a good job this year of getting the margins up 2.1 points for the year? So I think the franchise is in pretty good shape. Bob Glasspiegel – Langen McAlenney: Thank you.

Thanks Bob.

Our next question is coming from Michael Grasher with Piper Jaffray. Please proceed with your question sir. Michael Grasher – Piper Jaffray: Thank you, good morning everyone. First of all, congratulations on 2009, it was a very trying year and you did quite well. Second comment would be just a question around extrapolating on the change in organic growth in the quarter Pat; you alluded to it in terms of the wins which drove the improvement. Could you give a little bit more background on that?

Yes, first of all, there is no timing in that; there were no accounts that moved around. Our pipeline was good and really it was virtually across the globe. Our London teams did extremely well especially in the energy business; our West Coast had some very nice wins especially in entertainment. Our Mid West region had some very strong wins in the (inaudible) and there was not one single account that really bolstered us. We just I think did a good job of holding on to – our loss business numbers were better in the quarter than in the third quarter and the team just performed well. Michael Grasher – Piper Jaffray: Okay, I guess how much – can you site three or four that maybe had the biggest impact on all those or on the change or is truly just a dozen or so transactions?

It is more than a dozen Michael, it is literally, probably 50, 60 accounts but there were some energy wins, there was a very entertainment win on the West Coast and in New York and there was just good solid middle market production. Michael Grasher – Piper Jaffray: Okay, thank you for that.

Our next question is coming from the line of Keith Walsh from Citi. Please go ahead with your question sir. Keith Walsh – Citi: Good morning everybody.

Good morning Keith. Keith Walsh – Citi: I guess first question for Pat and/or Doug, again about the revenues, are we looking here just focusing on new business, I mean excluding new business, I apologize, is the economy having an impact here, are we seeing better or decelerating revenue decline let us say from your existing book excluding the new business that you put on, and then maybe if you could talk more broadly about the interplay on revenues between the economy in general and pricing, and which one you view as more important shorter term and longer term, and then I have a couple of follow-ups, thanks.

That is fine, let me try a shot at that and then I will ask Doug to pipe in as well. If you saw the CIAB numbers in terms of fourth quarter reduction rate, their numbers across all categories we were off about 6%. So that is a major headwind right there. Anecdotally, because I am not an economist and I know that the economy supposedly grew in the fourth quarter over 5%, I will just tell you we are not seeing that. In particular, our construction book has been hammered, not the infrastructure guys but if you had a homebuilder, they are not building any homes. And all the trades are way, way up. People that were doing 15 million, 16 million, 17 million are doing 5s, 3s and 2s and we do not see that recovering right now. Hopefully we will but we do not see it and our employee counts at our benefits businesses are not recovering just yet. Now, there is a lot of predictions that maybe during the year people will have to start adding headcount again but I think that what you have got is two headwinds that continue this year that we think are going to continue to be strong at least for the first half. I think the economy is going to continue to hammer us, it hammered us in 2009 and as I said during my comments, you are seeing the results that are being posted by our underwriting partners, they are having fantastic results and that is adding to surplus which is going to continue to put pressure on the rates. So I think 2010 portends to be a very difficult year. We do not have the expense levers that we had going into 2009 to pull. So we are really telling our team, we have got to redouble our efforts, you have got to make the call on Friday afternoon, you got to be out there on the street, this is about selling right now. We have got to really ramp up our sales efforts and that is the message from the management team through the whole organization. Keith Walsh – Citi: Okay and then Doug, just to kind of peg you back on that, maybe just the interplay between the economy and pricing over a longer period of time, which one is actually a bigger lever for you guys, and how do you look at that?

I think that pricing is the bigger lever for us. I think that exposure units, they are coming down of course but when you have got carriers still cutting prices 6%, it is tough for us to work over the top of that.

I disagree with Doug on that Risk Management segment. When your claims counts come down 8.2% that is a tough headwind.

Yes, my comments were (inaudible).

And when the economy recovers, we typically, in historical terms, would have anywhere from 2% to 5% organic claim count growth and that is a very good tail wind. So it is going to take a while till we see that recover. Keith Walsh – Citi: Okay, very helpful. Then on Liberty, Doug, you know you talked roughly – you revised upwards several times last year what the contribution to EBITDA in 2009 would be, maybe if you could just update what the actual contribution was and if there is any updates for your thoughts for 2010 there?

Yes, good question. We said that when we got the deal we thought it contributed about $25 million to $30 million worth of EBITDA. When it finally gets ramped up, we got about $10 million of it this year, so we are probably allowed $15 million more coming in over the top in 2010. Keith Walsh – Citi: Okay, so no change from the $25 million to $30 million total that you talked about?

