Arthur J. Gallagher & Co. · NYSE:AJG
Arthur J. Gallagher & — Gallagher Arthur J & — Shareholder Meeting (May 2014)
49 slides from Arthur J. Gallagher &'s shareholder meeting presentation, May 13, 2014
Slide 1: Annual Stockholders Meeting
Exhibit 99 Annual Stockholders Meeting Tuesday, May 13, 2014
Slide 2: Stockholders' Meeting May 13, 2014
Stockholders’ Meeting May 13, 2014 • 2014 Annual Meeting • Chairman’s Remarks 2013 Review Closing Comments • Questions & Answers
Slide 3: 2014 Board of Directors
2014 Board of Directors • Sherry S. Barrat • William L. Bax • Frank E. English, Jr. • Elbert O. Hand • David S. Johnson • Kay W. McCurdy • Norman L. Rosenthal, Ph.D.
Slide 4: James R. Wimmer
James R. Wimmer • As a partner at Lord, Bissell & Brook, provided legal advice and guidance for Gallagher’s initial public offering in 1984 • Joined Gallagher’s Board of Directors in • Served as a member of the Board’s Audit Committee, Compensation, Compliance and Nominating/Governance Committee • C
Slide 5: Stockholders' Meeting May 13, 2014
Stockholders’ Meeting May 13, 2014 • 2014 Annual Meeting
Slide 6: Stockholders' Meeting May 13, 2014
Stockholders’ Meeting May 13, 2014 • 2014 Annual Meeting • Chairman’s Remarks 2013 Review
Slide 7: Information Regarding Forward-Looking Statements
Information Regarding Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this presentation, the words “anticipates,” “believes,” “contemplates,” “see,” “should,” “could,” “estimat
Slide 8: Information Regarding Non-GAAP Measures
Information Regarding Non-GAAP Measures Earnings Measures - Gallagher believes that each of Adjusted EBITDAC and Adjusted EBITDAC margin, as defined below, provides a meaningful representation of its operating performance and Reconciliations – Please see the examples set forth in "Reconciliation of
Slide 9: Brokerage Segment
Brokerage Segment – (in $M) See important disclosures regarding Non-GAAP measures on Page 8. $1,824 $2,139 $1,500 $1,750 $2,000 $2,250 Adjusted Revenues 17% $413 $511 $250 $350 $450 $550 Adjusted EBITDAC 24% 4.4% 5.6% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% Organic Growth in Base Commissions & Fees 22.7%
Slide 10: Risk Management Segment
Risk Management Segment – (in $M) See important disclosures regarding Non-GAAP measures on Page 8. $90 $96 $75 $80 $85 $90 $95 $100 Adjusted EBITDAC 6% $563 $610 Adjusted Revenues 8% 4.0% 9.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Organic Growth in Fees 16.0% 15.8% 0.0% 5.0% 10.0% 15.0% 20.0% Adjusted EBIT
Slide 11: Brokerage & Risk Mgmt Combined
Brokerage & Risk Mgmt Combined – (in $M) See important disclosures regarding Non-GAAP measures on Page 8. $2,200 $2,400 $2,600 $2,800 Adjusted Revenues 15% 4.0% 6.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Organic Growth in Base Commissions & Fees $503 $607 $400 $500 $600 $700 Adjusted EBITDAC 21% 21.1% 22.1%
Slide 12: Net Earnings from Clean Energy Investments
Net Earnings from Clean Energy Investments (in $M) -$10.0 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 -$4.8 $7.5 $3.9 $32.7 $63.7
Slide 13: Dividends Declared as % of Cash Flows from Operating Activities
Dividends Declared as % of Cash Flows from Operating Activities 62% 52% 0% 25% 50% 75% 100%
Slide 14: Dividends Per Share
Dividends Per Share $1.44* $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 *Indicated – On January 23, 2014, Gallagher’s Board of Directors declared a $.36 per share first-quarter 2014 dividend.
