Arthur J. Gallagher & Co. · NYSE:AJG
Arthur J. Gallagher & — Gallagher Arthur J & — Shareholder Meeting (June 2015)
49 slides from Arthur J. Gallagher &'s shareholder meeting presentation, Jun 1, 2015
Slide 1: 2015 Annual Stockholders Meeting
Monday, June 1, 2015 2015 Annual Stockholders Meeting Exhibit 99
Slide 2: Stockholders' Meeting June 1, 2015
Stockholders’ Meeting June 1, 2015 • 2015 Annual Meeting • Chairman’s Remarks 2014 Review Closing Comments • Questions & Answers
Slide 3: 2015 Board of Directors
2015 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 • Norman L. Rosenthal, Ph.D.
Slide 4: Stockholders' Meeting: 2015 Annual Meeting
Stockholders’ Meeting June 1, 2015 • 2015 Annual Meeting
Slide 5: Chairman's Remarks: 2014 Review
Stockholders’ Meeting June 1, 2015 • 2015 Annual Meeting • Chairman’s Remarks 2014 Review
Slide 6: 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 7: 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. -
Slide 8: Who We Are
• Founded in 1927 • Public since 1984 – 30 years ago • One of the World’s Leading Insurance Brokers ** • World’s largest P&C third-party administrator ** Who We Are 3.1 % $ 0.37 52-Week Range $ 49.46 Hi $ 42.97 Lo Outstanding Shares 164.6 M Dividend Yield 2015 Q1 Dividend/Share at January 29, 2015 *
Slide 9: Snapshot of Core Operations
• 81% of revenue* • We sell insurance and consult on insurance programs • P&C and benefits • Retail and wholesale • Primarily middle-market commercial clients and individuals • 78% of revenue is commissions – 22% is fee-based • 19% of revenue* • We adjust claims and help companies and carriers reduc
Slide 10: Diverse Revenue Base
Diverse Revenue Base Risk Management Brokerage *Brokerage and Risk Management adjusted revenue as of December 31, 2014. Wholesale Retail-P/C Retail-Benefits Domestic International Property Workers Compensation Liability Domestic International 60% 17% 23% 71% 4% 23% 77% 23% 65% 35%
Slide 11: Brokerage Segment
Brokerage Segment – See important disclosures regarding Non-GAAP measures on Page 7. (in $M)
Slide 12: Risk Management Segment
(in $M) Risk Management Segment – See important disclosures regarding Non-GAAP measures on Page 7. $604 $664 $550 $600 $625 $650 $675 Adjusted Revenues 10% $95 $110 $80 $90 $100 $110 $120 Adjusted EBITDAC 16% 9.3% 9.5% 5.0 % 7.0% 9.0% 11.0% 13.0% Total Organic Growth 15.6% 12.0% 14.0% 16.0% 18.0% 20
Slide 13: Brokerage & Risk Mgmt Combined
Brokerage & Risk Mgmt Combined – (in $M) See important disclosures regarding Non-GAAP measures on Page 7. $2,754 $3,571 $2,400 $2,800 $3,200 $3,600 Adjusted Revenues 30% 6.0% 5.5% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Total Organic Growth $605 $843 $500 $600 $700 $800 $900 Adjusted EBITDAC 39% 22% 24% 20.0%
Slide 14: Adjusted Net Earnings from Clean Energy Investments
Adjusted Net Earnings from Clean Energy Investments (in $M) Excludes non-cash after tax gains of $14.1m and $5.8m from re-consolidation accounting gains related to clean-energy investments recorded in first quarters of 2014 and 2013, respectively.
Slide 15: Dividends Per Share
Dividends Per Share *Indicated – On January 29, 2015, Gallagher’s Board of Directors declared a $.37 per share first-quarter 2015 dividend. $1.48*
Slide 16: 2014 Was An Extraordinary Year!
