Arthur J. Gallagher & Co.
For the period ended Dec 31, 2024. Filed Feb 18, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 18, 2025
AJG$281.61-2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-09.
0000950170-24-013370
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-18.
0000950170-25-021775
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 260 previous paragraphs and 235 current paragraphs.
130 unchanged; 89 reworded; 14 added; 37 removed; 4 previous and 2 current paragraphs rearranged.
Tables are not compared: 20 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Acquisition of AssuredPartners
Current report
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 approval, standard closing conditions and is expected to close during first quarter 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 expect to fund the transaction using $8.5 billion of cash raised in our December 11, 2024 follow-on common stock offering and $5.0 billion of cash borrowed in our December 19, 2024 senior notes issuance (which we refer to, together with the follow-on common stock offering, as the AssuredPartners Financing). 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 report
2024 adjusted EBITDAC margin would be 35.0% excluding approximately $20.0 million of interest income revenues earned on the proceeds received in December 2024 related to the AssuredPartners Financing.
Current report
On December 19, 2024, we closed and funded an offering of $5,000.0 million of unsecured senior notes in five tranches. The $750.0 million aggregate principal amount of 4.60% Senior Notes is due in 2027, $750.0 million aggregate principal amount of 4.85% Senior Notes is due in 2029, $500.0 million aggregate principal amount of 5.00% Senior Notes is due in 2032, $1,500.0 million aggregate principal amount of 5.15% Senior Notes is due in 2035, $1,500.0 million aggregate principal amount 5.55% Senior Notes is due in 2055. The weighted average interest rate is 5.25% per annum after giving effect to underwriting costs and a net hedge gain. During 2024, we entered into a pre-issuance interest rate hedging transaction related to these notes. We realized a net cash gain of approximately $4.1 million on the hedging transactions that will be recognized on a pro rata basis as a decrease to our reported interest expense over ten years. We expect to use the net proceeds of this offering to fund a portion of the cash consideration payable in connection with the AssuredPartners transaction and, to the extent that any proceeds remain thereafter, or if the AssuredPartners transaction is not completed, for general corporate purposes, including other acquisitions.
Current report
On February 12, 2024, we closed and funded an offering of $1,000.0 million of unsecured senior notes in two tranches. The $500.0 million aggregate principal amount of 5.45% Senior Notes is due in 2034 and $500.0 million aggregate principal amount of 5.75% Senior Notes is due in 2054. The weighted average interest rate is 5.71% per annum after giving effect to underwriting costs and a net hedge loss. During 2023, we entered into a pre-issuance interest rate hedging transaction related to these notes. We realized a net cash loss of approximately $1.4 million on the hedging transactions that will be recognized on a pro rata basis as an increase to our reported interest expense over ten years. We used the proceeds of these offerings to fund acquisitions, earnout payments related to acquisitions and general corporate purposes.
Current report
The $105.6 million increase in compensation expense in 2024 compared to 2023 was primarily due to increases in base compensation to service and support organic growth and higher benefit costs - $73.2 million in the aggregate, compensation associated with the acquisitions completed in the twelve month period ended December 31, 2024 - $29.6 million, increases in workforce related charges - $2.4 million and acquisition integration related costs - $0.6 million, partially offset by reduced acquisition earnout related adjustments - $0.2 million.
Current report
Significant Future Income Tax Law Changes -Although no new significant tax legislation was enacted in 2024, several previous law and administrative changes, particularly the scheduled sunset of numerous provisions of the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, at the end of this year are being reviewed. In addition, the implications of the November 2024 U.S. elections on the tax environment are still being evaluated, with possible new or renewed initiatives going forward,
Current report
The OECD’s Pillar 2 framework became effective for tax years beginning January 1, 2024, and calls for implementing a minimum 15% effective corporate tax rate for multinational companies with global consolidated revenues of €750 million or more, regardless of the local tax rate. The OECD’s Pillar 2 corporate tax has been implemented in many jurisdictions worldwide in some form, including in countries where we have significant operations, including the U.K, Canada, Australia and New Zealand. Different countries have implemented the necessary rules in different ways, through their individual agreement to tax treaty changes and through changes to their own domestic tax laws.
Current report
On December 7, 2024, we signed a definitive agreement to acquire AssuredPartners for gross consideration of $13.45 billion. The Transaction is subject to customary regulatory approval, standard closing conditions and is expected to close during first quarter 2025. AssuredPartners is a leading U.S. insurance broker with client capabilities across commercial property/casualty, specialty, employee benefits, and personal lines and with operations in the U.K. and Ireland. We expect to fund the Transaction using $8.5 billion of cash raised in our December 11, 2024 follow-on common stock offering and $5.0 billion of cash borrowed in our December 19, 2024 senior notes. 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 report
On December 6, 2023, we acquired all of the issued and outstanding shares of My Plan Manager for an initial gross consideration of $301.6 million. We funded the transaction using free cash flow and funds received from an unsecured senior notes offering. The acquired My Plan Manager is the leading provider of plan management services to participants in Australia’s National Disability Insurance Scheme.
Current report
On October 31, 2023, we acquired the net assets of Eastern Insurance for an initial gross consideration of $515.1 million. We funded the transaction using free cash flow and funds received from an unsecured senior notes offering. The acquired Eastern Insurance business offers comprehensive commercial property/casualty and personal lines products as well as employee benefits consulting to clients throughout the Northeastern U.S.
Current report
Total cash and cash equivalents, restricted cash and fiduciary cash at December 31, 2024 and December 31, 2023, include $15,371.6 million and $1,744.9 million, respectively, of income earning money market accounts. The increase in cash invested in money market accounts between years is primarily due to the proceeds received in December 2024 from the stock issuance ($8.5 billion) and senior notes ($5.0 billion). The dividend income on money market accounts was recorded in interest income, premium finance and other income in our consolidated statement of earnings, which increased $105.9 million during 2024 ($29.0 million of which related to the proceeds from the AssuredPartners financing) to $473.2 million for the year ended December 31, 2024 compared to $367.3 million for the year ended December 31, 2023.
Current report
Through the acquisition of Buck, we acquired the assets and assumed the liabilities associated with three frozen defined benefit pension plans that provide postretirement benefits to their participants located in the U.S., U.K. and Canada (which we refer to as the Buck Pension Plans). The Buck Pension Plans were amended to freeze benefit plan accruals for all participants (closed to new entrants and existing participants do not accrue any additional benefits) effective December 31, 2014. Effective December 31, 2024, the U.S. Buck Pension Plan was merged into our defined benefit pension plan. In January 2025, we notified plan participants that we will fully terminate such plan. In first quarter 2025, we will initiate the wind down of the plan and we expect to complete such wind down by settling all future obligations under the plan through a combination of lump sum payments to eligible, electing participants and transferring the remaining liability through the purchase of a group annuity contract to a highly-rated third-party insurance company. We expect that the wind down will be completed in fourth quarter 2025. Based on estimates as of December 31, 2024, we anticipate recognizing a non-cash, pre-tax loss of approximately $34.2 million in fourth quarter 2025 to compensation expense in the consolidated statement of earnings that may be offset by an approximately $12.8 million adjustment to consolidated statement of comprehensive earnings, a $16.5 million write-down of a prepaid pension asset and a $4.6 million reversal of a deferred tax asset.
