Good morning, and welcome to Arthur J. Gallagher &. Company's Third Quarter 2013 Earnings Conference Call. [Operator Instructions] 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. These forward-looking statements are subject to certain risks and uncertainties that will be discussed on this call and which are also described in the company's reports filed with the Securities and Exchange Commission. Actual results may differ materially from those discussed today. It is now my pleasure to introduce Mr. Patrick Gallagher, Chairman, President and Chief Executive Officer of Arthur J. Gallagher & Co. Mr. Gallagher, you may begin.

Thank you. Welcome, everyone, to our third quarter conference call. We appreciate your being with us this morning. Today, I'm joined by Doug Howell, our Chief Financial Officer; as well as the heads of our operating divisions. We had a very active quarter and I'm very pleased with our accomplishments and financial performance. First, our results were excellent. Frankly, our operating teams hit the ball out of the park this quarter. On a combined basis, Brokerage and Risk Management were up 13% for the quarter on adjusted revenue, 6.2% of that was organic and adjusted EBITDAC is up 17% for the quarter. Year-to-date, adjusted revenue is up 15%, that equates to $256 million of additional revenue, adjusted EBITDAC is up 20% or over $74 million. Let me talk a little about the Brokerage segment. As I said we had an outstanding quarter. Adjusted revenues up 15%, organic revenues grew 5.5%, our continuing testament to our sales and service culture. Adjusted EBITDAC was up 20% and our margin expanded 120 basis points. Really, frankly, an incredible quarter. Virtually all of our Brokerage operations globally contributed to our growth in the third quarter. This morning, I'd like to add some color in 3 specific areas of our Brokerage segment: The first is the property-casualty rate environment and I want to talk about our recent trip to the Council of Insurance Agents & Brokers meeting. Secondly, mergers and acquisition, we had an incredible quarter. And thirdly, employee benefits especially concentrating on private insurance exchanges. First on the rate environment. The CIAB quarterly survey shows rates rising again in the third quarter by an average of 3.4%. Earlier this month, we spent 5 days meeting with more than 20 senior management teams of our insurance company partners at the CIAB meeting. I came away…

Thanks, Pat, and good morning, everyone. Let's start on the first page with the Brokerage segment. What a terrific quarter. The Brokerage segment was up nicely on all measures. A couple of things to note. First the integration cost. $0.03 was wrapping up Heath Lambert and $0.01 was from Bollinger, both of those right in line with what we've discussed before. Looking forward, we're done with Heath and now we have about $0.02 to $0.03 a quarter related to Bollinger and Giles running through the first quarter of 2015. Second, you'll see a couple of pennies of acquisition earnout-related adjustments. Those are always a bit volatile and you see them from time to time. As for the Risk Management segment, another solid quarter with no adjustments of significance. So let me foreshadow the fourth quarter. Recalling the fourth quarter of 2012, we had a penny of cost related to ramping up a new large Australian client that went live effective January 1, 2013. As for this year, you heard Pat say that Gallagher Bassett has been making investments in the capabilities to better service our carrier outsource base. We're pleased to say that we're on track to take over a portion of the carriers claim operations effective January 1, 2014. If we do, we would again incur a penny of ramp-up costs in the fourth quarter of 2013 and that would set us up nicely going into 2014. Let's flip to the Brokerage segment, organic growth tables of the lower half of Page 2. Another strong quarter with base commissions and fees being up 5.5%. And we saw -- just so you know, we saw about 5% in each of our domestic retail and wholesaling units and a bit more than 10% internationally. And as Pat said, less than 1%…

Thank you, Doug. Mannie, you want to open this line up now for questions, please?

[Operator Instructions] . Our first question comes from Arash Soleiman of KBW. Arash Soleimani - Keefe, Bruyette, & Woods, Inc., Research Division: Just a couple of quick ones here. First, I just wanted to ask about the margins on the Exchange business, the partnership with Liazon. I guess there, does that -- I know you said they're both a commission and fee component. Would that business have higher margins than the traditional brokerage -- benefits Brokerage business or would it be about the same? Just wanted to...

It will be the same, Arash.

It will be the same, Arash.

It's going to be the same. We're brokers. We're going to place people where they are best suited. And we'll get paid a fee or a commission based on how our client wants to pay us. And the margins will be the same. Arash Soleimani - Keefe, Bruyette, & Woods, Inc., Research Division: Okay, that's fair. And then the second quick question I just wanted to ask, just a numbers question, that line you have, I think it was about $2.5 million disposed of operations. But what's going in there exactly, I just want to get more clarity into that.

From time to time, we will divest ourselves of a office location or a unit that doesn't fit in let's say one of our niches, that doesn't fit with our culture, doesn't fit with how we think that it should be operated. So that's really what happens. And you'll see those pop up every other quarter or a little bit every quarter. It just happens when we get that from time to time we get a book of business would be better operating some someplace else.

The next question is from Gregory Locraft of Morgan Stanley.