2014 Was An Extraordinary Year! See important disclosures regarding Non-GAAP measures on Page 7 and Page 14. Outstanding Brokerage & Risk Management growth: • 30% adjusted revenue growth • 39% adjusted EBITDAC growth • 21% adjusted EPS growth • 163 bps margin improvement Strong clean energy contribu
Slide 17: Risk. Any Time.
Archur J. Gallagher & Co. Risk. Any Time. (MERGERS AND 2 AQuISITIONS orcanic ES PS o — wT Grown (casi aw PRODUCTIVITY AND QUALITY *
Slide 18: Consistent Growth Strategy – Organic
Consistent Growth Strategy – Organic
Slide 19: Driving Organic Growth – Brokerage
Organic Growth Driving Organic Growth – Brokerage Grow our own Hire experienced teams Focus into Niches Provide Sales training Cross Selling Enhance carrier compensation Global expansion mgmt tools and
Slide 20: Driving Organic Growth – Risk Management
Organic Growth Driving Organic Growth – Risk Management Direct sales force Non-affiliated insurance brokers Comm’l Entities Consistently improving Cross selling Alternate Markets Carriers Product expansion Global expansion products & services Expertise, Analytics, Systems
Slide 21: 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 22: Brokerage & Risk Mgmt Organic Growth
Brokerage & Risk Mgmt Organic Growth See important disclosures regarding Non-GAAP measures on Page 7.
Slide 23: Commercial P&C Pricing Shows Flattening Cycle
Commercial P&C Pricing Shows Flattening Cycle CPI Rates 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 24: Gallagher Sales Culture Performs Through Any Pricing Cycle
Gallagher Sales Culture Performs Through Any Pricing Cycle 2014 CIAB is YTD as of 4Q. Gallagher’s Brokerage Segment Organic Growth including Supplemental Commissions See important disclosures regarding Non-GAAP measures on Page 7. 14.0% 16.0% 10.0% 2.0% 2.0% 5.0% 2.0% -0.8% -2.4% -1.7% 3.1% 4.4% 5.6
Slide 25: Better for Clients, Carriers, Brokers
Better for Clients Better for Carriers Better for Brokers Flattening Rate Environment Is:
Slide 26: Rate & Economy Effect on Organic Growth
Economy Rates Rate & Economy Effect on Organic Growth Insurance Rates & Economy New Business and Improved Retentions With 4% organic growth, less than 1% is from rate and economy combined Of the 1% effect from rates and economy, 1/3 is from rate and 2/3 is from economy
Slide 27: Consistent Growth Strategy – M&A
Consistent Growth Strategy – M&A
Slide 28: 2014 – Record Acquisition Revenue Growth
Annualized Revenues Acquired (in $M’s) 2014 – Record Acquisition Revenue Growth $- $100 $200 $300 $400 $500 $600 $700 $800 Domestic Property & Casualty Foreign Property & Casualty Employee Benefits Risk Management
Slide 29: M&A Opportunities Continue
Limited Consolidators Gallagher Acquisition Units Gallagher’s Core Competency 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 Culture Proven History of Doing the Deal Ability
Slide 30: Platforms In Place for Bolt-on M&A
Platforms In Place for Bolt-on M&A
Slide 31: International Correspondent Broker Network
Client Capabilities in 140 Countries International Correspondent Broker Network
Slide 32: Integration Process
Spread across three different operating units in four separate country platforms - Retail, Benefits, Wholesale Integration Process • Timing depends on size • Larger deals – to months • Smaller deals – to months Integration HR & Accounting Systems Combined IT Conversion Closing Team Strategy & Analys
Slide 33: Productivity and Quality Initiatives
Productivity and Quality Initiatives
Slide 34: Optimizing Productivity & Quality
Controlling Headcount Established Offshore Centers of Excellence Utilizing Sourcing to Manage Expenses Building Productivity Tools – DMS and Workflow Standardizing Processes and Systems Optimizing Real Estate Footprint Investing in Business Intelligence Leveraging Sales Force Management Tools Contin