Current report
On February 12, 2024, we closed and funded an offering of $1,000.0 million of unsecured senior notes in two tranches. The $500.0 million aggregate principal amount of 5.45% Senior Notes is due in 2034 and $500.0 million aggregate principal amount of 5.75% Senior Notes is due in 2054. The weighted average interest rate is 5.71% per annum after giving effect to underwriting costs and a net hedge loss. During 2023, we entered into a pre-issuance interest rate hedging transaction related to these notes. We realized a net cash loss of approximately $1.4 million on the hedging transactions that will be recognized on a pro rata basis as an increase to our reported interest expense over ten years. We used the proceeds of these offerings to fund acquisitions, earnout payments related to acquisitions and general corporate purposes.
Removed paragraphs (37)
Previous report
Acquisition of My Plan Manager, Cadence Insurance, Eastern Insurance and Buck
Previous report
On December 6, 2023, we acquired all of the issued and outstanding shares of My Plan Manager. See Note 3 to our 2023 consolidated financial statements for information on the purchase price consideration paid to acquire My Plan Manager. We funded the transaction using free cash flow and borrowings under our Credit Agreement (see Financing Cash Flow section below). The acquired My Plan Manager is the leading provider of plan management services to participants in Australia’s National Disability Insurance Scheme.
Previous report
On November 30, 2023, we acquired all of the issued and outstanding shares of Cadence Insurance. See Note 3 to our 2023 consolidated financial statements for information on the purchase price consideration paid to acquire Cadence Insurance. We funded the transaction using free cash flow and funds received from an unsecured senior notes offering. The acquired Cadence Insurance business offers a full suite of commercial property/casualty, employee benefits and personal lines products to clients from 34 offices spanning nine states across the Southeast, including Texas.
Previous report
On October 31, 2023, we acquired the net assets of Eastern Insurance. See Note 3 to our 2023 consolidated financial statements for information on the purchase price consideration paid to acquire Eastern Insurance. We funded the transaction using free cash flow and funds received from an unsecured senior notes offering. The acquired Eastern Insurance business offers comprehensive commercial property/casualty and personal lines products as well as employee benefits consulting to clients throughout the Northeastern U.S.
Previous report
On April 3, 2023 we acquired the partnership interests of Buck. See Note 3 to our 2023 consolidated financial statements for information on the purchase price consideration paid to acquire Buck. We funded the transaction using free cash flow and funds received from an unsecured senior notes offering. The acquired Buck business is a leading provider of retirement, human resource and employee benefits consulting and administration services operating for more than 100 years with a diverse client base by both size and industry. Immediately prior to closing, Buck had over 2,300 employees, including more than 220 credentialed actuaries, primarily serving customers throughout the U.S., Canada and the U.K.
Previous report
Clean energy investments - We have investments in limited liability companies that own or have owned 29 clean coal production plants developed by us and six clean coal production plants we purchased from a third party. All 35 plants produced refined coal using propriety technologies owned by Chem-Mod. We believe that the production and sale of refined coal at these plants prior to 2022 was qualified to receive refined coal tax credits under IRC Section 45. The plants which were placed in service prior to December 31, 2009 (which we refer to as the 2009 Era Plants) received tax credits through 2019 and the 21 plants which were placed in service prior to December 31, 2011 (which we refer to as the 2011 Era Plants) received tax credits through 2021. All twenty-one of the 2011 Era Plants were under long‑term production contracts with several utilities. Those agreements ended December 31, 2021 due to the expiration of the IRC Section 45 program.
Previous report
We also own a 46.5% controlling interest in Chem-Mod, which prior to 2022 marketed The Chem‑Mod™ Solution proprietary technologies principally to refined fuel plants that sell refined fuel to coal-fired power plants owned by utility companies, including those plants in which we hold interests. Chem-Mod has not generated after-tax earnings since 2021.
Previous report
o
Previous report
Legal and tax related, which represents the impact of (a) adjustments in fourth quarter 2023 related to costs associated with legal and tax matters as well as the impact of tax items associated with 2022 tax returns filed in October 2023, (b) adjustments in second quarter of 2023 related to additional U.K. income tax expense related to the non‑deductibility of acquisition-related adjustments made in the quarter and costs associated with legal and tax matters, (c) adjustments in second quarter 2022 related to a one-time U.S. state tax benefit that resulted from legal entity restructuring and a favorable U.K. tax impact related to earnout liability adjustments, and (d) adjustments in first quarter 2022 related to a one-time benefit related to the revaluation of certain deferred income tax assets associated with increasing our U.S. state effective income tax rate.
Previous report
On November 30, 2023, we acquired all of the issued and outstanding shares of Cadence Insurance. See Note 3 to our 2023 consolidated financial statements for information on the purchase price consideration paid to acquire Cadence Insurance. We funded the transaction using free cash flow and funds received from an unsecured senior notes offering. The acquired Cadence Insurance business offers a full suite of commercial property/casualty, employee benefits and personal lines products to clients from 34 offices spanning nine states across the Southeast, including Texas.
Previous report
On October 31, 2023, we acquired the net assets of Eastern Insurance. See Note 3 to our 2023 consolidated financial statements for information on the purchase price consideration paid to acquire Eastern Insurance. We funded the transaction using free cash flow and funds received from an unsecured senior notes offering. The acquired Eastern Insurance business offers comprehensive commercial property/casualty and personal lines products as well as employee benefits consulting to clients throughout the Northeastern U.S.
Previous report
On April 3, 2023, we acquired the partnership interests of Buck. See Note 3 to our 2023 consolidated financial statements for information on the purchase price consideration paid to acquire Buck. We funded the transaction using free cash flow and funds received from an unsecured senior notes offering. The acquired Buck business is a leading provider of retirement, human resources and employee benefits consulting and administration services operating for more than 100 years and has a diverse client base by both size and industry. Immediately prior to closing, Buck had over 2,300 employees, including more than 220 credentialed actuaries, primarily serving customers throughout the Canada, the U.K. and the U.S.
Previous report
During 2022, we received a subpoena from the FCPA Unit of the DOJ seeking information related to our insurance business with public entities in Ecuador. During the fourth quarter of 2023, the DOJ informed us that it had closed its inquiry and would not be pursuing enforcement action against us in connection with this matter.
Previous report
On December 6, 2023, we acquired all of the issued and outstanding shares of My Plan Manager. See Note 3 to our 2023 consolidated financial statements for information on the purchase price consideration paid to acquire My Plan Manager. We funded the transaction using free cash flow and borrowings under our Credit Agreement (see Financing Cash Flow section below). The acquired My Plan Manager is the leading provider of plan management services to participants in Australia’s National Disability Insurance Scheme.
Previous report
The $111.9 million increase in compensation expense in 2023 compared to 2022 was primarily due to increased base compensation related to merit wage increases and hiring to support growth, benefits, and other incentive compensation linked to operating results - $110.6 million in the aggregate. Also contributing to the increase was compensation associated with the acquisition completed in the twelve month period ended December 31, 2023 - $2.6 million and acquisition integration costs - $0.7 million, partially offset by reduced workforce related charges $2.0 million.
Previous report
Even though the law governing IRC Section 45 tax credits expired as of December 31, 2021, we did have some production at our clean coal production plants in 2022 to run-off existing chemical supplies.
Previous report
The de minimis 2022 revenues from consolidated clean coal production plants represents revenues from the consolidated IRC Section 45 facilities in which we have a majority ownership position and maintain control over the operations at the related facilities.
Previous report
Royalty income from clean coal licenses represents revenues related to Chem-Mod LLC. We held a 46.5% controlling interest in Chem-Mod LLC. As Chem-Mod LLC’s manager, we are required to consolidate its operations.
