Arthur J. Gallagher & Co. · NYSE:AJG
Arthur J. Gallagher & — Gallagher Arthur J & — Investor Presentation (May 2017)
45 slides from Arthur J. Gallagher &'s investor presentation, May 25, 2017
Slide 1: Investor Presentation May 2017
INVESTOR PRESENTATION MAY 2017 Exhibit 99.1
Slide 2: 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. Examples of forward-looking statements in this presentation include, but are not limited to, statements regarding: (i)
Slide 3: Non-GAAP Measures Disclosures
This presentation includes references to EBITDAC, 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 - Gall
Slide 4: Who We Are
Who We Are Key Facts Key Shareholder Data 2.8% $0.39 52-Week Range*** $57.82 Hi $43.90 Lo Outstanding Shares 179.5M $4.3B Acquired Revenues – 1Q2017** $170.4M $9.9B 1Q2017 Total Adjusted Revenue** Dividend Yield*** 2017 Q2 Dividend/Share*** Market Cap*** 33 Employees 25,284 Founded in 1927 Public si
Slide 5: Snapshot of Core Operations
83% of revenue* We sell insurance and consult on insurance programs Property/Casualty and employee benefits Retail and wholesale Primarily middle-market commercial clients and individuals 78% of C&F revenue is commission – 22% is fee-based 17% of revenue* We adjust claims and help companies and carr
Slide 6: Diverse Revenue Base
Diverse Revenue Base Risk Management* Brokerage* * Brokerage and Risk Management adjusted revenue for the year ended December 31, 2016.
Slide 7: Brokerage Segment – TTM 3/31/17
Brokerage Segment – TTM 3/31/17 (in $M) See important disclosures regarding Non-GAAP measures on Page 3.
Slide 8: Risk Management Segment – TTM 3/31/17
(in $M) Risk Management Segment – TTM 3/31/17 See important disclosures regarding Non-GAAP measures on Page 3.
Slide 9: Brokerage & Risk Management – TTM 3/31/17
Brokerage & Risk Management – TTM 3/31/17 (in $M) See important disclosures regarding Non-GAAP measures on Page 3. 6% 9%
Slide 10: Adjusted Net Earnings from Clean Energy Investments
Adjusted Net Earnings from Clean Energy Investments (in $M) The adjustment referred to above excludes a non-cash after tax gain of $14.1m from a re-consolidation accounting gain, related to clean-energy investments, recorded in 2014. 2017 estimated adjusted clean-energy related net earnings attribut
Slide 11: Dividends Per Share
Dividends Per Share *Indicated – On January 25, 2017, Gallagher’s Board of Directors declared a $0.39 per share first-quarter 2017 dividend. 1984 2017E $1.56*
Slide 12: First Quarter 2017 Business Highlights
First Quarter 2017 Business Highlights Brokerage & Risk Management growth: 7% adjusted revenue growth 12% adjusted EBITDAC growth 93 bps margin improvement 2.5% total organic growth M&A growth: $62.5m in annualized acquired revenues 12 additional: avg $5.2m rev Fair valuations Focus on tuck-in oppor
Slide 13: Where We're Going
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 presence in claims space U.S. clients with global op
Slide 14: Indicators for U.S. P/C Carriers – Shallow Rate Environment
Source for calendar year combined ratio data: AM Best. 2016 reflects data through the first nine months of 2016. Data excludes certain large mortgage insurance and personal lines companies. Indicators for U.S. P/C Carriers – Shallow Rate Environment Source for data : Total US P/C Industry from Best’
Slide 15: Commercial P&C Pricing Shows Shallow Cycle
CPI 140 Rates 92 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 16: Shows Shallow Pricing Cycle
G> Arthur. Gallagher « Co. Shows Shallow Pricing Cycle ’ 6.0% 4.0% 2.0% 0.0% “2.0% 4.0% | 6.0% Sdgha dior amrarhigh Ah gi? fg ib Ah brant wh 10 1 0 1 4 1 WO 9 oh RRO Re No oN oN NNO OO A OOO AO OKO 9040 NO gO nO ONO OO ONO PAD” 4ON CIAB - Change in Average Commercial Rates ; FOO Aff,
Slide 17: 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. CIAB
Slide 18: Shallow Rate Cycle Is Better for Clients, Carriers & Brokers
Shallow Rate Cycle Is Better for: CLIENTS CARRIERS & BROKERS
Slide 19: How We're Getting There – Consistent Growth Strategy
How We’re Getting There-Consistent Growth Strategy
Slide 20: Consistent Growth Strategy – Organic
Consistent Growth Strategy – Organic
Slide 21: Driving Brokerage Organic Growth
Driving Brokerage Organic Growth