Slide 35: Benefits Continue from Offshore Centers of Excellence
Benefits Continue from Offshore Centers of Excellence
Slide 36: Building Client Service Operations
Client-Facing Efforts • Processes deliver consistent client service • Technology and tools improve operating efficiencies • Staffed by dedicated service professionals that: • Generate client applications and proposals • Handle client requests • Improves turn-around time on client requests • Supports
Slide 37: Behind the Scenes Efforts
Behind the Scenes Efforts Offshore Centers of Excellence Update • We now have more than 2,000 associates in four locations • Utilized for processes such as: • Policy checking • Certificates of insurance • Auto ID cards • Renewal support • Accounting support • Substantially improved quality and reduc
Slide 38: Efficiency Improvements Drive Quality
Efficiency Improvements Drive Quality Quality Metrics 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% Single agency management system and standardized processes across the network Real-time,
Slide 39: Reduced Adjusted Operating Expense Ratio
Reduced Adjusted Operating Expense Ratio Brokerage Risk Management See important disclosures regarding Non-GAAP measures on Page 7. 27.0% 24.0% 23.0% 24.0% 25.0% 26.0% 27.0% 28.0% 20.8% 17.6% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 22.0%
Slide 40: Brokerage & Risk Mgmt Adjusted EBITDAC Margin
Brokerage & Risk Mgmt Adjusted EBITDAC Margin See important disclosures regarding Non-GAAP measures on Page 7.
Slide 41: Awards and Recognition
AJG – 2014 Best Mid-Sized Broker Reactions Magazine AJG Intl/Palm – 2014 Private Sector Insurer of the Year General Palace AJG Intl/OIM – 2014 MGA of the Year Insurance Post AJG Benefits Team – 2014 Group Risk Adviser of the Year Corporate Adviser AJG – 2013 Ranked Top Ten Best Companies for Leaders
Slide 42: Any Challenge. Any Risk. Any Time.
Arthur J. Gallagher & Co. Any Challenge. Any Risk. Any Time. MERGERS AND __ AQUISITIONS qm | ORGANIC PRODUCTIVITY AND QUALITY ‘
Slide 43: Maintain Unique Culture
Arthur J. Gallagher & Co. Maintain Unique Culture Any Risk. Any Time,
Slide 44: One of the World's Most Ethical Companies
Recognized again in 2015 by Ethisphere as One of the World’s Most Ethical Companies
Slide 45: One of America's Best Employers
One of “America’s Best Employers” as recognized by Forbes Magazine • Selected from 1,100 U.S.-based employers with more than 2,500 domestic employees • Across 25 industry sectors, including insurance • Independent, anonymous survey of 20,000 employees who work for large companies • Focused on six ca
Slide 46: Why Invest?
Why Invest? You Believe Our Company Has: Gallagher is well positioned for future growth 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
Slide 47: Why Invest? We Are Just Getting Started
Why Invest? We Are Just Getting Started AJG 404% S&P 500 86% Source for data: Bloomberg. Total returns from 1/1/2000 – 12/31/2014 include reinvestment of dividends.
Slide 48: For Additional Information
Marsha Akin Director – Investor Relations Marsha_Akin@ajg.com Phone: 630-285-3501 For Additional Information:
Slide 49: Appendix: EBITDAC and Organic Growth Reconciliations
Appendix: EBITDAC and Organic Growth Reconciliations Brokerage Segment Risk Management Segment Corporate Segment Total Company Reconciliation of EBITDAC to Net Earnings Net earnings 263.8 $ 204.8 $ 41.2 $ 46.2 $ (1.6) $ 17.6 $ 303.4 $ 268.6 $ Provision (benefit) for income taxes 151.8 122.8 24.5 27.
Gallagher Arthur J & — Shareholder Meeting (June 2015) on 6ix