AJG Arthur J. Gallagher & Co. - 10-K
0001628280-26-008662Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.06pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Risk Factors (Item 1A)
16,141 words
Item 1A. Risk Factors.
Risk Factor Summary
Risks Relating to our Business Generally
• Global economic and geopolitical events, such as fluctuations in interest and inflation rates; geo-economic fragmentation and protectionism; a recession or economic downturn; a U.S. government shutdown or political violence; and instability, including as a result of armed conflicts in Ukraine, the Middle East, Latin America and the Caribbean could adversely affect our results of operations and financial condition.
• Economic conditions that result in financial difficulties for underwriting enterprises or lead to reduced risk-taking capital capacity could adversely affect our results of operations and financial condition.
• We have historically acquired large numbers of insurance brokers, benefit consulting firms and, to a lesser extent, third party claims administration and risk management firms. We may not be able to continue such an acquisition strategy in the future and there are risks associated with such acquisitions, which could adversely affect our growth and results of operations.
• Damage to our reputation and culture could have a material adverse effect on our business.
• Our sustainability aspirations, goals and initiatives, and our public statements and disclosures regarding them, expose us to numerous risks.
• If we are unable to apply technology, data analytics and AI effectively in driving value for our clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of technology and related tools, our operating results, client relationships, organic and inorganic growth and compliance programs could be adversely affected.
• We are subject to risks associated with AI.
• Our success depends, in part, on our ability to attract and retain qualified talent, including our senior management team.
• Business disruptions could have a material adverse effect on our operations, damage our reputation and impact client relationships.
• Our business or reputation could be harmed by our reliance on third-party providers.
• Sustained increases in compensation expense and the cost of employee benefits could reduce our profitability.
• Our substantial operations outside the U.S. expose us to risks different than those we face in the U.S.
• Changes in tax laws could adversely affect us.
• We face significant competitive pressures in each of our businesses.
• Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability.
• Contingent and supplemental revenues we receive from underwriting enterprises are less predictable than standard commission revenues, and any decrease in the amount of these forms of revenue could adversely affect our results of operations.
• We face a variety of risks in our benefit consulting operations distinct from those we face in our insurance brokerage operations.
• We face a variety of risks in our third-party claims administration operations that are distinct from those we face in our brokerage and benefit consulting operations.
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Regulatory, Legal and Accounting Risks
• Improper disclosure of confidential, personal or proprietary information and cybersecurity attacks or other security breach of our information systems, or those of third-party vendors we rely on, could result in regulatory scrutiny, legal liability or reputational harm, and could adversely affect our business, financial condition and reputation.
• We are subject to a number of contingencies and legal proceedings which, if determined unfavorably to us, would adversely affect our financial results.
• Changes in data privacy and protection laws and regulations, or any failure to comply with such laws and regulations, could adversely affect our business and financial results.
• We could be adversely affected by violations or alleged violations of laws that impose requirements for the conduct of our overseas operations, including the FCPA, the U.K. Bribery Act or other anti-corruption laws, sanctions laws, and FATCA.
• We are subject to regulation worldwide. If we fail to comply with regulatory requirements or if regulations change in a way that adversely affects our operations, we may not be able to conduct our business, or we may be less profitable.
• Changes in our accounting estimates and assumptions could negatively affect our financial position and operating results.
• Limited protection of our intellectual property could harm our business and our ability to compete effectively, and we face the risk that our services or products may infringe upon the intellectual property rights of others.
Risks Relating to our Investments, Debt and Common Stock
• Our clean energy investments are subject to various risks and uncertainties.
• The IRC Section 45 operations in which we have invested and the by-products from such operations may result in environmental and product liability claims and environmental compliance costs.
• We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and limitations that could significantly impact our ability to operate our business.
• Credit rating downgrades would increase our financing costs and could subject us to operational risk.
• We are a holding company and, therefore, may not be able to receive dividends or other distributions in needed amounts from our subsidiaries.
• Future sales or other dilution of our equity could adversely affect the market price of our common stock.
Risks Relating to our Business Generally
Global economic conditions and geopolitical events may impact the countries, regions or industries in which we operate and adversely affect our business results of operations and financial condition.
Global economic and geopolitical events, including fluctuations in interest, inflation and exchange rates, geo-economic fragmentation and protectionism resulting in greater restrictions on international trade and market uncertainty, tariffs, trade wars and other governmental actions affecting the flow of goods, services or currency, military actions and war, including between Russia and Ukraine, the Middle East, Latin America and the Caribbean, political crises like U.S. governmental shutdowns, and political violence and instability worldwide could also weigh negatively on the economy.
A recession or decline in economic activity, for these and any other reasons, could adversely impact us in future periods. For example, our clients might reduce the amount of insurance coverage, reinsurance coverage, consulting services or claims administration services they purchase due to reductions in headcount, payroll, or replacement and asset values, among other factors. Whether these reductions are caused by an overall economic downturn or declines in certain countries, regions and industries in which we operate, our commission and fee revenues, consulting revenues, or revenues
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from managing third-party insurance claims could be adversely impacted. Some of our clients may also experience liquidity problems or other financial difficulties due to tightening credit markets or lower levels of economic activity. If our clients file for bankruptcy, liquidate their operations, consolidate or are generally unable to meet their obligations, our revenues, ability to collect receivables and liquidity could be adversely impacted, which could have an adverse effect on our results of operations and financial condition.
While lower interest rates benefit us by reducing our cost of borrowing, they also reduce investment earnings on our cash, revenue from our premium financing operations and short-term investments of fiduciary and operating funds. In addition, lower levels of inflation may reduce our revenue growth by slowing the increase in insurable asset values.
Uncertain economic conditions have created volatility in the U.S. and other markets where we operate. A rise in the cost of labor or cost of capital, among other things, could negatively impact our operating and general and administrative expenses. We have no or limited control over such developments. If our costs grow significantly, our margins and results of operations may be materially and adversely impacted and we may not be able to achieve our strategic and financial objectives. Further, a tightening of credit or capital markets could negatively impact our business, financial condition and liquidity, including our ability to continue to access preferred sources of liquidity when needed and under similar terms, which may increase our capital costs. We could also experience losses on holdings of cash and investments due to failures of financial institutions and other counterparties. Thus, a deterioration in macroeconomic conditions could adversely affect our business, results of operations or financial condition.
Economic conditions that result in financial difficulties for underwriting enterprises or lead to reduced risk-taking capital capacity could adversely affect our results of operations and financial condition.
We have a significant amount of receivables from certain of the underwriting enterprises with which we place insurance and reinsurance. If those companies experience liquidity problems or other financial difficulties, we could encounter delays or defaults in payments owed to us, which could have a significant adverse impact on our consolidated financial condition and results of operations. The failure of an underwriting enterprise with which we place business could result in E&O claims against us by our clients. Further, the failure of E&O underwriting enterprises could make the E&O insurance we rely upon cost prohibitive or unavailable. Underwriting enterprises are also clients of our reinsurance and third-party claims administration operations and, as such, any of the negative developments for underwriting enterprises referred to above could also reduce our commission and fee revenues from such clients. Any of these developments could adversely affect our results of operations and financial condition. In addition, if underwriting enterprises merge, fail, or withdraw from offering certain lines of coverage, for example, because of large payouts related to natural or man-made disasters, climate or weather events, or other emerging risk areas, overall risk-taking capital capacity could be negatively affected, which could reduce our ability to place certain lines of coverage, reduce demand from the insurance company clients of our reinsurance and third-party claims administration operations and, as a result, reduce our revenues and profitability.
We have historically acquired large numbers of insurance brokers, benefit consulting firms and, to a lesser extent, third party claims administration and risk management firms. We may not be able to continue such acquisition strategy in the future and there are risks associated with such acquisitions, which could adversely affect our growth and results of operations.
Our acquisition program has been an important part of our historical growth, particularly in our brokerage segment, and we believe that similar acquisition activity will be important to maintaining comparable growth in the future. Failure to successfully identify and complete acquisitions would likely result in slower growth. Continuing consolidation in our industry and a high level of interest in acquiring insurance brokers on the part of private equity firms, private equity-backed consolidators and newly public insurance brokers has, in some cases, made, and could in the future make, appropriate acquisition targets more difficult to identify and more expensive. Even if we are able to identify appropriate acquisition targets, we may not have sufficient capital to fund acquisitions, be able to execute transactions on favorable terms or integrate targets in a manner that allows us to realize the benefits we have historically experienced from acquisitions. When regulatory approval of acquisitions is required, our ability to complete acquisitions may be limited by an ongoing regulatory review or other issues with the relevant regulator. Our ability to finance and integrate acquisitions may also decrease if we complete a greater number of larger acquisitions than we have historically. See the paragraph below regarding larger acquisitions. See also Note 3 to our 2025 consolidated financial statements for information regarding the size of transactions in the reporting period.
Post-acquisition risks include poor cultural fit and risks relating to retention of personnel, retention of clients, entry into unfamiliar or complex markets or lines of business, contingencies or liabilities not covered by or in excess of escrowed or indemnified amounts (such as those arising from unlawful sales practices and violations of sanctions laws or anti-corruption laws including the FCPA and U.K. Bribery Act), risks relating to ensuring compliance with licensing and regulatory requirements, tax and accounting issues, the risk that an acquisition distracts management and personnel from our existing business, and integration difficulties relating to accounting, information technology (which we refer to as IT),
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pay equity, or human resources, some or all of which could have an adverse effect on our results of operations and growth. The failure of acquisition targets to achieve anticipated revenue and earnings levels could result in goodwill impairment charges. Additionally, through our acquisitions, we may enter new lines of business or offer new services within existing lines of business. For example, our acquisitions of Woodruff Sawyer and Caytons Law added legal consulting services related to directors' and officers’ liability insurance and a U.K.-based claims and legal solutions firm. These new businesses may pose additional risks or increased regulatory burden.
Integration efforts relating to larger acquisitions (including, for example, AssuredPartners, the largest acquisition in our history) are more complex, including with respect to technology systems, which may divert management’s attention and resources and could adversely affect our operating results. In addition, we have made certain assumptions relating to these acquisitions that may be inaccurate, including as a result of the failure to realize expected benefits, higher than expected integration costs and unknown liabilities as well as general economic and business conditions. These assumptions relate to various matters, including projections of future revenues, non-GAAP measures, expenses and expense allocation; our ability to maintain, develop and deepen relationships with employees, including key brokers, and clients; the amount of goodwill and intangibles; our ability to realize anticipated cost savings and revenue synergies; and other unforeseen compliance, financial and strategic risks.
Damage to our reputation or culture could have a material adverse effect on our business.
Our reputation is one of our key assets. We advise our clients on and provide services related to a wide range of subjects and our ability to attract acquisition partners and attract and retain clients and employees is highly dependent upon perceptions of our expertise, level of service, ability to protect client information, trustworthiness, business practices, financial condition and other subjective qualities such as ethics, culture and values. We believe that our culture has been a critical component of our growth and success since our founding nearly 100 years ago and the failure to uphold our culture as we grow could negatively impact our reputation. Negative perceptions or publicity, including our association with clients or business partners with damaged reputations, as a result of actions taken by companies we acquire before the acquisition, as a result of marketing partnerships (for example, with a sports team or league), or from actual or alleged conduct by us or our employees, including corruption or bribery allegations or cybersecurity incidents, could damage our reputation. Negative publicity may be posted on social media or other Internet forums, whether or not true, and the speed and pervasiveness with which information can be disseminated through these channels, in particular social media, may magnify the risks noted above. Our success is also dependent on maintaining a good reputation with investors, regulators and the communities in which we operate. As we enter new jurisdictions and markets globally, negative reputational events (whether arising from regulatory matters or otherwise) may have a disproportionate impact in locations or markets where our employee and client presence is limited. Any negative publicity could potentially hinder our growth prospects in such locations or markets. Any of these matters could have a material adverse effect on our business, financial condition and results of operations. See below for additional risk factors regarding sustainability initiatives and disclosures.
Our sustainability-related aspirations, goals and initiatives, and our statements and disclosures regarding sustainability expose us to numerous risks.
Differing views and regulatory approaches regarding sustainability have made compliance with regulations, frameworks and stakeholder expectations increasingly complex and subject to risk. Our sustainability-related aspirations, goals and initiatives face scrutiny from the investment community, regulators, current and potential clients, employees, potential acquisition targets, and other stakeholders related to sustainability. This includes scrutiny regarding our goal to reach operational net zero carbon emissions (Scope 1 and Scope 2) by 2050 and our interim goal of a 50% reduction in such emissions, on a per employee basis, by 2030. We anticipate the same level of scrutiny with respect to any other goals, targets and objectives we may announce in the future, and our methodologies and timelines for pursuing them.
We could become the target of litigation, investigations or public criticism alleging that our sustainability efforts are anti-competitive, discriminatory or otherwise unlawful. For example, the State of Texas recently issued an opinion on the legality of corporate diversity, equity and inclusion (DEI) programs taking the position that such programs are potentially unlawful under certain circumstances. On the other hand, our failure or perceived failure to pursue or fulfill our sustainability-related goals, targets and objectives, to comply with ethical, social, environmental or other standards, regulations or expectations, or to satisfy various sustainability reporting standards, which vary widely across different jurisdictions, could also make us the target of litigation, investigations or public criticism. Any resulting erosion of trust and confidence could make it difficult for us to attract acquisition targets or attract and retain clients, employees or investors; result in lower sustainability ratings, exclusion of our stock from sustainability-oriented indices, and reduced demand for our stock from sustainability-focused or anti-ESG investment funds; increase our cost of borrowing; or harm our relationships with regulators and the communities in which we operate. See also “We are subject to regulation worldwide. If we fail to comply with regulatory requirements or if regulations change in a way that adversely affects our operations, we may not be able to conduct our business, or we may be less profitable.”
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If we are unable to apply technology and data analytics effectively in driving value for our clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of technology and related tools, our operating results, client relationships, ability to attract acquisition targets, growth and compliance programs could be adversely affected.
Our future success depends, in part, on our ability to collect and leverage data relating to our business and otherwise anticipate and respond effectively to the risks and opportunities presented by digital disruption, “big data” and data analytics, AI and other developments in technology. These may include new applications or insurance-related services based on AI (e.g., generative AI, machine learning), robotics, blockchain, or new approaches to data mining that impact the nature of how we generate revenue. We may be exposed to competitive risks related to the adoption and application of new technologies by established market participants (for example, through disintermediation) or new entrants such as technology companies, “Insurtech” start-up companies, and others. These new entrants are focused on using technology and innovation in an attempt to simplify and improve the client experience, increase efficiencies, alter business models and effect other potentially disruptive changes in the industries in which we operate. We must also develop and implement technology solutions and technical expertise among our employees that anticipate and keep pace with rapid and continuing changes in technology, industry standards, client preferences and internal control standards. We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis and our ideas may not be accepted in the marketplace. Additionally, the effort to gain technological expertise, make use of data analytics, and develop new technologies in our business requires us to incur significant expenses. Investments in technology systems and data analytics capabilities may not deliver the benefits or perform as expected, or may be replaced or become obsolete more quickly than expected, which could result in operational difficulties or additional costs. If we cannot offer new technologies or data analytics solutions as quickly as our competitors, or if our competitors develop more cost-effective technologies, data analytics solutions or other product offerings, we could experience a material adverse effect on our operating results, client relationships, ability to attract acquisition targets, growth, and compliance programs.