Previous report
Cost of revenues -Cost of revenues from consolidated clean coal production plants in 2022 consists of the cost of coal, labor, equipment maintenance, chemicals, supplies, management fees and depreciation incurred by the clean coal production plants to generate the consolidated revenues discussed above. Even though the law governing IRC Section 45 tax credits expired as of
Previous report
December 31, 2021, we did have some production at our clean coal production plants in 2022 to run-off existing chemical supplies.
Previous report
Litigation Matters - In July 2019, Midwest Energy filed a patent infringement lawsuit in the United States District Court for the District of Delaware against us, Chem‑Mod LLC and numerous other related and unrelated parties. The complaint alleged that the named defendants infringed patents held exclusively by Midwest Energy and sought unspecified damages and injunctive relief. During the fourth quarter of 2023, we settled this matter for an amount that was not material and without admitting any wrongdoing.
Previous report
Clean Energy Investments - We have investments in limited liability companies that own or have owned 29 clean coal production plants developed by us and six clean coal production plants we purchased from a third party. All 35 plants produced refined coal using propriety technologies owned by Chem-Mod LLC. We believe that the production and sale of refined coal at these plants prior to 2022 were qualified to receive refined coal tax credits under IRC Section 45. The 14 2009 Era Plants received tax credits through 2019 and the 21 2011 Era Plants received tax credits through 2021.
Previous report
Our investment in Chem-Mod LLC prior to 2022 generated royalty income from refined coal production plants owned by those limited liability companies in which we invested as well as refined coal production plants owned by other unrelated parties.
Previous report
See the risk factors regarding our IRC Section 45 investments under Item 1A, “Risk Factors.” for a more detailed discussion of these and other factors could impact the information above. See Note 14 to our 2023 consolidated financial statements for more information regarding risks and uncertainties related to these investments.
Previous report
On December 6, 2023, we acquired all of the issued and outstanding shares of My Plan Manager. See Note 3 to our 2023 consolidated financial statements for information on the purchase price consideration paid to acquire My Plan Manager. We funded the transaction using free cash flow and funds received from an unsecured senior notes offering. The acquired My Plan Manager is the leading provider of plan management services to participants in Australia’s National Disability Insurance Scheme.
Previous report
On October 31, 2023, we acquired the net assets of Eastern Insurance. See Note 3 to our 2023 consolidated financial statements for information on the purchase price consideration paid to acquire Eastern Insurance. We funded the transaction using free cash flow and funds received from an unsecured senior notes offering. The acquired Eastern Insurance business offers comprehensive commercial property/casualty and personal lines products as well as employee benefits consulting to clients throughout the Northeastern U.S.
Previous report
On December 1, 2021, we acquired substantially all of the Willis Re for an initial gross consideration of $3.17 billion, and potential additional consideration of $750 million subject to certain third-year revenue targets. We funded the transaction using cash on hand, including the $1.4 billion of net cash raised in our May 17, 2021 follow-on common stock offering, $850 million of net cash borrowed in our May 20, 2021 30-year senior note issuance, $750 million of net cash borrowed in our November 9, 2021 10-year ($400 million) and 30-year ($350 million) senior note issuances and short‑term borrowings.
Previous report
The 2023 income taxes paid amounts were favorably impacted compared to 2022 due to the reversal of the tax method changes on our 2022 tax return filed in the fourth quarter of 2023. Also in 2022, we elected to defer the utilization of 2022 net operating losses in the U.K. causing additional cash tax payments of $49.0 million relating to 2022. The U.K. payments would have been made in future periods, and do not represent additional taxes due.
Previous report
Change in Presentation of Fiduciary Assets and Liabilities in First Quarter 2023
Previous report
In first quarter 2023, we changed the presentation of certain amounts and classifications in our consolidated balance sheet and statement of cash flows to identify and present fiduciary assets and liabilities and respective changes of these accounts in the balance sheet and statement of cash flows. These revisions also better reflect the cash flows associated with our operations. Lines for accounts receivable, fiduciary assets and fiduciary liabilities were added and lines for restricted cash, premiums and fees receivable and premiums payable to underwriting enterprises were removed. In addition to these changes, we moved the net change in fiduciary assets and liabilities from the operating section to the financing section of the statement of cash flows. We made the applicable revisions to the December 31, 2022 balance sheet and statement of cash flow for the year ended December 31, 2022 and 2021 to conform to the current period presentation. These changes had no impact on the 2022 and 2021 consolidated statement of earnings or December 31, 2022 and 2021 stockholders’ equity. See Note 5 to our 2023 consolidated financial statements for an additional discussion of the change in presentation of fiduciary assets and liabilities.
Previous report
Clean Energy Investments - During the period from 2009 through 2021, we made significant investments in clean energy operations capable of producing refined coal that we believe qualified for tax credits under IRC Section 45. The IRC Section 45 tax credits generate positive cash flow by reducing the amount of federal income taxes we pay. We anticipate positive net cash flow related to IRC Section 45 activity in 2024. However, there are several variables that can impact net cash flow from clean energy investments in any given year. Therefore, accurately predicting cash in particular future periods is not possible at this time. However, if we continue to generate sufficient taxable income to use the tax credits produced by our IRC Section 45 investments, we anticipate that these investments will continue to generate positive net cash flows due to the utilization of IRC Section 45 tax credits to offset taxable income in years after the program expired. In October 2023, we filed our 2022 federal income tax return and elected to discontinue a tax method change. This resulted in the addback of tax credits that were not utilized on the tax return by approximately $157.0 million, which was recorded in the fourth quarter 2023. Amended tax returns in the fourth quarter 2023 and closed tax years accounted for the addback of unutilized tax credits of $6.6 million of IRC Section 45 tax credits. In October 2022, we filed our 2021 federal tax return and elected to continue a tax method change in that return. This resulted in an acceleration of the amount of tax credits that we utilized on the return by approximately $150.0 million, which was recorded in fourth quarter 2022. We also amended our 2014 and 2015 federal tax returns in the fourth quarter of 2022, which resulted in a refund of $3.7 million of IRC Section 45 tax credits. While we cannot precisely forecast the cash flow impact in any particular period, we anticipate that the net cash flow impact of IRC Section 45 activity will be positive overall. Please see "Clean energy investments" on page 54 for a more detailed description of these investments and their risks and uncertainties.
Previous report
On November 9, 2021, we closed and funded an offering of $750.0 million of unsecured senior notes in two tranches. The $400.0 million aggregate principal amount of 2.40% Senior Notes are due 2031 (which we refer to as the 2031 November Notes) and $350.0 million aggregate principal amount of 3.05% Senior Notes are due 2052 (which we refer to as the 2052 November Notes and together with the 2031 November Notes, the November Notes). The weighted average interest rate is 2.80% per annum after giving effect to underwriting costs. The November Notes were issued pursuant to an indenture, dated as of May 20, 2021, as modified and supplemented in respect of the November Notes by an Officer’s Certificate pursuant to the indenture, dated as of November 9, 2021. The relevant terms of the November Notes, the indenture and the Officer’s Certificate are further described under the caption “Description of Notes” in the prospectus supplement filed with the SEC on November 3, 2021. We used the net proceeds of the November Notes offering to fund a portion of the cash consideration payable in connection with the Willis Re transaction.