Slide 15: Recap – What We Delivered in 2013
What we said What we did Recap – What We Delivered in 2013 See important disclosures regarding Non-GAAP measures on Page 8. Improve organic growth in Brokerage & Risk Management M&A pipeline extremely full and look for partners that help build out geographic/niche/program presence Driving operationa
Slide 16: Recap – What We Delivered in 2013
What we said What we did Recap – What We Delivered in 2013 See important disclosures regarding Non-GAAP measures on Page 8. Complete Heath integration Heath integration completed in 3Q as planned GB – IT investments without margin contraction Enhanced client service capabilities like analytics workb
Slide 17: MERGERS AND
MERGERS AND orcanc Pa GROWIH) P MAINTAIN oo ~~ \\ UNQUE PRODUCTIVITY =) CULTURE AND QUALITY 4]
Slide 18: Driving Organic Growth
Organic Growth Enhance Carrier Compensation Global Expansion Grow Our Own Hire Experienced Teams Focus Into Niches Provide Sales Mgmt. Tools and Training Cross Selling Driving Organic Growth
Slide 19: Gallagher's Sales Culture Performs Throughout the Entire Cycle
Gallagher’s Sales Culture Performs Throughout the Entire Cycle Hard Market Firm Market 2013 CIAB is YTD as of 3Q. Gallagher’s Brokerage Segment Organic Growth including Supplemental Commissions. See important disclosures regarding Non-GAAP measures on Page 8. 14.0% 16.0% 10.0% 2.0% 2.0% 5.0% 2.0% -0
Slide 20: My MERGERS AND
My MERGERS AND RPA 2 CQUISITIONS GROWTH MAINTAIN | UNIQUE | PRODUCTIVITY CULTURE AND QUALITY
Slide 21: M&A Looking Forward – Opportunities Continue
Limited Consolidators Gallagher Acquisition Units Gallagher’s Core Competency Vast Pipeline 18,000 agents/brokers in the U.S. Baby boomers looking for exit strategy Need Gallagher’s Expertise Gallagher Culture Proven History of Doing the Deal Ability to Integrate MGA MGU Captive Domestic and Interna
Slide 22: Current Gallagher U.S. Locations
Current Gallagher U.S. Locations
Slide 23: Larger Cities with Expansion Potential
Larger Cities with Expansion Potential Cities with population of 100,000+ where Gallagher has no presence.
Slide 24: Client Capabilities in More Than Countries
Client Capabilities in More Than 140 Countries International Correspondent Brokers
Slide 25: Strong Acquisition Momentum
Strong Acquisition Momentum Annualized revenues acquired (in $Ms). Domestic Brokerage 2011 Heath Lambert; 2013 Bollinger and Giles Int’l Brokerage Risk Management $0 $50 $100 $150 $200 $250 $300 $350 $400
Slide 26: Results of Gallagher Focus on International Expansion
Results of Gallagher focus on International Expansion International Expansion • Position Gallagher as a top 5 U.K. broker • Strengthen Gallagher’s retail distribution platform and underwriting footprint in the U.K. • Expanding scale outside London • Complement and strengthen niche practice groups –
Slide 27: Bollinger, Inc. August 2013
Bollinger, Inc. August 2013 Bollinger Strategic Rationale • Expanding Gallagher’s Northeastern footprint particularly in New Jersey and New York • Combining two very similar cultures • Assimilating Bollinger’s parallel operations into three core businesses • Complementing and expanding specialized n
Slide 28: Giles Group of Companies November 2013
Giles Group of Companies November 2013 Giles Strategic Rationale Significantly expanding Gallagher’s client base in the U.K. middle market Adding significant growth in Gallagher’s underwriting footprint Similar team-based sales cultures Driving longer-term operational efficiencies through a consolid
Slide 29: Oval Group of Companies April 2014
Oval Group of Companies April 2014 Oval Strategic Rationale • Builds on the Giles acquisition and establishes Gallagher as a top three U.K. retail commercial broker • Significantly expands Gallagher’s retail client base in the U.K. middle market • Shared culture that focuses on enhancing client serv
Slide 30: OAMPS and Crombie Lockwood April 2014
OAMPS and Crombie Lockwood April 2014 Wesfarmers Strategic Rationale • Gives Gallagher scale in Australia and New Zealand with one of the largest insurance brokers in the region • Platform for future growth in Australasia – combined organization will be attractive to potential partners • Strong sale
Slide 31: MERGERS AND
MERGERS AND ORGANIC (<a, ACQUISTIONSS”> GROWTH | i | MAINTAIN \ UNIQUE © CULTURE
