Arthur J. Gallagher & Co. · NYSE:AJG
Arthur J. Gallagher & — Gallagher Arthur J & — Shareholder Meeting (May 2018)
51 slides from Arthur J. Gallagher &'s shareholder meeting presentation, May 15, 2018
Slide 1: 2018 Annual Stockholders Meeting
2018 ANNUAL STOCKHOLDERS MEETING May 15, 2018 Exhibit 99.1
Slide 2: Stockholders’ Meeting
2 Stockholders’ Meeting May 15, 2018 • 2018 Annual Meeting • Chairman’s Remarks • 2017 Review • Closing Comments • Questions & Answers
Slide 3: Please turn off all cell phones
3 Stockholders’ Meeting May 15, 2018 Please turn off all cell phones. All audio and video recording is prohibited.
Slide 4: 2018 Board of Directors
4 2018 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: 2018 Annual Meeting
5 Stockholders’ Meeting May 15, 2018 • 2018 Annual Meeting
Slide 6: Stockholders’ Meeting
6 Stockholders’ Meeting May 15, 2018 • 2018 Annual Meeting • Chairman’s Remarks • 2017 Review
Slide 7: Cautionary Note on New Accounting Standard and Forward-Looking Statements
7 Cautionary Note on New Accounting Standard and Information on Forward-Looking Statements Cautionary Note Regarding New Revenue Recognition Accounting Standard The financial information in the slides that follow are presented under “Old GAAP” – i.e., before implementation of the new revenue recogni
Slide 8: Non-GAAP Measures
8 This presentation includes references to Adjusted EBITDAC, Adjusted EBITDAC margin, Adjusted Revenues, Adjusted Operating Expense Ratio and Organic Revenue Growth, which are measures not in accordance with, or an alternative to, the GAAP information provided herein. Earnings Measures - Gallagher b
Slide 9: Who We Are: Key Facts and Shareholder Data
9 52-Week Range*** $ 70.55 Hi $ 53.63 Lo 2.5% Dividend Yield*** $ 0.41 • Founded in 1927 • Public since 1984 • One of the World’s leading insurance brokers* • One of the World’s largest P&C third-party administrators* As of December 31, 2017 unless otherwise indicated Acquired Revenues 2017** $ 172
Slide 10: Snapshot of Core Operations
10 10 *Brokerage and Risk Management adjusted revenue for the year ended December 31, 2017. Snapshot of Core Operations RISK MANAGEMENT SEGMENT BROKERAGE SEGMENT • 83% of revenue* • We sell insurance and consult on insurance programs • Property/Casualty and employee benefits • Retail and wholesale •
Slide 11: Diverse Revenue Base
11 Risk Management* Brokerage* Diverse Revenue Base *Brokerage and Risk Management adjusted revenue for the year ended December 31, 2017. 57% 26% 17% WHOLESALE RETAIL P/C RETAIL BENEFITS 66% 34% DOMESTIC INTERNATIONAL 87% 13% DOMESTIC INTERNATIONAL 64% LIABILITY 32% 4% PROPERTY WORKERS’ COMPENSATION
Slide 12: Brokerage Segment
12 $3,508 $3,827 3.6% 4.4% 26.9% 27.4% $945 $1,050 (in $M) Brokerage Segment See Cautionary Note on page 7 regarding the new revenue recognition accounting standard. See also important disclosures regarding Non-GAAP measures on Page 8. $3,400 $3,600 $3,800 $4,000 2016 2017 Adjusted Revenues 9% (in $
Slide 13: Risk Management Segment
13 $720 $769 1.3% 5.2% $125 $133 17.4% 17.4% 13 (in $M) Risk Management Segment See Cautionary Note on page 7 regarding the new revenue recognition accounting standard. See also important disclosures regarding Non-GAAP measures on Page 8. $700 $720 $740 $760 $780 2016 2017 Adjusted Revenues 7% (in $
Slide 14: Brokerage & Risk Management
14 $4,228 $4,596 3.1% 4.5% $1,070 $1,183 25.3% 25.8% (in $M) Brokerage & Risk Management See Cautionary Note on page 7 regarding the new revenue recognition accounting standard. See also important disclosures regarding Non-GAAP measures on Page 8. $4,000 $4,250 $4,500 $4,750 2016 2017 Adjusted Reven
Slide 15: Net Earnings from Clean Energy Investments
15 $32.7 $63.7 $90.5 $100.9 $114.4 $132.7 (in $M) Net Earnings from Clean Energy Investments *Excludes a 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 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100
