Arthur J. Gallagher & Co.

Arthur J. Gallagher & Co. operates in the insurance brokerage, reinsurance brokerage, consulting, and third-party property/casualty claims settlement and administration services industry. The company does not assume underwriting risk on a net basis, with capital for covering events of loss provided by underwriting enterprises that the company does not own or control. The brokerage and risk management segments contributed approximately 87% and 13%, respectively, to 2025 revenues. Approximately 67% of revenues from the combined brokerage and risk management segments are generated in the U.S., with the remaining 33% generated internationally, primarily in Australia, Canada, New Zealand and the U.K.

Gallagher is the world's third largest insurance broker/risk manager based on revenues according to Business Insurance magazine's June/July 2025 edition, and one of the world's largest property/casualty third party claims administrators, according to Business Insurance magazine's April/May 2025 edition. The company had a market capitalization at December 31, 2025 of approximately $67 billion ¹. The insurance and reinsurance brokerage and consulting businesses are highly competitive, with many organizations and individuals throughout the world actively competing in every area of the business. The company also faces competition from insurance and reinsurance carriers that market, distribute and service a portion of their products directly, and in some cases from banks, consulting and accounting firms, and technology companies. Two of the firms Gallagher competes with in the global brokerage and risk management markets have larger revenues than Gallagher. The company believes its primary competitive advantages are the quality of services offered, personalized attention, individual and corporate expertise, data analytics and technology capabilities, overall cost efficiencies for clients, and the ability to address client needs across the insurance value chain by leveraging capabilities in insurance, reinsurance, alternative risk transfer, management and administrative services, benefits consulting and claims management.

The company generates revenue through two primary segments: brokerage and risk management. The brokerage segment generates revenues by identifying, negotiating and placing all forms of insurance and reinsurance coverage, providing data analytics and risk consulting services, acting as an agent or broker for multiple underwriting enterprises, providing consulting services related to health and welfare benefits, compensation, retirement planning, and providing management and administrative services to captives and pools. The primary source of revenues for brokerage services is commissions from underwriting enterprises based on a percentage of premiums paid by clients, or fees received from clients based on an agreed level of service. The risk management segment generates revenues from fees generally negotiated on a per-claim or per-service basis, on a cost-plus basis, or as performance-based fees. The corporate segment does not generate any significant revenues.

The brokerage segment accounted for 87% of the company's revenues in 2025. The brokerage segment operates through a network of more than 650 sales and service offices located throughout the U.S. and approximately 400 sales and service offices in approximately 60 countries, most of which are in Australia, Canada, New Zealand and the U.K. The company offers client service capabilities in approximately 130 countries around the world through direct operations and a network of correspondent brokers and consultants. Domestic retail insurance brokerage operations accounted for 75% of brokerage segment revenues in 2025. These retail operations place nearly all lines of commercial property/casualty and health and welfare insurance coverage and are organized within certain key niche/practice groups, which account for approximately 74% of retail brokerage revenues. Global reinsurance brokerage operations (Gallagher Re) accounted for 12% of brokerage segment revenues in 2025, operating from more than 77 offices across 27 countries. Wholesale insurance brokerage operations accounted for 13% of brokerage segment revenues in 2025, operating through approximately 149 offices primarily located across the U.S., Bermuda and through an approved Lloyd's of London brokerage operation, with more than 75% of wholesale brokerage revenues coming from non-affiliated brokerage clients.

The risk management segment accounted for 13% of the company's revenues in 2025. Approximately 59% of the risk management segment's revenues are from workers' compensation-related claims, 34% are from general and commercial auto liability-related claims and 7% are from property-related claims in 2025. Risk management services are primarily marketed on an independent basis from brokerage operations to Fortune 1000 companies, larger middle-market companies, nonprofit organizations, public sector entities, and underwriting enterprises. The company manages its third party claims adjusting operations through a network of more than 40 offices located throughout Australia, Canada, New Zealand, the U.K. and the U.S. Approximately 95% of the risk management segment's revenues come from clients not affiliated with the company's brokerage operations.

