Arthur J. Gallagher & Co. · NYSE:AJG
Arthur J. Gallagher & — Gallagher Arthur J & — Shareholder Meeting (May 2016)
51 slides from Arthur J. Gallagher &'s shareholder meeting presentation, May 17, 2016
Slide 1: 2016 Annual Stockholders Meeting
2016 Annual Stockholders Meeting Exhibit 99.1 Tuesday, May 17, 2016
Slide 2: Stockholders' Meeting Agenda
Stockholders’ Meeting – May 17, • 2016 Annual Meeting • Chairman’s Remarks 2015 Review Closing Comments • Questions & Answers
Slide 3: Please turn off all cell phones
Stockholders’ Meeting – May 17, Please turn off all cell phones. All audio and video recording is prohibited.
Slide 4: 2016 Board of Directors
2016 Board of Directors • Sherry S. Barrat • William L. Bax • D. John Coldman • Frank E. English, Jr. • Elbert O. Hand • David S. Johnson • Kay W. McCurdy • Ralph J. Nicoletti • Norman L. Rosenthal, Ph.D.
Slide 5: 2016 Annual Meeting
Stockholders’ Meeting – May 17, • 2016 Annual Meeting
Slide 6: Chairman's Remarks and 2015 Review
Stockholders’ Meeting – May 17, • 2016 Annual Meeting • Chairman’s Remarks 2015 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,” “will,”
Slide 8: Information Regarding Non-GAAP Measures
Information Regarding Non-GAAP Measures This presentation includes references to Adjusted EBITDAC, Adjusted EBITDAC margin, Adjusted Revenues, Adjusted Operating Expense Ratio and Organic Growth, which are measures not in accordance with, or an alternative to, the GAAP information provided herein. E
Slide 9: Who We Are
• Founded in 1927 • Public since 1984 – 32 years ago • One of the World’s Leading Insurance Brokers * • One of the world’s largest P&C third-party administrators * Who We Are KEY FACTS KEY SHAREHOLDER DATA 3.2 % $ 0.38 52-Week Range*** $ 49.59 Hi $ 35.96 Lo Outstanding Shares 176.9 M $ 4.0+ B Acquir
Slide 10: Snapshot of Core Operations
• 82% of revenue* • We sell insurance and consult on insurance programs • P&C and benefits • Retail and wholesale • Primarily middle-market commercial clients and individuals • 77% of revenue* is commissions – 23% is fee-based • 18% of revenue* • We adjust claims and help companies and carriers redu
Slide 11: Diverse Revenue Base
Diverse Revenue Base RISK MANAGEMENT* BROKERAGE* *Brokerage and Risk Management adjusted revenue for the year ended December 31, 2015. 59% 24% 17% WHOLESALE RETAIL P/C RETAIL BENEFITS 64% 36% DOMESTIC INTERNATIONAL 69% 27% 4% PROPERTY WORKERS COMPENSATION LIABILITY 81% 19% DOMESTIC INTERNATIONAL
Slide 12: Brokerage Segment
$2,795 $3,317 4.3% 3.6% $710 $867 25.4% 26.1% Brokerage Segment – (in $M) See important disclosures regarding Non-GAAP measures on Page 3. $2,500 $3,000 $3,500 ADJUSTED REVENUES 19% 2.0% 4.0% 6.0% 8.0% TOTAL ORGANIC GROWTH $600 $700 $800 $900 $1,000 ADJUSTED EBITDAC 22% 23.0% 24.0% 25.0% 26.0% 27.0%
Slide 13: Risk Management Segment
$660 $728 $107 $126 16.1% 17.3% 9.5% 11.3% (in $M) Risk Management Segment – 10% 18% See important disclosures regarding Non-GAAP measures on Page 3. $625 $650 $675 $700 $725 $750 ADJUSTED REVENUES $90 $100 $110 $120 $130 $140 ADJUSTED EBITDAC 12.0% 14.0% 16.0% 18.0% 20.0% ADJUSTED EBITDAC MARGIN 5.
