Arthur J. Gallagher & Co. · NYSE:AJG

Arthur J. Gallagher & — Q3 2024 Earnings Presentation

50 slides from Arthur J. Gallagher &'s earnings presentation, Oct 24, 2024

  1. Slide 1: Investor Presentation November 2024

    November 2024 Investor Presentation ©2023 ARTHUR J. GALLAGHER & CO.

  2. Slide 2: Cautionary Note on Revenue Comparisons and Forward-Looking Statements

    CAUTIONARY NOTE ON REVENUE COMPARISONS PRIOR TO 2016 & INFORMATION ON FORWARD- LOOKING STATEMENTS Revenue Recognition Accounting Standard The financial information in the slides that follow for any period prior to 2016 is presented under “Old GAAP” – i.e., before implementation of the changed revenu

  3. Slide 3: Information Regarding Non-GAAP Measures

    INFORMATION REGARDING NON-GAAP MEASURES In addition to reporting financial results in accordance with GAAP, this presentation provides information regarding EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, diluted net earnings per share, as adjusted (adjusted EPS), adjusted revenu

  4. Slide 4: Who We Are

    • Founded in 1927 WHO WE ARE • Public since 1984 • One of the World’s leading insurance brokers (1) • One of the World’s largest P&C third-party administrators (1) Key Facts Key Shareholder Data 130 Countries (2) 54,691 Employees 0.8% Yield (3) $ 0.60 2024 Q4 Dividend/Share $ 11.1 B Total Adjusted R

  5. Slide 5: Gallagher Mission Statement

    GALLAGHER MISSION STATEMENT We are an international Sales and Marketing company that plans and administers cost- effective, differentiated property/casualty and human resource risk management programs as brokers, consultants and third-party administrators. Our mission is to: • Provide superior, cost

  6. Slide 6: Snapshot of Core Operations

    SNAPSHOT OF CORE OPERATIONS • 87% of revenue* • We advise and consult on insurance programs and place insurance for clients • Property/Casualty and employee benefits BROKERAGE • Retail, wholesale and reinsurance SEGMENT • Middle-market commercial focus and also serve small business, risk management

  7. Slide 7: Diverse Revenue Base

    DIVERSE REVENUE BASE Brokerage REINSURANCE 13% INTERNATIONAL RETAIL P/C DOMESTIC 39% 50% 61% RETAIL BENEFITS 23% WHOLESALE 14% Risk Management WORKERS’ LIABILITY DOMESTIC INTERNATIONAL COMPENSATION 33% 82% 18% 61% PROPERTY 6% Brokerage and Risk Management segments for the trailing twelve month perio

  8. Slide 8: Brokerage & Risk Management Segments Combined – YTD 3Q 2024

    BROKERAGE & RISK MANAGEMENT SEGMENTS COMBINED – YTD 3Q 2024 Adjusted Revenues Organic Revenues $9,000 12.0% 15% 9.0% $8,000 $7,000 6.0% $7,537 $8,668 10.3% 7.8% $6,000 3.0% YTD 3Q 2023 YTD 3Q 2024 YTD 3Q 2023 YTD 3Q 2024 Adjusted EBITDAC Adjusted EBITDAC Margin $3,000 34.0% 18% +80 bpts $2,750 33.5%

  9. Slide 9: Brokerage & Risk Management Segments Combined – 5 Yr View

    BROKERAGE & RISK MANAGEMENT SEGMENTS COMBINED – 5 YR VIEW Adjusted Revenues $12,000 $9,000 15% CAGR $6,000 $5,035 $9,915 $3,000 2018 2023 Adjusted EBITDAC Adjusted EBITDAC Margin $3,300 34.0% 20% CAGR +650 bpts $2,400 30.0% $1,500 26.0% $1,311 $3,221 26.0% 32.5% $600 22.0% 2018 2023 2018 2023 Broker

  10. Slide 10: Brokerage Segment – YTD 3Q 2024

    BROKERAGE SEGMENT – YTD 3Q 2024 Adjusted Revenues Organic Revenues $8,000 10.0% 15% 8.0% $7,000 $6,000 6.0% $6,590 $7,587 9.4% 7.6% $5,000 4.0% YTD 3Q 2023 YTD 3Q 2024 YTD 3Q 2023 YTD 3Q 2024 Adjusted EBITDAC Adjusted EBITDAC Margin $2,800 36.0% 17% +70 bpts $2,500 35.5% $2,200 35.0% $2,311 $2,715 3

  11. Slide 11: Brokerage Segment – 5 Yr View

    BROKERAGE SEGMENT – 5 YR VIEW Adjusted Revenues $9,000 $7,000 15% CAGR $5,000 $4,237 $8,628 $3,000 2018 2023 Adjusted EBITDAC Adjusted EBITDAC Margin $3,000 37.0% 20% CAGR +660 bpts $2,200 33.0% $1,400 29.0% $1,172 $2,963 27.7% 34.3% $600 25.0% 2018 2023 2018 2023 Brokerage segment for the full year