I just wanted to ask on call. It looks like in one of the notes or in the release that you guys, I guess acquired another 5 plants or something from a third-party on September 1. Can you give us some color what happened there?

It was a -- we were really stepping into 5 plants, where we're acting as the monetizer from those credits. So we bought a significant portion of each of those plants. They're very small plants. These are mostly in industrial locations and so it was an opportunistic investment. The advantage of owning more 2011 plants is they actually generate tax credits that move the AMT rate down from 20% to 8.75%. So the nature of those credits are actually better credits right now than the 2009 year plan. So it was a partner -- it was a licensee of Chem-Mod that was looking for a partner to own a piece of the plant. So we -- I think that our cash out from was like $4 million, something like that.

Okay. But these are new plants. This isn't an existing investor that just wanted to walk from the investment that you had to bailout?

No. Not at all, these are plants were built in 2011 or placed in service probably prior to the end of 2011 and they don't have -- very common, the developers don't necessarily have an appetite for all that credits that they can generate. So they look for partners that can use the credits and we can use the credits. So it wasn't a struggling situation or anything like that. It's just they're looking for a partner to own a piece of the plant.

Got it. And do you anticipate more of these kinds of deals. In other words, are there developers out there that are basically doing what you all used to do and then bringing it forward to you because you guys have an appetite for and can use the tax credits more efficiently than they can?

I would say generally no. I think that these are -- I think this opportunity is there. We are getting to the point, if we're successful throughout 2014, that we will be saturated with credits that we need. Remember, we don't want to generate credits that we warehouse to use in 2023 or 2024 or 2025. We want to create credits that create tax savings for us today, so those cash flows can be used for M&A. So I think that we're about done. I think our appetite is full at this point.

Okay, great. And then again, I mean -- I know this is a very, very hard business to predict, but obviously the miss was largely in that line in this quarter relative to what you thought it was going to be a few months ago. I assume it's all just production schedules, right? You're trying to guess utilization at the utilities. Is that the entire reason?

Yes, that's exactly right. And what we're learning is the plant operator will look for opportunities to take the plant down, to do maintenance. Where we would prefer that they always just run the machines full out, they actually look for opportunities to take it down in kind of low peak loads, so that they can do maintenance on it, so that they don't have the plant go down during peak loads. So we're learning on this, going back to my actuarial days if I had great triangles on this, I think, I'd be better at predicting that. But we're learning that the behaviors of these utility partners are not exactly predictable. And unfortunately, but then again, if you look at it on a yearly basis, to make $60 million or more, I'll take the volatility, I guess.

Yes. I know it's a good thing for cash over time. I'm just, it's just trying to predict it, which sounds like you're wrestling with as well and it sounds like what -- we just have a more conservative plan on the table going forward, so.

I think so.

Okay, great. Other entirely different question is just on the integration costs. And this is just something I'm wrestling with, Doug, which is you guys have done some excellent deals, especially in the third quarter, we've got Giles coming in the fourth. There is a difference between your adjusted numbers and your reported numbers due to integration expense. It's now running off through 2014 and 2015. And what point does this just become kind of cost of doing business for AJ Gallagher because you're acquiring businesses constantly? I mean should we really be stripping it out for our purposes and for compensation? I think you guys pay yourself on EBITDAC, adjusted on an adjusted basis.

No, we actually pay ourselves on reported.

Oh you do. Okay.

So I think....

So the Boards sees it as. Okay, great. All right.

Yes, but I think the fact is on these larger deals, the acquisition amounts interestingly both Bollinger and Giles are extremely well-run organizations. So if you look at the amount of money that we'll really be -- we'll take to integrate into our operations, it's not like Heath Lambert. If you recall, Heath Lambert was really struggling to make margins. It was transformative for our U.K. operations, so the amount of -- and we didn't pay the multiple that we did for Bollinger and Giles as probably 2 turns left and so we knew that there'll be more investment, if you go back and listen to that back then, we knew there will be more investment. But we feel good about Giles and Bollinger, because they are well-run operations and I just don't think a few million bucks or the $3 million a quarter is that much money to bring in, basically $100 -- $250 million of additional revenue. So -- but I do understand what you're saying, but on the smaller deals we just pay for those as we go.

Right. Okay, okay. Again it's perfectly disclosed, so we know what it is reported and adjusted. So that's good and the deals are good. Last is just on Giles. I mean again you guys are picking this up at good prices, but it sounds like you were very clear, you are going to use the credit facility, pay 1.3% to pull it in, it's an all-cash deal and then you are going to term it out. The terming it out, how do we think about that cost of the debt as the cost of funding as we model our interest expense going forward?