In some cases, we depend on key third-party vendors and partners to provide technology and other support for our strategic initiatives. If these third parties fail to perform their obligations or cease to work with us, our ability to execute on our strategic initiatives could be adversely affected. See also “We are subject to risks associated with AI.”
We are subject to risks associated with AI.
We use AI in our business, including with respect to services provided to our clients. We have internal policies and controls governing development, procurement, deployment and the use of AI by our employees designed to align with globally recognized AI principles, maintain trust with clients and protect the company from cybersecurity threats, breaches of data privacy and intellectual property, E&O liability and regulatory enforcement risk; however, our employees could violate these policies and they or external threat actors could circumvent our controls and expose us to such risks. Furthermore, our exposure to these risks may increase if our vendors, suppliers, or other third-party providers employ AI in relation to the products or services they provide to us, as we have limited control over such use in third-party products or services. These risks include, among others, the input of confidential information, including material non-public information, in contravention of our policies or contractual restrictions to which any of the foregoing are subject, or in violation of applicable laws or regulations, including those relating to data protection and AI. This could result in such information becoming part of a data set that is accessible by other third-party AI applications and users.
Additionally, AI heavily relies on the collection and analysis of extensive data sets. The third-party models underlying our AI tools may be inadequately designed, implemented or trained, and due to the impracticality of incorporating all relevant data into the models used by AI, it is inevitable that data sets within these models will contain information that has inaccuracies and errors, and potential biases. This could potentially render such models inadequate or flawed, leading to outputs surfacing third-party intellectual property or that contain information that is biased, unethical, discriminatory, incomplete, inaccurate, misleading or poor-quality that could negatively impact the effectiveness of the technology or our services. We are exposed to the risks associated with these inaccuracies, errors and biases, along with the adverse impacts that such flawed models could have on our business and operations. Furthermore, there is a risk that the use of AI may subject the company to reputational harm and liability related to governance and ethical issues and potential litigation from third-party intellectual property holders.
The increasing adoption of AI technologies by cyber threat actors presents a significant and evolving risk to our company. These actors may leverage AI to develop more sophisticated and targeted cyberattacks, including advanced phishing schemes, malware, and data exfiltration techniques, which could compromise our controls and systems, client data, and proprietary information. Such incidents could result in operational disruptions, financial losses, reputational damage, regulatory scrutiny, and potential legal liabilities. As the capabilities of AI-driven threats continue to advance, the complexity and scale of cyber risks we face may increase, necessitating ongoing investment in robust cybersecurity measures and threat mitigation strategies.
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AI and its applications are developing rapidly. The use of this technology by our clients or underwriting enterprises may impact the way our business operates, and its use by our competitors and new market entrants with competing services derived from their AI capabilities may give them a competitive advantage. We cannot predict the effect of these changes at this time. or example, they may decrease the demand for our services or negatively affect our assumptions regarding the competitive landscape of our business. Further, the rapid development of these technologies may require significant efforts to upskill or reskill existing employees. Consequently, it is difficult to predict all risks associated with this new technology, which may eventually impact our business, results of operations, or financial condition. See also “Changes in data privacy and protection laws and regulations, or any failure to comply with such laws and regulations, could adversely affect our business and financial results.”
Our success depends, in part, on our ability to attract and retain qualified talent, including our senior management team.
We depend upon members of our senior management team, who possess extensive knowledge and a deep understanding of our business and strategy. We could be adversely affected if we fail to successfully execute our succession plans for these leaders, including our chief executive and chief financial officers, and if our succession plans are not well-received by our employees, trading partners, investors and other stakeholders. Additionally, members of our senior management team face the risk of cybersecurity and physical threats that, if carried out, could adversely affect our business.
We could be adversely affected if we fail to attract and retain talent and foster a diverse and inclusive workplace throughout our organization. Competition for talent is intense in many areas of our business, particularly in our claims management business, IT and in rapidly developing fields such as AI and data engineering. The prevalence of remote working arrangements has expanded the pool of companies that compete with us for talent. As competition for skilled professionals remains intense, employers are implementing new offerings to attract talent, including but not limited to increasing compensation, enhancing health and wellness solutions, and providing remote work options. We may have to devote significant resources to attract and retain talent, which could negatively affect our business, operating results and financial condition.
Our industry has experienced competition for brokers and in the past we have lost key brokers and groups of brokers, along with their clients, business relationships and intellectual property directly to our competition. We enter into agreements with many of our brokers and significant client-facing employees and all of our executive officers, which prohibit them from disclosing confidential information and/or soliciting our clients, prospects and employees upon their termination of employment. The confidentiality and non-solicitation provisions of such agreements terminate in the event of a hostile change in control, as defined in the agreements. Although we pursue legal actions for alleged breaches of such agreements, theft of trade secrets, breaches of fiduciary duties, intellectual property infringement and related causes of action, such legal actions may not be effective in preventing such breaches, theft or infringement. In certain cases, our competitors have solicited employees in violation of their employment agreements as a matter of standard business practice, apparently determining that the cost of defending litigation is outweighed by the benefits of acquiring our employees in this manner. Certain states like Minnesota, North Dakota, Oklahoma and Wyoming have implemented rules that would prevent employers from entering into non-competes with employees, while California has broadened the scope of its longstanding restrictions on non-competes. If more states adopt similar rules or if we fail to adequately address any of the issues referred to above, we could experience a material adverse effect on our business, operating results and financial condition.
Business disruptions could have a material adverse effect on our operations, damage our reputation and impact client relationships.
Our ability to conduct business may be adversely affected by a disruption in the infrastructure that supports our business. This includes infrastructure controlled by third-party vendors and suppliers. Such disruptions could be caused by various factors, such as cybersecurity incidents, security breaches, human error, capacity constraints, hardware failures or defects, natural or man-made disasters, climate and weather events, pandemics, fires, power outages, telecommunication failures, break-ins, sabotage, intentional acts of vandalism, acts of terrorism, civil disruption, political violence and unrest, military actions or war. While we have disaster recovery procedures in place, they may not be effective. Additionally, insurance covering such disruptions may not continue to be available at reasonable prices and may not address all potential losses or compensate us for the possible loss of clients or increase in claims and lawsuits against us. Further, because we do not control infrastructure owned by third parties, we cannot guarantee that such parties have effective recovery procedures, or sufficient funds or insurance to recover any damages, losses or other liabilities that we may incur due to business interruptions caused by disruptions to their infrastructure.
The risk of business disruption is more pronounced in certain geographic areas where a significant portion of our business is concentrated. For example, we have substantial operations in India that provide important client support and other services for our global organization. To date, the dispute between India and Pakistan involving the Kashmir region, rising tensions between India and China, incidents of terrorism in India, the potential for civil unrest and general geopolitical
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uncertainties have not adversely affected our operations in India. However, such factors could potentially affect our operations there in the future. If our access to these services is disrupted, our client relationships could be harmed, our liability for E&O could increase, and our reputation could be damaged, adversely affecting our business, operating results and financial condition.
Our business or reputation could be harmed by our reliance on third-party providers.
While we maintain some of our critical information technology systems, we are dependent on third-party providers of information technology systems and services, as well as other non-IT services, to meet the needs of our business and our clients around the world. As we do not fully control the actions of these third parties, we are subject to the risk that their decisions, actions, or inactions may adversely impact us, and replacing these service providers could create significant delay and expense. There is a risk that our third-party providers could engage in business practices that are prohibited by our internal policies or violate applicable laws and regulations. A failure by third parties to comply with service-level agreements or regulatory or legal requirements in a high-quality and timely manner, particularly during periods of our peak demand for their services, could result in economic and reputational harm to us. These third parties face their own technology, operating, business and economic risks, and any significant failures by them, including the improper use or disclosure of our confidential client, employee or company information, could cause harm to our business and reputation. An interruption in or the cessation of service by any service provider as a result of systems failures, cybersecurity incidents, capacity constraints, financial difficulties, or for any other reason could disrupt our operations, impact our ability to offer certain products and services, and result in contractual or regulatory penalties, liability claims from clients or employees, damage to our reputation, and harm to our business. See also “Business disruptions could have a material adverse effect on our operations, damage our reputation and impact client relationships.”
Sustained increases in compensation expense and the cost of employee benefits could reduce our profitability.
Compensation expense and the cost of employees’ medical and other employee benefits, substantially affect our profitability. In the past, we have occasionally experienced significant increases in these costs as a result of macro-economic factors beyond our control, including wage inflation and increases in health care costs. In 2025, our health care costs rose by approximately 20% compared to 2024 (includes impact of inflation, increased utilization and increased headcount) and our consolidated compensation expense ratio in 2025 as a percent of total consolidated revenue at 56.2% decreased slightly compared to 2024. Although we have actively sought to control increases in compensation expense and the cost of employee benefits, we can make no assurance that we will succeed in limiting future cost increases, and continued upward pressure in these costs could reduce our profitability.
Our substantial operations outside the U.S. expose us to risks different than those we face in the U.S.
In 2025, we generated approximately 33% of our combined brokerage and risk management revenues outside the U.S. Our business outside the U.S. presents operational, regulatory, economic and other risks that are different from, or greater than, the risks we face doing comparable business in the U.S. These include, among others, risks relating to:
• Maintaining awareness of and complying with a wide variety of labor practices and foreign laws, including those relating to labor and employment, data privacy requirements, AI regulations, prohibitions on corrupt payments to government officials, export and import duties, environmental policies, sustainability disclosures, as well as laws and regulations applicable to U.S. business operations abroad;
• Our employees, agents, or affiliated entities, or their respective officers, directors, employees and agents, may take actions in violation of local laws, regulations or policies, for which we might be held responsible. Actual or alleged violations could result in substantial fines, sanctions, civil or criminal penalties, debarment from government contracts, curtailment of operations in certain jurisdictions, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations, financial condition or strategic objectives;
• We expect relations with work councils and trade unions will continue to be satisfactory. However, work stoppages could occur in countries where such organizations exist and we may not be successful in negotiating new collective bargaining agreements. In addition, collective bargaining negotiations may (1) result in significant increases in the cost of labor, (2) divert management’s attention away from operating the business or (3) break down and result in the disruption of operations. See also “Regulatory, Legal and Accounting Risks”;
• We own interests in firms where we do not exercise management control (such as Casanueva Perez S.A.P.I. de C.V. in Mexico and Renomia, A.S. in the Czech Republic) and
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are therefore unable to direct or manage the business to realize the full range of benefits, including mitigation of risks, that could be achieved through full ownership;
• The potential costs, difficulties and risks associated with local regulations across the globe, including the risk of personal liability for directors and officers (for example, in the U.K.) and “piercing the corporate veil” risks under the corporate law regimes of certain countries;
• Difficulties in staffing and managing foreign operations. For example, we are growing our Latin America operations through acquisitions of local family-owned insurance brokerage firms. If we lose a key local employee, hiring and retaining talent locally or finding an internal candidate qualified to transfer to such location could be difficult;
• Less flexible employee relationships, which in certain circumstances have limited our ability to prohibit employees from competing with us after they are no longer employed with us or recover damages, and made it more difficult and expensive to terminate their employment;
• Conflicting regulations in the countries in which we do business;
• Political and economic instability (including risks relating to undeveloped or evolving legal systems, unstable governments, acts of terrorism, military actions and war, including between Russia and Ukraine, the Middle East and Latin America and the Caribbean). See also “Global economic conditions and geopolitical events may impact the countries, regions or industries in which we operate and adversely affect our business, results of operations and financial condition”;
• Coordinating our communications, policies and logistics across geographic distances, multiple time zones and in different languages, including during times of crisis management;
• Risks relating to our post-Brexit plan to address the loss of passporting rights between the U.K. and the European Economic Area (which we refer to as EEA) with respect to insurance brokerage services. The plan we implemented in 2020 involved transferring the EEA clients of our U.K.-based regulated entities to a Swedish subsidiary authorized in the EEA, and providing some services through a U.K. branch of such subsidiary. Although this “reverse branch” model is typical of other brokers of a similar size, EEA, regulators continue to assess their approach to this model, including as a result of, among other developments, the supervisory statement issued by the European Insurance and Occupational Pensions Authority (EIOPA) in February 2023. While we are continuously assessing the impact of these developments, it is difficult to predict such impact on our current plan;
• Unfavorable audits and exposure to additional liabilities relating to various non-income taxes (such as payroll, sales, use, value-added, net worth, property and goods and services taxes) in non-U.S. jurisdictions. In addition, our future effective tax rates could be unfavorably affected by changes in tax rates, discriminatory or confiscatory taxation, changes in the valuation of our deferred tax assets or liabilities, changes in tax laws or their interpretation and the financial results of our non-U.S. subsidiaries. See also “Changes in tax laws could adversely affect us”;
• Legal or political constraints on our ability to maintain or increase prices;
• Cash balances held in foreign banks and institutions where governments have not specifically enacted formal guarantee programs;
• Certain of our non-U.S. subsidiaries receive revenues or incur obligations in currencies that differ from their functional currencies. We must also translate the financial results of our non-U.S. subsidiaries into U.S. dollars. Although we have used foreign currency hedging strategies in the past and currently have some in place, such risks cannot be eliminated entirely, and significant changes in exchange rates may adversely affect our results of operations;
• Epidemics or pandemics at a regional or global level;
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• Lost business or other financial harm due to protectionism in the U.S. and in countries around the world, including adverse trade policies, tariffs, trade wars and other governmental actions affecting the flow of goods, services or currency, and governmental restrictions on the transfer of funds to us from our operations outside the U.S.; for example, the practice of using off-shore labor has come under increased scrutiny in the U.S. and governmental authorities or insurance carriers could seek to impose financial costs or restrictions on the use of off-shore centers of excellence such as the ones we operate in India and other international jurisdictions (see also “Business disruptions could have a material adverse effect on our operations, damage our reputation and impact client relationships”); and
• Increased tensions between countries such as the U.S., China and Russia and related trade and military policies of the U.S. government that may cause retaliation or countermeasures from other countries or regions, could further develop in ways that exacerbate the risks described above, or introduce new risks for our non-U.S. operations, such as increasing the potential that sanctions, tariffs, global mobility restrictions or other related measures may impact our business.
If any of these risks materialize, our results of operations and financial condition could be adversely affected.
Changes in tax laws could adversely affect us.
We operate in various jurisdictions and are subject to changes in applicable tax laws, treaties, or regulations in those jurisdictions. A material change in the tax laws, treaties, or regulations, or their interpretation, of any jurisdiction with which we do business, or in which we have significant operations, could adversely affect us. For example, in the Organization for Economic Cooperation and Development (which we refer to as the OECD) continues to issue reports and recommendations as part of its Base Erosion and Profit Shifting project (which we refer to as BEPS) and in 2021, it announced that 136 countries and tax jurisdictions agreed to implement a new Pillar 2 approach to international taxation. Pillar 1 exempts regulated financial institutions and we believe we qualify for such exemption.
