Arthur J. Gallagher & Co. Q1 FY2025 earnings call

• Combined segments performance: Combined Brokerage and Risk Management segments had 14% revenue growth, 9% organic growth, net earnings margin 23%, adjusted EBITDAC margin 41.1% (up 338 basis points year-over-year), adjusted EBITDAC growth 26% (20th consecutive quarter of double-digit growth), GAAP earnings per share of $3.29 and adjusted earnings per share of $4.16.
• M&A activity: Completed 11 new tuck-in mergers in Q1 (~$100 million of estimated annualized revenue), announced and completed acquisition of Woodruff Sawyer in early April, pipeline has over 40 term sheets signed or being prepared representing north of $450 million of annualized revenue.
• P/C insurance market: Global P/C market rational, carriers growing in acceptable return lines and seeking rate increases where needed. Renewal premium changes: property down 2%, D&O down 3%, workers’ comp up 5%, personal lines up 8%, casualty lines up 8% overall; divergence between small to midsize accounts (renewal premiums up 5%) and large accounts (up 1%).
• Reinsurance market: First quarter influenced by January 1 renewals, generally favored reinsurance buyers, Gallagher Re had excellent retention and new business wins, April renewals had downward pricing pressure.
• Customers’ business activity: Daily revenue indications from audits, endorsements, cancellations net positive, no signs of meaningful global economic slowdown, U.S. labor market strong, health insurance utilization and cost increasing, employers looking for workforce growth and benefit cost control.
• Gallagher culture: Unique Gallagher culture on display at Global Sales Award meeting, people and culture are key assets.

Brokerage segment

• Reported revenue growth was 16%. Organic growth was 9.5%, including about 1 point of favorable timing. Without timing impact, all-in organic was in line with expectations. Adjusted EBITDAC margin expanded 359 basis points to 43.4%. Retail P/C operations: U.S. organic north of 5%, international (UK, Canada, Australia, New Zealand) closer to 4%. Global employee benefit brokerage and consulting business posted organic of more than 7%. Reinsurance, wholesale and specialty businesses had organic of 13%, including 20% organic from Gallagher Re and 8% from wholesale and specialty businesses.

Risk Management segment (Gallagher Bassett)

• First quarter revenue growth was 6%, including organic of about 4%. Adjusted EBITDAC margin was 20.5%. Full year 2025 organic is expected in the 6% to 8% range and margins around 20.5%.

• Brokerage segment full year 2025 organic in the 6% to 8% range.
• Risk Management segment full year 2025 organic in the 6% to 8% range and margins around 20.5%.
• Expect to close the AssuredPartners acquisition in the second half of 2025.
• Brokerage segment adjusted EBITDAC margin expansion expected based on organic growth, with underlying margin expansion potential at organic >4%, 6% organic ~60 basis points expansion, 8% organic ~100 basis points expansion.

• Forward-looking statements subject to risks and uncertainties in securities laws, actual results may differ from forward-looking statements.
• P/C insurance market sensitive to cat losses, property market fragile, potential impact on pricing.
• AssuredPartners acquisition subject to DOJ review process, timing and outcome uncertain.

Q: Elyse Greenspan asked about 20% growth in reinsurance, breakdown of pricing, retention, new demand; status of DOJ response to AssuredPartners acquisition; timing impact on first quarter.

A: J. Patrick Gallagher, Jr. broke down reinsurance growth, Doug Howell discussed DOJ response timeline and timing impact details.

Q: Greg Peters asked about pending AssuredPartners acquisition, organic profile comparison to retail business.

A: J. Patrick Gallagher, Jr. said acquisition has gotten stronger, Doug Howell said AssuredPartners' organic profile is similar to retail.

Q: Mike Zaremski asked about Brokerage organic timing benefit, RPC stat, difference between organic and RPC.

A: Doug Howell explained timing benefit and RPC related details, J. Patrick Gallagher, Jr. talked about company changes and tools contributing to organic growth.

Q: Mark Hughes asked about workers’ comp growth, property market outlook.

A: J. Patrick Gallagher, Jr. and Doug Howell discussed workers’ comp factors and property market sensitivity to cat losses.

Q: David Motemaden asked about RPC trends, difference between middle market and large account property books, 1Q organic in U.S. retail.

A: Doug Howell and J. Patrick Gallagher, Jr. answered on RPC outlooks, account buying power, and U.S. retail organic.

Q: Katie Sakys asked about Brokerage organic growth cadence and EBITDAC multiple of tuck-ins.

A: Doug Howell discussed growth cadence and tuck-in multiple details.

Q: Andrew Andersen asked about supplemental commissions in Brokerage, growth difference between open brokerage and MGA in specialty.

A: Doug Howell and J. Patrick Gallagher, Jr. answered on supplemental commissions and specialty growth.

Q: Meyer Shields asked about Gallagher Re impact on retail and culture, sensitivity of large account revenue growth to cycle.

A: J. Patrick Gallagher, Jr. and Doug Howell talked about Gallagher Re's positive impact and large account revenue growth characteristics.

Q: Cave Montazeri asked about clients' impact of tariffs, international organic growth regional color, international M&A appetite.

A: J. Patrick Gallagher, Jr. and Doug Howell answered on tariff impacts, international organic growth regions, and international M&A appetite.