No, it is still a great deal right now. Keith Walsh – Citi: Okay and then just a last question, it could be Pat or Doug, just thinking about Brokerage in general, it seems like a pretty simplistic business model, right, when I think about Chem-Mod, the question that just comes to mind is why, why are you guys doing this? How does it benefit shareholders? Could you not be using your time, money and effort in a different direction? If you could just talk to that a little bit.

I would let Doug touch on Chem-Mod but I want to – I appreciate your question on the brokerage space. I gave a presentation in New York a week ago to the RIMS chapter there and the question they asked is what does the brokerage world look like post the recession? And I tell you, when I look out longer term, the assets will grow and recover and that requires insurance. Virtually, and I think the Liberty deal proves this; every commercial account uses an agent or a broker. As you start at the top of the pyramid with the Fortune 100 or Fortune 5000, they use us differently than those small accounts that are personal alliances or small commercial accounts, but virtually 100% of those people use an agent or a broker. So, in the long term, you have got asset growth, you have got more need to protect it at the same time the world is getting riskier, and as the world gets riskier, insurance is going to come into play more and more often. You step back from that and look at 18,000 agencies and brokerages in the United States; there are five of us that buy them. Long term, I could not be more bullish and this is what we are using to recruit young people into this business telling them it is the greatest business they could join coming out of college. It is tough, it is cyclical, long cycles, but long term this is one hell of a business. So, I will let Doug touch on Chem-Mod and how that interrelates to this other business that I think is the greatest business on earth.

First of all, Chem-Mod is the technology that we own 42% of that we use in our section 45 the clean energy facility to generate tax credit. So we have eight facilities now. Why are we there? We have the investment; we explained last summer that in order for us to commercialize this investment, we need to get up plants up and running. We view this not as building a business, it is a way to minimize our taxes and generate cash – Keith Walsh – Citi: And not build the business.

Yes, we are not building a business out of this but it is a way to generate cash. We think that it can generate $40 million of cash for us for the next ten years. So, why are we doing it because we think that this is the way for us to generate maybe upwards of a half a billion of cash for the company. Keith Walsh – Citi: Okay thanks.

Our next question is from the line of Jack Sherck with Suntrust. Please proceed with your question? Jack Sherck – Suntrust Robinson Humphrey: Thank you very much. I just had a question about the acquisition environment, since we have seen a push out of any expectations for really a hard market, have you seen some more I guess capitalization or agreement on behalf of sellers in terms of their interest level.

Jack, this is Pat. I would say that the answer to that is it depends. One of the things about acquisition activity is every single deal has its own flow. It really is a sales process and we turn them into a marriage, we are not looking to synergize costs out and replace management. So would I say that there is more of an acquiescence in the marketplace, I think there is a realization that the reality is you are not going to see a hard market in the short term. So I also think there is a recognition that it is likely the tax codes are going to change and that in order to be able to duplicate what we are willing to pay in terms of getting the cash and stock up front, someone will really have to look at growing their enterprise substantially over the next four or five years and holding on to it. Most of those 18,000 firms that I mentioned earlier are owned by Baby Boomers. So I think there is a closer meeting of the minds right now, multiples are down a little bit obviously because growth is down a little bit, but I would not say there is any substantial wave of change. We are actively working hard to sell people on the fact that they can do very well by joining us, taking our stock, receiving a nice dividend while they wait for an adjustment in rates. So I think you will see that activity ramp up slightly this year. Jack Sherck – Suntrust Robinson Humphrey: Great, thank you very much.

Our next question is from Meyer Shields with Stifel Nicolaus. Please proceed with your question. Meyer Shields – Stifel Nicolaus & Company: Thanks, good morning everyone.

Good morning Meyer. Meyer Shields – Stifel Nicolaus & Company: Should we expect any impact since your organic growth from the last two years at headcount reductions?

Headcount reductions? Meyer Shields – Stifel Nicolaus & Company: Yes.

No, those were not reduction of producers unless the producers were not validating, and as I said during 2009 we continued to recruit production talent. Our producer headcount is up. Meyer Shields – Stifel Nicolaus & Company: Okay. I was just wondering about you got producers in many cases that are under producing and obviously there could be right there but I think you have answered that. With regard to the lower travel meeting and professional fees that you reported, how much of that comes back next year?

We are hoping to hold the line up, there will be some that comes back in and there is some natural inflation and just the travel that was out there, fares were a little bit lower last year than we are expecting this year, hotel prices are down so that might offset the difference, but we are hoping to hold the line on it. Meyer Shields – Stifel Nicolaus & Company: Okay, that is all. Thanks.

Thanks Meyer.

(Operator instructions) Our next question is from the line of Doug Mewhirter with RBC Capital Markets. Please start with you question sir. Doug Mewhirter – RBC Capital Markets: Good morning.