During 2025, the company completed several acquisitions that were larger than its usual tuck-in acquisitions, namely the acquisitions of Woodruff Sawyer and AssuredPartners, within the brokerage segment. On April 10, 2025, the company acquired all of the issued and outstanding stock of Woodruff-Sawyer & Co. for consideration of $1.2 billion ², funded using cash on hand. On August 18, 2025, the company acquired all of the issued and outstanding stock of Dolphin TopCo, Inc., the holding company of AssuredPartners, Inc., for gross consideration of $13.8 billion ³. The company raised $8.5 billion ⁴ of cash in its December 11, 2024 follow-on common stock offering and borrowed $5.0 billion ⁵ of cash in its December 19, 2024 senior notes issuance to fund the AssuredPartners transaction. On January 7, 2025, the company received an additional $1.3 billion ⁶ of cash due to the exercise by the underwriters of the overallotment provision related to the follow-on common stock offering. Total expected expense to integrate AssuredPartners is approximately $575 million ⁷ over three years. Total expected expense to integrate Woodruff Sawyer is approximately $150 million ⁸ over three years. The company completed 33 ⁹ acquisitions in 2025 and 48 ¹⁰ acquisitions in 2024. Annualized revenues of businesses acquired in 2025 and 2024 totaled approximately $3,562 million ¹¹ and $387 million ¹², respectively. In 2025, the company initiated a process to fully terminate its defined benefit pension plan, and in the fourth quarter of 2025, substantially all future obligations under the plan were settled through a combination of lump sum payments and a transfer of the remaining liability through the purchase of a group annuity contract.

Total revenues for the company were $13,778 million ¹³ in 2025 compared to $11,401 million ¹⁴ in 2024. Net earnings attributable to controlling interests were $1,494 million ¹⁵ in 2025 compared to $1,463 million ¹⁶ in 2024. Diluted net earnings per share were $5.74 ¹⁷ in 2025 compared to $6.50 ¹⁸ in 2024. On an adjusted non-GAAP basis, diluted net earnings per share were $10.69 ¹⁹ in 2025 compared to $10.10 ²⁰ in 2024. Consolidated EBITDAC was $3,678 million ²¹ in 2025 compared to $3,125 million ²² in 2024. Cash provided by operating activities was $1,930 million ²³ in 2025 compared to $2,583 million ²⁴ in 2024.

The company anticipates that its retail brokerage operations' greatest revenue growth over the next several years will continue to come from its niche/practice groups and middle-market accounts, cross-selling other brokerage products to existing clients, mergers and acquisitions, and developing and managing alternative market mechanisms such as captives, rent-a-captives and deductible plans/self-insurance. The company anticipates growing Gallagher Re by increasing the number of underwriting enterprise clients, deepening relationships with current underwriting enterprise clients, developing new products, further building out facultative capabilities, and through mergers and acquisitions. The company believes its growth prospects for wholesale brokerage operations depend on increasing the number of broker-clients, developing new managing general agency and underwriter programs, and through mergers and acquisitions. The company expects that the risk management segment's most significant growth prospects through the next several years will come from program business and the outsourcing of portions of underwriting enterprise claims departments, increased levels of business with Fortune 1000 companies, larger middle-market companies and captives, and mergers and acquisitions.

The company's consolidated compensation expense ratio in 2025 as a percent of total consolidated revenue at 56.2% ²⁵ decreased slightly compared to 2024. The company anticipates reporting an effective tax rate of approximately 24.5% to 26.5% ²⁶ in its brokerage segment based on known changes in tax rates in future periods. The company anticipates reporting an effective tax rate on adjusted results of approximately 25.0% to 27.0% ²⁷ in its risk management segment based on known changes in tax rates in future periods.

In 2026, the company expects total expenditures for capital improvements to be approximately $227 million ²⁸, which includes the impact of acquisitions closed through December 31, 2025, part of which is related to expenditures on office moves and investments being made in IT and software development projects. The increase in expected capital expenditures in 2026 compared to 2025 is primarily due to such projects. The company expects to use cash on hand, new debt, its Credit Agreement, cash from operations and its common stock, or a combination thereof to fund all of the acquisitions it completes in 2026.