  12. Slide 12: Risk Management Segment – YTD 3Q 2024

    RISK MANAGEMENT SEGMENT – YTD 3Q 2024 Adjusted Revenues Organic Revenues $1,100 18.0% 14% 13.0% $1,000 $900 8.0% $948 $1,081 16.8% 8.9% $800 3.0% YTD 3Q 2023 YTD 3Q 2024 YTD 3Q 2023 YTD 3Q 2024 Adjusted EBITDAC Adjusted EBITDAC Margin $240 21.0% +100 bpts $210 20% 20.0% $180 19.0% $187 $224 19.7% 20

  13. Slide 13: Risk Management Segment – 5 Yr View

    RISK MANAGEMENT SEGMENT – 5 YR VIEW Adjusted Revenues $1,400 10% CAGR $1,100 $800 $798 $1,287 $500 2018 2023 Adjusted EBITDAC Adjusted EBITDAC Margin $280 21.0% +260 bpts $220 13% CAGR 19.0% $160 17.0% $139 $258 17.4% 20.0% $100 15.0% 2018 2023 2018 2023 Risk Management segment for the for the full

  14. Slide 14: Tax Credit Carryforwards

    TAX CREDIT CARRYFORWARDS $1,200 $1,000 $800 $600 $400 $200 $233 $112 $147 $342 $478 $683 $857 $962 $998 $1,074 $773 $867 $797 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023* 2024** The amounts above represent the outstanding deferred tax asset associated with tax credit carryforwards

  15. Slide 15: Dividends Per Share

    DIVIDENDS PER SHARE $2.40* $2.40 $2.20 $2.00 $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 1984 2024E *Indicated – On October 23, 2024, Gallagher’s Board of Directors declared a $0.60 per share fourth quarter 2024 dividend. 15 ©2023 ARTHUR J. GALLAGHER & CO.

  16. Slide 16: YTD 3Q 2024 M&A Highlights

    YTD 3Q 2024 M&A HIGHLIGHTS $188M 28 in estimated annual new merger partners acquired revenues Fair valuations Focus on tuck-in opportunities Brokerage and Risk Management segments for the nine months ended September 30, 2024 16 ©2023 ARTHUR J. GALLAGHER & CO.

  17. Slide 17: Where We Are Going

    WHERE WE ARE GOING • Driving new business production • Continuing tuck-in M&A BROKERAGE • Growing global brand recognition SEGMENT • Leveraging internal resources and processes across divisions • Increasing data utilization to deliver a better client experience • Increasing global presence in claims

  18. Slide 18: US Commercial P/C Pricing & Inflation

    US COMMERCIAL P/C PRICING & INFLATION 190 180 CPI 170 180 160 150 Rates 140 141 130 120 110 100 90 80 US 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 La

  19. Slide 19: US Commercial P/C Pricing

    US COMMERCIAL P/C PRICING Commercial Casualty 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% Commercial Property 25% 20% 15% 10% 5% 0% -5% -10% Reflects Counsel of Insurance Agents and Brokers (CIAB) data. Commercial Casualty represents the average of commercial auto, workers comp, general liability, umbrella,

  20. Slide 20: Sales Culture Performs Through Cycle

    SALES CULTURE PERFORMS THROUGH CYCLE Hard Firm 25.0% Market Soft Market Shallow Market Market 19.8% 19.8% 20.0% 15.6% 15.0% 14.4% 9.8% 9.7% 8.8% 9.0% 10.0% 9.5% 7.5% 8.1% 5.6% 6.0% 5.5% 7.5% 8.2% 4.8% 4.4% 3.8% 3.8% 4.6% 7.5% 6.5% 5.0% 1.9% 3.1% 5.6% 1.9% 4.4% -0.3% 3.8% 3.4% 3.1% 2.0% 1.8% 0.0% -1.

  21. Slide 21: Consistent Growth Strategy

    CONSISTENT GROWTH STRATEGY 21 ©2023 ARTHUR J. GALLAGHER & CO.

  22. Slide 22: Consistent Growth Strategy: Organic

    CONSISTENT GROWTH STRATEGY: ORGANIC 22 ©2023 ARTHUR J. GALLAGHER & CO.

  23. Slide 23: Driving Brokerage Organic Growth

    DRIVING BROKERAGE ORGANIC GROWTH 23 ©2023 ARTHUR J. GALLAGHER & CO.