Oh, I think it will be somewhere between -- that just depends if we do 10-year notes, it would be somewhere around 4.5%, something like that, maybe a little bit less than that, we will watch the rate. If we decide to put some longer term debt in 15 or 20 years, that would probably go up go a point on that. I think we're in a really interesting position, that we can put some long-term debt out, maybe 15 or 20 years, because we're generating so much -- so many earnings from our clean energy investments, it really, the additional point of interest on that probably wouldn't hurt us too much at all. So and I'm guessing that we will try to do something here before the end of the fourth quarter and we may do a delayed draw on it and not pull it down until April or even later.

Next question is from Sarah DeWitt of Barclays.

Looking at the 2 big acquisitions you did with Giles and Bollinger. Has there been any change in acquisition strategy, where you are going after bigger deals now and then also what do you see as the overall accretion from those deals and are there any risks to achieving that?

Well Sarah, this is Pat. I'll take the strategies side of that question and Doug can answer the other. No. This is no change in our strategy whatsoever. First of all, if you take a look at Business Insurance July issue, they show the top 100 agents and brokers in the United States and to be #100, you had to do, they did $22 million in total revenue. We think there is probably 18,000 agents and brokers in America. So there's an awful lot of them that are smaller than $22 million and that's what makes up most of our pipeline. But when the ones in the top 100 come available, if we can strike a deal that makes financial sense and if the culture fits, we're very happy to have an opportunity to play on those as well. It's just that there aren't many of them. So it's -- it was kind of an interesting quarter in a sense that we had 2 larger opportunities than we've typically seen but the other 7 transactions we did were right in our normal sweet spot.

Sarah, in terms of the accretion, it depends on how you want to calculate. First of all, we are doing -- we did both of these deals with almost all cash and debt other than about 3 million shares we put out for Bollinger. So if you really look at it, we put out 3 million shares to maybe make $80 million to $90 million of EBITDA per share, so it's a staggering number in terms of the what is going t contribute. We use a 100% stock, again if you do the math that way, it's still accretive if you use 2x debt and it's accretive on that measure. So it's accretive on all measures, but because we did most all of this without stock, it's nicely accretive to our earnings.

Okay. And then looking at your private exchange with Liazon. How many enrollees do have there and how big of a revenue opportunity do you see this over time? Is it more of just shifting your existing benefit clients from being -- from broker to an exchange or is there an incremental revenue opportunity?

I'll let Jim Durkin take that. Jim heads our Benefits operation. Jim?

Currently we have about 2,000 employees that have actually enrolled in the plan. A handful of different employers, we do have a very active pipeline. There are a significant number of customers that are looking at this and considering it for 2014. As Pat said in the comments, we expect there will more uptake as we go through 2014 and beyond. And I guess the second part of your question, could you expanded on that. I'm not sure I understood what you're asking.

Should we view this as revenue neutral because you're just shifting existing benefits customers onto the exchange or is there an incremental revenue opportunity there?

I think for the existing customers, it most likely will be revenue neutral. There is an opportunity through the exchange platform to offer a variety of additional products, voluntary products, retirement products, those will generate additional revenues. Certainly that will take time to get there. But I also think the bigger opportunity for us going forward is, there's a lot of customers that are looking to us for what we can do and so -- excuse me prospects that are looking for us. So those are new opportunities and this kind of technology will attrack them to the services we offer. So existing clients, most likely neutral, but there is opportunity to bring additional products to that platform and there is an opportunity for new business.

And let me make a comment on that, too. The smaller brokers and agents out there that we compete with, and 85% of the time when we compete on an account, we're competing that somebody that's smaller than we are. We actually know that. And guess what, they don't have a clue. The smaller guys do not have a clue. They don't know which way the exchanges are going and clients are beginning to ask those questions. It's taken longer for clients to wake up to this than I thought it would. I thought they'd be all over the Affordable Health Act probably earlier in the year. The fact that the mandate was moved back a year gives them even another year to breath. But ultimately, to Jim's point, we're going to have tremendous new business opportunities.

The next question is from Michael Nannizzi of Goldman Sachs.

Just to follow up on that. Do you expect then that the benefit companies will provide a bigger part -- will become a bigger piece of your M&A program, just given that you're competing with folks that just don't have the expertise that you do? And do you see opportunities in this part of the market?

Yes, very much so. You'll recall last year that we did 60 transactions, 30 of those were in the benefit space. We're big believers that clients -- clients are going to need our help more today than they ever have because this Affordable Health Act is complicated. The compliance provisions alone are just draconian and employers have got to -- then add to the fact that what exchanges really are is additional choice. And so the sorting through all the opportunities and -- let's also remember, the costs of health and benefits to employers is huge. This is a cost -- this gets the CEO's attention. And they're going to need a lot of help.

Got it. And then another comment you made on rational rates setting -- I don't know if you maybe you addressed this in the first couple of minutes, but where is that most relevant, is that standard lines, specialty lines, larger risks, small risks?