Slide 16: Dividends Per Share
16 1984 2018E $ 1.64 * Dividends Per Share *Indicated – On January 24, 2018, Gallagher’s Board of Directors declared a $0.41 per share first-quarter 2018 dividend. $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80
Slide 17: 2017 Business Highlights: Brokerage & Risk Management Combined
17 9% adjusted revenue growth 4.5% total organic growth 11% adjusted EBITDAC growth 46 bps margin improvement 2017 Business Highlights Brokerage & Risk Management Combined See Cautionary Note on page 7 regarding the new revenue recognition accounting standard. See also important disclosures regardin
Slide 18: 2017 Business Highlights: Mergers & Acquisitions
18 $172.3m in acquired revenues +39 additional – average $4.4m in revenue ~8.0x EBITDAC Fair valuations tuck-in opportunities Focus on 2017 Business Highlights Mergers & Acquisitions See Cautionary Note on page 7 regarding the new revenue recognition accounting standard. See also important disclosur
Slide 19: 2017 Business Highlights: Clean Energy
19 $132.7m of net earnings 16% increase in net earnings over 2016 2017 Business Highlights Clean Energy
Slide 20: 2017 Business Highlights: Global M&A integration
20 Global M&A integration Completed Australia/New Zealand & Canada Completed U.K. retail 2017 integration costs less than a third of 2016 costs 2017 Business Highlights All while accomplishing…
Slide 21: Where We Are Going
21 Where We Are Going BROKERAGE SEGMENT • Improving new business production • Continuing tuck-in M&A • Increasing global brand recognition • Leveraging internal resources and processes across divisions • To be premier provider of claims management services with superior outcomes • Increasing global
Slide 22: Commercial P&C Pricing Shows Shallow Cycle
22 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. CPI Rates
Slide 23: Shows Shallow Pricing Cycle
23 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% -3.7% -3.9% -3.2% -3.3% -2.5% -2.8% -1.3% 0.3% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% CIAB – Change in Average Commercial Rates
Slide 24: Sales Culture Performs Through Cycle
24 Hard Market Shallow Market CIAB Sales Culture Performs Through Cycle CIAB is the 4 quarter average. Gallagher’s Brokerage Segment Organic Growth excluding Contingent Commissions. See Cautionary Note on page 7 regarding the new revenue recognition accounting standard. See also important disclosure
Slide 25: Shallow Rate Cycle Is Better for Clients, Carriers & Brokers
25 CLIENTS CARRIERS & BROKERS Shallow Rate Cycle Is Better for:
Slide 26: Consistent Growth Strategy
26 Consistent Growth Strategy
Slide 27: Consistent Growth Strategy – Organic
27 Consistent Growth Strategy – Organic
Slide 28: Driving Brokerage Organic Growth
28 Driving Brokerage Organic Growth
Slide 29: Niche Expertise Teams – Brokerage
29 Aviation Automotive Affinity Real Estate/ Hospitality Global Risks Construction Personal Marine Higher Education Healthcare Environmental Entertainment Energy Private Client Public Entity Religious Restaurant Technology Trade Credit/ Political Risk Transportation Financial Institutions K12 Educat
Slide 30: Driving Risk Management Organic Growth
30 Driving Risk Management Organic Growth
Slide 31: Risk Management Growth Focuses on Four Market Segments
31 ALTERNATIVE MARKET PARTICIPANTS LARGE COMMERCIAL ENTITIES PUBLIC SECTOR ENTITIES INSURANCE CARRIERS Risk Management Growth Focuses on Four Market Segments
Slide 32: Consistent Growth Strategy – M&A
32 Consistent Growth Strategy – M&A
Slide 33: Acquisition Revenue Growth
33 Acquisition Revenue Growth Annualized Revenues Acquired (in $M’s) See Cautionary Note on page 7 regarding the new revenue recognition accounting standard. $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Dome
Slide 34: M&A Opportunities Continue