Slide 14: Brokerage & Risk Management Combined
$3,455 $4,045 5.5% 5.1% $816 $993 23.6% 24.5% Brokerage & Risk Management Combined – (in $M) See important disclosures regarding Non-GAAP measures on Page 3. 17% 22% $2,800 $3,200 $3,600 $4,000 $4,400 ADJUSTED REVENUES 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% TOTAL ORGANIC GROWTH $600 $700 $800 $900 $1,000 $1,
Slide 15: Adjusted Net Earnings from Clean Energy Investments
$32.7 $63.7 $90.5 $100.9 Adjusted Net Earnings from Clean Energy Investments (in $M) Excludes non-cash after tax gain of $14.1m from a re-consolidation accounting gain, related to clean-energy investments, recorded in 2014. -$4.8 $7.5 $3.9 -$10.0 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0
Slide 16: Dividends Per Share
Dividends Per Share *Indicated – On January 28, 2016, Gallagher’s Board of Directors declared a $.38 per share first-quarter 2016 dividend. $1.52* $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60
Slide 17: 2015 Business Highlights
2015 Business Highlights Brokerage & Risk Management growth: • 17% adjusted revenue growth • 22% adjusted EBITDAC growth • 92 bps margin improvement • 5.1% total organic growth M&A growth: $230.8m in acquired revenues • WGA - New England Platform • +43 additional - avg $3.6m in revenue • Returning t
Slide 18: Where We're Going
• Improving new business production • Continuing tuck-in M&A • Increasing global brand recognition • Completing large U.K. M&A integration • Leveraging internal resources across divisions • To be premier provider of claims management services with superior outcomes • Increasing global presence in cl
Slide 19: Indicators for U.S. P/C Carriers – Shallow Rate Environment
Source for calendar year combined ratio data: AM Best. Using 9 month 2014 data as of 01/29/15. 2012 and prior excludes certain large mortgage insurance and personal lines companies. Indicators for U.S. P/C Carriers – Shallow Rate Environment INVESTMENT YIELDS STATUTORY SURPLUS ($Billions) months 201
Slide 20: Commercial P&C Pricing Shows Shallow Cycle
CPI Rates Commercial P&C Pricing Shows Shallow Cycle Commercial Rate Index reflects the cost of P&C premiums relative to the year 2000. Constructed using Counsel of Insurance Agents and Brokers (CIAB) data. CPI index uses data from the Bureau of Labor Statistics.
Slide 21: Shows Shallow Pricing Cycle
Shows Shallow Pricing Cycle -2.9% -0.1% 0.9% 2.7% 4.4% 4.3% 3.9% 5.0% 5.2% 4.3% 3.4% 2.1% 1.5% -0.5% 0.1% -0.7% -2.3% -3.3% -3.1% -2.8% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% CIAB - Change in Average Commercial Rates
Slide 22: Gallagher Sales Culture Performs Through Any Pricing Cycle
Gallagher Sales Culture Performs Through Any Pricing Cycle Hard Market Shallow Market CIAB is the 4 quarter average. Gallagher’s Brokerage Segment Organic Growth excluding Contingent Commissions. See important disclosures regarding Non-GAAP measures on Page 3. 14.0% 16.0% 10.0% 2.0% 2.0% 5.0% 2.0% -
Slide 23: Shallow Rate Cycle Is Better for:
Shallow Rate Cycle Is Better for: CLIENTS CARRIERS & BROKERS
Slide 24: How We're Getting There – Consistent Growth Strategy
How We’re Getting There-Consistent Growth Strategy
Slide 25: Consistent Growth Strategy – Organic
Consistent Growth Strategy – Organic
Slide 26: Driving Brokerage Organic Growth
Driving Brokerage Organic Growth
Slide 27: Niche Expertise Teams – Brokerage
Niche Expertise Teams – Brokerage Aviation & Aerospace Automotive Agribusiness Real Estate Manufacturing Global Risks Construction Personal Marine Life Solutions Life Sciences Hospitality Higher Education Healthcare Environmental Entertainment Energy Private Equity Professional Groups Public Entity
Slide 28: Driving Risk Management Organic Growth
Driving Risk Management Organic Growth
Slide 29: Risk Mgmt Growth Focuses on Four Market Segments
ALTERNATIVE MARKET PARTICIPANTS LARGE COMMERCIAL ENTITIES PUBLIC SECTOR ENTITIES INSURANCE CARRIERS Risk Mgmt Growth Focuses on Four Market Segments
Slide 30: Consistent Growth Strategy – M&A
Consistent Growth Strategy – M&A
Slide 31: Annualized Revenues Acquired – 2015 Acquisition Revenue Growth
Annualized Revenues Acquired (in $M’s) 2015 –Acquisition Revenue Growth Domestic Property & Casualty Foreign Property & Casualty Employee Benefits Risk Management
Slide 32: M&A Opportunities Continue
Vast Pipeline Domestic and international markets highly fragmented 18,000+ agents/ brokers just in the U.S. Baby boomers looking for exit strategy Need Gallagher’s expertise Acquisition Units Retail P&C Wholesale Benefits International MGA MGU Captive Limited Consolidators Core Competency Culture Pr
Slide 33: Platforms In Place for Bolt-on M&A
Platforms In Place for Bolt-on M&A
Slide 34: Client Capabilities in Countries