Well, I think if you look at this CIAB survey, you'll see that probably larger risks have the least amount of actual increase because larger risks take more of the risks themselves in their retentions. So if you look smaller to middle market, that's where you're seeing pretty consistent increases in pricing from a myriad of carriers. This is not driven by 1 carrier, it's not one line. As I said, in my prepared remarks, coming out of this CIAB meeting earlier in the month, it's very clear to me that there's a change in the marketplace in terms of what information these CEOs have. They just really have a handle on where they are succeeding and where they're not. And they're all over those. And they know they have to make money underwriting. So it really is pretty much across-the-board. But listen, it's account driven. What I was interested in hearing is, not 1 of the CEOs goes out to their team and says, get out of that market and give me 5%. What they say is if the account deserves a 10% decrease, give it to them. But if the account demands a 15% increase, you better demand it. And they're watching their underwriting team every single day. And their retention rates are not dropping. So it is a very different market than we've seen in the past.

And then just one on -- kind of still on that theme. I mean, if that's the case, I mean, do you expect that you could see more interest from insurance companies looking to build out areas -- in areas where they don't have infrastructure to see more interest in the services Gallagher Bassett provides?

I definitely do, Mike. I think one of our greatest opportunities in the next decade will be outsourcing from insurance companies. That's a big part of what we do right now. And to your point, new capital in particular has no interest in infrastructure. New capital wants infrastructure when they need it. Business process outsourcing is something that they are very comfortable with, and I believe that Gallagher Bassett is the best claim opportunity for those -- for that new capital, and frankly, for some of the old capital to take advantage of our expertise to reduce losses to get return for their shareholders.

And have you seen new customers of size come in or approach Gallagher Bassett recently?

Yes. And as Doug mentioned in his prepared remarks, we have a substantial opportunity we're working on in the fourth quarter right now.

The next question is from Sean Darden of Macquarie.

Following up on the Risk Management business, I'm wondering if your 16% EBITDAC margin target still holds here. And I know you called out several initiatives with Gallagher Bassett. But could you quantify the level of additional investment made this year and in the quarter from a dollar perspective?

I think for the year we probably spent 1.5 point margin, maybe 2 points.

Okay. And so the guidance still holds?

Yes, I think we should be able to get her in that 16%, a little above that for the year. And the team is doing a really good job. I mean, the maturity of the Gallagher Bassett team, to be able to plan out enhancements execute against them yet still hit their margin targets, is really a nice evolution for the folks there.

The next question is from Adam Klauber of William Blair. Adam Klauber - William Blair & Company L.L.C., Research Division: A couple of different questions. Great acquisitions on Bollinger's and Giles. Right now, are those businesses growing organically as much as the other businesses or is that an opportunity to get them growing faster?

Yes, Adam. They are actually -- the trend is interesting, especially on Bollinger, which we have better line of sight into Giles at this point is that the organic really, in the third quarter, is not all that different than what our retail operations were in North America. So they have really responded well to the new ownership. There is a lot of team selling going on with Gallagher, and they've -- their return to organic maybe lagged ours a little bit, but it certainly got up to speed pretty quick. In Giles, my understanding is they had a pretty good third quarter also, and they're already talking about how there is opportunities together with us to go out and serve new clients in the U.K. So both of them, I don't see much difference at all.

Actually, Adam, part of -- the fun has been that we've written a number of new accounts, and particularly with the Bollinger folks, right in our specialty areas, right in the niches that we operate in. There were opportunities that Bollinger was working on right before the transaction was announced, and literally the week after it was announced, we picked up a number of really nice accounts because the clients go, "Oh, I know Gallagher in this space," and, "I like the people I was working with at Bollinger." Two or 3 really nice orders in the first 3 weeks.

They actually outperformed their EBITDA in the two months that we owned them versus the budget, so they end with pro forma. So they've done really well. Adam Klauber - William Blair & Company L.L.C., Research Division: That's great. Another question, talking about wholesale a little. Has that growth been better, better than your average over the last couple of quarters?

Yes, it has been. This quarter is was right in line. There were a couple of ins and outs in this quarter that levelize them more with the broader group, but typically, that's been running in the upper single digits in this quarter or somewhere around 5%. Adam Klauber - William Blair & Company L.L.C., Research Division: And how much of that business is property, and do you think that will be more impacted next year as property potentially is under more pressure than some of the other markets?

1/4 of it is property, so there could be some there. But really that business is hard to place new business, startup business, but it's only about 25% is property.

And not all of that 25% is catastrophe property, so probably 1/2 of that. So you get about 12.5% of their business is directly impacted by catastrophe property. Adam Klauber - William Blair & Company L.L.C., Research Division: Okay, that's helpful. And then finally, any view on supplemental and contingent, or at least what factors we should be thinking about as we go into next year?

We said last year that we hope to bring it in at flat for the year. If we catch up for the timing that we had in the third quarter and get it in the fourth quarter, we still hope to finish the year flat on an organic basis. And I would say that's -- in this environment right now, that's probably pretty good work for next year too. So if we can hold those flat, the carriers are showing some nice profitability, so may be there could be an uptick on it. There may be some geography between supplementals and contingence also. But I think we think that 2014 flat organically would be a good year. Adam Klauber - William Blair & Company L.L.C., Research Division: Okay. Even -- shouldn't you -- with new deals, Bollinger, Bollinger being included in a bunch of new deals, shouldn't that push it up somewhat, or do you...