Many countries in which we do business have adopted, or are expected to adopt, these rules which will change various aspects of the existing framework under which our tax obligations are determined. For example, the U.K., the majority of the E.U., Canada, Australia and New Zealand have now adopted nearly all aspects of these rules with limited variation from the OECD model rules. Other jurisdictions in which we do business also reacted to these efforts; for example, Bermuda enacted a corporate tax regime for the first time in 2023, which became effective in 2025.
On January 5, 2026, OECD released additional administrative guidance on the application of Pillar 2 global minimum tax rules, which are designed to ensure that large multinational enterprise (MNE) groups are subject to a minimum effective tax rate of 15% in each jurisdiction in which they operate. This guidance introduces a package of new and expanded safe harbors and simplification measures, including a “side-by-side” safe harbor regime applicable to certain U.S.-parent MNE groups, extensions and modifications to existing transitional safe harbors, and additional rules addressing the treatment of tax incentives and effective tax rate calculations. The most significant element of this guidance is the “side-by-side” safe harbor which is intended to coordinate the Pillar 2 global minimum tax regime with certain domestic minimum tax systems, including those in the U.S. Subject to eligibility requirements and elections, this safe harbor may substantially reduce or eliminate the application of Pillar 2 “top-up taxes,” including the Income Inclusion Rule and Undertaxed Profits Rule for affected MNE groups for fiscal years beginning on or after January 1, 2026. These developments, once enacted into domestic law by Pillar 2 adopters, have the potential to significantly de-risk Pillar 2 exposure for U.S. multinationals like Gallagher. Whether those enactments take effect in 2026 or later, they will need to be monitored and anticipated top-ups adjusted to reflect those enactment dates. Regardless of the adoption of this new guidance, the domestic minimum top-up aspect of Pillar 2 (referred to as “QDMTT”) and its related compliance aspects will remain for all multinationals that operate in jurisdictions that have enacted it.
We anticipate further significant developments across several jurisdictions in which we operate in 2026 and 2027. Should the jurisdictions in which we operate, and those in which we and our subsidiaries are based, choose not to implement the OECD’s January 2026 guidance in their tax treaties and domestic tax laws, particularly if the U.S. does not adopt Pillar 2, although we do not anticipate a material financial impact, we could be adversely affected by a top-up.
We face significant competitive pressures in each of our businesses.
The insurance brokerage, reinsurance brokerage and employee benefit consulting businesses are highly competitive and many insurance brokerage, reinsurance brokerage and employee benefit consulting organizations actively compete with us in one or more areas of our business around the world. Two of the firms we compete with in the global brokerage and risk management markets have larger revenues than ours. In addition, many other smaller firms that operate nationally or that
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are strong in a particular country, region or locality may have, in that country, region or locality, an office with revenues as large as or larger than those of our corresponding local office. Our third-party claims administration operation also faces significant competition from stand-alone firms as well as divisions of larger firms. Over the past decade or more, private equity sponsors have invested heavily in the insurance brokerage and third-party claims administration industries, creating new competitors and strengthening existing ones. Across all of our operations, Insurtech and technology-based start-ups are entering the business. In most cases, these businesses complement or enhance our offerings, but in some cases, they compete with us.
We believe that the primary factors determining our competitive position with other organizations in our industry are the quality of the services we offer, our data analytics capabilities, the personalized attention we provide, the individual and corporate expertise of the brokers and consultants providing the actual service to the client, our ability to address client needs across the insurance value chain by leveraging our capabilities in insurance, reinsurance, alternative risk transfer, management and administrative services, benefits consulting, and claims management, and our ability to help our clients manage their overall risk exposure and insurance or reinsurance costs. Losing business to competitors offering similar services or products at a lower cost or having other competitive advantages would adversely affect our business.
Consolidation among our existing competitors could create additional competitive pressure on us as such firms grow their market share, take advantage of strategic and operational synergies and develop lower cost structures. In addition, any increase in competition due to new legislative or industry developments could adversely affect us.
These developments include:
• Increased capital-raising by underwriting enterprises, which could result in new risk-taking capital in the industry, which in turn may lead to lower insurance premiums and commissions;
• Underwriting enterprises selling insurance directly to insureds without the involvement of a broker or other intermediary;
• Changes in our business compensation model as a result of regulatory developments;
• Federal and state governments establishing programs to provide health insurance (such as a single-payer system) or, in certain cases, property insurance in catastrophe-prone areas or other alternative market types of coverage, that compete with, or completely replace, insurance products currently offered by underwriting enterprises;
• Sustainability regulations in the U.S. and around the world, particularly those promoting the transition to a lower-carbon economy, which could create new competitive pressures around climate resilience consulting services and innovative insurance solutions;
• Continued consolidation in the financial services industry, leading to large financial services institutions offering a wider variety of services including insurance brokerage and risk management services;
• Increased competition from new market participants such as banks, accounting firms, consulting firms and Internet or other technology firms offering risk management or insurance brokerage services, or new distribution channels for insurance such as payroll firms and professional employer organizations; and
• Third-party capital providers entering the insurance and reinsurance risk transfer market offering products and capital directly to our clients. Their presence in the market has increased the competitive pressures that we face.
New competition as a result of these or other legislative or industry developments could cause the demand for our products and services to decrease, which could in turn adversely affect our results of operations and financial condition.
Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability.
We derive much of our revenue from commissions and fees for our brokerage services. We do not determine the premiums on which our commissions are generally based. Moreover, premiums are cyclical in nature and may vary widely based on market conditions. Because of market cycles for insurance and reinsurance product pricing, which we cannot predict or control, our brokerage revenues and profitability can be volatile or remain depressed for significant periods of time.
Underwriting enterprises may seek to minimize their expenses by reducing the commission rates payable to agents or brokers such as us. The reduction of these commission rates, along with general volatility and/or declines in premiums,
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may significantly affect our profitability. Because we do not determine the timing or extent of premium pricing changes, it is difficult to forecast our commission revenues precisely, including whether they will significantly decline. As a result, we may have to adjust our budgets for future acquisitions, capital expenditures, dividend payments, debt repayments and other expenditures to account for unexpected changes in revenues, and any decreases in premium rates may adversely affect the results of our operations.
In addition, there have been and may continue to be various trends in the insurance and reinsurance markets toward alternative insurance markets including, among other things, greater levels of self-insurance, captives, rent-a-captives, risk retention groups and non-insurance capital markets-based solutions to traditional insurance. While historically we have been able to participate in certain of these activities on behalf of our clients and obtain fee revenue for such services, there can be no assurance that we will realize revenues and profitability as favorable as those realized from our traditional brokerage activities. Our ability to generate premium based commission revenue may also be challenged by the growing desire of some clients to compensate brokers based upon flat fees rather than a percentage of premium. This could negatively impact us because fees are generally not indexed for inflation and might not increase with premiums as commissions do or with the level of service provided.
Contingent and supplemental revenues we receive from underwriting enterprises are less predictable than standard commission revenues, and any decrease in the amount of these forms of revenue could adversely affect our results of operations.
A meaningful portion of our revenues consists of contingent and supplemental revenues from underwriting enterprises. Contingent revenues are paid after the insurance contract period, generally in the first or second quarter, based on the growth and/or profitability of business we placed with an underwriting enterprise during the prior year. On the other hand, supplemental revenues are paid up front, on an annual or quarterly basis, generally based on our historical premium volumes with the underwriting enterprise and additional capabilities or services we bring to the engagement. While underwriting enterprises generally maintain supplemental revenues in the current year at a pre-determined rate, that rate can change in future years as described above. If, due to the current economic environment or for any other reason, we are unable to meet an underwriting enterprise’s particular profitability, volume or growth thresholds, as the case may be, or such companies increase their estimate of loss reserves (over which we have no control), actual contingent revenues or supplemental revenues could be less than anticipated, which could adversely affect our results of operations. In the case of contingent revenues, under revenue recognition accounting standards, this could lead to the reversal of revenues in future periods that were recognized in prior periods.
We face a variety of risks in our benefit consulting operations distinct from those we face in our insurance brokerage operations.
Our benefit consulting operations face a variety of risks distinct from those faced by our brokerage operations. The portion of our revenue derived from consulting engagements and special project work is more vulnerable to reduction, postponement, cancellation or non-renewal during an economic downturn than traditional insurance brokerage commissions. A portion of our benefit consulting operation revenue is tied to assets invested by our clients, and when investment returns are adversely affected that portion of our revenue is negatively impacted. Certain areas within our retirement consulting practice may attract a higher level of regulatory scrutiny due to regulators’ historical interest in such matters, including pension-related products and investment advisory and broker-dealer services. In addition, we have made significant investments in product and knowledge development to assist clients as they navigate the complex regulatory requirements relating to employer-sponsored healthcare. New laws or regulations reducing employer-sponsored health insurance, by limiting or eliminating tax-advantaged employer-sponsored benefits or otherwise, could impact clients’ demand for our services. If we are unable to adapt our services to changes in the legal and regulatory landscape around employer-sponsored benefits, our results of operations could be adversely impacted.
We face a variety of risks in our third-party claims administration operations that are distinct from those we face in our brokerage and benefit consulting operations.
Our third party claims administration operations face a variety of risks distinct from those faced by the rest of our business, including the risks that:
• Epidemics and pandemics that reduce in-person business activity have a greater negative impact because they result in a reduction in the number of claims processed, as experienced during the years 2020, 2021 and the beginning of 2022. If a new epidemic or pandemic were to emerge, these operations could face similar negative impacts in the future;
• RISX-FACS®, our proprietary risk management information system, on which our ability to provide clients with insurance claim settlement and administration services is highly dependent, becomes inoperable for some reason. In addition, we are increasing our use of
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cloud storage and cloud computing application services supported, upgraded and maintained by third-party vendors. A disruption affecting RISX-FACS®, third-party cloud services or any other infrastructure supporting our business, including key client relationship management software, could have a material adverse effect on our operations, cause reputational harm and damage our employee and client relationships;
• The favorable trend among both underwriting enterprises and self-insured entities toward outsourcing various types of claims administration and risk management services will reverse or slow, causing our revenues or revenue growth to decline;
• Concentration of large amounts of revenue with certain clients results in greater exposure to the potential negative effects of lost business due to changes in management at such clients or changes in state government policies, in the case of our government-entity clients, or for other reasons;
• Contracting terms will become less favorable or the margins on our services will decrease due to increased competition, regulatory constraints or other developments;
• We do not satisfy regulatory requirements related to third party administrators or that regulatory developments, impose additional burdens, costs or business restrictions that make our business less profitable; for example, regulations relating to security, cybersecurity, AI and data privacy as we manage a large amount of highly sensitive and confidential information including personally identifiable information, protected health information and financial information;
• Volatility in our case volumes, which are dependent upon a number of factors and difficult to forecast accurately, could impact our revenues;
• Wage inflation, difficulty attracting and retaining talent, and rising technology costs, may impact our ability to remain competitive in the marketplace and profitably fulfill our existing contracts (other than those that provide cost-plus or other margin protection);
• We may be unable to develop further efficiencies in our claims-handling business and may be unable to obtain or retain certain clients if we fail to make adequate improvements in technology or operations; and
• Underwriting enterprises or certain large self-insured entities may create in-house servicing capabilities, including as a result of the adoption of AI that compete with our third party administration and other administration, servicing and risk management products, and we could face additional competition from potential new entrants into the global claims management services market. See also “We are subject to risks associated with AI.”
If any of these risks materialize, our results of operations and financial condition could be adversely affected.
Regulatory, Legal and Accounting Risks
Improper disclosure of confidential, personal or proprietary information and cybersecurity attacks or other security breach of our information systems, or those of third-party vendors we rely on, could result in regulatory scrutiny, legal liability or reputational harm, and could adversely affect our business, financial condition and reputation.
We collect, use, store, transmit and otherwise process, confidential, personal and proprietary information relating to our company, acquisition targets, our employees and our clients. This information includes personally identifiable information, protected health information, financial information, mergers and acquisitions information and intellectual property.
We maintain policies, procedures and technical safeguards designed to protect the security and privacy of confidential, personal and proprietary information. Nonetheless, we cannot eliminate the risk of human error, malfeasance or highly sophisticated cyber-attacks, which are heightened as a result of military actions and war, including between Russia and Ukraine, the Middle East, Latin America and the Caribbean, or other cybersecurity incidents. Further, there is a possibility that our internal processes and those of our third-party vendors to de-identify or delete confidential, personal and proprietary information may not be adequate to ensure that sensitive information is disposed of in compliance with applicable laws and regulations. In addition, our increased reliance on technologies that support remote and hybrid work and our employees’ more frequent use of personal devices and non-standard business processing as well as the increasing prevalence of sophisticated cyber-attacks using AI, such as “deep fakes,” may increase the risk of cybersecurity or data breaches from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing”
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attacks (including digital or telephonic impersonation), computer viruses, ransomware, malware, malicious or destructive code, employee or insider error, malfeasance, social engineering, physical breaches or other actions. It is possible that our preventive, detective, containment or remedial security controls, employee training and other aspects of our cybersecurity safeguards are not effective.
We have and continue to invest in technology security initiatives, policies, resources and employee training. The cost and operational consequences of implementing, maintaining and enhancing appropriate technical measures is high. Given the continuously evolving cyber threat landscape, it will become increasingly difficult to detect, defend against and remediate cybersecurity incidents and data breaches. If we are unable to effectively maintain and enhance our system safeguards in line with evolving cyber threats, including in connection with the integration of acquisitions, we may incur unexpected costs, including litigation costs, regulatory enforcement action, loss of clients, reputational damage, and certain of our systems may become more vulnerable to unauthorized access.
We rely on IT and third party vendors some of which have direct access to our systems, to support our business activities, including our secure processing of personal, confidential, sensitive, proprietary and other types of information. Despite ongoing efforts to improve our and our vendors’ ability to protect and defend against cyber-attacks, we may not be able to protect all of our data. From time to time, cybersecurity incidents and data breaches of certain systems on which we rely have occurred, such as computer viruses, unauthorized parties gaining access to our information technology systems, and privacy incidents, such as loss or inadvertent transmission of data, although to date we have not been materially impacted by such events. In the future, breaches of any third-party or internal systems may result from circumvention of security systems, denial-of-service, hacking, “phishing”, computer viruses, ransomware, malware, or other cyber-attacks, employee or insider error, malfeasance, social engineering, physical breaches or other actions. Furthermore, the risk from threat actors has increased due to the rapid development of AI capabilities.
With respect to our commercial arrangements with third-party vendors, we have processes designed to require third party IT outsourcing, offsite storage and other vendors to agree to maintain certain standards with respect to their storage, protection and transfer of confidential, personal and proprietary information. However, we have limited control over their security, privacy and data governance practices so there can be no assurance that we can prevent, mitigate, or remediate a potential failure of those standards and we remain at risk of a cyber or data incident due to the intentional or unintentional non-compliance by a vendor’s employee or agent, the breakdown of a vendor’s processes, or a cybersecurity incident involving vendor’s information systems. We cannot ensure that any provisions in our agreements with these vendors would be enforceable or adequate or would otherwise protect us from any liability in connection with these incidents. See also “Our business or reputation could be harmed by our reliance on third-party providers.”