Previous report
On May 20, 2021, we closed and funded an offering of $1,500.0 million of unsecured senior notes in two tranches. The $650.0 million aggregate principal amount of 2.50% Senior Notes were due 2031 (which we refer to as the 2031 May Notes) and $850.0 million aggregate principal amount of 3.50% Senior Notes are due 2051 (which we refer to as the 2051 May Notes and together with the 2031 May Notes, the May Notes). The weighted average interest rate is 3.13% per annum after giving effect to underwriting costs and the net hedge loss. In 2018 and 2019, we entered into a pre-issuance interest rate hedging transaction related to these notes. We realized a net cash loss of approximately $57.8 million on the hedging transactions that will be recognized on a pro rata basis as an increase to our reported interest expense over ten years.
Previous report
The offering of the May Notes was made pursuant to a shelf registration statement filed with the SEC. The relevant terms of the May Notes, the Indenture and the Officer’s Certificate are further described under the caption “Description of Notes” in the prospectus supplement dated May 13, 2021, filed with the SEC on May 17, 2021.
Previous report
The 2031 May Notes had a special optional redemption whereby, we had the option to redeem the 2031 May Notes, in whole and not in part, by providing notice of such redemption to the holders of the 2031 May Notes within 30 days following a Willis Re transaction termination event, at a redemption price equal to 101% of the aggregate principal amount of the 2031 May Notes, plus any accrued and unpaid interest. These notes were redeemed on August 13, 2021. As a result of the redemption of this debt, we incurred a loss on extinguishment of debt of $16.2 million, which included the redemption price premium of $6.5 million, which is presented in cash flows from financing activities, and the unamortized discount amount on the debt issuance and the write-off of all the debt acquisition costs of $9.7 million, which is presented in cash flows from operating activities. The 2051 May Notes are not subject to the special optional redemption. We used the net proceeds of the 2051 May Notes offering to fund a portion of the cash consideration payable in connection with the Willis Re transaction.
Previous report
On May 5, 2021, we closed and funded a private placement of $75.0 million aggregate principal amount of unsecured senior notes. The unsecured senior notes were issued with an interest rate of 2.46% and are due in 2036. We used the proceeds of this offering in part to fund acquisitions and general corporate purposes. The weighted average interest rate is 3.98% after giving effect to a net hedging loss. In 2018, we entered into a pre-issuance interest rate hedging transaction related to this private placement. We realized a net cash loss of approximately $17.2 million on the hedging transactions that will be recognized on a pro rata basis as an increase in our reported interest expense over ten years of the total 15‑year notes.
Previous report
On February 10, 2021, we closed a private placement of $100.0 million aggregate principal amount of unsecured senior notes. The unsecured senior notes were issued with an interest rate of 2.44% and are due in 2036. We used the proceeds of these offerings in part to fund the $75.0 million February 10, 2021 Series D note maturity, and for acquisitions and general corporate purposes. The weighted average interest rate is 3.97% after giving effect to a net hedging loss. In 2018, we entered into a pre‑issuance interest rate hedging transaction related to this private placement. We realized a net cash loss of approximately $22.9 million on the hedging transactions that will be recognized on a pro rata basis as an increase in our reported interest expense over ten years of the total 15‑year notes.
Reworded paragraphs (89)
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. We believe that one of our major strengths is our ability to deliver comprehensively structured insurance and risk management services to our clients. Our brokers, agents and administrators act as intermediaries between underwriting enterprises and our clients and we do not assume net underwriting risks. We are headquartered in Rolling Meadows, Illinois, and provide brokerage, risk management and consulting services in approximately 130 countries around the world through our owned operations and a network of correspondent brokers and consultants. In 2023, we expanded, and expect to continue to expand, our international operations through both acquisitions and organic growth. We generate approximately 64% of our revenues for the combined brokerage and risk management segments domestically, with the remaining 36% generated internationally, primarily in the Australia, Canada, New Zealand and the U.K. (based on 2023 revenues). We have three reportable segments: brokerage, risk management and corporate. Brokerage and risk management contributed approximately 86% and 14%, respectively, to 2023 revenues. The corporate segment generated revenues from our clean energy investments until 2022, during which we ran-off existing chemical supplies as part of the wind down of such investments’ operations, after our ability to generate additional tax credits from qualified refined coal pursuant to IRC Section 45 ended in December 2021. Our major sources of operating revenues are commissions, fees and supplemental and contingent revenues from brokerage operations and fees from risk management operations. Investment income is generated from invested cash and fiduciary funds, clean energy investments (prior to 2022), and revenue 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. We believe that one of our major strengths is our ability to deliver comprehensively structured insurance and risk management services to our clients. Our brokers, agents and administrators act as intermediaries between underwriting enterprises and our clients and we do not assume net underwriting risks. We are headquartered in Rolling Meadows, Illinois, and provide brokerage, risk management and consulting services in approximately 130 countries around the world through our owned operations and a network of correspondent brokers and consultants and third-party property/casualty claims settlement and administration services through a network of offices located throughout Australia, Canada, New Zealand, the U.K. and the U.S. In 2024, we expanded, and expect to continue to expand, our international operations through both acquisitions and organic growth. We generate approximately 64% of our revenues for the combined brokerage and risk management segments domestically, with the remaining 36% generated internationally, primarily in Australia, Canada, New Zealand and the U.K. (based on 2024 revenues). We have three reportable segments: brokerage, risk management and corporate. Brokerage and risk management contributed approximately 86% and 14%, respectively, to 2024 revenues. 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, premium finance revenues and other income is generated from invested cash and fiduciary funds and revenue from premium financing.
Previous wording
In our corporate segment, net after-tax (loss) earnings from our clean energy investments was $(11.5) million and $(9.2) million in 2023 and 2022, respectively. At this time, we anticipate our clean energy investments will produce after-tax losses in 2024.
Current wording
In our corporate segment, net after-tax (loss) earnings from our clean energy investments was $(4.4) million and $(11.5) million in 2024 and 2023, respectively. At this time, we anticipate our clean energy investments will produce after-tax losses in 2025.
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 2023 and 2022. 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 48 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 2024 and 2023. 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 44 and 50 of this filing.
Previous wording
For the year ended December 31, 2023, the pretax impact of the brokerage segment adjustments totals $1,192.0 million, mostly due to non-cash period expenses related to intangible amortization and acquisition earnout payable adjustments, with a corresponding adjustment to the provision for income taxes of $295.6 million relating to these items. For the year ended December 31, 2023, the pretax impact of the risk management segment adjustments totals $12.2 million, with a corresponding adjustment to the provision for income taxes of $3.3 million relating to these items. For the year ended December 31, 2023, the pretax impact of the corporate segment adjustments totals $82.6 million, with a corresponding adjustment to the benefit for income taxes of $27.8 million relating to these items and other tax items noted on page 54. For the corporate segment, the clean energy related adjustments are described on page 54.
Current wording
For the year ended December 31, 2024, the pretax impact of the brokerage segment adjustments totals $1,021.4 million, mostly due to non-cash period expenses related to intangible amortization and acquisition earnout payable adjustments, with a corresponding adjustment to the provision for income taxes of $259.2 million relating to these items. For the year ended December 31, 2024, the pretax impact of the risk management segment adjustments totals $25.0 million, with a corresponding adjustment to the provision for income taxes of $7.0 million relating to these items. For the year ended December 31, 2024, the pretax impact of the corporate segment adjustments totals $29.9 million, with a corresponding adjustment to the benefit for income taxes of $1.8 million relating to these items and other tax items noted on page 56. For the corporate segment, the clean energy related adjustments are described on page 56.