Yes. No, I... Yes, my comment was on organic. But yes, acquisition should... Yes, but acquisition should fuel that also.

The next question is from Josh Shanker of Deutsche Bank.

So there is -- obviously, you're not the only Guinea healthcare exchanges we're learning on the fly here. You talked about this revenue-neutral opportunity for current clients. Can we talk a little bit about how you're paying your partner at Liaizon in that situation, what they are making out of it versus -- so is it more revenue than you would make ordinarily, but you're splitting that revenue with someone? Or how should we think about that?

Liaizon has, like most exchange platforms, has a per employee per month transaction charge, part of that includes benefit administration. So there is an enrollment process, there is a administrative function that takes place, which is included in -- typically in the exchange platform. So there is a cost associated with that. Liaizon has that charge. We're passing that charge directly onto the customer as an expense to manage, not only their benefit administration, but to manage the exchange platform.

And in terms of -- one thing I'm always very unclear about is what service are you providing the clients in advising them and what service is the actual exchange backbone providing them in that relationship?

Yes, I'll start with the exchange for the moment since it's probably easier. As I said, essentially there is 2 things. This is a technology play. It's an electronic portal where employees can go and get access to the different choices that they might have. So think of it as just an electronic chassis. They go, see what those options are and they enroll in those plans. That enrollment process is what I referred to when I said benefit administration. So there is essentially 2 things that we're talking about: the actual technology platform; and then the administrative process of managing, enrolling and getting the premium allocation correct to the different insurance companies. That's what an exchange platform essentially is doing. What we do is help the customer think about a strategy that gets them to where they want to be in terms of how they compensate their employees, as well as what benefit levels they're going to provide. And exchange strategy is just one of those things that we have to help the customer think through. In addition to that, if you look at the Liaizon platform, it's our job to go out in the marketplace and bring the best insurance partners to that platform. So we've designed a, what we call, Gallagher marketplace, and these are the markets that we're bringing to the platform, we're managing that side of the transaction. Liaizon simply brings the technology.

And those partners are paying you a commission?

May or may not. It's up to the customer. At the end of today -- we've talked about this before, I disclose my compensation to the customer every year. The conversation goes something like this: Here is what I am going to do for you. These are the services that I am going to provide as your advisor, as your consultant, as your broker. Here is what I need in terms of compensation; how do you want to pay me? You can pay me a commission; you can pay me a fee; or you can pay me a combination. And that's simple.

And we've been completely 100% transparent in our dealings with our -- on both the property/casualty as well as the benefit side since 2006.

Well, I think that's very clear, and I appreciate that the learning curve is still for many of us being climbed. So thank you, and good luck.

The next question is from Charles Sebaski of BMO.

I wanted to talk one about strategy, the Giles acquisition in the U.K. Most of the ramp-up on the P&C business has been domestic. What are your thoughts about further growth in continental Europe or other international expansion?

Charles, let me be clear. We have not been focused on just domestic acquisitions for the last decade. We've been building out our international platform literally since 1974, and about 25% to, coming on soon, 30% of our revenues will come from outside the U.S. We have a very sizable business in Australia. We're strong in Canada. We're strong in the Caribbean. We did a 21% partnership with our trading partners in Mexico last year. And we've been building up the U.K. platform, as I said, since 1974. So this is not a new approach for us. Giles fits perfectly as a platform play for us in the U.K. We had historically been a very strong specialty player, as a wholesaler in the London market. That was probably 90% of our business 5 years ago. The Heath Lambert acquisition gave us a platform. As we said at that time, that gave us a domestic retail platform to then be able to do acquisitions in the U.K., as we have in the U.S., which is essentially bolting them on smaller transactions around the U.K. And that led to probably 9 or 10 transactions over the last 2 years that did exactly that. Giles comes in as really a nice fit in the -- of the commercial middle market. So we had specialty covered in London, and our specialty business there really is almost completely built out. We had a good small-accounts platform with Heath as well as the Risk Management platform, and we're kind of missing that solid middle market. And that's really what Giles brings us: 35, 40 offices around the U.K., GBP 100 million plus in revenue, no single office that really drives the book. It's just a really, really nice retail fit for us.

I maybe misstated the question. I think the Giles transaction is great. I am talking about additional breadth of middle market size business, like Giles in continental Europe, for instance. Like that kind of thought process, not questioning the Giles or how that fits in.

