Arthur J. Gallagher & Co.

Previous wording

The discussion and analysis that follows relates to our financial condition and results of operations for the three-month period ended March 31, 2025. Readers should review this information in conjunction with the March 31, 2025 unaudited consolidated financial statements and notes included in Item 1 of Part I of this quarterly report on Form 10‑Q and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our annual report on Form 10-K for the year ending December 31, 2024.

Current wording

The discussion and analysis that follows relates to our financial condition and results of operations for the six-month period ended June 30, 2025. Readers should review this information in conjunction with the June 30, 2025 unaudited consolidated financial statements and notes included in Item 1 of Part I of this quarterly report on Form 10‑Q and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our annual report on Form 10-K for the year ending December 31, 2024.

Previous wording

For Information on fiscal first quarter 2024 results and similar comparisons, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-Q for the fiscal three-month period ended March 31, 2024.

Current wording

For Information on fiscal second quarter 2024 results and similar comparisons, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-Q for the fiscal three and six-month periods ended June 30, 2025.

Previous wording

Acquisition integration costs, which include costs related to certain large acquisitions (including the acquisitions of Willis Re, Buck, Cadence Insurance, Eastern Insurance and My Plan Manager), outside the scope of our usual tuck‑in strategy, not expected to occur on an ongoing basis in the future once we fully assimilate the applicable acquisition. These costs are typically associated with redundant workforce, compensation expense related to amortization of certain retention bonus arrangements, extra lease space, duplicate services and external costs incurred to assimilate the acquisition into our IT related systems.

Current wording

•Acquisition integration costs, which include costs related to certain large acquisitions (including the acquisitions of Willis Re, Buck, Cadence Insurance, Eastern Insurance, My Plan Manager and Woodruff Sawyer), outside the scope of our usual tuck‑in strategy, not expected to occur on an ongoing basis in the future once we fully assimilate the applicable acquisition. These costs are typically associated with redundant workforce, compensation expense related to amortization of certain retention bonus arrangements, extra lease space, duplicate services and external costs incurred to assimilate the acquisition into our IT related systems.

Previous wording

Acquisition related adjustments principally relate to changes in estimated acquisition earnout payables adjustments and acquisition related compensation charges. In addition, from time to time may include changes in balance sheet estimates arising from conforming accounting principles, purchase-related true-ups and other balance sheet adjustments made after the closing date; the net impact on the results for first quarter 2024 was approximately

Current wording

•Acquisition related adjustments principally relate to changes in estimated acquisition earnout payables adjustments and acquisition related compensation charges. In addition, from time to time may include changes in balance sheet estimates arising from conforming accounting principles, purchase-related true-ups and other balance sheet adjustments made after the closing date; the net impact on the results for first quarter 2024 was approximately $26 million of revenues and approximately $28 million of compensation expense.

Previous wording

EPS, as adjusted and Net Earnings, as adjusted -Adjusted net earnings have been adjusted to exclude the after-tax impact of net gains on divestitures, acquisition integration costs, the impact of foreign currency translation, workforce related charges, lease termination related charges, acquisition related adjustments, transaction related costs, amortization of intangible assets, and effective income tax rate impact, as applicable. Adjusted EPS is Adjusted Net Earnings divided by diluted weighted average shares outstanding. This measure provides a meaningful representation of our operating performance (and as such should not be used as a measure of our liquidity), and for the overall business is also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.

Current wording

39 - amortization of intangible assets, and effective income tax rate impact, as applicable. Adjusted EPS is Adjusted Net Earnings divided by diluted weighted average shares outstanding. This measure provides a meaningful representation of our operating performance (and as such should not be used as a measure of our liquidity), and for the overall business is also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.

Previous wording

These revenue items are excluded from organic revenues in order to determine a comparable, but non-GAAP, measurement of revenue growth that is associated with the revenue sources that are expected to continue in the current year and beyond, as well as eliminating the impact of the items that have a high degree of variability. We have historically viewed organic revenue growth as an important

Current wording

These revenue items are excluded from organic revenues in order to determine a comparable, but non-GAAP, measurement of revenue growth that is associated with the revenue sources that are expected to continue in the current year and beyond, as well as eliminating the impact of the items that have a high degree of variability. We have historically viewed organic revenue growth as an important indicator when assessing and evaluating the performance of our brokerage and risk management segments. We also believe that using this non‑GAAP measure allows readers of our financial statements to measure, analyze and compare the growth from our brokerage and risk management segments in a meaningful and consistent manner.