Previous wording
We use the Council of Insurance Agents & Brokers (which we refer to as the 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 fourth quarter 2023 survey had not been published as of the filing date of this report. The first three 2023 quarterly surveys indicated that U.S. commercial property/casualty rates increased by 8.8%, 8.9%, and 8.1% on average, for the first, second and third quarters of 2023, respectively. We expect a similar trend to be noted when the CIAB fourth quarter 2023 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 & Brokers (which we refer to as the 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 fourth quarter 2024 survey had not been published as of the filing date of this report. The first three 2024 quarterly surveys indicated that U.S. commercial property/casualty rates increased by 7.7%, 5.2%, and 5.1% on average, for the first, second and third quarters of 2024, respectively. We expect a similar trend to be noted when the CIAB fourth quarter 2024 survey report is issued, which would indicate overall continued price firming and hardening in most lines of business.
Previous wording
We believe increases in property/casualty rates will continue throughout 2024 due to rising loss costs, a hard reinsurance market, increased frequency of catastrophe losses and social inflation. If loss trends deteriorate over the coming quarters, including due to the impact of natural catastrophes, it could lead to a more difficult rate and conditions environment in certain lines. The combination of increasing insurable values (due in large part to inflation, including wage inflation), a tight labor market and lower unemployment is likely contributing to increases in client insured exposures. Additionally, we expect that our history of strong new business generation, solid retentions and enhanced value-added services for our carrier partners should all 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’ budget. Based on our experience, there is currently adequate capacity in the insurance and reinsurance market for most lines of coverage.
Current wording
We believe increases in property/casualty rates will continue throughout 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 $150 billion during 2024, and first quarter 2025 insured losses are likely to be elevated due to the California wildfires and, 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 (due to inflation, including wage inflation), a tight labor market and low unemployment is likely contributing to increases in client insured exposures. Additionally, we expect that our history of strong new business generation, solid retentions and enhanced value-added services for our carrier partners should all 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’ budget. 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.
Previous wording
Net gains on divestitures, which are primarily net proceeds received related to sales of books of business and other divestiture transactions, such as the disposal of a business through sale or closure.
Current wording
Net gains (losses) on divestitures, which are primarily net proceeds received related to sales of books of business and other divestiture transactions, such as the disposal of a business through sale or closure.
Previous wording
Acquisition integration costs, which include costs related to certain large acquisitions (including Willis Re, the acquisition of Buck and the acquisitions of 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 the Willis Towers Watson plc treaty reinsurance brokerage operations (which we refer to as 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.
Previous wording
Transaction-related costs, which primarily are associated with the acquisition of Willis Re (primarily related to deferred closings in certain jurisdictions in 2022), the acquisition of Buck and the acquisitions of Cadence Insurance, Eastern Insurance and My Plan Manager. These include costs related to regulatory filings, legal and accounting services, insurance and incentive compensation.
Current wording
Transaction-related costs, which are associated with completed, future and terminated acquisitions. Costs primarily relate to the acquisitions of Willis Re, Buck, Cadence Insurance, Eastern Insurance and My Plan Manager and the pending acquisition of AssuredPartners. These include costs related to regulatory filings, legal and accounting services, insurance and incentive compensation.
Previous wording
Acquisition related adjustments, which include the change in estimated acquisition earnout payables adjustments and acquisition related compensation charges.
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
Adjustments in fourth quarter 2022 include costs associated with legal and tax matters as well as the impact of tax planning items associated with 2022 tax returns filed in fourth quarter 2023. Adjustments in fourth quarter 2022 include (a) additional U.K. income tax expense related to the non‑deductibility of acquisition-related adjustments made in the quarter, (b) gains and costs associated with legal and tax matters, (c) income tax provision adjustments as filed in our 2021 tax returns and (d) income tax benefit related to adjusting certain U.K. deferred income tax assets to the future 25% corporate income tax rate.
Current wording
Legal and tax related, which represents the impact of (a) adjustments in 2024 and 2023 related to costs associated with legal and tax matters as well as costs associated with the impact of tax items associated with 2022 tax returns filed in October 2023, (b) adjustments in 2023 related to additional U.K. income tax expense related to the non‑deductibility of acquisition-related adjustments made in the quarter and costs associated with legal and tax matters.
Previous wording
Organic Revenues (a non-GAAP measure) - For the brokerage segment, organic change in base commission and fee revenues, supplemental revenues and contingent revenues excludes the first twelve months of such revenues generated from acquisitions and such revenues related to divested operations in each year presented. These revenues are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of our business in both the current and prior year. In addition, organic change in base commission and fee revenues, supplemental revenues and contingent revenues exclude the period-over-period impact of foreign currency translation to improve the comparability of our results between periods. For the risk management segment, organic change in fee revenues excludes the first twelve months of such revenues generated from acquisitions and such revenues related to divested operations in each year presented. In addition, change in organic growth in fee revenues excludes the period-over-period impact of foreign currency translation to improve the comparability of our results between periods.
Current wording
Organic Revenues (a non-GAAP measure) - For the brokerage segment, organic change in base commission and fee revenues, supplemental revenues and contingent revenues excludes the first twelve months of such revenues generated from acquisitions and such revenues related to divested operations which include disposals of a business through sale or closure, run-off of a business and the restructuring and/or repricing of programs and products in each year presented. These revenues are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of our business in both the current and prior year. In addition, organic change in base commission and fee revenues, supplemental revenues and contingent revenues exclude the period-over-period impact of foreign currency translation to improve the comparability of our results between periods. For the risk management segment, organic change in fee revenues excludes the first twelve months of such revenues generated from acquisitions and such revenues related to divested operations in each year presented. In addition, change in organic growth in fee revenues excludes the period-over-period impact of foreign currency translation to improve the comparability of our results between periods.
Previous wording
Reconciliation of Non-GAAP Information Presented to GAAP Measures - This report includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on pages 42 and 48), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on page 35), for organic revenue measures (on pages 43 and 48), respectively, for the brokerage and risk management segments, for adjusted compensation and operating expenses and adjusted EBITDAC margin (on page 45), respectively, for the brokerage segment and (on page 49) for the risk management segment.
Current wording
Reconciliation of Non-GAAP Information Presented to GAAP Measures - This report includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on pages 44 and 50), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on page 37), for organic revenue measures (on pages 45 and 50), respectively, for the brokerage and risk management segments, for adjusted compensation and operating expenses and adjusted EBITDAC margin (on page 46), respectively, for the brokerage segment and (on page 51) for the risk management segment.
Previous wording
The brokerage segment accounted for 86% of our revenue in 2023. Our brokerage segment is primarily comprised of retail, wholesale and Gallagher Re. Our brokerage segment generates revenues by:
Current wording
The brokerage segment accounted for 86% of our revenue in 2024. 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 or 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
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
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 resource technology, communications and benefits administration; and
Current 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
Previous wording
Commissions and fees - The aggregate increase in base commissions and fees for 2023 was due to revenues associated with acquisitions that were made during 2023 and 2022 ($531.8 million) and organic revenue growth. Commission revenues increased 13% and fee revenues increased 28% in 2023 compared to 2022, respectively. The organic change in base commission and fee revenues was 9% in 2023 and 2022.
Current wording
Commissions and fees - The aggregate increase in base commissions and fees for 2024 was due to revenues associated with acquisitions that were made during 2024 and 2023 ($618.2 million) and organic revenue growth. Commission revenues increased 14% and fee revenues increased 16% in 2024 compared to 2023. The organic change in base commission and fee revenues was 7% in 2024 and 9% in 2023.