I think, definitely, we have global aspirations. We have trade in over 100 countries. We're not going to run around the globe sticking pins in the map. What we do is we work with people, opportunities like Giles come along. If we had an opportunity like that in central Europe or in mainland Europe, yes, we would take a look at that. But we prefer to know the folks very well, understand their culture, trade with them. So what we did in Perth, Australia, what we did in the Caribbean and what we've done in Mexico is take positions with partners and then ultimately go to 100% ownership. And that seems to have worked out very well with us, people that we trade with.

I think so too, Charles, a pile on to that. When we have an opportunity on a certain niche -- for instance, we went into Calgary because of our energy platform -- niche, when you see that pulling you into a country, where adding a team in country X, really rounds out the global ability to service, say, an energy partner around world, that's opportunistic for us. So it'd be kind of -- the niche pulling us into the country, and then if they're trading significantly with us in the U.S. or in the U.K., we may want to deepen our relationship with them. But we like put the tail in first and then increasing ownership, and I think that at the end of the day, we want local management to continue to run the operation. So many of these we might only own 80% of them ultimately long term.

Just one numbers question. Did you say earlier that the amortization expense is going to run around $34 million?

It's $34 million in the fourth quarter, and then you'll have to make a guess of how it increases per quarter next year, in 2014; and generally, the rule of thumb is take 1% of any purchase price and add that to the amortization per quarter, and you'll get close.

The next question is from Mark Hughes of SunTrust.

On the exchanges, when you shift from a group plan to the individuals shopping for insurance on the exchange, what are you seeing on rates?

What do you mean? Can you expand on that a little bit?

Yes, I can. Whatever the per person per month fee might have been under the group plan, once those individuals get shifted over to the exchange, and presumably it's an individual product where there is more selection, can you talk about that how many carriers are actually active in those exchanges and -- what's your assessment of their pricing? What's the experience for the individual? Are they finding that pricing is better or worse when they go to the exchanges?

Yes, I think it's all of the above. I think that an employer is going to make a choice to go to the exchange for a couple of reasons: one, they want to look at lowering their overall costs. Ultimately, the long-term goal -- the long-term, I think, interest will be employers looking at a defined contribution strategy. So I am going to give my employees a set dollar amount each month, and that's all I am going to pay. It's up to them to decide what they want to choose, what they want to pay above that. In terms of the carriers that are on the exchange platform, while there is individual choice, individual employees are making selections, it's really still underwritten based on the overall group experience. So I think that you're going to see big swings for the exact same plan and cost, probably not initially. It's going to take a little time for that to sort its way through. There is a belief -- and I know I'm giving you a lot of information here -- but there is a belief that in today's selection process, because the employer makes the decision essentially, here's the level of benefits all employees are going to have that when you give employees choices, there'll be a segment of the population that doesn't want to buy that much insurance. So they'll be buying less. And that translates into lower cost, not only for the employees, but could translate into lower cost for the employer. So it's kind of all over the board at the moment. I don't think anybody has a real clear handle. But ultimately, I think this could help lower the cost for the employees and lower the cost for the employer.

For the broader experience, when the individuals get down into the individual market and pre-existing conditions have to be taken, it seems like the rates are more likely to go up.

Yes, this isn't the same. You think of -- these employees are already covered. In terms of the employer marketplace, pre-existing conditions really haven't been an issue, except for the very, very small employers for many, many years.

So I guess you're describing sort of the high grade where the group plan is still in effect and individual is protected from the market, so to speak, initially. But when that goes to a, here's your subsidy have at it, what's the risk of their sticker shock at that point?

No, Mark, I think you raised a good point. There was a great article in the Chicago Tribune 3 Saturdays ago, and the sticker shock that they were talking about is they've started to look at the exchanges here in Illinois. It wasn't necessarily the premium, the deductibles were unbelievable. And they were saying, "You're starting off with deductibles at $9,000 and $10,000 for families of 4, making $65,000," that is really sticker shock.

Yes. But I think, Pat, just to expand on that, that's really in the individual marketplace, and part of what's driving that is the fact that you're going to have an awful lot of employees that couldn't get coverage in the past. And that's what they're worried about. So the pricing is going to get up in the "group marketplace", the place -- and I use that term broadly. And the carriers that we're working with are already in effect dealing with this risk exposure. These employees are covered under these plans today. Now you're just giving them more choice, different options, and in some instances, there'll be multiple carriers where the employees can choose from. So I think it's less about the phenomena you're seeing in the individual marketplace, it's more about what has occurred in, what I'll call loosely, the "group marketplace".

Yes. My final point is, that worked because everyone knew in the group that both, sick and healthy, were going to be in the group, and so the carriers could underwrite based on that assumption. If you then throw it open and sick people buy the coverage and healthier people buy less coverage or no coverage, and put the subsidy in their pocket, then it becomes...

Correct, Mark, you're absolutely right. And I think the penalty for not having health insurance, I think, is like $97. So you're going to have your entire young population pocket the money and say -- and by the way, they get to go to an exchange anytime they want to buy, so when they get sick, they'll buy it.