The company's board of directors approved a common stock repurchase plan of up to $1.5 billion ²⁹ of common stock. During the years ended December 31, 2025 and 2024, the company did not repurchase shares of its common stock. On January 28, 2026, the company announced a quarterly dividend for first quarter 2026 of $0.70 ³⁰ per common share. If the dividend is maintained at $0.70 per common share throughout 2026, this dividend level would result in an annualized net cash used by financing activities in 2026 of approximately $719 million ³¹, or an anticipated increase in cash used of approximately $52 million ³² compared to 2025. The company anticipates its clean energy investments will produce after-tax losses in 2026.

The company faces headwinds from global economic and geopolitical events, including fluctuations in interest and inflation rates, geo-economic fragmentation and protectionism, a recession or economic downturn, and political violence and instability. A rise in the cost of labor or cost of capital could negatively impact operating and general and administrative expenses. The company also faces risks from economic conditions that result in financial difficulties for underwriting enterprises or lead to reduced risk-taking capital capacity, which could adversely affect results of operations and financial condition. The company's health care costs rose by approximately 20% ³³ compared to 2024, which includes the impact of inflation, increased utilization and increased headcount. The company estimates global insured natural catastrophe losses were approximately $129 billion ³⁴ during 2025, below the 5-year annual average loss of $155 billion ³⁵.

The company faces constraints from the competitive environment, including continuing consolidation in the insurance brokerage industry and a high level of interest in acquiring insurance brokers on the part of private equity firms, private equity-backed consolidators and newly public insurance brokers, which has in some cases made appropriate acquisition targets more difficult to identify and more expensive. The company also faces risks related to its ability to attract and retain qualified talent, including senior management, as competition for talent is intense in many areas of the business. The prevalence of remote working arrangements has expanded the pool of companies that compete for talent. Certain states have implemented rules that would prevent employers from entering into non-competes with employees, and if more states adopt similar rules, the company could experience a material adverse effect on its business.

The company faces material risks from its significant debt outstanding, which as of December 31, 2025 was approximately $13.1 billion ³⁶, and could adversely affect financial flexibility and subject the company to restrictions and limitations that could significantly impact its ability to operate its business. The company also faces risks related to its acquisition strategy, including the integration of AssuredPartners, the largest acquisition in its history with gross consideration of $13.8 billion ³⁷, and Woodruff Sawyer with consideration of $1.2 billion ³⁸, where integration efforts are more complex and may divert management's attention. The company is exposed to risks from improper disclosure of confidential information and cybersecurity attacks, with the risk heightened by military actions and war. The company's substantial operations outside the U.S., which generated approximately 33% ³⁹ of combined brokerage and risk management revenues in 2025, expose it to risks including compliance with a wide variety of foreign laws, political and economic instability, and foreign currency exchange rate risk. The company faces risks related to its clean energy investments, having generated a total of $1,706 million ⁴⁰ in IRC Section 45 tax credits from 2009 to 2021, of which approximately $1,102 million ⁴¹ have been used and $604 million ⁴² remain unused and available to offset future U.S. federal tax liabilities, with the risk that the IRS could ultimately determine the operations did not satisfy the conditions set forth in IRC Section 45.

Management's tone in the filing is forward-looking and emphasizes the company's ability to deliver comprehensively structured insurance, reinsurance and risk management solutions, superior claim outcomes and comprehensive consulting services to clients. Management highlights the company's position as the world's third largest insurance broker/risk manager based on revenues and one of the world's largest property/casualty third party claims administrators. Key strategic priorities emphasized for the period ahead include continuing the acquisition program, which has been an important part of historical growth, particularly in the brokerage segment, and integrating recent large acquisitions including AssuredPartners and Woodruff Sawyer. Management also emphasizes the importance of organic growth through niche/practice groups, cross-selling, and developing alternative market mechanisms. The company expects that its history of strong new business generation, solid retentions and enhanced value-added services for carrier partners should all result in further organic growth opportunities around the world. Management believes favorable trends in customer retention, new business generation, and renewal premium increases should continue in 2026, though notes that if economic conditions worsen or renewal premium increases slow, revenue growth could be lower than growth in 2025.