Slide 22: Niche Expertise Teams – Brokerage
Niche Expertise Teams – Brokerage Aviation & Aerospace Automotive Affinity Real Estate Manufacturing Global Risks Construction Personal Marine Life Sciences Hospitality Higher Education Healthcare Environmental Entertainment Energy Private Equity Professional Groups Public Entity Religious/Nonprofit
Slide 23: Driving Risk Management Organic Growth
Driving Risk Management Organic Growth
Slide 24: Risk Mgmt Growth Focuses on Four Market Segments
Risk Mgmt Growth Focuses on Four Market Segments Alternative market participants Large commercial entities Public sector Entities Insurance carriers
Slide 25: Consistent Growth Strategy – M&A
Consistent Growth Strategy – M&A
Slide 26: Annualized Revenues Acquired
Annualized Revenues Acquired (in $M’s) Acquisition Revenue Growth
Slide 27: M&A Opportunities Continue
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 Limited Consolidators
Slide 28: Platforms In Place for Bolt-on M&A
Platforms In Place for Bolt-on M&A
Slide 29: International Correspondent Broker Network
International Correspondent Broker Network Client Capabilities in over 150 Countries
Slide 30: Productivity and Quality Initiatives
Productivity and Quality Initiatives
Slide 31: Continue to Improve Productivity and Quality
Building Productivity Tools – DMS and Workflow Optimizing Real Estate Footprint Investing in Business Intelligence Leveraging Sales Force Management Tools Continue to Improve Productivity and Quality Utilizing Centers of Excellence HarmonizingSystems Utilizing Sourcing to Manage Expenses Standardizi
Slide 32: Benefits Continue: From Centers of Excellence
Benefits Continue: From Centers of Excellence
Slide 33: Client-Facing Efforts Building Client Service Operations
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 Improves
Slide 34: Behind the Scenes Efforts – Centers of Excellence Update
Behind the Scenes Efforts Centers of Excellence Update We now have more than 2,500 associates in four locations Responsible for processes such as: Policy checking Policy issuance Certificates of insurance Renewal support Claims support Accounting support Substantially improved quality and reduced bo
Slide 35: Efficiency Improvements Drive Quality and Service
Efficiency Improvements Drive Quality AND SERVICE 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 policy issuance for top 30 car
Slide 36: Reduced Adjusted Operating Expense Ratio
Reduced Adjusted Operating Expense Ratio BROKERAGE RISK MANAGEMENT See important disclosures regarding Non-GAAP measures on Page 3.
Slide 37: Brokerage & Risk Mgmt Adjusted EBITDAC Margin
Brokerage & Risk Mgmt Adjusted EBITDAC Margin See important disclosures regarding Non-GAAP measures on Page 3.
Slide 38: Relentless Focus on Quality and Customer Service
Relentless Focus on Quality and Customer Service America’s Best Employers – 2015 Forbes magazine Voted Best UK Broker for Service – 2015 Strategic Risk’s UK FTSE survey Best TPA in Casualty Claims Handling – 2015 ADVISEN Claims Satisfaction Survey UK Employee Benefits Consultancy of the Year – 2015
Slide 39: Maintaining Culture
<— LLLILIP > Artur Gallacher & Co, Maintaining Culture
Slide 40: Maintain Unique Culture
Maintain Unique Culture THE GALLAGHER WAY CORE VALUES TEAMWORK PERFORMANCE-BASED CULTURE PEOPLE
Slide 41: One of the World's Most Ethical Companies
One of the World’s Most Ethical Companies as Recognized by Ethisphere six 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 Demonstratin
Slide 42: Why Invest?
Why Invest? You Believe Our Company Has: 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 Gallagher is well positioned for future growth
Slide 43: Why Invest? We Are Just Getting Started
Source for data: Bloomberg. Total returns from 1/1/2000 – 3/31/2017 include reinvestment of dividends. 549% AJG S&P 500 124% WHY INVEST? WE ARE JUST GETTING STARTED!
Slide 44: For Additional Information
For Additional Information: Ray_Iardella@ajg.com Vice President, Investor Relations Ray Iardella Phone: 630-285-3661
Slide 45: 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 1st Q 17 1st Q 16 1st Q 17 1st Q 16 1st Q 17 1st Q 16 1st Q 17 1st Q 16 Net earnings 78.1 $ 65.9 $ 14.3 $ 15.0 $ (24.6)
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