Previous wording
In our property/casualty brokerage operations, during the twelve-month period ended December 31, 2023, we saw continued strong customer retention and new business generation and increasing renewal premiums (premium rates and exposures). We believe these favorable trends should continue in 2024; however, if economic conditions worsen or premium rate increases slow, we could see our revenue growth soften.
Current wording
In our property/casualty brokerage operations, during the twelve-month period ended December 31, 2024, we saw continued strong customer retention, higher new business generation and increasing renewal premiums (premium rates and exposures). We believe these favorable trends should continue in 2025; however, if economic conditions worsen or premium rate increases slow, we could see our revenue growth moderate.
Previous wording
For 2023 and 2022, we issued 1,612,000 and 726,000, shares, respectively, of our common stock at the request of sellers and/or in connection with tax-free exchange acquisitions.
Current wording
For 2024 and 2023, we issued 512,000 and 1,612,000, shares, respectively, of our common stock at the request of sellers and/or in connection with tax-free exchange acquisitions.
Previous wording
Interest income, premium finance revenues and other income in 2023 increased compared to 2022 primarily due to increases in interest income earned on our own and fiduciary funds.
Current wording
Interest income, premium finance revenues and other income in 2024 increased compared to 2023 primarily due to increases in interest income earned on our own and fiduciary funds, including the $20.0 million interest income earned in December 2024 related to the proceeds from the AssuredPartners Financing.
Previous wording
The $744.4 million increase in compensation expense in 2023 compared to 2022 was primarily due to base compensation related to the hiring of producers and other roles to service and support organic growth, benefits, stock compensation and other incentive compensation linked to operating results - $341.2 million in the aggregate, compensation associated with the acquisitions completed in the twelve month period ended December 31, 2023 - $322.4 million, increases in acquisition integration costs ‑ $39.2 million, acquisition earnout related adjustments - $22.5 million and workforce related charges - $19.1 million.
Current wording
The $732.3 million increase in compensation expense in 2024 compared to 2023 was primarily due to compensation associated with the acquisitions completed in the twelve month period ended December 31, 2024 - $350.8 million, increases in base compensation related to the hiring of producers and other roles to service and support organic growth and higher benefit costs - $291.7 million in the aggregate, increases in acquisition earnout related adjustments - $77.9 million and workforce related charges - $52.1 million, partially offset by reduced acquisition integration costs ‑ $40.2 million.
Previous wording
The $23.5 million increase in operating expense in 2023 compared to 2022 was primarily due to the return of underlying inflation of, travel, entertainment and other client-related expenses and additional investments in technology - $23.9 million in the aggregate. Also contributing to the increase was operating expenses associated with the acquisitions completed in the twelve month period ended December 31, 2023 - $1.1 million, partially offset by reduced acquisition integration - $1.5 million.
Current wording
The $91.1 million increase in operating expense in 2024 compared to 2023, was primarily due to expenses associated with the acquisitions completed in the twelve-month period ended December 31, 2024 - $78.9 million, underlying inflation of travel and entertainment costs and additional investments in technology - $22.1 million, increases in workforce related charges - $3.4 million, partially offset by reduced acquisition integration costs - $13.3 million.
Previous wording
Depreciation - The increase in depreciation expense in 2023 compared to 2022 was due primarily to the impact of purchases of furniture, equipment and leasehold improvements related to office consolidations and moves, and expenditures related to upgrading computer systems. Also contributing to the increases in depreciation expense in 2023 was the depreciation expense associated with acquisitions completed in 2023.
Current wording
Depreciation - The increase in depreciation expense in 2024 compared to 2023 was due primarily to the impact of purchases of furniture, equipment and leasehold improvements related to office consolidations and moves, and expenditures related to upgrading computer systems. Also contributing to the increases in depreciation expense in 2024 was the depreciation expense associated with acquisitions completed in 2024 and the latter part of 2023.
Previous wording
Amortization - The increase in amortization in 2023 compared to 2022 was primarily due to the impact of amortization expense of intangible assets associated with acquisitions completed in 2023 and 2022, partially offset by the impact of acquisition valuation true-ups recorded in 2023 relating to acquisitions made in 2022. Expiration lists, non‑compete agreements and trade names are amortized using the straight-line method over their estimated useful lives (two to fifteen years for expiration lists, two to six years for non-compete agreements and two to fifteen years for trade names). Based on the results of impairment reviews performed on amortizable intangible assets in 2023 and 2022, we wrote off $3.5 million and $2.0 million, respectively, of amortizable intangible assets related to the brokerage segment. We review all of our intangible assets for impairment periodically (at least annually for goodwill) and whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. We perform such impairment reviews at the division (i.e., reporting unit) level with respect to goodwill and at the business unit level for amortizable intangible assets. In reviewing intangible assets, if the undiscounted future cash flows were less than the carrying amount of the respective (or underlying) asset, an indicator of impairment would exist and further analysis would be required to determine whether or not a loss would need to be charged against current period earnings as a component of amortization expense. We performed a qualitative impairment review on carrying value of our goodwill for all of our reporting units as of December 31, 2023 and no indicators of impairment were noted.
Current wording
Amortization - The increase in amortization in 2024 compared to 2023 was primarily due to the impact of amortization expense of intangible assets associated with acquisitions completed in 2024 and 2023, partially offset by the impact of acquisition valuation true-ups recorded in 2024 relating to acquisitions made in 2023. Expiration lists, non‑compete agreements and trade names are amortized using the straight-line method over their estimated useful lives (two to fifteen years for expiration lists, two to six years for non-compete agreements and two to fifteen years for trade names). Based on the results of impairment reviews performed on amortizable intangible assets in 2024 and 2023, we wrote off $19.4 million and $3.5 million, respectively, of amortizable intangible assets related to the brokerage segment. We review all of our intangible assets for impairment periodically (at least annually for goodwill) and whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. We perform such impairment reviews at the division (i.e., reporting unit) level with respect to goodwill and at the business unit level for amortizable intangible assets. In reviewing intangible assets, if the undiscounted future cash flows were less than the carrying amount of the respective (or underlying) asset, an indicator of impairment would exist and further analysis would be required to determine whether or not a loss would need to be charged against current period earnings as a component of amortization expense. In October 2024, we performed a qualitative impairment review on carrying value of our goodwill for all of our reporting units and no indicators of impairment were noted as of December 31, 2024.
Previous wording
Change in estimated acquisition earnout payables - The change in the expense from the change in estimated acquisition earnout payables in 2023 compared to 2022 was due primarily to adjustments made to the estimated fair value of earnout obligations related to revised assumptions due to rising interest rates and increased market volatility and projections of future performance. During 2023 and 2022, we recognized $76.1 million and $60.2 million, respectively, of expense related to the accretion of the discount recorded for earnout obligations in connection with our acquisitions made from 2020 to 2023. During 2023 and 2022, we recognized $300.7 million and $30.2 million of expense, respectively, related to net adjustments in the estimated fair market values of earnout obligations in connection with revised projections of future performance for 80 and 86 acquisitions, respectively. The net adjustments in 2023, primarily include changes made to the estimated fair value of the Willis Re acquisition earnout and reflect updated assumptions as of December 31, 2023, including forecasted 2024 revenue projections based on January 1, 2024 reinsurance renewals.