Vast Pipeline Domestic and international markets highly fragmented 18,000+ agents/ brokers just in the U.S. Need Gallagher’s expertise Baby boomers looking for exit strategy Acquisition Units Retail P&C Wholesale Benefits International MGA/MGU Captive TPA Limited Consolidators Core Competency Cultur
Slide 35: Platforms In Place for Bolt-on M&A
35 Platforms In Place for Bolt-on M&A
Slide 36: International Correspondent Broker Network
36 Client Capabilities in 150 Countries International Correspondent Broker Network
Slide 37: Productivity and Quality Initiatives
37 Productivity and Quality Initiatives
Slide 38: Optimizing Productivity & Quality
38 Building Productivity Tools – DMS and Workflow Optimizing Real Estate Footprint Investing in Business Intelligence Leveraging Sales Force Management Tools Utilizing Centers of Excellence Harmonizing Systems Utilizing Sourcing to Manage Expenses Standardizing Processes CONTINUE TO IMPROVE PRODUCTI
Slide 39: Benefits Continue: From Centers of Excellence
39 Foster Innovation Increase Speed to Market Reduce Costs Focus on Core Improve Quality Benefits Continue: From Centers of Excellence
Slide 40: Centers of Excellence Update
40 Behind the Scenes Efforts Centers of Excellence Update We now have more than 3,500 associates in three locations
Slide 41: Centers of Excellence Update: Processes
Policy checking Policy issuance Certificates of insurance Renewal support Accounting support Claims support 41 Behind the Scenes Efforts Centers of Excellence Update Responsible for processes such as:
Slide 42: Centers of Excellence Update: Results
Substantially improved quality Reduced both operating and E&O costs Easy for new acquisition partners to leverage 42 Behind the Scenes Efforts Centers of Excellence Update
Slide 43: Reduced Adjusted Operating Expense Ratio
43 20.8% 15.6% 27.0% 24.6% Brokerage Risk Management Reduced Adjusted Operating Expense Ratio See Cautionary Note on page 7 regarding the new revenue recognition accounting standard. See also important disclosures regarding Non-GAAP measures on Page 8. 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0%
Slide 44: Adjusted EBITDAC Margin
44 20.4% 21.2% 22.1% 23.6% 24.5% 25.3% 25.8% Brokerage & Risk Management Adjusted EBITDAC Margin See Cautionary Note on page 7 regarding the new revenue recognition accounting standard. See also important disclosures regarding Non-GAAP measures on Page 8. 18.0% 19.0% 20.0% 21.0% 22.0% 23.0% 24.0% 25
Slide 45: Relentless Focus on Quality and Customer Service
45 Relentless Focus on Quality and Customer Service Best Companies for Leaders – 2016 CHIEF EXECUTIVE MAGAZINE UK Group Risk Adviser of the Year – 2017 UK CORPORATE ADVISER Best UK Employee Benefit Consultant – 2016 REWARD GUIDE VIB AWARDS CEREMONY Shilling Named Best Member Communication Strategy –
Slide 46: Gallagher
@ Gallagher Insurance| RiskManagement | Consting
Slide 47: The Gallagher Way
47 The Gallagher Way since 1927 Maintain Unique Culture
Slide 48: One of the World’s Most Ethical Companies
48 One of the World’s Most Ethical Companies as Recognized by Ethisphere seven 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 Dem
Slide 49: Why Invest?
49 Why Invest? • Right management • Unique culture • Proven growth strategy • Continuing M&A opportunities • Increasing productivity/quality • Good use of leverage • Strong balance sheet • Excellent return to shareholders You Believe Our Company Has: GALLAGHER IS WELL-POSITIONED FOR FUTURE GROWTH
Slide 50: Why Invest? We Are Just Getting Started!
50 S&P % % AJG Why Invest? We Are Just Getting Started! Source for data: Bloomberg. Total returns from 1/1/2000 – 12/31/2017 include reinvestment of dividends.
Slide 51: Additional Information
51 Additional Information: Ray Iardella Vice President, Investor Relations Ray_Iardella@ajg.com Phone: 630 285-3661
Gallagher Arthur J & — Shareholder Meeting (May 2018) on 6ix