We are an acquisitive organization. The process of integrating information systems of businesses we acquire is complex and exposes us to additional risk as we might not adequately identify weaknesses in the targets’ information systems or information handling, privacy and security policies and protocols, which could expose us to unexpected liabilities or make our own systems and data more vulnerable to employee or insider error, malfeasance or cybersecurity incidents. These risks may be exacerbated in connection with the integration of AssuredPartners. Any future, material cybersecurity or data incident, may cause us to experience unauthorized access, exfiltration, manipulation, corruption, loss or disclosure of our proprietary, client, employee, or other data, reputational harm, the inability to render services due to system outages or other business disruptions, loss of clients and revenue, regulatory action and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard clients’ information, increases in cybersecurity costs or financial losses. Any of the foregoing may be exacerbated by a delay or failure to detect a cybersecurity incident or the full extent of such incident. In addition, disclosure or media reports of actual or perceived security vulnerabilities to our systems or those of our third-party service providers, even if no breach has been attempted or occurred, could lead to reputational harm, loss of customers and revenue, or increased regulatory actions oversight and scrutiny.
Such incidents could result in confidential, personal or proprietary information being lost or stolen, used to perpetuate fraud, maliciously made public, surreptitiously modified, or rendered inaccessible for a period of time. We cannot ensure that any limitations of liability provisions in our agreements with clients, vendors and other third parties with which we do business would be enforceable or adequate or would otherwise protect us from any liability with respect to claims arising from a cybersecurity, data or similar incident.
During a cybersecurity incident, we might have to take our systems offline, which could interfere with services to our clients or damage our reputation. While we endeavor to design and implement technologies, controls, policies and procedures to identify such incidents as quickly as possible, any response could take substantial time, and there may be extensive delays before we obtain full and reliable information. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all of which may further increase the costs and consequences of such incident. Any of these losses may not be insured against or be fully covered by insurance we maintain. Further, we cannot ensure that our and our third-party vendors’ existing insurance coverage will continue to be available on acceptable terms or at all. Certain
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regulations and contractual obligations require us to inform regulators, clients or affected persons in the event of a breach of confidential, personal or proprietary information on our or our third-party vendors’ systems, which we may need to deliver before we fully understand the impact of such breach resulting in damage to our reputation and our relationship with regulators and clients.
In addition, the competition for talent is high in the cybersecurity and privacy space, and we may not be able to hire, develop or retain suitable talent that we need to be capable of minimizing, identifying, mitigating or remediating these risks.
With respect to our commercial arrangements with third-party vendors, we have processes designed to require third party IT outsourcing, offsite storage and other vendors to agree to maintain certain standards with respect to their storage, protection and transfer of confidential, personal and proprietary information. However, we have limited control over their security, privacy and data governance practices so there can be no assurance that we can prevent, mitigate, or remediate a potential failure of those standards and we remain at risk of a cyber or data incident due to the intentional or unintentional non-compliance by a vendor’s employee or agent, the breakdown of a vendor’s processes, or a cybersecurity incident involving vendor’s information systems. We cannot ensure that any provisions in our agreements with these vendors would be enforceable or adequate or would otherwise protect us from any liability in connection with these incidents. See also “Our business or reputation could be harmed by our reliance on third-party providers.”
Any of the foregoing may have a material adverse effect on our business, financial condition and reputation.
Changes in data privacy and protection laws and regulations, or any failure to comply with such laws and regulations, could adversely affect our business and financial results.
We are subject to a variety of continuously evolving and developing laws and regulations globally regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, cross-border transfer, destruction, and security of personal data. These laws apply to transfers of personal information among our affiliates, as well as to transactions we enter into with third party vendors and clients. Significant uncertainty exists as privacy and data protection laws evolve. Such laws are complex and may be interpreted and applied differently from country to country and state to state, and may create inconsistent or conflicting requirements. Some of these laws provide rights to individuals to access, correct, and delete their personal information and to obtain copies at the expense of the business entities that process their data. Some of these laws carry heavy penalties for violations, e.g., fines of up to 4% of worldwide revenue under the U.K. Data Protection Act and the European Union General Data Protection Regulation (which we refer to as GDPR), up to $20,000 per violation under the Colorado Privacy Act (which we refer to as CPA), and up to $7,500 per intentional violation under the California Consumer Privacy Act (which we refer to as CCPA). In the U.S., there is pending federal legislation and over a dozen states have proposed and some have implemented their own comprehensive data privacy bills similar to the GDPR and CCPA, with some of those laws already in effect, and others coming into effect through 2026. Despite recent privacy frameworks developed between the U.S., the U.K. and the E.U., there remains a high level of uncertainty concerning the flow of personal information between these jurisdictions, which may impair our ability to offer existing and new services and increase our costs and compliance burden.
India and other countries where we have operations outside the U.S. have proposed or have enacted sweeping data protection laws, and in some cases we are subject to sector and personal data localization laws that may require that data or personal data stay within their borders, such as India's IRDIA (Maintenance of Insurance Records) Regulation, 2015.
In addition, in the U.S., legislators are continuing to enact comprehensive cybersecurity laws. For example, we are subject to the New York State Department of Financial Services Cybersecurity Regulation for Financial Services Companies, which were substantively amended in 2023. We also expect to be subject to a variety of laws and regulations governing AI, such as the E.U. AI Act which was enacted in 2024 and will gradually enter into force during the next two years , the Colorado AI Act, and the California AI Transparency Act. Further, the issuance of the President‘s AI Executive Order entitled “Ensuring a National Policy Framework for Artificial Intelligence” introduces significant uncertainty in the regulatory landscape for AI across the United States. This uncertainty may lead to a fragmented regulatory environment, complicating compliance efforts, increasing operational risks, and potentially impacting the company’s ability to adapt to evolving legal and regulatory requirements. These laws and regulations are still evolving, and while we are continuing to assess how regulators may apply existing consumer protection, data protection and other similar laws to AI, there is uncertainty regarding the scope of new laws and how existing laws will apply. Due to this uncertainty, we may face challenges complying with existing and new laws, and our policies and governance frameworks may not be successful in mitigating these risks. See also “We are subject to risks associated with AI.”
Adhering to the increased obligations imposed by various new and emerging laws as well as the terms of our privacy notices and contractual obligations to third parties causes us to incur substantial expense in connection with developing, implementing, and securing our systems and effectively implementing data privacy governance policies for the lawful processing of personal data. Such increased obligations also result in the allocation of additional resources towards new privacy compliance processes and enhanced technologies, further contributing to our IT and compliance costs. We have implemented privacy policies detailing how we collect, use, disclose, transfer across borders, retain, and otherwise process personal information but our employees, third-party vendors or other third parties we work with may not fully adhere to
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such policies. Such non-compliance could lead to private rights of action or regulatory enforcement actions or investigations if our processing of personal data is deemed deceptive, unfair, misrepresentative of our published privacy notices or otherwise non-compliant with privacy regulation. In addition, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations generally continue to increase. The enactment of more restrictive laws, rules, regulations, or future enforcement actions or investigations could impact us through increased costs or restrictions on our business and could result in regulatory penalties and significant legal liability.
We are subject to a number of contingencies and legal proceedings which, if determined unfavorably to us, would adversely affect our financial results.
We are or have been subject to numerous claims, tax assessments, lawsuits and proceedings that arise in the ordinary course of business. Such claims, lawsuits and other proceedings include claims for damages based on allegations that our employees or sub-agents improperly failed to procure coverage, report claims on behalf of clients, provide underwriting enterprises with complete and accurate information relating to the risks being insured, or provide clients with appropriate consulting, advisory, pension and claims handling services. There is the risk that our employees or sub-agents may fail to appropriately apply funds that we hold for our clients on a fiduciary basis. Certain of our benefits and retirement consultants provide investment advisory or decision-making services to clients. Additionally, Gallagher Re operates a securities business. If our clients experience investment losses, our reputation could be damaged and our financial results could be negatively affected as a result of claims asserted against us and lost business. Where appropriate, we have established provisions against these matters that we believe are adequate in light of current information and legal advice, and we adjust such provisions from time to time based on current material developments. The damages claimed in such matters are or may be substantial, including, in many instances, claims for punitive, treble or other extraordinary damages. It is possible that, if the outcomes of these contingencies and legal proceedings were not favorable to us, it could materially adversely affect our future financial results. In addition, our results of operations, financial condition or liquidity may be adversely affected if, in the future, our insurance coverage proves to be inadequate or unavailable or we experience an increase in liabilities for which we self-insure. We have purchased E&O insurance and other insurance to provide protection against losses that arise in such matters. Accruals for these items, net of insurance receivables, when applicable, have been provided to the extent that losses are deemed probable and are reasonably estimable. These accruals and receivables are adjusted from time to time as current developments warrant.
As more fully described in Note 15 to our 2025 consolidated financial statements, we are a defendant in various legal actions incidental to our business, including but not limited to matters related to employment practices, alleged breaches of non-compete or other restrictive covenants, theft of trade secrets, breaches of fiduciary duties, and related causes of action. We are also periodically the subject of inquiries and investigations by regulatory and tax authorities into various matters related to our business. For example, our micro-captive advisory services business has been under investigation by the IRS since 2013. We currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations or cash flows. However, legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other adverse events could occur, including the payment of substantial monetary damages or an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices or requiring other remedies, which may result in a material adverse impact on our business, results of operations or financial position. In addition, regardless of any unfavorable ruling, any such matter could expose us to negative publicity, reputational damage, harm to our client or employee relationships, or diversion of personnel and management resources, which could adversely affect our ability to recruit quality brokers and other significant employees to our business, and otherwise adversely affect our results of operations.
We could be adversely affected by violations or alleged violations of laws that impose requirements for the conduct of our overseas operations, including the FCPA, the U.K. Bribery Act or other anti-corruption laws, sanctions laws and FATCA.
In countries outside the U.S., a risk exists that our employees or third parties acting on our behalf, including correspondent brokers, consultants, introducers, partners or agents, could engage in business practices prohibited by applicable laws and regulations, including anti-bribery and anti-corruption laws, and sanctions laws such as those administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control. Anti-bribery and anti-corruption laws, such as the FCPA and the U.K. Bribery Act, generally prohibit companies from making improper payments to foreign officials and require companies to keep accurate books and records and maintain appropriate internal controls. Trade and financial sanctions laws generally restrict the ability to engage in trade with, or provide goods or services, to designated governments or other parties, or may require freezing of such parties’ assets. We operate in some parts of the world that have experienced governmental corruption. In such parts of the world, in certain circumstances, local customs and practice might not be consistent with the requirements of anti-bribery and anti-corruption laws. Similarly, some of these countries do not
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implement sanctions laws and may not restrict trade with parties designated as sanctions targets under U.S., U.K. or E.U. laws.
Our policies mandate strict compliance with such laws and we devote substantial resources to programs designed to ensure compliance, including investigating business practices and taking steps to address the risk that our employees, third party representatives, partners or agents will engage in business practices that are prohibited by our policies and/or such laws and regulations.
We offer client service capabilities in many countries around the world and sometimes work through a network of third-party representatives acting on our behalf such as correspondent brokers and consultants. There is a risk that our third party representatives engage in business practices that are prohibited by our internal policies or violate applicable laws and regulations, such as the FCPA and the U.K. Anti-Bribery Act.
Violations by us or our third party representatives could result in significant internal investigation costs and legal fees, civil and criminal penalties, including prohibitions on the conduct of our business, and reputational harm.
We may also be subject to legal liability and reputational damage if we violate trade sanctions laws of the U.S., the E.U., the U.K. and other jurisdictions in which we operate. In addition, FATCA requires certain of our subsidiaries, affiliates and other entities to obtain valid FATCA documentation from payees prior to remitting certain payments to such payees and our failure to do so properly could result in penalties.
We are subject to regulation worldwide. If we fail to comply with regulatory requirements or if regulations change in a way that adversely affects our operations, we may not be able to conduct our business, or we may be less profitable.
Many of our activities throughout the world, especially regulated businesses such as our insurance brokerage, securities broker-dealer and investment advisory services, are subject to supervision and regulations promulgated by regulatory or self-regulatory bodies such as the SEC, the NYSE, the DOJ, the IRS, the Financial Crimes Enforcement Network, the FTC and FINRA in the U.S., the FCA in the U.K., the Australian Securities and Investments Commission in Australia and insurance regulators in nearly every jurisdiction in which we operate. Our retirement-related consulting and investment advisory services are subject to pension law and financial regulation in many countries. Our activities are also subject to a variety of other laws, rules and regulations addressing licensing, cybersecurity, data privacy, AI, wage-and-hour standards, employment and labor relations, competition, anti-corruption, currency, the conduct of business, reserves and the amount of local investment with respect to our operations in certain countries. For example, the DOJ updated its guidance on corporate compliance programs to include AI risk management. These and other forms of regulatory action could reduce our profitability or growth by increasing the costs of compliance, increasing the risk of costly enforcement actions, restricting the products or services we sell, the markets we enter, the methods by which we sell our products and services, or the prices we can charge for our services and the form of compensation we can accept from our clients, underwriting enterprises and third parties. As our operations grow around the world, it is increasingly difficult to monitor and enforce regulatory compliance across the organization. A compliance failure by even one of our smallest branches could lead to a loss of reputation in the local market, and litigation and/or disciplinary actions that may include compensating clients for loss, the imposition of penalties, and/or the loss of our authorization to operate. In all such cases, we would also likely incur significant internal investigation costs and legal fees.
The global nature of our operations increases the complexity and cost of compliance with laws and regulations, including increased staffing needs, the development of new policies, procedures and internal controls and providing training to employees in multiple locations, adding to our cost of doing business. Many of these laws and regulations may have differing or conflicting legal standards across jurisdictions, increasing further the complexity and cost of compliance. We experience substantial geopolitical and regulatory changes on a real-time basis, which may lead to uncertainty and increase the complexity, difficulty, and cost of compliance. In emerging markets and other jurisdictions with less developed legal systems, local laws and regulations may not be established with sufficiently clear and reliable guidance to provide us with adequate assurance that we are aware of all necessary licenses to operate our business, that we are operating our business in a compliant manner, or that our rights are otherwise protected. In addition, major political and legal developments in jurisdictions in which we do business may lead to new regulatory costs and challenges. For example, China has in place a “blocking” statute similar to that of the E.U. requiring compliance with certain Chinese laws if they conflict with U.S. laws. Rising global tensions and protectionism may also lead other countries to adopt similar blocking statutes, which could make it more difficult and costly for us to expand our operations globally.
Changes in legislation or regulations and actions by regulators, including changes in administration and enforcement policies, or the failure of state and local governments to follow through on agreed-upon state and local tax credits or other tax related incentives, could adversely affect our results of operations or require operational changes that could result in lost revenues or higher costs or hinder our ability to operate our business.
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For example, the method by which insurance brokers are compensated has received substantial scrutiny in the past because of the potential for conflicts of interest. The potential for conflicts of interest arises when a broker is compensated by two parties in connection with the same or similar transactions. The vast majority of the compensation we receive for our work as insurance and reinsurance brokers is in the form of retail commissions and fees. We receive additional revenue from underwriting enterprises, separate from retail commissions and fees, including, among other things, contingent and supplemental revenues and payments for consulting and analytics services we provide them. Future changes in the regulatory environment may impact our ability to collect these revenues. Adverse regulatory, legal or other developments regarding these revenues could have a material adverse effect on our business, results of operations or financial condition, expose us to negative publicity and reputational damage and harm our relationships with clients, underwriting enterprises or other business partners.