In the individual marketplace, I think that the state-run, the federal-run exchanges, those are going to be concerns. Those are going to be challenges. I think it's less of a concern in the employer exchange environment. Because I think about - again, think about it, most employers are going to offer kind of a core set, "here is kind of the core you get."

Yes. A completely separate question. The international market, 10% growth, as I understand it, organic on the brokered side, is there some reason that was elevated this quarter, or can we -- is there some reason that should be sustained at a higher level going forward?

They -- our international operation, our U.K. operation has been running at upper single digits, lower double digits for several quarters for the last year or so. We're actually seeing a nice start of an economic recovery in the U.K. So that's helping. And I think that we feel good about our international growth rates in that number.

The next question is from Brian DiRubbio of Yield/Capital. Brian DiRubbio - Y/Cap Management, LLC: I just have 1 question, and this is regarding the 2 big acquisitions. What's the motivation -- what was the motivation for both these guys to sell to you at this point in time? And you've done now a couple of very large acquisitions. What is the change in motivation at Gallagher to do the larger acquisitions now, where historically you shied away from that?

Well, I don't think that's -- there really was no change in motivation, Brian. Both of these were opportunistic. Both of them had different reasons for being for sale. Both of them had large private equity holdings that were owners. And I think it was literally an opportunistic situation that came together, and strategically, we thought they both fit. These were not overnight simple transactions. Both of them were kind of difficult and stringent negotiations, and we did incredible due diligence on both of these. I mean, you literally would not believe the amount of due diligence we did. And the more we looked at both of them, more we thought that was a good cultural fit and a good business fit. And this is no signal in a change in our strategy. Opportunistically, if some of the other top 100 brokers were to come available, we'd be interested. It's just more of the same. We're building out our platform.

I think they are also seeing, Brian, they're seeing that even at a $100 million of revenue, the resources and capabilities that we bring to them at $3 billion is they realized that they need those in order to compete in the marketplace. So the motivations about -- especially when you look at aggregators like Giles and Bollinger were that their needs for capabilities are very similar to what individual one-off locations would need. They need the resources, and frankly, we just didn't see the level of investment being made into those franchises by their former owners. So in this case, they needed our resources and our capabilities, just like the $5 million shop down the road. The good salespeople, great culture, hardworking folks that when you take our resources and lay it over them, they can be much more successful. Brian DiRubbio - Y/Cap Management, LLC: Got you. No, I think both deals are great. It's just is to see two large deals done so close to each other was a little bit of a change.

Well, remember too, Brian, in the case of Bollinger, what you have was 3 acquisitions there: about $20 million of that business will fall nicely into our benefits operations; about $15 million or $12 million will fall very nicely as program business into Risk Placement Services, our wholesaler; and that leaves about $65 million or $70 million that falls into our property/casualty retail branches in the U.S. And so those are -- it's really not all that big when you look at the 3 different groups that are taking aboard the revenue.

The next question is from Dan Farrell of Sterne Agee. Dan Farrell - Sterne Agee & Leach Inc., Research Division: Doug, just another question for you on the clean energy. The ultimate annual after-tax earnings that you put in as the ultimate target is a good deal higher than where your guidance would be for 2014. Can you talk about some of the differences there? And those ultimate targets, also don't include some of the ones that are in negotiations as well. So I am just wondering -- explain the gap a little bit, and can you talk about, over time, do you see the gap and what you're earning in those ultimate targets closing?

Yes, a good question. Think about it, there is lots of different reasons why those estimates move every quarter. But basically, the primary reason is the one utility that, if you recall, that purchased has been incompatible call [ph] with our solution. We don't know -- we hear they're going to ramp up back into better call [ph] during 2014, so that's the difference between ultimate. So if you look at what they'll make in 2014 versus 2015, that would be a big difference between what they produce, and then ultimately, what they can earn in 2015. There is also another -- there is a couple of smaller plants that we're going to be moving to higher production locations. But by the time we take them off the line where they are now, move them, put the new footings in, and we might not get the production in 2014, but we would by 2015. So that's illustrative of two reasons why there is a gap between being up 10% to 20% next year versus the ultimate number. As for the remaining plants that will go into locations, remember what our objective is there: get those up and running, and then we'll probably ratchet down our percentage ownership of all the plants, so we end up with a portfolio of about 30 plants that -- I'm just going to say this -- that maybe we own 30% to 40% of. So it's really much more of a portfolio of investments than it is individual one-off ones that are causing some of these swings. So I hope that we should be well through that by the end of 2014, and then what we'll do is, we'll be able to say, let's say, "We got 30 of them that are producing. If one goes offline for a week, it doesn't hurt us that much in the overall smoothness of the earnings." Charles Gregory Peters - Raymond James & Associates, Inc., Research Division: Great. And then just another question on the 2 large deals that you've done. On a full year basis, how do you think about the impact to overall margins to the segment? I think, in some of the disclosure, it seemed that these were higher-margin businesses that might need a little investment. But still I'm just trying to think about how you think of impact of the total margin.