Current wording
Change in estimated acquisition earnout payables - The change in the expense from the change in estimated acquisition earnout payables in 2024 compared to 2023 was due primarily to adjustments made to the estimated fair value of earnout obligations related to revised assumptions due to rising interest rates and increased market volatility and projections of future performance. During 2024 and 2023, we recognized $61.3 million and $76.1 million, respectively, of expense related to the accretion of the discount recorded for earnout obligations in connection with our acquisitions made from 2021 to 2024. During 2024 and 2023, we recognized $35.7 million of income and $300.7 million of expense, respectively, related to net adjustments in the estimated fair market values of earnout obligations in connection with revised projections of future performance for 91 and 80 acquisitions, respectively. The net adjustments in 2024 include changes made to the estimated fair value of the Willis Re acquisition earnout and reflect updated assumptions as of December 31, 2024 and are based on actual 2024 recognized revenues. The net adjustments in 2023, primarily included changes made to the estimated fair value of the Willis Re acquisition earnout and reflected updated assumptions as of December 31, 2023, including forecasted 2024 revenue projections based on January 1, 2024 reinsurance renewals.
Previous wording
Provision for income taxes - The brokerage segment’s effective tax rate in 2023 and 2022 was 25.6% and 24.7%, respectively. As of April 1, 2023, a U.K. corporate tax rate of 25% went into effect making the full year effective rate in the U.K. 23.5%. In the first quarter of 2022, we increased our state effective income tax rate, which resulted in the overall U.S. effective income tax rate increasing from 25% to 26% and caused us to incur additional income tax expense. We anticipate reporting an effective tax rate of approximately 24.5% to 26.5% in our brokerage segment based on known changes in tax rates in future periods.
Current wording
Provision for income taxes - The brokerage segment’s effective tax rate in 2024 and 2023 was 25.4% and 25.6%, respectively. As of April 1, 2023, a U.K. corporate tax rate of 25% went into effect making the 2023 full year effective rate in the U.K. 23.5%. We anticipate reporting an effective tax rate of approximately 24.5% to 26.5% in our brokerage segment based on known changes in tax rates in future periods.
Previous wording
Net earnings attributable to noncontrolling interests - The amounts reported in this line for 2023 and 2022 include noncontrolling interest earnings of $6.3 million and $4.4 million, respectively.
Current wording
Net earnings attributable to noncontrolling interests - The amounts reported in this line for 2024 and 2023 include noncontrolling interest earnings of $7.7 million and $6.3 million, respectively.
Previous wording
As previously disclosed, our IRC 831(b) (or “micro-captive”) advisory services business has been under audit by the IRS since 2013. Among other matters, the IRS is investigating whether we have been acting as a tax shelter promoter in connection with these operations. Additionally, the IRS is conducting a criminal investigation related to IRC 831(b) micro-captive underwriting enterprises. We have been advised that we are not a target of the criminal investigation. We are fully cooperating with both matters.
Current wording
As previously disclosed, our IRC 831(b) (or “micro-captive”) advisory services business has been under a promoter investigation by the IRS since 2013. Among other matters, the IRS is investigating whether we have been acting as a tax shelter promoter in connection with these operations. Additionally, the IRS is conducting a criminal investigation related to IRC 831(b) micro-captive underwriting enterprises. We have been advised that we are not a target of the criminal investigation. We are fully cooperating with both matters.
Previous wording
Fees- In 2023, our risk management operations, new core workers’ compensation and general liability claims arising improved from new clients coming on board in 2022 and 2023. We believe these favorable trends should continue for 2024, however, worsening economic conditions or a reversal in the number of workers employed, could cause fewer new liability and core workers’ compensation claims to arise in future quarters. Organic change in fee revenues was 16% in 2023 and 13% in 2022.
Current wording
Fees- In 2024, our risk management operations, new core workers’ compensation and general liability claims arising improved from new clients coming on board in 2024 and 2023. We believe these favorable trends should continue for 2025, however, worsening economic conditions or a reversal in the number of workers employed, could cause fewer new liability and core workers’ compensation claims to arise in future quarters. Organic change in fee revenues was 8% in 2024 and 16% in 2023.
Previous wording
Interest income and other income - Interest income and other income primarily represents interest income earned on cash, cash equivalents and fiduciary cash. Interest income and other income in 2023 increased compared to 2022 primarily due to increases in interest rates earned on fiduciary cash.
Current wording
Interest income and other income - Interest income and other income primarily represents interest income earned on cash, cash equivalents and fiduciary cash. Interest income and other income in 2024 increased compared to 2023 primarily due to increases in interest income from increases in interest rates earned on fiduciary cash and increased levels of fiduciary cash.
Previous wording
The $232.4 million increase in operating expense in 2023 compared to 2022, was primarily due to expenses associated with the acquisitions completed in the twelve-month period ended December 31, 2023 - $91.2 million, acquisition integration costs - $36.6 million, and an increase of $104.6 million in the aggregate from the return of, and underlying inflation of, advertising, travel, entertainment and other client-related expenses, professional fees, business insurance and additional investments in technology.
Current wording
The $21.3 million increase in operating expense in 2024 compared to 2023 was primarily due to expenses associated with the acquisitions completed in the twelve month period ended December 31, 2024 - $10.3 million, additional investments in technology and business insurance - $8.3 million, increases in workforce related charges - $1.4 million and acquisition integration costs - $1.3 million.
Previous wording
Depreciation - Depreciation expense decreased in 2023 compared to 2022, which reflects the impact of office consolidations that occurred as leases expired in 2023 and 2022 (less depreciation associated with furniture, equipment and leasehold improvements), partially offset by expenditures related to upgrading computer systems.
Current wording
Depreciation - Depreciation expense increased in 2024 compared to 2023, which reflects the impact of expenditures related to upgrading computer systems. partially offset by office consolidations that occurred as leases expired in 2024 (less depreciation associated with furniture, equipment and leasehold improvements). Also contributing to the increase in depreciation expense in 2024 was the depreciation expense associated with the acquisitions completed in 2024 and the latter part of 2023.
Previous wording
Amortization - Amortization expense increased in 2023 compared to 2022. The increase in amortization in 2023 compared to 2022 was primarily due to the impact of amortization expense of intangible assets associated with the acquisition completed in 2023. Based on the results of impairment reviews performed on amortizable intangible assets during 2023 and 2022, there were no impairments of amortizable assets related to the risk management segment.
Current wording
Amortization - Amortization expense increased in 2024 compared to 2023. The increase in amortization in 2024 compared to 2023 was primarily due to the impact of amortization expense of intangible assets associated with the acquisitions completed in 2024 and the later part of 2023 (My Plan Manager was completed in December 2023). Based on the results of impairment reviews performed on amortizable intangible assets during 2024 and 2023, there were no impairments of amortizable assets related to the risk management segment.
Previous wording
Change in estimated acquisition earnout payables - The change in expense from the change in estimated acquisition earnout payables in 2023 compared to 2022, were due primarily to adjustments made in 2023 and 2022 to the estimated fair value of an earnout obligation related to revised projections of future performance. During 2023 and 2022, we recognized $0.5 million and $0.8 million, respectively, of expense related to the accretion of the discount recorded for earnout obligations in connection with our 2020 to 2023 acquisitions, respectively. During 2023, there were no net adjustments in the estimated fair value of earnout obligations related to projections of future performance for acquisitions. During 2022, we recognized $8.2 million of income related to net adjustments in the estimated fair value of earnout obligations related to revised projections of future performance for three acquisitions.