  24. Slide 24: Niche Expertise Teams - Brokerage

    NICHE EXPERTISE TEAMS - BROKERAGE Affinity Manufacturing Automotive Marine Aviation Nonprofit Construction Personal Energy Private Client Entertainment Public Sector Environmental Real Estate/ Hospitality Equity Advisors Religious Financial Institutions Restaurant Food/Agribusiness Retail and Servic

  25. Slide 25: Driving Risk Management Organic Growth

    DRIVING RISK MANAGEMENT ORGANIC GROWTH 25 ©2023 ARTHUR J. GALLAGHER & CO.

  26. Slide 26: Risk Management Growth Focuses on Four Market Segments

    RISK MANAGEMENT GROWTH FOCUSES ON FOUR MARKET SEGMENTS ALTERNATIVE PUBLIC SECTOR MARKET ENTITIES PARTICIPANTS LARGE COMMERCIAL INSURANCE CARRIERS ENTITIES 26 ©2023 ARTHUR J. GALLAGHER & CO.

  27. Slide 27: Consistent Growth Strategy: M&A

    CONSISTENT GROWTH STRATEGY: M&A 27 ©2023 ARTHUR J. GALLAGHER & CO.

  28. Slide 28: Acquisition Revenue Growth

    ACQUISITION REVENUE GROWTH $1,100 U.S. Property & Casualty Risk Management $1,000 Employee Benefits Non-U.S. Property & Casualty $900 Reinsurance $800 $700 $500 $400 $300 $200 $100 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2

  29. Slide 29: M&A Opportunities Continue

    M&A OPPORTUNITIES CONTINUE Vast Pipeline Acquisition Units Limited Strategic Core Competency Consolidators Domestic and international Retail P&C Culture markets highly fragmented Wholesale Ability to reinvest in: Proven history 18,000+ agents/ brokers just - People in the U.S. Benefits - Systems Abi

  30. Slide 30: Platforms in Place for Bolt-On M&A

    PLATFORMS IN PLACE FOR BOLT-ON M&A 30 ©2023 ARTHUR J. GALLAGHER & CO.

  31. Slide 31: International Correspondent Broker Network

    INTERNATIONAL CORRESPONDENT BROKER NETWORK Client Capabilities in Approximately 130 Countries 31 ©2023 ARTHUR J. GALLAGHER & CO.

  32. Slide 32: Productivity and Quality

    PRODUCTIVITY AND QUALITY 32 ©2023 ARTHUR J. GALLAGHER & CO.

  33. Slide 33: Optimizing Productivity & Quality

    OPTIMIZING PRODUCTIVITY & QUALITY Utilizing Harmonizing Centers of Agency Excellence Systems Leveraging Investing in Sales Force Business Management Intelligence, Tools CONTINUE TO CONTINUE TO Data & IMPROVE IMPROVE Analytics PRODUCTIVITY & PRODUCTIVITY Utilizing Sourcing & QUALITY QUALITY Standardi

  34. Slide 34: Behind the Scenes Efforts

    BEHIND THE SCENES EFFORTS Centers of Excellence Update Claims support Approximately 13,000 associates Policy checking & issuance • Increase quality • Improve process • Control operating costs Accounting support • Reduce E&O costs Analytics & • Easy for new acquisitions to leverage Robotics Renewal s

  35. Slide 35: Benefits from Centers of Excellence

    BENEFITS FROM CENTERS OF EXCELLENCE Reduce Costs Foster Innovation Increase Speed to Market Focus on Core Improve Quality 35 ©2023 ARTHUR J. GALLAGHER & CO.

  36. Slide 36: Reduced Adjusted Operating Expense Ratio

    REDUCED ADJUSTED OPERATING EXPENSE RATIO Brokerage Risk Management 21% 28% 20% 27% 19% 26% 18% 25% 17% 24% 16% 23% 15% 22% 14% 21% 13% 20% 12% 19% 20.8% 13.0% 27.0% 18.7% 11% 18% 2008 3Q 2024 - TTM 2008 3Q 2024 - TTM See Cautionary Note on page 2 regarding the ASC 606 revenue recognition accounting

  37. Slide 37: Brokerage & Risk Management Adjusted EBITDAC Margin

    BROKERAGE & RISK MANAGEMENT ADJUSTED EBITDAC MARGIN 34.0% 32.0% 30.0% 28.0% 26.0% 24.0% 22.0% 20.0% 20.3% 21.1% 22.2% 23.6% 24.5% 25.0% 25.6% 26.0% 26.9% 30.7% 31.9% 32.1% 32.5% 33.1% 18.0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 TTM 9/30/2024 See Cautionary Note on page 2 r

  38. Slide 38: Awards & Recognitions

    Best Places to Work for Disability Inclusion – 2024 DISABILITY EQUALITY INDEX Platinum Bell Seal Certification for Workplace Mental Health – 2024 MENTAL HEALTH AMERICA Awards & America’s Greatest Workplaces for Women – 2024 FORBES MAGAZINE Recognitions Claims Specialist – 2023 (Gallagher Bassett) CA

  39. Slide 39: Maintain Unique Culture

    MAINTAIN UNIQUE CULTURE 39 ©2023 ARTHUR J. GALLAGHER & CO.