Good morning Doug. Doug Mewhirter – RBC Capital Markets: I have three hopefully quick questions. First, do you have an employee count as of the end of the year? Are you right around 10,000 still or –

It is in our press release here on page – we have 5890 in Brokerage and 3741 in Risk Management; it is on page 6 of 8 of the press release, so it will be 9500 the two together, 9600. Doug Mewhirter – RBC Capital Markets: Okay, thanks, I guess I just skipped over that, the second is more about contingent commissions, I maybe a little off in the semantics regarding contingent commissions and also it came to be called as supplemental commissions, you got a victory by getting those to sort of put back in there is allowed, but if you think that you would change, any of your contracts change or maybe when the contingent commissions went away, they switched to more of a supplemental commission agreement where you will just be trading dollars next year or in 2011, it is the same money so it would not be (inaudible) commissions you are just sort of trading one term for the other, do you understand what I am getting at?

I think I do. Yes, we are going to work hard to maintain kind of the level we have got. You are right in that it is a bit confusing. We have what are called guaranteed supplementals, we have supplementals that are not necessarily guaranteed and then we have got contingent commissions. The good thing about getting our contingent commissions back was that we were at a point where our merger partners from the previous three years we are going to have to stop taking them, so that problem was eliminated. In addition, the regional carriers that we were not able to negotiate any kind of supplemental arrangement with, we are now back in taking contingents from them and one of those is an example of Cincinnati Financial. They just simply were never going to convert, they believed in contingence, they did not believe in supplementals and they were not going to bow to the whims of the attorney generals. So those are where we are able to gain back, and the reason we say it is about $10 million is we want to make sure people did not think, oh my God, you got to plug another $30 million and that is what these guys lost in 2005. A lot of that has been replaced by these supplemental programs that the carriers have moved to. I hope I answered your question. Doug Mewhirter – RBC Capital Markets: I think that was very helpful, thanks. My last question I guess is more of an industry question, you said the claim counts were down in the range of 8% that is sort of an absolute number, what do you think the actual claim frequency rates are and do you see any movement on that side because obviously there is less payroll, there is less asset value, less business revenues, but do you think the actual claim frequencies are down, or steady or up?

Yes, I think they are down, they are down in the order of 8.2% at Gallagher Bassett last year but there is an interesting thing, an interesting trend that we are seeing there that we had not seen before and that trend is where the claim count is coming down in many instances is from medical only claims that are part of the workers’ compensation work that we do. Now, medical only claim is the easiest claim for us to adjudicate. It is the quickest claim that comes into the system and then is put to bed and it really reflects someone that needs to go to an immediate care place, get a few stitches, and then come back to work. So we are sitting back looking at this saying, what is happening here, are we in an economy where people are actually getting hurt at work and not telling anybody? Are they afraid of their jobs because we have never seen a drop-off of net only claims like this, those are the ones that typically kind of just stay steady as the work is done. Now, when you take the economy and add to that the fact that most of our clients have reduced headcount substantially, that also is a major drag on those claim counts. Plus I would say our clients, our clients’ efforts at loss control and we have got probably 25 or 30 years now of very strong focus in American business on loss control, they are having a positive effect, which is a good thing Doug Mewhirter – RBC Capital Markets: Okay, great, thanks, that is all my questions.

Thanks Doug.

Our next question is from the line of Alex Pitchard [ph] with Trimaran Fund Management. Alex Pitchard – Trimaran Fund Management: Good morning, had a question about compensation expense in the book of business. I noticed that revenues were down about 50% sequentially, compensation was back up, severance is up 6%, it seemed to be a bit more than you expect given the seasonality and compensation, so I just wanted to see if there is anything unexpected in there that caused it to be higher than what you were thinking?

Yes, sequential over the third quarter once you take out the workforce reduction related charges and everything, it really happened for two reasons. Our producer and branch manager bonuses were higher in the quarter because we actually had a pretty good quarter and that tripped him over into actually receiving more comps, so they did better as we closed out the year and so we booked more bonus there. And then also we had some medical expenses that hit in the quarter that drove it up a little bit too. So that produced some volatility into the fourth quarter which is kind of typical for us is if you got a producer that is running along for a year our brands, it does not look like they are going to make the numbers, they can also have a good fourth quarter, then you will see a little bit of a catch-up that goes into that number. Alex Pitchard – Trimaran Fund Management: Okay. Medical expenses, is that a one-time in nature or is that something you expect to kind of be at a new run rate in the fourth quarter?

We did have a little bit of one-time in there but also, in my opening comments, I said that we are seeing medical inflation out there and when you look at the – we are going to try to – our headcount reduction is going to come down $34 million of savings but we are going to give $12 million or so back that is in that number there. Alex Pitchard – Trimaran Fund Management: Okay, thank you.

