Arthur J. Gallagher & Co. Q3 FY2025 earnings call

• Revenue growth strategy: Organic and M&A drove 20% revenue growth in Q3, 19th straight quarter of double-digit growth. - Brokerage segment organic: Retail P&C U.S. up over 7%, international flat; Employee Benefits ~1% organic; Wholesale and specialty 5% organic; Reinsurance high single-digit organic. - P&C insurance pricing: Global renewal premiums positive, property renewals down due to competition, casualty up offsetting property decreases. - M&A: Since AssuredPartners close in August, dozens of Gallagher leaders have integrated with AP, 5 new mergers completed with ~$40M annualized revenue, year-to-date acquired revenue over $3.4B. Pipeline has ~35 term sheets for ~$400M annualized revenue. - Culture: Emphasis on Gallagher Way, teamwork and shared purpose driving success.

Brokerage segment: Reported revenue growth 22%, organic growth 4.5%. Adjusted EBITDAC margin 33.5% flat YoY but underlying margin expansion of 60 basis points when excluding M&A and interest income. Retail operations had 5% organic overall, P&C U.S. up over 7%, international flat; Employee Benefits ~1% organic. Wholesale and specialty businesses had 5% organic, U.S. outperforming international; Reinsurance had high single-digit organic. AssuredPartners' third quarter organic was 5%. Risk Management segment (Gallagher Bassett): Third quarter revenue growth 8%, organic 6.7%. Expecting ~7% organic growth in Q4, third quarter adjusted EBITDAC margin 21.8%, with fourth quarter and full year margins around 21%.

• Brokerage segment Q4 organic expected around 5%, full year organic over 6%. - Gallagher Bassett expects ~7% organic growth in Q4, full year margins around 21%. - Year-to-date M&A acquired revenue over $3.4B, ~30% of 2024 revenue. - AssuredPartners integration showing early success with selling together.

• Timing aberrations from AssuredPartners integration affecting revenue accounting. - Seasonality impacts on AssuredPartners' business. - Potential market fluctuations affecting contingents and lumpy life sales in Brokerage segment.

Q: My first question, I want to start on AssuredPartners. When we're thinking about, well, I guess, new business by AP, I'm assuming that, that's in the M&A line, but then what about synergies? Is that -- does that fall in the M&A line? Or is that something when they start coming online that will be included within organic revenue growth?

A: Well, the revenue synergies that we get out -- get from -- that goes into the AssuredPartners P&Ls will be given credit to them, not to us. If there is something that we would book, for instance, a broader base contingent commission or supplemental that impacts our books, that would go into the legacy Gallagher organic growth. So to a certain extent, if we pick up some more on the AssuredPartners book of business, that would not -- that would understate organic revenues. Does that help?

Q: And then my last one is on M&A. When you guys talk about the pipeline, I'm assuming that's now like a combined Gallagher and AP pipeline? And how has -- now that you guys have closed on the AssuredPartners acquisition, how has, I guess, the M&A from their side of the house? How is it like added to the pipeline as well as just when you think out about kind of your bolt-on M&A over the course of like the next year or 2?

A: Elyse, give us a couple of weeks on that. I mean we just really got closed, and we're kind of getting around that. As I said, we've been doing a lot of visits. We're going to have most of their folks in the field come to the home office over the next 1.5 months or so. And that pipeline has not been yet put into our pipeline report. They did have a good pipeline. Things we're working along. And of course, we're going to bring them together with our M&A people. But I don't have a real good handle on that yet. We're hopeful that, that business and those opportunities will roll that over to us, but I haven't seen that yet.