Previous wording

Reconciliation of Non-GAAP Information Presented to GAAP Measures - This quarterly report on Form 10‑Q includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on pages 42 and 49), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on page 38), for organic revenue measures (on pages 43 and 49), respectively, for the brokerage and risk management segments, for adjusted compensation and operating expenses and adjusted EBITDAC margin, (on page 45) for the brokerage segment and (on pages 50 and 51) for the risk management segment.

Current wording

Reconciliation of Non-GAAP Information Presented to GAAP Measures - This quarterly report on Form 10‑Q includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on pages 51 and 58), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on pages 44 and 45), for organic revenue measures (on pages 52 and 59), respectively, for the brokerage and risk management segments, for adjusted compensation and operating expenses and adjusted EBITDAC margin, (on pages 54 and 55) for the brokerage segment and (on pages 60 and 61) for the risk management segment.

Previous wording

Other Informa tion - Allocations of investment income and certain expenses are based on reasonable assumptions and estimates primarily using revenue, headcount and other information. We allocate the provision for income taxes to the brokerage and risk management segments using local statutory rates. We anticipate reporting an effective tax rate of approximately 24.5% to 26.5% in the brokerage segment and 25.0% to 27.0% in the risk management segment for the foreseeable future. Reported operating results by segment would change if different allocation methods were applied.

Current wording

Other Information - Allocations of investment income and certain expenses are based on reasonable assumptions and estimates primarily using revenue, headcount and other information. We allocate the provision for income taxes to the brokerage and risk management segments using local statutory rates. We anticipate reporting an effective tax rate of approximately 24.5% to 26.5% in the brokerage segment and 25.0% to 27.0% in the risk management segment for the foreseeable future. Reported operating results by segment would change if different allocation methods were applied.

Previous wording

We are engaged in providing insurance brokerage, reinsurance brokerage, consulting services, and third-party property/casualty claims settlement and administration services to entities and individuals around the world. In the three-month period ended March 31, 2025, we generated approximately 66% of our revenues for the combined brokerage and risk management segments domestically and 34% internationally, primarily in Australia, Canada, New Zealand and the U.K. We have three reportable segments: brokerage, risk management and corporate. The brokerage and risk management segments contributed approximately 89% and 11%, respectively, to revenues during the three-month period ended March 31, 2025. The corporate segment did not generate any significant revenues in the three-month period ended March 31, 2025. Our major sources of operating revenues are commissions, fees and supplemental and contingent revenues from brokerage operations and fees from risk management operations. Interest income is earned on cash, cash equivalents and fiduciary cash and revenues are generated from premium financing.

Current wording

We are engaged in providing insurance brokerage, reinsurance brokerage, consulting services, and third-party property/casualty claims settlement and administration services to entities and individuals around the world. In the six-month period ended June 30, 2025, we generated approximately 65% of our revenues for the combined brokerage and risk management segments domestically and 35% internationally, primarily in Australia, Canada, New Zealand and the U.K. We have three reportable segments: brokerage, risk management and corporate. The brokerage and risk management segments contributed approximately 88% and 12%, respectively, to revenues during the six-month period ended June 30, 2025. The corporate segment did not generate any significant revenues in the six-month period ended June 30, 2025. Our major sources of operating revenues are commissions, fees and supplemental and contingent revenues from brokerage operations and fees from risk management operations. Interest income is earned on cash, cash equivalents and fiduciary cash and revenues are generated from premium financing.

Previous wording

We use the Council of Insurance Agents and Brokers (which we refer to as CIAB) insurance pricing quarterly survey as an indicator of the insurance rate environment. The CIAB represents the leading domestic and international insurance brokers, who write approximately 85% of the commercial property/casualty premiums in the U.S. The first quarter 2025 survey had not been published as of the filing date of this report. The fourth quarter 2024 survey indicated that commercial property/casualty rates increased by 5.4% on average and we expect a similar trend to be noted when the CIAB's first quarter 2025 survey report is issued, which would indicate overall continued price firming and hardening in most lines of business.