In addition, climate change and sustainability issues remain a significant focus for investors, clients and other business partners, while regulatory approaches across jurisdictions continue to vary widely. Some jurisdictions, such as the U.K., Australia and the State of California, are intensifying regulation and enforcement with respect to climate-related disclosures, where others are moving towards deregulation – for example, at the U.S. federal level the SEC abandoned the defense of the climate-related disclosures rule and the E.U. approved the Omnibus I directive that reduced significantly the entities subject to, and the requirements of, the Corporate Sustainability Reporting Directive (which we refer to as CSRD) and the Corporate Sustainability Due Diligence Directive (which we refer to as CSDDD). In addition, the State of Texas recently issued an opinion on the legality of corporate DEI programs taking the position that such programs are potentially unlawful under certain circumstances. Navigating these inconsistent and evolving rules may demand substantial effort and resources, potentially diverting management’s attention. Failure to effectively navigate these complexities could harm our reputation and strain relationships with regulators, investors, clients, and other business partners, which may adversely affect our business, operating results and financial condition.
Changes in our accounting estimates and assumptions could negatively affect our financial position and operating results.
We prepare our financial statements in accordance with U.S. generally accepted accounting principles (which we refer to as GAAP). These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements. We are also required to make certain judgments and estimates that affect the disclosed and recorded amounts of revenues and expenses related to revenue recognition and deferred costs - see Note 4 to our 2025 consolidated financial statements. We periodically evaluate our estimates and assumptions, including those relating to the valuation of goodwill and other intangible assets, investments, income taxes, revenue recognition, deferred costs, stock-based compensation, claims handling obligations, retirement plans, litigation and contingencies. We base our estimates on historical experience and various assumptions that we believe to be reasonable based on specific circumstances. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed in our consolidated financial statements.
Further, in 2022, the U.S. enacted the Inflation Reduction Act (which we refer to as the IRA) which, among other things, implements a corporate book minimum tax and an excise tax on stock buy backs. While guidance is still being issued and the administration may enact significant amendments to the IRA, our current understanding of the IRA suggests that we will not face significant impacts. Additionally, in July 2025, the U.S. enacted the One Big Beautiful Bill Act which includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The application of the OBBBA did not have any material impact on our financial statements for 2025. As additional guidance relating to the IRA, OBBBA, and upcoming amendments are released, our estimates related to tax and other liabilities arising under these frameworks may change. Additionally, changes in accounting standards (see Note 2 to our 2025 consolidated financial statements) could increase costs to the organization and could have an adverse impact on our future financial position and results of operations.
Limited protection of our intellectual property could harm our business and our ability to compete effectively, and we face the risk that our services or products may infringe upon the intellectual property rights of others.
We cannot guarantee that trade secret, trademark and copyright law protections, or our internal policies and procedures regarding our management of intellectual property, are adequate to deter misappropriation of our intellectual property. Existing laws of some countries in which we provide services or products may offer only limited protection of our intellectual property rights. Also, we may be unable to detect the unauthorized use of our intellectual property and take the necessary steps to enforce our rights, which may have a material adverse impact on our business, financial condition or results of operations. We cannot be sure that our services and products, or the products of others that we offer to our clients, do not infringe on the intellectual property rights of third parties, and we may have infringement claims asserted
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against us or our clients. These claims may harm our reputation, result in financial liability, consume financial resources to pursue or defend, and prevent us from offering some services or products. In addition, these claims, whether with or without merit, could be expensive, take significant time and divert management’s focus and resources from business operations. Successful challenges against us could require us to modify or discontinue our use of technology or business processes where such use is found to infringe or violate the rights of others, or require us to purchase licenses from third parties, any of which could adversely affect our business, financial condition and operating results.
Risks Relating to our Investments, Debt and Common Stock
Our clean energy investments are subject to various risks and uncertainties.
We generated tax credits under IRC Section 45 from 2009 to 2021. As of December 31, 2025, we had generated a total of $1,706 million in IRC Section 45 tax credits, of which approximately $1,102 million have been used to offset U.S. federal tax liabilities and $604 million remain unused and available to offset future U.S. federal tax liabilities.
Our ability to use tax credits under IRC Section 45 depends upon the operations in which we invested having satisfied the conditions set forth in IRC Section 45. These include, among others, the “placed-in-service” condition and requirements relating to qualified emissions reductions, coal sales to unrelated parties and at least one of the operations’ owners qualifying as a “producer” of refined coal. While we have received some degree of confirmation from the IRS relating to our ability to claim these tax credits, the IRS could ultimately determine that the operations did not satisfy the conditions set forth in IRC Section 45. The IRS audited a number of these operations. Such audits were either closed with no adjustments or, in one instance, the relevant partnership defended its position in court and prevailed.
There is a risk that foreign laws will not protect the intellectual property associated with The Chem-Mod™ Solution to the same extent as U.S. laws, leaving us vulnerable to companies outside the U.S. who may attempt to copy such intellectual property. In addition, other companies may make claims of intellectual property infringement with respect to The Chem-Mod™ Solution. Litigation is inherently uncertain and it is not possible for us to predict the ultimate outcome of any future claims against us by other parties.
The IRC Section 45 operations in which we have invested and the by-products from such operations may result in environmental and product liability claims and environmental compliance costs.
The construction and operation of the IRC Section 45 operations were subject to federal, state and local laws, regulations and potential liabilities arising under or relating to the protection or preservation of the environment, natural resources and human health and safety. Some environmental laws, without regard to fault or the legality of a party’s conduct, impose liability on certain entities that are considered to have contributed to, or are otherwise responsible for, the release or threatened release of hazardous substances into the environment. One party may, under certain circumstances, be required to bear more than its share or the entire share of investigation and cleanup costs at a site if payments or participation cannot be obtained from other responsible parties. By having used The Chem‑Mod™ Solution at locations owned and operated by others, we and our partners may be exposed to the risk of being held liable for environmental damage from releases of hazardous substances we may have had little, if any, involvement in creating. Such risk remains even after production ceases at an operation to the extent the environmental damage can be traced to the types of chemicals or compounds used or operations conducted in connection with The Chem-Mod™ Solution. Increasing attention to global climate change has resulted in an increased possibility of regulatory attention and private litigation. For example, claims have been made against certain energy companies alleging that greenhouse gas emissions constitute a public nuisance. In addition to the possibility of being named in such actions, we and our partners could face the risk of environmental and product liability claims related to concrete incorporating fly ash produced using The Chem-Mod™ Solution. No assurances can be given that contractual arrangements and precautions taken to provide for assumption of these risks by facility owners or operators, or other end users, will result in that facility owner or operator, or other end user, accepting full responsibility for any environmental or product liability claim. Nor can we or our partners be certain that facility owners or operators, or other end users, fully complied with all applicable laws and regulations, and this could result in environmental or product liability claims. It is also common for private claims by third parties alleging contamination to also include claims for personal injury, property damage, nuisance, diminution of property value, or similar claims. Furthermore, many environmental, health and safety laws authorize citizen suits, permitting third parties to make claims for violations of laws or permits. Our insurance may not cover all environmental risk and costs or may not provide sufficient coverage in the event of an environmental or product liability claim, and defense of such claims can be costly, even when such defense prevails. If significant uninsured losses arise from environmental or product liability claims, or if the costs of environmental compliance increase for any reason, our results of operations and financial condition could be adversely affected.
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We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and limitations that could significantly impact our ability to operate our business.
As of December 31, 2025, we had total consolidated debt outstanding of approximately $13.1 billion. The level of debt outstanding each period could adversely affect our financial flexibility. We also bear risk at the time our debt matures. Our ability to make interest and principal payments, to refinance our debt obligations and to fund our acquisition program and planned capital expenditures will depend on our ability to generate cash from operations. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, such as an environment of rising interest rates. A small portion of our private placement debt consists of floating rate notes, and interest payments under our senior revolving credit facility are based on a floating rate which exposes us to the risk of a changing or unknown rate environment. Our indebtedness will also reduce the ability to use that cash for other purposes, including working capital, dividends to stockholders, acquisitions, capital expenditures, share repurchases, and general corporate purposes. If we cannot service our indebtedness, we may have to take actions such as selling assets, issuing additional equity or reducing or delaying capital expenditures, strategic acquisitions, and investments, any of which could impede the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business. Additionally, we may not be able to effect such actions, if necessary, or refinance any of our indebtedness on commercially reasonable terms, or at all.
The agreements governing our debt include covenants that, among other things, restrict our ability to dispose of assets, incur additional debt, engage in certain asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in certain transactions with affiliates, change our business or make investments, and require us to comply with certain financial and legal covenants. The restrictions in the agreements governing our debt may prevent us from taking actions that we believe would be in the best interest of our business and our stockholders and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted. We may also incur future debt obligations that might subject us to additional or more restrictive covenants that could affect our financial and operational flexibility, including our ability to pay dividends. We cannot make any assurances that we will be able to refinance our debt or obtain additional financing on terms acceptable to us, or at all. A failure to comply with the restrictions under the agreements governing our debt could result in a default under the financing obligations or could require us to obtain waivers from our lenders for failure to comply with these restrictions. The occurrence of a default that remains uncured or the inability to secure a necessary consent or waiver could cause our obligations with respect to our debt to be accelerated and have a material adverse effect on our financial condition and results of operations.
Our reinsurance securities business serves from time to time as the underwriter and initial purchaser of securities (such as catastrophe bonds) issued by our reinsurance company clients. This involves us, acting as an intermediary, using our capital on hand and short-term borrowings to cover the purchase price of the securities. We place the securities with investors and use the funds we receive from them to repay our obligations. Risks specific to these short-term borrowings include counterparty risk (which is the risk that arises due to uncertainty about a counterparty’s ability to meet its obligations) with respect to the investors. Non-performance by any of our counterparties in these transactions for financial or other reasons could potentially expose us to material losses.
Credit rating downgrades would increase our financing costs and could subject us to operational risk.
If we need to raise capital in the future (for example, in order to maintain adequate liquidity, fund maturing debt obligations or finance acquisitions or other initiatives), credit rating downgrades would increase our financing costs, and could limit our access to financing sources. We would also face the risk of a credit rating downgrade if we do not retire or refinance the debt to levels acceptable to the credit rating agencies in a timely manner. Further, a downgrade to a rating below investment-grade could result in greater operational risks through increased operating costs and increased competitive pressures.
We are a holding company and, therefore, may not be able to receive dividends or other distributions in needed amounts from our subsidiaries.
We are organized as a holding company, a legal entity separate and distinct from our operating subsidiaries. As a holding company without significant operations of our own, we are dependent upon dividends and other payments from our operating subsidiaries to meet our obligations for paying principal and interest on outstanding debt obligations, for paying dividends to stockholders, repurchasing our common stock and for corporate expenses. In the event our operating subsidiaries are unable to pay sufficient dividends and other payments to us, we may not be able to service our debt, pay our obligations, pay dividends on or repurchase our common stock.
Further, we derive a meaningful portion of our revenue and operating profit from operating subsidiaries located outside the U.S. Since the majority of financing obligations as well as dividends to stockholders are paid from the U.S., it is important to be able to access the cash generated by our operating subsidiaries located outside the U.S. in the event we are unable to meet these U.S. based cash requirements.
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Funds from our operating subsidiaries outside the U.S. may be repatriated to the U.S. via stockholder distributions and intercompany financings, where necessary. A number of factors may arise that could limit our ability to repatriate funds or make repatriation cost prohibitive, including, but not limited to the imposition of currency controls and other government restrictions on repatriation in the jurisdictions in which our subsidiaries operate, fluctuations in foreign exchange rates, the imposition of withholding and other taxes on such payments and our ability to repatriate earnings in a tax-efficient manner.
In the event we are unable to generate or repatriate cash from our operating subsidiaries for any of the reasons discussed above, our overall liquidity could deteriorate and our ability to finance our obligations, including to pay dividends on or repurchase our common stock, could be adversely affected.
Future sales or other dilution of our equity could adversely affect the market price of our common stock.
An important way we grow our business is through acquisitions. One method of acquiring companies or otherwise funding our corporate activities is through the issuance of additional equity securities. The issuance of any additional shares of common or of preferred stock or convertible securities could be substantially dilutive to holders of our common stock. Moreover, to the extent that we issue restricted stock units, performance stock units, options or warrants to purchase shares of our common stock in the future and those options or warrants are exercised or as the restricted stock units or performance stock units vest, our stockholders will experience further dilution. In March 2024, we established an "at the market" equity offering program (which we refer to as an ATM program) pursuant to which we may offer and sell up to 3,000,000 shares of our common stock. We have refreshed our ATM program in the past and expect to refresh our ATM program periodically. Sales under our ATM program will result in additional dilution for our stockholders. Holders of our common stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our stockholders. The market price of our common stock could decline as a result of sales of shares of our common stock or the percep tion that such sales could occur.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase- termination+2
- divested+2
- restatement+2
- impairments+1
- caution+1
- strong+1
- excellent+1
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MD&A (Item 7)
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Introduction
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included in Item 8 of this annual report. In addition, please see “Information Regarding Non-GAAP Measures and Other” beginning on page 38 for a reconciliation of the non-GAAP measures for adjusted total revenues, organic commission, fee and supplemental revenues and adjusted EBITDAC to the comparable GAAP measures, as well as other important information regarding these measures.
We are engaged in providing insurance brokerage, reinsurance brokerage, consulting services, and third-party property/casualty claims settlement and administration services to entities and individuals around the world. We believe that one of our major strengths is our ability to deliver comprehensively structured insurance and risk management services to our clients. Our brokers, agents and administrators act as intermediaries between underwriting enterprises and our clients and we do not assume net underwriting risks. We are headquartered in Rolling Meadows, Illinois, and provide brokerage, risk management and consulting services in approximately 130 countries around the world through our owned operations and a network of correspondent brokers and consultants and third-party property/casualty claims settlement and administration services through a network of offices located throughout Australia, Canada, New Zealand, the U.K. and the U.S. In 2025, we expanded, and expect to continue to expand, our international operations through both acquisitions and organic growth. We generate approximately 67% of our revenues for the combined brokerage and risk management segments domestically, with the remaining 33% generated internationally, primarily in Australia, Canada, New Zealand and the U.K. (based on 2025 revenues). We have three reportable segments: brokerage, risk management and corporate. Brokerage and risk management contributed approximately 87% and 13%, respectively, to 2025 revenues. Our major sources of operating revenues are commissions, fees and supplemental and contingent revenues from brokerage operations and fees from risk management operations. Interest income, premium finance revenues and other income is generated from invested cash and fiduciary funds and revenue from premium financing.
Prior Year Discussion of Results and Comparisons
For information on fiscal 2024 results and similar comparisons, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the fiscal year ended December 31, 2024.
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Summary of Financial Results - Year Ended December 31,
See the Reconciliations of Non-GAAP Measures on page 38 .