  40. Slide 40: Maintain Unique Culture

    MAINTAIN UNIQUE CULTURE The Gallagher Way since 1927 40 ©2023 ARTHUR J. GALLAGHER & CO.

  41. Slide 41: Why Invest?

    WHY INVEST? You Believe Our Company Has: • Right management GALLAGHER IS • Unique culture WELL-POSITIONED • Proven growth strategy FOR FUTURE GROWTH • Continuing M&A opportunities • Increasing productivity/quality • Good use of leverage • Strong balance sheet • Excellent return to shareholders 41 ©2

  42. Slide 42: Why Invest? We Are Just Getting Started!

    WHY INVEST? WE ARE JUST GETTING STARTED! 3900% 3,548% 3400% AJG 2900% 2400% 1900% 1400% 900% 523% S&P 400% 500 -100% Source for data: Bloomberg. Total returns from 1/1/2000 – 9/30/2024 include reinvestment of dividends. 42 ©2023 ARTHUR J. GALLAGHER & CO.

  43. Slide 43: Non-GAAP Reconciliations – Organic Revenues

    NON-GAAP RECONCILIATIONS – ORGANIC REVENUES Brokerage and Risk Management Segments Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions): Organic Revenues (Non-GAAP) 1st Q 2023 2nd Q 2023 3rd Q 2023 YTD 3Q 2023 1st Q 2024 2nd Q 2024 3rd Q 2024 YTD 3Q 2024 Brokerage Segment 2022 20

  44. Slide 44: Non-GAAP Reconciliations – Revenues, as Adjusted

    NON-GAAP RECONCILIATIONS – REVENUES, AS ADJUSTED Brokerage and Risk Management Segments Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions): Revenues, as adjusted (Non-GAAP) Brokerage Segment 1Q 2023 1Q 2024 2Q 2023 2Q 2024 3Q 2023 3Q 2024 YTD 3Q 2023 YTD 3Q 2024 Brokerage reven

  45. Slide 45: Non-GAAP Reconciliations – EBITDAC & EBITDAC Margin, as Adjusted

    NON-GAAP RECONCILIATIONS – EBITDAC & EBITDAC MARGIN, AS ADJUSTED Brokerage and Risk Management Segments Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions): Reported GAAP Net Earnings to EBITDAC, as Adjusted (Non-GAAP) Brokerage Segment 1Q 2023 1Q 2024 2Q 2023 2Q 2024 3Q 2023 3Q

  46. Slide 46: Non-GAAP Reconciliations – Revenue, as Adjusted

    NON-GAAP RECONCILIATIONS – REVENUE, AS ADJUSTED Brokerage and Risk Management Segments Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions): Revenues, as adjusted (Non-GAAP) Brokerage Segment 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 4Q 2023 1Q 2024 2Q 2024

  47. Slide 47: Non-GAAP Reconciliations – EBITDAC & EBITDAC Margin, as Adjusted

    NON-GAAP RECONCILIATIONS – EBITDAC & EBITDAC MARGIN, AS ADJUSTED Brokerage and Risk Management Segments Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions): Reported GAAP Net Earnings to EBITDAC, as Adjusted (Non-GAAP) Brokerage Segment 2011 2012 2013 2014 2015 2016 2017 2018 20

  48. Slide 48: Non-GAAP Reconciliations – Operating Expense Ratio

    NON-GAAP RECONCILIATIONS – OPERATING EXPENSE RATIO Reported GAAP Operating Expense to Operating Expense, as Adjusted (Non-GAAP) Brokerage Segment 2008 4th Q 2023 1st Q 2024 2nd Q 2024 3rd Q 2024 TTM 3rd Q 2024 Brokerage revenue, as reported $ 1,187.8 $ 2,051.5 $ 2,864.9 $ 2,376.3 $ 2,396.4 $ 9,689.1

  49. Slide 49: Non-GAAP Reconciliations – Organic Revenue Ex Contingents

    NON-GAAP RECONCILIATIONS – ORGANIC REVENUE EX CONTINGENTS Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions): Organic Revenues (Non-GAAP) CY CY CY CY CY CY CY CY CY CY CY CY Brokerage Segment - Current Year (CY) 2001 2002 2003 2004 2005 2006 2007 2008 2009 201

  50. Slide 50: Additional Information: Ray Iardella

    Additional Information: Ray Iardella Corporate Vice President, Investor Relations Ray_Iardella@ajg.com Phone: 630.285.3661 ©2023 ARTHUR J. GALLAGHER & CO.

Arthur J. Gallagher & — Q3 2024 Earnings Presentation on 6ix