Current wording
Change in estimated acquisition earnout payables - The change in estimated acquisition earnout payables in 2024 and 2023, primarily relates to accretion of discount in 2024 and 2023 relates to the estimated fair value of the earnout obligations. During 2024 and 2023, we recognized $0.4 million and $0.5 million, respectively, of expense related to the accretion of the discount recorded for earnout obligations in connection with our 2021 to 2024 acquisitions, respectively. During 2024 and 2023, there were no net adjustments in the estimated fair value of earnout obligations related to projections of future performance for acquisitions.
Previous wording
Provision for income taxes - We allocate the provision for income taxes to the risk management segment using local statutory rates. As of April 1, 2023, a U.K. corporate tax rate of 25% went into effect, making the full year effective rate 23.5%. The risk management segment’s effective tax rate in 2023 and 2022 was 26.4% and 26.3%, respectively. In first quarter of 2022, we increased our state effective income tax rate, which resulted in the overall U.S. effective income tax rate increasing from 25% to 26% and caused us to incur additional income tax expense. We anticipate reporting an effective tax rate on adjusted results of approximately 25.0% to 27.0% in our risk management segment based on known changes in tax rates in future periods.
Current wording
Provision for income taxes - We allocate the provision for income taxes to the risk management segment using local statutory rates. As of April 1, 2023, a U.K. corporate tax rate of 25% went into effect, making the 2023 full year effective rate 23.5%. The risk management segment’s effective tax rate in 2024 and 2023 was 26.6% and 26.4%, respectively. We anticipate reporting an effective tax rate on adjusted results of approximately 25% to 27% in our risk management segment based on known changes in tax rates in future periods.
Previous wording
The corporate segment reports the financial information related to our clean energy and other investments, our debt, certain corporate and acquisition-related activities and the impact of foreign currency remeasurement. See Note 14 to our 2023 consolidated financial statements for a summary discussion of the nature of our investments at December 31, 2023 and 2022. See Note 8 to our 2023 consolidated financial statements for a summary of our debt at December 31, 2023 and 2022.
Current wording
The corporate segment reports the financial information related to our debt, external acquisition-related expenses, other corporate costs and the impact of foreign currency remeasurement. See Note 7 to our 2024 consolidated financial statements for a summary of our debt at December 31, 2024 and 2023.
Previous wording
Revenues -Revenues in the corporate segment consist of the following:
Current wording
Revenues -Revenues in the corporate segment consist of other income related to the run-off of clean energy and legacy investments, and in 2024, some interest income related to the proceeds from the AssuredPartners financing.
Previous wording
Compensation expense - Compensation expense for 2023 and 2022 includes salary, incentive compensation, and associated benefit expenses of $135.3 million and $110.2 million, respectively. The change in 2023 compensation expense compared to 2022 was primarily due to growth in base compensation and increased incentive compensation, as well as transaction-related costs as described on page 54 in note (2).
Current wording
Compensation expense - Compensation expense for 2024 and 2023 includes salary, incentive compensation, and associated benefit expenses of $138.5 million and $135.3 million, respectively. The change in 2024 compensation expense compared to 2023 was primarily due to increased incentive compensation, which includes transaction‑related costs as described on page 56 in note (2) and increased costs associated with stock-based compensation, partially offset by savings in base compensation.
Previous wording
Operating expense for 2022 includes banking and related fees of $2.5 million, external professional fees and other due diligence costs related to 2022 acquisitions of $40.8 million, which includes specific transaction-related costs as described on page 54 in note (2), other corporate and clean energy related expenses of $44.4 million, including legal fees, and costs associated with the idling of the IRC Section 45 program and a net unrealized foreign exchange remeasurement gain of $30.6 million.
Current wording
Operating expense - Operating expense for 2024 includes banking and related fees of $3.1 million, external professional fees and other due diligence costs related to 2024 acquisitions of $38.5 million, which includes $22.8 million of transaction-related costs as described on page 56 in note (2), other corporate and clean energy related expenses, including litigation matters, technology and other professional fees of $70.1 million in aggregate, and a net unrealized foreign exchange remeasurement loss of $0.1 million.
Previous wording
Operating expense - Operating expense for 2023 includes banking and related fees of $3.1 million, external professional fees and other due diligence costs related to 2023 acquisitions of $33.8 million, which includes $17.6 million of transaction-related costs as described on page 54 in note (2), other corporate and clean energy related expenses, including litigation matters, technology and other professional fees - $113.3 million in aggregate, and a net unrealized foreign exchange remeasurement loss of $9.8 million.
Current wording
Operating expense for 2023 includes banking and related fees of $3.1 million, external professional fees and other due diligence costs related to 2023 acquisitions of $33.8 million, which includes $17.6 million of transaction-related costs as described on page 56 in note (2), other corporate and clean energy related expenses, including litigation matters, technology and other professional fees of $113.3 million in aggregate, and a net unrealized foreign exchange remeasurement loss of $9.8 million.
Showing the first 40 of 89 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Adjustments in 2024 and 2023 include costs associated with legal and tax matters as well as the impact of tax planning items associated with 2022 tax returns filed in 2023. Adjustments in 2023 include additional U.K. income tax expense related to the non‑deductibility of acquisition-related adjustments made during the year and costs associated with legal and tax matters.
Current report — wording carried from elsewhere
For example, in circumstances where our revenues are dependent on a full calendar year loss ratio, adverse loss experience in the fourth quarter could not only negate revenue earnings in the fourth quarter, but also trigger the need to reverse revenues previously recognized during the prior quarters. Variable consideration is recognized when we conclude, based on all the facts and information available at the reporting date, that it is probable that a significant revenue reversal will not occur in future periods.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Clean energy related, which represents the resolution of various partnership matters related to our clean energy investments.
Previous report — wording carried elsewhere
On March 2, 2023, we closed and funded an offering of $950.0 million of unsecured senior notes in two tranches. The $350.0 million aggregate principal amount of 5.50% Senior Notes are due 2033 (which we refer to as the 2033 Notes) and $600.0 million aggregate principal amount of 5.75% Senior Notes are due 2053 (which we refer to as the 2053 Notes). The weighted average interest rate is 5.05% per annum after giving effect to underwriting costs and a net hedge gain. During 2019 through 2022, we entered into a pre‑issuance interest rate hedging transaction related to these notes. We realized a net cash gain of approximately $112.7 million on the hedging transactions that will be recognized on a pro rata basis as a decrease to our reported interest expense over ten years. We used the proceeds of these offerings to fund acquisitions and earnout payments related to acquisitions and general corporate purposes.
Previous report — wording carried elsewhere
The decrease in royalty income in 2023 compared to 2022 was due to the IRC Section 45 program expiring as of December 31, 2021.
Previous report — wording carried elsewhere
Daily Floating Rate, Term SOFR, Alternative Currency Daily Rate or Alternative Currency Term Rate, as defined in the Credit Agreement, plus a margin of 0.775% to 1.375%, depending on the rating of our long-term senior unsecured debt. The annual facility fee related to the Credit Agreement is between 0.100% and 0.250% of the revolving credit commitment, depending on the rating of our long-term senior unsecured debt. Subject to certain conditions stated in the Credit Agreement, we may borrow, prepay and reborrow amounts under the Credit Agreement at any time during the term of the Credit Agreement. Funds borrowed under the Credit Agreement may be used for general corporate and working capital purposes of the Company and its subsidiaries.