Year 2025
Year 2024
Change
Reported
GAAP
Adjusted
Non-GAAP
Reported
GAAP
Adjusted
Non-GAAP
Reported
GAAP
Adjusted
Non-GAAP
(In millions, except per share data)
Brokerage Segment
Revenues
Organic revenues
Net earnings
Net earnings margin
- 14 bpts
Adjusted EBITDAC
Adjusted EBITDAC margin
+ 145 bpts
Diluted net earnings per share
Risk Management Segment
Revenues before reimbursements
Organic revenues
Net earnings
Net earnings margin (before reimbursements)
- 51 bpts
Adjusted EBITDAC
Adjusted EBITDAC margin (before reimbursements)
+ 54 bpts
Diluted net earnings per share
Corporate Segment
Diluted net loss per share
Total Company
Diluted net earnings per share
Total Brokerage and Risk Management Segment
Diluted net earnings per share
In our corporate segment, net after-tax (loss) earnings from our clean energy investments was $(5) million in both 2025 and 2024. At this time, we anticipate our clean energy investments will produce after-tax losses in 2026.
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The following provides information that management believes is helpful when comparing revenues before reimbursements, net earnings, EBITDAC and diluted net earnings per share for 2025 and 2024. In addition, these tables provide reconciliations to the most comparable GAAP measures for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share. Reconciliations of EBITDAC for the brokerage and risk management segments are provided on pages 45 and 51 of this filing.
Year Ended December 31 Reported GAAP to Adjusted Non-GAAP Reconciliation:
(In millions, except per share data)
Revenues Before
Reimbursements
Net Earnings
(Loss)
EBITDAC
Diluted Net Earnings (Loss)
Per Share
Segment
Chg
Brokerage, as reported
Net (gains) on divestitures
Acquisition integration
Workforce and lease termination
Acquisition related adjustments
Amortization of intangible assets
Effective income tax rate impact
Levelized foreign currency translation
Brokerage, as adjusted *
Risk Management, as reported
Net (gains) on divestures
Acquisition integration
Workforce and lease termination
Acquisition related adjustments
Amortization of intangibles assets
Levelized foreign currency translation
Risk Management, as adjusted *
Corporate, as reported
Transaction-related costs
Legal, tax and benefit plan related
Clean energy-related
Corporate, as adjusted *
Total Company, as reported
Total Company, as adjusted *
Total Brokerage and Risk
Management, as reported
Total Brokerage and Risk
Management, as adjusted *
* For the year ended December 31, 2025, the pretax impact of the brokerage segment adjustments totals $1,482 million, mostly due to non-cash period expenses related to intangible amortization, with a corresponding adjustment to the provision for income taxes of $375 million relating to these items. For the year ended December 31, 2025, the pretax impact of the risk management segment adjustments totals $45 million, with a corresponding adjustment to the provision for income taxes of $11 million relating to these items. For the year ended December 31, 2025, the pretax impact of the corporate segment adjustments totals $200 million, with a corresponding adjustment to the benefit for income taxes of $51 million relating to these items and other tax items noted on page 56 . For the corporate segment, the clean energy related adjustments are described on page 56 .
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Reconciliation of Non-GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share
(In millions except share and per share data)
Earnings
(Loss)
Before
Income
Taxes
Provision
(Benefit)
for
Income
Taxes
Net
Earnings
(Loss)
Net Earnings (Loss)
Attributable to
Noncontrolling
Interests
Net Earnings
(Loss)
Attributable to
Controlling
Interests
Diluted Net
Earnings
(Loss) per
Share
Year Ended Dec 31, 2025
Brokerage, as reported
Net (gains) on divestitures
Acquisition integration
Workforce and lease termination
Acquisition related adjustments
Amortization of intangible assets
Brokerage, as adjusted
Risk Management, as reported
Net (gains) on divestitures
Acquisition integration
Workforce and lease termination
Acquisition related adjustments
Amortization of intangible assets
Risk Management, as adjusted
Corporate, as reported
Transaction-related costs
Legal, tax and benefit plan related
Corporate, as adjusted
Year Ended Dec 31, 2024
Brokerage, as reported
Net (gains) on divestitures
Acquisition integration
Workforce and lease termination
Acquisition related adjustments
Amortization of intangible assets
Effective income tax rate impact
Levelized foreign currency translation
Brokerage, as adjusted
Risk Management, as reported
Acquisition integration
Workforce and lease termination
Amortization of intangible assets
Risk Management, as adjusted
Corporate, as reported
Transaction-related costs
Legal and tax related
Clean energy related
Corporate, as adjusted
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Acquisition of AssuredPartners and Woodruff Sawyer
On August 18, 2025, we acquired all of the issued and outstanding stock of Dolphin TopCo, Inc., the holding company of AssuredPartners, Inc., a Delaware corporation (which we refer to, together with its subsidiaries, as “AssuredPartners”) for gross consideration of $13.8 billion. AssuredPartners is a leading U.S. insurance broker with client capabilities across commercial property/casualty, specialty, employee benefits and personal lines with operations in the U.K. and Ireland. We raised $8.5 billion of cash in our December 11, 2024 follow-on common stock offering and borrowed $5.0 billion of cash in our December 19, 2024 senior notes issuance (which we refer to, together with the follow-on common stock offering, as the AssuredPartners Financing) to fund the transaction. On January 7, 2025, we received an additional $1.3 billion of cash due to the exercise by the underwriters of the overallotment provision related to the follow-on common stock offering. AssuredPartners had over 10,900 employees serving through offices located across the U.S., U.K. and Ireland.
On April 10, 2025, we acquired all of the issued and outstanding stock of Woodruff-Sawyer & Co. (which we refer to as Woodruff Sawyer) for consideration of $1.2 billion. We funded the transaction using cash on hand. Woodruff Sawyer provides a full suite of commercial property/casualty products, employee benefits solutions and risk management services with a focus on middle and large market clients. Immediately prior to closing, Woodruff Sawyer had over 600 employees serving clients through 14 U.S. offices and one U.K. office.
Insurance Market Overview
Fluctuations in premiums charged by property/casualty underwriting enterprises have a direct and potentially material impact on the insurance brokerage industry. Commission revenues are generally based on a percentage of the premiums paid by insureds and normally follow premium levels. Insurance premiums are cyclical in nature and may vary widely based on market conditions. Various factors, including competition for market share among underwriting enterprises, increased underwriting capacity and improved economies of scale following consolidations, can result in flat or reduced property/casualty premium rates (a “soft” market). A soft market tends to put downward pressure on commission revenues. Various countervailing factors, such as greater than anticipated loss experience, unexpected loss exposure and capital shortages, can result in increasing property/casualty premium rates (a “hard” market). A hard market tends to favorably impact commission revenues. Hard and soft markets may be broad-based or more narrowly focused across individual product lines or geographic areas. As markets harden, buyers of insurance (such as our brokerage clients), have historically tried to mitigate premium increases and the higher commissions these premiums generate, including by raising their deductibles and/or reducing the overall amount of insurance coverage they purchase. As the market softens, or costs decrease, these trends have historically reversed. During a hard market, buyers may switch to negotiated fee in lieu of commission arrangements to compensate us for placing their risks, or may consider the alternative insurance market, which includes self-insurance, captives, rent-a-captives, risk retention groups and capital market solutions to transfer risk. Our brokerage units are very active in these markets as well. While increased use by insureds of these alternative markets historically has reduced commission revenue to us, such trends generally have been accompanied by new sales and renewal increases in the areas of risk management, claims management, captive insurance and self-insurance services and related growth in fee revenue. Inflation tends to increase the levels of insured values and risk exposures, resulting in higher overall premiums and higher commissions. However, the impact of hard and soft market fluctuations has historically had a greater impact on changes in premium rates, and therefore on our revenues, than inflationary pressures.
We use the Council of Insurance Agents & Brokers (which we refer to as the CIAB) insurance pricing quarterly survey as an indicator of the insurance rate environment. The CIAB represents the leading domestic and international insurance brokers, who write approximately 85% of the commercial property/casualty premiums in the U.S. The fourth quarter 2025 survey had not been published as of the filing date of this report. The first three 2025 quarterly surveys indicated that U.S. commercial property/casualty rates increased by 4.2%, 3.7%, and 1.6% on average, for the first, second and third quarters of 2025, respectively, indicating overall continued price firming.
We are seeing carrier competition across property related coverages and continued caution within casualty lines, particularly in the U.S. We believe these trends are likely to persist throughout 2026. We estimate global insured natural catastrophe losses were approximately $129 billion during 2025, below the 5-year annual average loss of $155 billion. More normalized global loss activity during 2026 may cause insurance and/or reinsurance carriers to increase property pricing upon renewal. Additionally, elevated loss trends and continued profitability concerns within casualty coverages, could lead to a more difficult rate and conditions environment in certain lines. The combination of increasing insurable values (due to inflation, including wage inflation), a tight labor market and low unemployment is likely contributing to increases in client insured exposures.
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We expect that our history of strong new business generation, solid retentions and enhanced value-added services for our carrier partners should all result in further organic growth opportunities around the world. Our professionals can demonstrate their expertise and high-quality, value-added capabilities by strengthening our clients’ insurance portfolios and delivering insurance and risk management solutions within our clients’ budget.
Business Combinations and Dispositions
See Note 3 to our 2025 consolidated financial statements for a discussion of our 2025 business combinations.
Results of Operations
Information Regarding Non-GAAP Measures and Other
In the discussion and analysis of our results of operations that follows, in addition to reporting financial results in accordance with GAAP, we provide information regarding EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, diluted net earnings per share, as adjusted (adjusted EPS), adjusted revenue, adjusted compensation and operating expenses, adjusted compensation expense ratio, adjusted operating expense ratio and organic revenue. These measures are not in accordance with, or an alternative to, the GAAP information provided in this report. We believe that these presentations provide useful information to management, analysts and investors regarding financial and business trends relating to our results of operations and financial condition or because they provide investors with measures that our chief operating decision maker uses when reviewing the Company’s performance. See further below for definitions and additional reasons each of these measures is useful to investors. Our industry peers may provide similar supplemental non-GAAP information with respect to one or more of these measures, although they may not use the same or comparable terminology and may not make identical adjustments. The non-GAAP information we provide should be used in addition to, but not as a substitute for, the GAAP information provided. As disclosed in our most recent Proxy Statement, we make determinations regarding certain elements of executive officer incentive compensation, performance share awards and annual cash incentive awards, partly on the basis of measures related to adjusted EBITDAC.
Adjusted Non-GAAP presentation - We believe that the adjusted non-GAAP presentation of our 2025 and 2024 information, presented on the following pages, provides stockholders and other interested persons with useful information regarding certain financial metrics that may assist such persons in analyzing our operating results as they develop a future earnings outlook for us. The after-tax amounts related to the adjustments were computed using the normalized effective tax rate for each respective period.
• Adjusted measures - Revenues (for the brokerage segment), revenues before reimbursements (for the risk management segment), net earnings, compensation expense and operating expense, respectively, each adjusted to exclude the following, as applicable:
◦ Net gains (losses) on divestitures, which are primarily net proceeds received related to sales of books of business and other divestiture transactions, such as the disposal of a business through sale or closure.
◦ Acquisition integration costs, which include costs related to certain large acquisitions (including the acquisitions of the Willis Towers Watson plc treaty reinsurance brokerage operations (which we refer to as Willis Re), Buck, Cadence Insurance, Eastern Insurance, My Plan Manager, Woodruff Sawyer and AssuredPartners), outside the scope of our usual tuck-in strategy, not expected to occur on an ongoing basis in the future once we fully assimilate the applicable acquisition. These costs are typically associated with redundant workforce, compensation expense related to amortization of certain retention bonus arrangements, extra lease space, duplicate services and external costs incurred to assimilate the acquisition into our IT related systems.
◦ Transaction-related costs, which are associated with completed, future and terminated acquisitions. Costs primarily relate to the acquisitions of Willis Re, Buck, Cadence Insurance, Eastern Insurance, all of which closed in 2023, as well as Woodruff Sawyer and AssuredPartners, which closed in April 2025 and August 2025, respectively. These include costs related to regulatory filings, legal and accounting services, insurance and incentive compensation.
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◦ Workforce related charges, which primarily include severance costs (either accrued or paid) related to employee terminations and other costs associated with redundant workforce.
◦ Lease termination related charges, which primarily include costs related to terminations of real estate leases and abandonment of leased space.
◦ Acquisition related adjustments principally relate to changes in estimated acquisition earnout payables adjustments and acquisition related compensation charges. In addition, from time to time may include changes in balance sheet estimates arising from conforming accounting principles, purchase-related true-ups and other balance sheet adjustments made after the closing date; the net impact on the results for first quarter 2024 was approximately $26 million of revenues and approximately $28 million of compensation expense.
◦ Amortization of intangible assets which reflects the amortization of customer/expiration lists, non-compete agreements, trade names and other intangible assets acquired through our merger and acquisition strategy, the impact to amortization expense of acquisition valuation adjustments to these assets as well as non-cash impairment charges.
◦ The impact of foreign currency translation, as applicable. The amounts excluded with respect to foreign currency translation are calculated by applying current year foreign exchange rates to the same period in the prior year.
◦ Effective income tax rate impact, which levelizes the prior year for the change in current year tax rates.
◦ Legal and tax related, which represents the impact of adjustments in 2025 and 2024 related to costs associated with legal and tax matters.
◦ Benefit plan related, which represents the impact of adjustments in 2025 related to costs associated with the termination of the Gallagher U.S. defined pension plan and other benefit plan changes.
• Adjusted ratios - Adjusted compensation expense and adjusted operating expense, respectively, each divided by adjusted revenues.
Non-GAAP Earnings Measures
• EBITDAC and EBITDAC Margin - EBITDAC is net earnings before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables and EBITDAC margin is EBITDAC divided by total revenues (for the brokerage segment) and revenues before reimbursements (for the risk management segment). These measures for the brokerage and risk management segments provide a meaningful representation of our operating performance for the overall business and provide a meaningful way to measure our financial performance on an ongoing basis.
• EBITDAC, as Adjusted and EBITDAC Margin, as Adjusted - Adjusted EBITDAC is EBITDAC adjusted to exclude net gains on divestitures, acquisition integration costs, workforce related charges, lease termination related charges, acquisition related adjustments, transaction related costs, and the period-over-period impact of foreign currency translation, as applicable and Adjusted EBITDAC margin is Adjusted EBITDAC divided by total adjusted revenues (defined above). These measures for the brokerage and risk management segments provide a meaningful representation of our operating performance, and are also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.
• EPS, as Adjusted and Net Earnings, as Adjusted - Adjusted net earnings have been adjusted to exclude the after-tax impact of net gains on divestitures, acquisition integration costs, the impact of foreign currency translation, workforce related charges, lease termination related charges, acquisition related adjustments, transaction related costs,
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amortization of intangible assets, and effective income tax rate impact, as applicable. Adjusted EPS is Adjusted Net Earnings divided by diluted weighted average shares outstanding. This measure provides a meaningful representation of our operating performance (and as such should not be used as a measure of our liquidity), and for the overall business is also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.