Thanks Alex.

Our next question is from Alison Jacobowitz with Bank of America. Please go ahead with your question. Alison Jacobowitz – Bank of America Merrill Lynch: Thanks. Most of my questions have been answered but one favor please, can you just repeat what the 2010 roll-over amount was, the revenue from M&A activity, just went by me too fast.

$20 million to $25 million. Alison Jacobowitz – Bank of America Merrill Lynch: So that is now from the less than $100 million about that you did in 2009, that is what is left to roll through in 2010.

Correct. Alison Jacobowitz – Bank of America Merrill Lynch: So barring any additional acquisitions coming forward, that would be your only acquired revenue in 2010.

Exactly. Alison Jacobowitz – Bank of America Merrill Lynch: Perfect, thank you.

Thanks Alison.

Our next question is from the line of Brian Durupio with Field Capital. Please go ahead with your question. Brian Durupio – Field Capital: Good morning guys.

Hi Brian. Brian Durupio – Field Capital: Couple of questions, first of all, Gallagher Bassett, the revenue decline, is that purely a claims count issue or you are seeing any other trends such as re-bundling or companies moving out of self insurance back into paying for it?

Yes Brian, we are seeing re-bundling. It is probably one of our tougher years when it comes to loss business and a big chunk of that was in fact re-bundling. The main carriers would prefer to operate in a bundle environment. As hard as I tried to get them to understand that if Gallagher Bassett is involved, it really does not hurt their interest, they do believe that their proprietary claims handling benefits them, either by retention or by reduced claims expense. I think we can prove to them that the reduced claims expense is a myth, but the simple fact is they will raise requirements and collaterals if they can, they will charge oversight fees and they will quote cheaper insurance rates to get the claims work back. Brian Durupio – Field Capital: And Pat on the Brokerage side, as you look at the niches that you have, one of them is cyber risk, is that (inaudible) that you think you can really grow this year given all the news in the paper about Google and the cyber attacks they experienced recently.

That is a great question Brian. There was another thing in the New York Times today about the amount of cyber terrorism that could occur in the country. So, yes, I think that is a place that we are concentrating [ph]. Do I think it will explode in this year, probably not, but I will tell you what, there is going to be a lot more interest in their coverage. Brian Durupio – Field Capital: Got you. Lastly, question on the dividend is, I go back through your history, I do not think you have ever kept the dividend stable for this long. Can you just sort of give me your thoughts and obviously the Board’s thoughts about the dividend, do you have a target of payout ratio in mind, can you just help us along there, why the long pause?

Absolutely we could help you out. The yield is very strong, strongest in the business. The Board felt that the level that we were paying was an appropriate level. There was good discussion about whether or not you go two years without increasing it and it was the feeling of the Board that we have got an excellent payout right now and that we should keep it the same.

In terms of the payout ratio, we want to pay out between 50% and 60% of our free cash flows on it and that is still within that range, and I think that also with us having some opportunities on the M&A side, I think the Board thought that there might actually be a signal that there is some good growth opportunities out there. So they will look at it again next year and we will see where we go then. Brian Durupio – Field Capital: Perfect. Thanks a lot guys.

Thanks Brian.

(Operator instructions) Our next question is from the line of Sarah DeWitt with Barclays Capital. Please go ahead with your question. Sarah DeWitt – Barclays Capital: Good morning.

Good morning Sarah. Sarah DeWitt – Barclays Capital: Could you discuss your ability to continue to expand the brokerage margin in 2010 if organic growth remains negative?

Yes, in my opening comments I said that we are going to be fighting hard this year in order to hold the operating ratios the way we have them here in 2009. With respect to the compensation line, we believe that what we have done right now should lower our compensation cost next year because of the headcount reductions granted some of that is going to be given back in medical and incentive comp (inaudible). If it is flat, I think it could be – if we do not have negative organic change, you might see a slight expansion in the margin but not much, if it is up then you would see some margin expansion, if it is down then you might get a little bit of margin back. Sarah DeWitt – Barclays Capital: Great, thanks for the answer.

Sure.

Thank you. There are no further questions at this time; I would like to turn the floor back over to Mr Gallagher for closing remarks.

Thank you Rob. I just have a very brief closing. Thank you all again for joining us. Thanks for your good questions; I hope you got the answers from us that you wanted. As I said at the outset, I am really pleased with the progress that the team made in 2009. I am worried and I think that 2010 is going to be another test, but as I said, when I look out over a longer horizon I am really excited about our opportunities. We have got a tremendous sales focus, we have been able to maintain a very unique culture and I think we can continue to recruit the best and the brightest, and if we do that we know we are going to continue to build this great company. So thank you for being with us today and that is it Rob.

This does conclude today’s conference call. You may disconnect your lines at this time.