You just do the pure math based on -- take a guess for next year on what our company would look like and add them in, it could be as much as 80 points of margin expansion for next year.

[Operator Instructions] The next question is from Brett Huff of Stephens Inc.

It's John Campbell in for Brett Huff. Just trying to get a better sense for M&A just heading into 2014. I know it's tough to tell at this point, but it's been, I'd say, a blistering pace over the last, you can call it, 3 years. So just on a high-level view -- I mean, do you guys anticipate kind of running at that type of pace, or should we just maybe expect, I would just say, a meaningful slowdown, maybe back-to-back kind of $100 million or so level we have seen impact...

Well, I think, first of all, John and Brett, the pace last year was, in 2012, was helped a lot by the tax law changes that were coming in 2013. So we saw a rush for the door in the third and fourth quarter of 2012. And we mentioned that in the first and second quarter calls. This year, I think we've been aided in terms of the dollar amount of revenue by having 2 larger transactions that are not typical of what we see month in and month out. So I think you will see a consistent clicking-off of acquisitions continually through 2014, 2015 and on. I learned something recently that I found to be pretty interesting. According to the Independent Agents Association coming out of the NAPSLO meeting just a month ago, I thought the business was consolidating down to fewer and fewer players. According to independent agents of America, for every player that gets taken out through an acquisition, at least one, if not more than one, new firms are started. So the business continues to regenerate itself. Now you've heard me say before that the people that we're talking to most of the time, the independent owners, are baby boomers, and this is their largest asset. So our pipeline remains incredibly full, and I think we'll continue to see -- as we continue to add people to our company, there are literally dozens and dozens of us involved every single day in looking for, cajoling, talking to, selling people on joining our company. So I don't think you're going to see a big falloff, and all of a sudden it slows way down again, but I also think that the pace we've had the last 2 years will probably be looked at as a little bit stronger than the norm.

And just one housekeeping item. I mean, the brokerage tax rate, it came in a little bit lower than we were expecting. But just given Heath and Giles and just -- and Pat, I believe you said that rate outside the U.S. is now [ph] about 30%. But maybe just what your expectations are for the brokerage tax rate in 2014?

Guys, I think that's somewhere 37%, 38% and 39% would be a good pick in that range. We are getting some benefit by our international -- as Heath comes into more profitably and we're through the integration phase on that, and we're done with that, remember the U.K. tax rate is less than the U.S. tax rates, so that does have an impact on that. So we're seeing that in Australia, a little bit also with our earnings on Gallagher Bassett. So we think that -- you got to make a pick between 37% and 39%, but then you will see that drop compared to where it was in the past.

The next question is from Arash Soleimani of KBW. Arash Soleimani - Keefe, Bruyette, & Woods, Inc., Research Division: I just had a follow-up on exchanges. Specifically, I just wanted to ask about the Small Business Health Options Program. I know right now that's only available to smaller employers. But once that does open up, to what extent do you anticipate that, that would pose some -- at least some level of a competitive threat, or is that something that would be rather meaningless to your clients?

Yes, that's certainly, I don't -- I can't sit here today and tell you how that would shake out. I think the platforms we're building, the options we're putting into these platforms are going to be very attractive, they're going to be very competitive. And I think what we do will be certainly viewed as a better alternative than for -- an employer of size to consider just pushing their employees off to a public or for a federal exchange.

But I think, Arash, to your -- I think your question was around small accounts, and that's not going to have much impact on us. But not do that much.

But I think what you -- he's taking a step further and saying there will be, at some point in the future, the option for employers to also, larger employers, to also participate in that. And I don't see that as something that's going to be a groundswell. Arash Soleimani - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. That's fair. And then just another follow-up. I know you had mentioned before that -- I think, 85% of the competition was smaller brokers where it's basically an easy win for Gallagher. My question is...

Let's not say easy win, Arash. Arash Soleimani - Stifel, Nicolaus & Co., Inc., Research Division: I'm sorry. I guess easy...

I got a lot of colleagues listening to this call. Arash Soleimani - Keefe, Bruyette, & Woods, Inc., Research Division: I apologize. I guess, well, my question is with the remaining 15%. I guess my question there was what's the value proposition that Gallagher offers that would allow new business wins in that market? What's the differentiating factor there?

100% of the time, 100% of the time it's our people. What we've got is the matter between our ears, the gray matter. That's what we're selling. And we've got the best people in the business on this team. Manny, I think that's it.

Yes, we have no further questions in queue.

And I'd like to make just a quick comment as we wrap up here. Again, thanks, everybody, for being on the call with us this morning. We appreciate your questions. Good thoughtful questions. We really appreciate you taking the time to understand our business. Our team is turned on. We're focused on selling new business and taking great care of our existing accounts. We believe we're blessed to be working in the best business on earth, and the fact is, we believe we're just getting started. So thanks again for being with us, and have a great day.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.