Current wording

We use the Council of Insurance Agents and Brokers (which we refer to as CIAB) insurance pricing quarterly survey as an indicator of the insurance rate environment. The CIAB represents the leading domestic and international insurance brokers, who write approximately 85% of the commercial property/casualty premiums in the U.S. The second quarter 2025 survey had not been published as of the filing date of this report. The first quarter 2025 survey indicated that commercial property/casualty rates increased by 4.2% on average and we expect a similar trend to be noted when the CIAB's second quarter 2025 survey report is issued, which would indicate overall continued price firming.

Previous wording

We believe increases in property/casualty rates will continue for the remainder of 2025 due to rising loss costs, increased frequency of natural catastrophe and weather related losses, prior year reserve volatility and social inflation. We estimate global insured natural catastrophe losses were approximately $56 billion during first quarter 2025, including approximately $40 billion of insured losses due to the California wildfires. Further global natural catastrophe loss activity from severe convective storms, hurricanes and earthquakes during the remainder of 2025 may cause insurance and/or reinsurance carriers to increase property pricing upon renewal. Additionally, if loss trends deteriorate over the coming quarters, or if profitability concerns on casualty lines increase, it could lead to a more difficult rate and conditions environment in certain lines. The combination of increasing insurable values, a tight labor market and low unemployment is likely contributing to increases in client insured exposures and we have yet to see any meaningful changes in our customers’ business activity from the prospect of tariffs. Additionally, we expect that our history of strong new business generation, solid retentions and enhanced value‑added services for our carrier partners should result in further organic growth opportunities around the world. Overall, we believe that in a positive rate environment with increasing exposures, our professionals can demonstrate their expertise and high‑quality, value-added capabilities by strengthening our clients’ insurance portfolios and delivering insurance and risk management solutions within our clients’ budgets. Based on our experience, insurance and reinsurance carriers appear to be making rational pricing decisions and are providing adequate capacity in the market for nearly all lines of coverage.

Current wording

We believe increases in property/casualty rates will continue for the remainder of 2025 due to rising loss costs, increased frequency of natural catastrophe and weather related losses, prior year reserve volatility and social inflation. We estimate global insured natural catastrophe losses were approximately $84 billion during the first half of 2025. Further global natural catastrophe loss activity from severe convective storms, hurricanes and earthquakes during the remainder of 2025 may cause insurance and/or reinsurance carriers to increase property pricing upon renewal. Additionally, elevated loss trends and continued profitability concerns within casualty coverages, could lead to a more difficult rate and conditions environment in certain lines. Based on our experience, insurance and reinsurance carriers are providing adequate capacity in the market for nearly all lines of coverage and appear to be making rational pricing decisions. Accordingly, we are seeing more carrier competition across property, and continued caution within casualty lines.

Previous wording

The following provides information that management believes is helpful when comparing revenues before reimbursements, net earnings, EBITDAC and diluted net earnings per share for the three-month period ended March 31, 2025 with the same period in 2024. In addition, these tables provide reconciliations to the most comparable GAAP measures for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share. Reconciliations of EBITDAC for the brokerage and risk management segments are provided on pages 42 and 49, respectively, of this filing.

Current wording

The following provides information that management believes is helpful when comparing revenues before reimbursements, net earnings, EBITDAC and diluted net earnings per share for the three and six-month periods ended June 30, 2025 with the same periods in 2024. In addition, these tables provide reconciliations to the most comparable GAAP measures for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share. Reconciliations of EBITDAC for the brokerage and risk management segments are provided on pages 51 and 58, respectively, of this filing.

Previous wording

For the Three-Month Periods Ended Reported GAAP to Adjusted Non-GAAP Reconciliation:

Current wording

For the Three-Month Periods Ended June 30 Reported GAAP to Adjusted Non-GAAP Reconciliation:

Previous wording

*For the three-month period ended March 31, 2025, the pretax impact of the brokerage segment adjustments totals $292.0 million, mostly due to non-cash period expenses related to intangible amortization, with a corresponding adjustment to the provision for income taxes of $73.7 million relating to these items. For the three-month period ended March 31, 2025, the pretax impact of the risk management segment adjustments totals $10.7 million, with a corresponding adjustment to the provision for income taxes of $2.9 million relating to these items. For the three-month period ended March 31, 2025, the pretax impact of the corporate segment adjustments totals $23.1 million, with a corresponding adjustment to the benefit for income taxes of $3.1 million. A detailed reconciliation of the 2025 provision (benefit) for income taxes is shown on page 39.