Slide 32: Optimizing Productivity & Quality
Improving Productivity and Quality Leveraging Sales Force Management Tools Established Offshore Centers of Excellence Controlling Headcount Utilizing Sourcing to Manage Expenses Building Productivity Tools – DMS and Workflow Standardizing Processes and Systems Optimizing Real Estate Footprint Invest
Slide 33: Back Office Infrastructure
Back Office Infrastructure –
Slide 34: General Ledger – Corporate Systems
GENERAL LEDGER Corporate Systems PLANNING
Slide 35: Current Front Office Activity
Current Front Office Activity
Slide 36: Reasons for Offshore Centers of Excellence
Reasons for Offshore Centers of Excellence Foster Innovation Increase Speed to Market Improve Quality Reduce Costs Focus on Core
Slide 37: Efficiency Improvements Drive Quality
Efficiency Improvements Drive Quality Quality Metrics Reduced policy delivery from 30 to 10 days Achieved 98% quality rate Reduced certificate of insurance delivery expense by 20% Improved quality rate to 99% Implemented claims adjusters enhanced quality audit programs Realized 20% improvement on ad
Slide 38: Reducing Adjusted Operating Expense Ratio
Reducing Adjusted Operating Expense Ratio Brokerage Risk Management See important disclosures regarding Non-GAAP measures on Page 8. 20.8% 16.7% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 22.0% 27.0% 23.9% 23.0% 24.0% 25.0% 26.0% 27.0% 28.0%
Slide 39: 2013 Awards and Recognition
AJG – 2013 Ins Broking CEO of the Year - Reactions Magazine AJG Risk Mgmt – 2013 Risk Mgmt Provider of the Year – Midcontinent Oil & Gas Awards AJG U.K. Retail – 2013 Commercial Lines Broker of the Year – Insurance Times AJG Intl/OIM – 2013 E-Business Award – Insurance Age GB US – 2013 Best Commerci
Slide 40: MERGERS AND
MERGERS AND ORGANIC (= GROWTH xf MAINTAIN eres UNIQUE RODUCTIVITY gx AND QUALITY
Slide 41: Shared Values at Arthur J Gallagher & Co
‘Shared values at Arthur J Gallagher & Co, ae the rock foundation ofthe Company and our Culture, What i a Shared Value? These ae concepts thatthe vast majority ofthe movers and shakers inthe Company passionately adhere to. What are some of Arthur J Gallagher & Coe Shared Valves? 1. Wearea Sales and
Slide 42: One of the World's Most Ethical Companies
One of the World’s Most Ethical Companies as Recognized by Ethisphere • Industry-leading commitment to ethics and dedication to integrity • Chosen for: Promoting ethical business standards and practices Exceeding legal compliance standards Innovating to benefit the public Demonstrating that corporat
Slide 43: Recognized again by Ethisphere as One of the World's Most Ethical Companies
Recognized again by Ethisphere as One of the World’s Most Ethical Companies
Slide 44: Top Ten Best Company for Leadership Development
A Top Ten Best Company for Leadership Development As Recognized by Chief Executive Magazine – • Recognized for: High percentage of senior and mid-manager positions filled internally Formal leadership process Commitment to leadership development program
Slide 45: Why Invest?
Why Invest? You Believe Our Company Has: Right management Unique culture Proven growth strategy Continuing M&A opportunities Increasing productivity Higher quality Prudent debt Strong balance sheet Excellent return to shareholders Gallagher is well positioned for 2014 and beyond
Slide 46: Why Invest? We are Just Getting Started
Why Invest? We are Just Getting Started AJG 386% S&P 500 64% -100% -50% 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% Source for data: Bloomberg. Total returns from 1/1/2000 – 12/31/2013 include reinvestment of dividends.
Slide 47: Stockholders' Meeting May 13, 2014
Stockholders’ Meeting May 13, 2014 • 2014 Annual Meeting • Chairman’s Remarks 2013 Review Closing Comments
Slide 48: Gallagher's Anniversary of IPO
Gallagher’s Anniversary of IPO June 20, 2014 • IPO stock price: $1.84 • Number of employees: 1,026 • Operations in three countries • Total revenues of $64.18 million • largest insurance broker* • Stock price at 12/31/13: $46.93 • Number of employees: 16,336 • Operations in 25 countries • Total reven
Slide 49: Questions & Answers
Marsha Akin Director – Investor Relations Marsha_Akin@ajg.com Questions & Answers For Additional Information: Phone: 630-285-3501
Gallagher Arthur J & — Shareholder Meeting (May 2014) on 6ix