Organic Revenues (a non-GAAP measure) - Organic revenue change measures the year-over-year percentage change in organic revenue. For the brokerage segment, organic revenue consists of base commission and fee revenues, supplemental revenues and contingent revenues excludes the first twelve months of such revenues generated from acquisitions and such revenues related to divested operations which include disposals of a business through sale or closure, estimate changes, run-off of a business and the restructuring and/or repricing of programs and products in each year presented. Such revenues are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of our business in both the current and prior year. In order to improve the comparability of our results between periods, we further exclude the period-over-period impact of foreign currency translation; revenue from certain large life product sales within Gallagher’s Executive Life and Benefits practice group (which are typically large, singular transactions with a high degree of variability in amount and timing); and revenue attributable to changes in assumptions used to calculate estimated deferred revenues, which impact the quarterly timing of revenues during the annual contract period. For the risk management segment, organic revenues consists of fee revenues excludes the first twelve months of such revenues generated from acquisitions and such revenues related to divested operations in each year presented. In order to improve the comparability of our results between periods, we further exclude the period-over-period impact of foreign currency translation
These revenue items are excluded from organic revenues in order to determine a comparable, but non-GAAP, measurement of revenue growth that is associated with the revenue sources that are expected to continue in the current year and beyond as well as eliminating the impact of the items that have a high degree of variability. We have historically viewed organic revenue growth as an important indicator when assessing and evaluating the performance of our brokerage and risk management segments. We also believe that using this non-GAAP measure allows readers of our financial statements to measure, analyze and compare the growth from our brokerage and risk management segments in a meaningful and consistent manner.
Reconciliation of Non-GAAP Information Presented to GAAP Measures - This report includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on pages 45 and 51 ), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on page 37 ), for organic revenue measures (on pages 46 and 51 ), respectively, for the brokerage and risk management segments, for adjusted compensation and operating expenses and adjusted EBITDAC margin (on page 48 ), respectively, for the brokerage segment and (on page 52 ) for the risk management segment.
Brokerage
The brokerage segment accounted for 87% of our revenue in 2025. Our brokerage segment is primarily comprised of retail, wholesale and reinsurance brokerage operations. Our brokerage segment generates revenues by:
• Identifying, negotiating and placing all forms of insurance (or insurance-like) coverage, as well as providing data analytics, risk-shifting, risk-sharing and risk-mitigation consulting services, principally related to property/casualty, life, health, welfare and disability insurance. We also provide these services through, or in conjunction with, other unrelated agents and brokers, consultants and management advisors;
• Identifying, negotiating and placing all forms of reinsurance coverage, as well as providing capital markets services, including acting as underwriter, with respect to insurance linked securities, weather derivatives, capital raising and selected merger and acquisition advisory activities;
• Acting as an agent or broker for multiple underwriting enterprises by providing services such as sales, marketing, selecting, negotiating, underwriting, servicing and placing insurance coverage on their behalf;
• Providing consulting services related to health and welfare benefits, voluntary benefits, executive benefits, compensation, retirement planning, institutional investment and
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fiduciary, actuarial, compliance, private insurance exchange, human resources technology, communications and benefits administration; and
• Providing management and administrative services to captives, pools, risk-retention groups, healthcare exchanges, small underwriting enterprises, such as accounting, claims and loss processing assistance, feasibility studies, actuarial studies, data analytics and other administrative services.
The primary source of revenues for our brokerage services is commissions from underwriting enterprises, based on a percentage of premiums paid by our clients, or fees received from clients based on an agreed level of service usually in lieu of commissions. Commissions are fixed at the contract effective date and generally are based on a percentage of premiums for insurance coverage or employee headcount for employer sponsored benefit plans. Commissions depend upon a large number of factors, including the type of risk being placed, the particular underwriting enterprise’s demand, the expected loss experience of the particular risk of coverage, and historical benchmarks surrounding the level of effort necessary for us to place and service the insurance contract. Rather than being tied to the amount of premiums, fees are most often based on an expected level of effort to provide our services. In addition, under certain circumstances, both retail brokerage and wholesale brokerage services receive supplemental and contingent revenues. Supplemental revenue is revenue paid by an underwriting enterprise that is above the base commission paid, is determined by the underwriting enterprise and is established annually in advance of the contractual period based on historical performance criteria. Contingent revenue is revenue paid by an underwriting enterprise based on the overall profit and/or volume of the business placed with that underwriting enterprise during a particular calendar year and is determined after the contractual period.
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Financial information relating to our brokerage segment results for 2025 and 2024 (in millions, except per share, percentages and workforce data):
Statement of Earnings
Change
Commissions
Fees
Supplemental revenues
Contingent revenues
Interest income, premium finance revenues and other income
Total revenues
Compensation
Operating
Depreciation
Amortization
Change in estimated acquisition earnout payables
Total expenses
Earnings before income taxes
Provision for income taxes
Net earnings
Net earnings attributable to noncontrolling interests
Net earnings attributable to controlling interests
Diluted net earnings per share
Other Information
Change in diluted net earnings per share
Growth in revenues
Organic change in commissions and fees
Compensation expense ratio
Operating expense ratio
Effective income tax rate
Workforce at end of period (includes acquisitions)
Identifiable assets at December 31
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The following provides information that management believes is helpful when comparing EBITDAC and adjusted EBITDAC for 2025 and 2024 (in millions):
Change
Net earnings, as reported
Provision for income taxes
Depreciation
Amortization
Change in estimated acquisition earnout payables
EBITDAC
Net (gains) on divestitures
Acquisition integration
Workforce and lease termination related charges
Acquisition related adjustments
Levelized foreign currency translation
EBITDAC, as adjusted
Net earnings margin, as reported
- 14 bpts
EBITDAC margin, as adjusted
+ 145 bpts
Reported revenues
Adjusted revenues - see page 37
* 2025 and 2024 adjusted EBITDAC margin includes approximately $363 million and $20 million, respectively, of interest income revenues earned on the proceeds received in December 2024 related to the AssuredPartners Financing.
Commissions and fees - The aggregate increase in base commissions and fees for 2025 was due to revenues associated with acquisitions, divested operations and other that were made during 2025 and 2024 ($1,598 million) and organic revenue growth. Commission revenues increased 20% and fee revenues increased 21% in 2025 compared to 2024. The organic change in base commission and fee revenues was 6% in 2025 and 7% in 2024.
In our property/casualty brokerage operations, during the twelve-month period ended December 31, 2025, we saw strong customer retention and, new business generation, in addition to continued renewal premiums increases (premium rates and exposures). We believe these favorable trends should continue in 2026; however, if economic conditions worsen or renewal premium increases slow, we could see our revenue growth be lower than growth in 2025.
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Items excluded from organic revenue computations yet impacting revenue comparisons for 2025 and 2024 include the following (in millions):
Year Ended December 31,
Change
Base Commissions and Fees
Commission and fees, as reported
Less commission and fee revenues from acquisitions, divested operations and other
Levelized foreign currency translation
Organic base commission and fees
Supplemental revenues
Supplemental revenues, as reported
Less supplemental revenues from acquisitions, divested operations and other
Levelized foreign currency translation
Organic supplemental revenues
Contingent revenues
Contingent revenues, as reported
Less contingent revenues from acquisitions, divested operations and other
Levelized foreign currency translation
Organic contingent revenues
Total reported commissions, fees, supplemental revenues and contingent revenues
Less commissions, fees, supplemental revenues and contingent revenues from acquisitions, divested operations and other
Levelized foreign currency translation
Total organic commissions, fees supplemental revenues and contingent revenues
Acquisition Activity
Number of acquisitions closed
Estimated annualized revenues acquired (in millions)
For 2025 and 2024, we issued 58,000 and 512,000, shares, respectively, of our common stock at the request of sellers and/or in connection with tax-free exchange acquisitions.
On December 19, 2024, we closed and funded an offering of $5,000 million of unsecured senior notes in five tranches. The $750 million aggregate principal amount of 4.60% Senior Notes is due in 2027, $750 million aggregate principal amount of 4.85% Senior Notes is due in 2029, $500 million aggregate principal amount of 5.00% Senior Notes is due in 2032, $1,500 million aggregate principal amount of 5.15% Senior Notes is due in 2035, $1,500 million aggregate principal amount 5.55% Senior Notes is due in 2055. The weighted average interest rate is 5.25% per annum after giving effect to underwriting costs and a net hedge gain. During 2024, we entered into a pre-issuance interest rate hedging transaction related to these notes. We realized a net cash gain of approximately $4 million on the hedging transactions that will be recognized on a pro rata basis as a decrease to our reported interest expense over ten years. We used the net proceeds of this offering to fund a portion of the cash consideration payable in connection with the AssuredPartners transaction and for general corporate purposes, including other acquisitions.
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On February 12, 2024, we closed and funded an offering of $1,000 million of unsecured senior notes in two tranches. The $500 million aggregate principal amount of 5.45% Senior Notes is due in 2034 and $500 million aggregate principal amount of 5.75% Senior Notes is due in 2054. The weighted average interest rate is 5.71% per annum after giving effect to underwriting costs and a net hedge loss. During 2023, we entered into a pre-issuance interest rate hedging transaction related to these notes. We realized a net cash loss of approximately $1 million on the hedging transactions that will be recognized on a pro rata basis as an increase to our reported interest expense over ten years. We used the proceeds of these offerings to fund acquisitions, earnout payments related to acquisitions and general corporate purposes.
Supplemental and contingent revenues - Reported supplemental and contingent revenues recognized in 2025 and 2024 by quarter are as follows (in millions):
Full Year
Reported supplemental revenues
Reported contingent revenues
Reported supplemental and contingent revenues
Reported supplemental revenues
Reported contingent revenues
Reported supplemental and contingent revenues
Interest income, premium finance revenues and other income - This primarily represents interest income earned on cash, cash equivalents and fiduciary cash and revenues from premium financing, income from equity investments and net gains related to divestitures and sales of books of business.
Interest income, premium finance revenues and other income in 2025 increased compared to 2024 primarily due to increases in interest income earned on our own and fiduciary funds, including the $363 million interest income earned in 2025 related to the proceeds from the AssuredPartners Financing.
The following table provides a reconciliation of brokerage segment interest income, premium finance revenues and other income, as reported in our consolidated financial statements to interest income earned on cash, cash equivalents and fiduciary cash (in millions):
Interest income, premium finance revenues and other income
Less:
Net (gains) on divestitures
Premium financing revenues and net earnings from equity interests
Interest income from cash, cash equivalents and fiduciary cash
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Compensation expense - The following provides non-GAAP information that management believes is helpful when comparing 2025 and 2024 compensation expense (in millions):
Compensation expense, as reported
Acquisition integration
Workforce related charges
Acquisition related adjustments
Levelized foreign currency translation
Compensation expense, as adjusted
Reported compensation expense ratios
Adjusted compensation expense ratios
Reported revenues
Adjusted revenues - see page 37
The $1,158 million increase in compensation expense in 2025 compared to 2024 was primarily due to compensation associated with the acquisitions completed in the twelve-month period ended December 31, 2025 - $875 million, increases in base compensation to service and support organic growth and employee benefit costs, partially offset by decreased incentive compensation - $165 million in the aggregate, workforce and lease termination related charges - $63 million, acquisition integration costs ‑ $28 million, and acquisition earnout related adjustments - $27 million.
Operating expense - The following provides non-GAAP information that management believes is helpful when comparing 2025 and 2024 operating expense (in millions):
Operating expense, as reported
Acquisition integration
Workforce and lease termination related charges
Levelized foreign currency translation
Operating expense, as adjusted
Reported operating expense ratios
Adjusted operating expense ratios
Reported revenues
Adjusted revenues - see page 37
The $313 million increase in operating expense in 2025 compared to 2024, was primarily due to expenses associated with the acquisitions completed in the twelve-month period ended December 31, 2025 - $233 million, additional investments in technology, partially offset by lesser real estate costs - $39 million in the aggregate, acquisition integration costs - $38 million, and workforce and lease termination related charges - $3 million.
Depreciation - The increase in depreciation expense in 2025 compared to 2024 was due primarily to the impact of purchases of furniture, equipment and leasehold improvements related to office consolidations and moves, and expenditures related to upgrading computer systems. Also contributing to the increases in depreciation expense in 2025 was the depreciation expense associated with acquisitions completed in 2025 and the latter part of 2024.
Amortization - The increase in amortization in 2025 compared to 2024 was primarily due to the impact of amortization expense of intangible assets associated with acquisitions completed in 2025 and 2024, partially offset by the impact of acquisition valuation true-ups recorded in 2025 relating to acquisitions made in 2025 and 2024. Expiration lists, non‑compete agreements and trade names are amortized using the straight-line method over their estimated useful lives (two to fifteen years for expiration lists, two to six years for non-compete agreements and two to fifteen years for trade names). Based on the results of impairment reviews performed on amortizable intangible assets in 2025 and 2024, we wrote off $66 million and $19 million, respectively, of amortizable intangible assets related to the brokerage segment. We review all of our intangible assets for impairment periodically (at least annually for goodwill) and whenever events or
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changes in business circumstances indicate that the carrying value of the assets may not be recoverable. We perform such impairment reviews at the division (i.e., reporting unit) level with respect to goodwill and at the business unit level for amortizable intangible assets. In reviewing intangible assets, if the undiscounted future cash flows were less than the carrying amount of the respective (or underlying) asset, an indicator of impairment would exist and further analysis would be required to determine whether or not a loss would need to be charged against current period earnings as a component of amortization expense. In October 2025, we performed a qualitative impairment review on carrying value of our goodwill for all of our reporting units and no indicators of impairment were noted as of December 31, 2025.
Change in estimated acquisition earnout payables - The change in the expense from the change in estimated acquisition earnout payables in 2025 compared to 2024 was due primarily to adjustments made to the estimated fair value of earnout obligations related to revised assumptions due to rising interest rates and increased market volatility and projections of future performance. During 2025 and 2024, we recognized $48 million and $61 million, respectively, of expense related to the accretion of the discount recorded for earnout obligations in connection with our acquisitions made from 2022 to 2025. During 2025 and 2024, we recognized $4 million and $36 million of income, respectively, related to net adjustments in the estimated fair market values of earnout obligations in connection with revised projections of future performance for 126 and 91 acquisitions, respectively. The net adjustments in 2024 include changes made to the estimated fair value of the Willis Re acquisition earnout and reflect updated assumptions as of December 31, 2024 and are based on actual 2024 recognized revenues.
The amounts initially recorded as earnout payables for our 2022 to 2025 acquisitions were measured at fair value as of the acquisition date and are primarily based upon the estimated future operating results of the acquired entities over a two- to three‑year period subsequent to the acquisition date. The fair value of these earnout obligations is based on the present value of the expected future payments to be made to the sellers of the acquired entities in accordance with the provisions outlined in the respective purchase agreements. In determining fair value, we estimate the acquired entity’s future performance using financial projections developed by management for the acquired entity and market participant assumptions that were derived for revenue growth and/or profitability. We estimate future earnout payments using the earnout formula and performance targets specified in each purchase agreement and these financial projections. Subsequent changes in the underlying financial projections or assumptions will cause the estimated earnout obligations to change and such adjustments are recorded in our consolidated statement of earnings when incurred. Increases in the earnout payable obligations will result in the recognition of expense and decreases in the earnout payable obligations will result in the recognition of income.