Client Capabilities in 150 Countries International Correspondent Broker Network
Slide 35: Productivity and Quality Initiatives
Productivity and Quality Initiatives
Slide 36: Focus Continues: Optimizing Productivity & Quality
Utilizing Offshore Centers of Excellence Controlling Headcount Building Productivity Tools – DMS and Workflow Optimizing Real Estate Footprint Investing in Business Intelligence Leveraging Sales Force Management Tools Utilizing Offshore Centers of Excellence Controlling Headcount Utilizing Sourcing
Slide 37: Benefits Continue: From Offshore Centers of Excellence
Increase Speed to Market Foster Innovation Reduce Costs Focus on Core Improve Quality Benefits Continue: From Offshore Centers of Excellence
Slide 38: Client-Facing Efforts
Client-Facing Efforts BUILDING CLIENT SERVICE OPERATIONS • Process and deliver consistent client service • Technology and tools improve operating efficiencies • Staffed by dedicated service professionals that: Generate client applications and proposals Handle client requests Manage renewal cycles •
Slide 39: Behind the Scenes Efforts
Behind the Scenes Efforts OFFSHORE CENTERS OF EXCELLENCE UPDATE • We now have more than 2,400 associates in four locations • Utilized for processes such as: Policy checking Policy issuance Certificates of insurance Renewal support Claims support Accounting support • Substantially improved quality an
Slide 40: Efficiency Improvements Drive Quality and Service
EFFICIENCY IMPROVEMENTS DRIVE QUALITY AND SERVICE Quality Metrics on Target Reduced policy delivery from 30 to 10 days Achieved 99% quality rate Reduced certificate of insurance delivery expense by 20+% Improved quality rate to 99.5% and reduced delivery time from 2 hours to 1 hour Standardized poli
Slide 41: Reduced Adjusted Operating Expense Ratio
20.8% 17.3% 27.0% 24.4% Reduced Adjusted Operating Expense Ratio BROKERAGE RISK MANAGEMENT See important disclosures regarding Non-GAAP measures on Page 3. 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 22.0% 23.0% 24.0% 25.0% 26.0% 27.0% 28.0%
Slide 42: Brokerage & Risk Mgmt Adjusted EBITDAC Margin
20.4% 21.2% 22.1% 23.6% 24.5% Brokerage & Risk Mgmt Adjusted EBITDAC Margin See important disclosures regarding Non-GAAP measures on Page 3. 18.0% 19.0% 20.0% 21.0% 22.0% 23.0% 24.0% 25.0%
Slide 43: Ranked Highest in Customer Satisfaction among Brokers
• Quality of advice/guidance provided • Reasonableness of fees • Ease of the renewal process • Variety of program offerings • Effectiveness of program review • Claims process Ranked “Highest in Customer Satisfaction among Brokers for Large Commercial Insurance” According to the Large Commercial Insu
Slide 44: Relentless Focus on Quality and Customer Service
Relentless Focus on Quality and Customer Service Best Companies for Leaders – CHIEF EXECUTIVE MAGAZINE America’s Best Employers – FORBES MAGAZINE Voted Best UK Broker for Service – STRATEGIC RISK’S UK FTSE SURVEY Best TPA in Casualty Claims Handling – ADVISEN CLAIMS SATISFACTION SURVEY UK Employee B
Slide 45: Arthur J. Gallagher & Co.
@& Anthur | Gallacher s Co
Slide 46: Shared Values at Arthur J. Gallagher & Co.
> Arthur J. Gallagher & ‘Shared values at Athur J. Gallagher 8 Co, are the rock foundation of the Company and our Culture. ‘What is a Shared Value? These are concepts thatthe vast majority of the movers and shakers in the Company passionately adhere to. What are some of Arthur J. Gallagher & Co.'s S
Slide 47: One of the World's Most Ethical Companies
One of the World’s Most Ethical Companies as Recognized by Ethisphere four years in a row • 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 Demonst
Slide 48: Why Invest?
Why Invest? You Believe Our Company Has: • Right management • Unique culture • Proven growth strategy • Continuing M&A opportunities • Increasing productivity • Higher quality • Good use of leverage • Strong balance sheet • Excellent return to shareholders GALLAGHER IS WELL POSITIONED FOR FUTURE GRO
Slide 49: Why Invest? We Are Just Getting Started
S&P 500 Why Invest? We Are Just Getting Started Source for data: Bloomberg. Total returns from 1/1/2000 – 12/31/2015 include reinvestment of dividends. 352% AJG 86%
Slide 50: Questions & Answers
Marsha Akin Director – Investor Relations 630-285-3501 For Additional Information: Marsha_Akin@ajg.com Questions & Answers
Slide 51: Appendix: EBITDAC and Organic Growth Reconciliations
Appendix: EBITDAC and Organic Growth Reconciliations 15COR23863C Brokerage Segment Risk Management Segment Corporate Segment Total Company Reconciliation of EBITDAC to Net Earnings Net earnings 268.1 $ 263.8 $ 57.2 $ 42.1 $ 63.8 $ 21.6 $ 389.1 $ 327.5 $ Provision (benefit) for income taxes 145.3 151
Gallagher Arthur J & — Shareholder Meeting (May 2016) on 6ix