Current wording

For the three-month period ended June 30, 2025, the pretax impact of the brokerage segment adjustments totals $279.9 million, mostly due to non-cash period expenses related to intangible amortization, with a corresponding adjustment to the provision for income taxes of $71.2 million relating to these items. For the three-month period ended June 30, 2025, the pretax impact of the risk management segment adjustments totals $13.6 million, with a corresponding adjustment to the provision for income taxes of $3.7 million relating to these items. For the three-month period ended June 30, 2025, the pretax impact of the corporate segment adjustments totals $29.0 million, with a corresponding adjustment to the benefit for income taxes of $4.7 million. A detailed reconciliation of the 2025 provision (benefit) for income taxes is shown on page 46.

Previous wording

*For the three-month period ended March 31, 2024, the pretax impact of the brokerage segment adjustments totals $196.4 million, with a corresponding adjustment to the provision for income taxes of $52.2 million relating to these items. For the three-month period ended March 31, 2024, the pretax impact of the risk management segment adjustments totals $8.6 million, with a corresponding adjustment to the provision for income taxes of $2.4 million relating to these items. For the three-month period ended March 31, 2024, the pretax impact of the corporate segment adjustments totals $3.2 million, with a corresponding adjustment to the benefit for income taxes of $0.5 million. A detailed reconciliation of the 2024 provision (benefit) for income taxes is shown on page 39.

Current wording

*For the three-month period ended June 30, 2024, the pretax impact of the brokerage segment adjustments totals $301.7 million, with a corresponding adjustment to the provision for income taxes of $78.9 million relating to these items. For the three-month period ended June 30, 2024, the pretax impact of the risk management segment adjustments totals $0.9 million, with a corresponding adjustment to the provision for income taxes of $0.2 million relating to these items. For the three-month period ended June 30, 2024, the pretax impact of the corporate segment adjustments totals $2.8 million, with a corresponding adjustment to the benefit for income taxes of $0.5 million. A detailed reconciliation of the 2024 provision (benefit) for income taxes is shown on page 46.

Previous wording

As previously disclosed, on December 7, 2024, we signed a definitive agreement to acquire all of the issued and outstanding stock of Dolphin Topco, Inc., the holding company of AssuredPartners, Inc., a Delaware corporation (together with its subsidiaries, “AssuredPartners”) for gross consideration of $13.45 billion. The transaction is subject to customary regulatory approvals, On March 7, 2025, we received a request for additional information as part of the Hart-Scott-Rodino filing. We are actively responding to the request and expect that the transaction will close in the second half of 2025. AssuredPartners is a leading U.S. insurance broker with client capabilities across commercial property/casualty, specialty, employee benefits and personal lines with operations in the U.K. and Ireland. We raised $8.5 billion of cash in our December 11, 2024 follow-on common stock offering and borrowed $5.0 billion of cash in our December 19, 2024 senior notes issuance (which we refer to, together with the follow-on common stock offering, as the AssuredPartners Financing) to fund the transaction. On January 7, 2025, we received an additional $1.28 billion of cash due to the exercise by the underwriters of the overallotment provision related to the follow-on common stock offering.

Current wording

47 - with its subsidiaries, “AssuredPartners”) for gross consideration of $13.45 billion. The transaction is subject to customary regulatory approvals. On March 7, 2025, we received a request for additional information as part of the Hart-Scott-Rodino filing. We have responded to the request and expect that the transaction will close in the third quarter of 2025. AssuredPartners is a leading U.S. insurance broker with client capabilities across commercial property/casualty, specialty, employee benefits and personal lines with operations in the U.K. and Ireland. We raised $8.5 billion of cash in our December 11, 2024 follow-on common stock offering and borrowed $5.0 billion of cash in our December 19, 2024 senior notes issuance (which we refer to, together with the follow-on common stock offering, as the AssuredPartners Financing) to fund the transaction. On January 7, 2025, we received an additional $1.28 billion of cash due to the exercise by the underwriters of the overallotment provision related to the follow-on common stock offering.

Previous wording

On March 4, 2025, we signed a definitive agreement to acquire all of the issued and outstanding stock of Woodruff-Sawyer & Co. (which we refer to as Woodruff Sawyer) for consideration of $1.2 billion. The acquisition closed on April 10, 2025. We funded the transaction using cash on hand. Woodruff Sawyer provides a full suite of commercial property/casualty products, employee benefits solutions and risk management services with a focus on middle and large market clients. Woodruff Sawyer has over 600 employees serving through 14 U.S. offices and one U.K. office.

Current wording

On April 10, 2025, we acquired all of the issued and outstanding stock of Woodruff-Sawyer & Co. (which we refer to as Woodruff Sawyer) for consideration of $1.2 billion. We funded the transaction using cash on hand. Woodruff Sawyer provides a full suite of commercial property/casualty products, employee benefits solutions and risk management services with a focus on middle and large market clients. Immediately prior to closing, Woodruff Sawyer had over 600 employees serving through 14 U.S. offices and one U.K. office.

Previous wording

The brokerage segment accounted for 89% of our revenues during the three-month period ended March 31, 2025. Our brokerage segment is primarily comprised of retail, wholesale and reinsurance brokerage operations. Our brokerage segment generates revenues by:

Current wording

The brokerage segment accounted for 88% of our revenues during the six-month period ended June 30, 2025. Our brokerage segment is primarily comprised of retail, wholesale and reinsurance brokerage operations. Our brokerage segment generates revenues by:

Previous wording

Identifying, negotiating and placing all forms of insurance coverage, as well as providing data analytics, risk-shifting, risk-sharing and risk-mitigation consulting services, principally related to property/casualty, life, health, welfare and disability insurance. We also provide these services through, or in conjunction with, other unrelated agents and brokers, consultants and management advisors;

Current wording

(i)Identifying, negotiating and placing all forms of insurance coverage, as well as providing data analytics, risk-shifting, risk-sharing and risk-mitigation consulting services, principally related to property/casualty, life, health, welfare and disability insurance. We also provide these services through, or in conjunction with, other unrelated agents and brokers, consultants and management advisors;

Previous wording

Identifying, negotiating and placing all forms of reinsurance coverage, as well as providing capital markets services, including acting as underwriter, with respect to insurance linked securities, weather derivatives, capital raising and selected merger and acquisition advisory activities;

Current wording

(ii)Identifying, negotiating and placing all forms of reinsurance coverage, as well as providing capital markets services, including acting as underwriter, with respect to insurance linked securities, weather derivatives, capital raising and selected merger and acquisition advisory activities;

Previous wording

Acting as an agent or broker for multiple underwriting enterprises by providing services such as sales, marketing, selecting, negotiating, underwriting, servicing and placing insurance coverage on their behalf;

Current wording

(iii)Acting as an agent or broker for multiple underwriting enterprises by providing services such as sales, marketing, selecting, negotiating, underwriting, servicing and placing insurance coverage on their behalf;

Previous wording

Providing consulting services related to health and welfare benefits, voluntary benefits, executive benefits, compensation, retirement planning, institutional investment and fiduciary, actuarial, compliance, private insurance exchange, human resources technology, communications and benefits administration; and

Current wording

(iv)Providing consulting services related to health and welfare benefits, voluntary benefits, executive benefits, compensation, retirement planning, institutional investment and fiduciary, actuarial, compliance, private insurance exchange, human resources technology, communications and benefits administration; and

Previous wording

Providing management and administrative services to captives, pools, risk-retention groups, healthcare exchanges, small underwriting enterprises, such as accounting, claims and loss processing assistance, feasibility studies, actuarial studies, data analytics and other administrative services.

Current wording

(v)Providing management and administrative services to captives, pools, risk-retention groups, healthcare exchanges, small underwriting enterprises, such as accounting, claims and loss processing assistance, feasibility studies, actuarial studies, data analytics and other administrative services.

Previous wording

Financial information relating to our brokerage segment results for the three-month period ended March 31, 2025 compared to the same period in 2024, is as follows (in millions, except per share, percentages and workforce data):

Current wording

Financial information relating to our brokerage segment results for the three and six-month periods ended June 30, 2025 compared to the same periods in 2024, is as follows (in millions, except per share, percentages and workforce data)