Provision for income taxes - The brokerage segment’s effective tax rate in 2025 and 2024 was 25.6% and 25.4%, respectively. We anticipate reporting an effective tax rate of approximately 24.5% to 26.5% in our brokerage segment based on known changes in tax rates in future periods.
Net earnings attributable to noncontrolling interests - The amounts reported in this line for 2025 and 2024 include noncontrolling interest earnings of $9 million and $8 million, respectively.
Litigation, Regulatory and Taxation Matters - We routinely are involved in legal proceedings, claims, disputes, regulatory matters and governmental inspections or investigations arising in the ordinary course of or incidental to our business, including relating to E&O claims and those noted below in this section. We record accruals in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. For the matters we disclose that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is immaterial, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies, unless disclosed below. We currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations or cash flows. However, legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur, including the payment of substantial monetary damages or an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices or requiring other remedies, which may result in a material adverse impact on our business, results of operations or financial position.
As previously disclosed, our IRC 831(b) (or “micro-captive”) advisory services business has been under a promoter investigation by the IRS since 2013. Among other matters, the IRS is investigating whether we have been acting as a tax shelter promoter in connection with these operations. Additionally, the IRS is conducting a criminal investigation related to IRC 831(b) micro-captive underwriting enterprises. We have been advised that we are not a target of the criminal investigation. We are fully cooperating with both matters.
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Risk Management
The risk management segment accounted for 13% of our revenue in 2025. Our risk management segment operations provide contract claim settlement, claim administration, loss control services and risk management consulting for commercial, nonprofit, captive and public sector entities, and various other organizations that choose to self-insure property/casualty coverages or choose to use a third‑party claims management organization rather than the claim services provided by underwriting enterprises. Revenues for our risk management segment are comprised of fees generally negotiated (i) on a per-claim or per-service basis, (ii) on a cost-plus basis, or (iii) as performance-based fees. We also provide risk management consulting services that are recognized as the services are delivered.
Financial information relating to our risk management segment results for 2025 and 2024 (in millions, except per share, percentages and workforce data):
Statement of Earnings
Change
Fees
Interest income and other income
Revenues before reimbursements
Reimbursements
Total revenues
Compensation
Operating
Reimbursements
Depreciation
Amortization
Change in estimated acquisition earnout payables
Total expenses
Earnings before income taxes
Provision for income taxes
Net earnings
Net earnings attributable to noncontrolling interests
Net earnings attributable to
controlling interests
Diluted earnings per share
Other information
Change in diluted earnings per share
Growth in revenues (before reimbursements)
Organic change in fees (before reimbursements)
Compensation expense ratio (before reimbursements)
Operating expense ratio (before reimbursements)
Effective income tax rate
Workforce at end of period (includes acquisitions)
Identifiable assets at December 31
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The following provides non-GAAP information that management believes is helpful when comparing 2025 and 2024 EBITDAC and adjusted EBITDAC (in millions):
Change
Net earnings, as reported
Provision for income taxes
Depreciation
Amortization
Change in estimated acquisition earnout payables
Total EBITDAC
Net (gains) on divestitures
Acquisition integration
Workforce and lease termination related charges
Acquisition related adjustments
Levelized foreign currency translation
EBITDAC, as adjusted
Net earnings margin, before reimbursements, as reported
- 51 bpts
EBITDAC margin, before reimbursements, as adjusted
+ 54 bpts
Reported revenues before reimbursements
Adjusted revenues - before reimbursements - see page 37
Fees - In 2025, new business production was strong, while client retention remained excellent relative to 2024. We believe these favorable net new business trends should continue for 2026, however, worsening economic conditions or a reversal in the number of workers employed, could cause fewer new liability and core workers’ compensation claims to arise in future quarters. Organic change in fee revenues was 6% in 2025 and 8% in 2024.
Items excluded from organic fee computations yet impacting revenue comparisons in 2025 and 2024 include the following (in millions):
Year Ended December 31,
Change
Fees
International performance bonus fees
Fees as reported
Less fees from acquisitions
Less divested operations
Levelized foreign currency translation
Organic fees
Acquisition Activity
Number of acquisitions closed
Estimated annualized revenues acquired (in millions)
Reimbursements - Reimbursements represent amounts received from clients reimbursing us for certain third-party costs associated with providing our claims management services. In certain service partner relationships, we are considered a principal because we direct the third party, control the specified service and combine the services provided into an
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integrated solution. Given this principal relationship, we are required to recognize revenue on a gross basis and service partner vendor fees in the operating expense line in our consolidated statement of earnings.
Interest income and other income - Interest income and other income primarily represents interest income earned on cash, cash equivalents and fiduciary cash. Interest income and other income in 2025 remained relatively flat compared to 2024 primarily due to interest income earned on fiduciary cash.
Compensation expense - The following provides non-GAAP information that management believes is helpful when comparing 2025 and 2024 compensation expense compensation expense (in millions):
Compensation expense, as reported
Acquisition integration
Workforce and lease termination related charges
Acquisition related adjustments
Levelized foreign currency translation
Compensation expense, as adjusted
Reported compensation expense ratios (before reimbursements)
Adjusted compensation expense ratios (before reimbursements)
Reported revenues (before reimbursements)
Adjusted revenues (before reimbursements) - see page 37
The $92 million increase in compensation expense in 2025 compared to 2024 was primarily due to increases in base and incentive compensation to service and support organic growth as well as employee benefit costs - $43 million in the aggregate, compensation associated with the acquisitions completed in the twelve-month period ended December 31, 2025 - $39 million, workforce and lease termination related charges - $5 million, acquisition earnout related adjustments - $4 million, and acquisition integration related costs - $1 million.
Operating expense - The following provides non-GAAP information that management believes is helpful when comparing 2025 and 2024 operating expense operating expense (in millions):
Operating expense, as reported
Acquisition integration
Workforce and lease termination related charges
Levelized foreign currency translation
Operating expense, as adjusted
Reported operating expense ratios (before reimbursements)
Adjusted operating expense ratios (before reimbursements)
Reported revenues (before reimbursements)
Adjusted revenues - (before reimbursements) see page 37
The $19 million increase in operating expense in 2025 compared to 2024 was primarily due to expenses associated with the acquisitions completed in the twelve-month period ended December 31, 2024 - $9 million, acquisition integration costs - $5 million, additional investments in technology, partially offset by lesser client-related expenses - $5 million in the aggregate.
Depreciation - Depreciation expense increased in 2025 compared to 2024, which reflects the impact of expenditures related to upgrading computer systems, partially offset by office consolidations that occurred as leases expired in 2025 (less depreciation associated with furniture, equipment and leasehold improvements). Also contributing to the increase in depreciation expense in 2025 was the depreciation expense associated with the acquisitions completed in 2025 and the latter part of 2024.
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Amortization - Amortization expense increased in 2025 compared to 2024. The increase in amortization in 2025 compared to 2024 was primarily due to the impact of amortization expense of intangible assets associated with the acquisitions completed in 2025 and 2024. Based on the results of impairment reviews performed on amortizable intangible assets during 2025 and 2024, there were no impairments of amortizable assets related to the risk management segment.
Change in estimated acquisition earnout payables - The change in estimated acquisition earnout payables in 2025 and 2024, primarily relates to accretion of discount in 2025 and 2024 relates to the estimated fair value of the earnout obligations. During 2025 and 2024, we recognized $2 million and zero, respectively, of expense related to the accretion of the discount recorded for earnout obligations in connection with our 2022 to 2025 acquisitions, respectively. During 2025 and 2024, there were no net adjustments in the estimated fair value of earnout obligations related to projections of future performance for acquisitions.
Provision for income taxes - We allocate the provision for income taxes to the risk management segment using local statutory rates. The risk management segment’s effective tax rate in 2025 and 2024 was 26.4% and 26.6%, respectively. We anticipate reporting an effective tax rate on adjusted results of approximately 25.0% to 27.0% in our risk management segment based on known changes in tax rates in future periods.
Corporate
The corporate segment reports the financial information related to our debt, external acquisition-related expenses, other corporate costs, the impact of foreign currency remeasurement and clean energy investments. See Note 7 to our 2025 consolidated financial statements for a summary of our debt at December 31, 2025 and 2024.
Financial information relating to our corporate segment results for 2025 and 2024 (in millions, except per share and percentages):
Statement of Earnings
Change
Other income
Total revenues
Compensation
Operating
Interest
Depreciation
Total expenses
Loss before income taxes
Benefit for income taxes
Net loss
Net loss attributable to noncontrolling interests
Net loss attributable to controlling interests
Diluted net loss per share
Identifiable assets at December 31
EBITDAC
Net loss
Benefit for income taxes
Interest
Depreciation
EBITDAC
Revenues - Revenues in the corporate segment consist of other income related to the run-off of legacy investments, and other investment income.
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Compensation expense - Compensation expense for 2025 and 2024 includes salary, incentive compensation, and associated benefit expenses of $208 million and $138 million, respectively. The change in 2025 compensation expense compared to 2024 was primarily due to increased incentive compensation, which includes transaction‑related costs as described on page 56 in note (1) and increased base compensation, which includes transaction‑related costs and benefit plan changes as described on page 56 in notes (1) and (4).
Operating expense - Operating expense for 2025 includes banking and related fees of $4 million, external professional fees and other due diligence costs related to 2025 acquisitions of $108 million, which includes $91 million of transaction-related costs as described on page 56 in note (1), other corporate and clean energy related expenses, including litigation matters, technology and other professional fees of $125 million in aggregate, which includes costs associated with legal and tax matters and benefit plan changes as described on page 56 in notes (3) and (4), and a net unrealized foreign exchange remeasurement loss of $47 million.
Operating expense for 2024 includes banking and related fees of $3 million, external professional fees and other due diligence costs related to 2024 acquisitions of $39 million, which includes $23 million of transaction-related costs as described on page 56 in note (1), other corporate and clean energy related expenses, including litigation matters, technology and other professional fees of $70 million in aggregate, and a net unrealized foreign exchange remeasurement loss of zero.
Interest expense - The increase in interest expense in 2025 compared to 2024 was due to the following (in millions):
Change in interest expense related to:
Interest on borrowings from our Credit Agreement
Interest on the maturity of the Series H notes
Interest on the maturity of the Series O notes
Interest on the maturity of the Series HH notes
Interest on the $1,000 million senior notes funded on February 15, 2024
Interest on the $5,000 million senior notes funded on December 19, 2024
Net change in interest expense
Depreciation - Depreciation expense in 2025 was flat compared to 2024, and includes capital improvements made at our corporate headquarters and Gallagher Centers of Excellence in 2025 and 2024 and to the acquisition of other corporate related fixed assets in 2025.
Benefit for income taxes - We allocate the provision for income taxes to the brokerage and risk management segments using local statutory rates. Our consolidated effective tax rate was 19.7% and 21.5%, for 2025 and 2024, respectively. The tax rate for 2025 was lower than the statutory rate primarily due to the income tax benefit of stock based awards. The tax rate for 2024 was lower than the statutory rate primarily due to the income tax benefit of stock-based awards. There were no IRC Section 45 tax credits generated in 2025, 2024 and 2023. The income tax benefit of stock based awards that vested or were settled in the years ended December 31, 2025 and 2025 was $121 million and $89 million, respectively.
Significant Future Income Tax Law Changes - On July 4, 2025, the One Big Beautiful Bill Act was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The application of the OBBBA does not have a material impact on our financial statements for 2025.
The Organization for Economic Cooperation and Development continues to issue reports and recommendations as part of its Base Erosion and Profit Shifting project in 2021, it announced that 136 countries and tax jurisdictions agreed to implement a new Pillar 2 approach to international taxation. Pillar 1 exempts regulated financial institutions, and we believe we qualify for such exemption.
Many countries in which we do business have adopted, or are expected to adopt, these rules which will change various aspects of the existing framework under which our tax obligations are determined. For example, the U.K., the majority of the E.U., Canada, Australia and New Zealand have now adopted nearly all aspects of these rules with limited variation
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from the OECD model rules. Other jurisdictions in which we do business also reacted to these efforts; for example, Bermuda enacted a corporate tax regime for the first time in 2023, which became effective in 2025.
On January 5, 2026, OECD released additional administrative guidance on the application of Pillar 2 global minimum tax rules, which are designed to ensure that large multinational enterprise (MNE) groups are subject to a minimum effective tax rate of 15% in each jurisdiction in which they operate. This guidance introduces a package of new and expanded safe harbors and simplification measures, including a “side-by-side” safe harbor regime applicable to certain U.S.-parent MNE groups, extensions and modifications to existing transitional safe harbors, and additional rules addressing the treatment of tax incentives and effective tax rate calculations. The most significant element of this guidance is the “side-by-side” safe harbor which is intended to coordinate the Pillar 2 global minimum tax regime with certain domestic minimum tax systems, including those in the U.S. Subject to eligibility requirements and elections, this safe harbor may substantially reduce or eliminate the application of Pillar 2 “top-up taxes,” including the Income Inclusion Rule and Undertaxed Profits Rule for affected MNE groups for fiscal years beginning on or after January 1, 2026. These developments, once actually enacted into domestic law by Pillar 2 adopters, significantly de-risk Pillar 2 exposure for US multinationals like Gallagher. Whether those enactments take effect from 2026 or later will need to be monitored and anticipated top-ups adjusted to reflect those enactment dates. Regardless of adoption of this new guidance, the domestic minimum top-up aspect of Pillar 2 (referred to as “QDMTT”) and its related compliance aspects will remain for all multi-nationals that operate in jurisdictions that have enacted it.
We anticipate further significant developments across several jurisdictions in which we operate in 2026 and 2027. Should the jurisdictions in which we operate, and those in which we and our subsidiaries are based, choose not to implement the OECD’s January 2026 guidance in their domestic tax laws, we could be adversely affected by a top-up. We do not currently anticipate that amount would be material relative to our overall financial statements.
U.S. Federal Income Tax Law Changes Items Impacting the Company Going Forward
Alternative Minimum Tax Credit - The IRA enacted a book-based Corporate Alternative Minimum Tax (which we refer to as CAMT) for years beginning after 2022. The CAMT imposes a minimum 15% cash tax on adjusted book income before general business credits. The IRS issued guidance in the fourth quarter of this year on CAMT to revise the proposed CAMT regulations and to provide taxpayers clarity related to the application of CAMT. As such, we do not currently anticipate being subject to the CAMT and even if we were to find ourselves subject to it in a particular year, we do not believe there would be an impact on our earnings.
Excise Tax On Stock Buybacks - The IRA adds a 1% surtax to corporate stock repurchases effective January 2023. Our board approved a common stock repurchase program in 2021. If we were to effectuate stock repurchases under this program, the excise tax would not have a material impact on our results of operations or cash flows.
New Tax Credits for Renewable Energy - The IRA introduced new tax credits for certain renewable energy projects and onshoring certain manufacturing activities associated with those projects. While we continue to explore additional renewable energy investments, we do not currently anticipate significant benefits from these new incentive programs.
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The following provides non-GAAP information that we believe is helpful when comparing 2025 and 2024 operating results for the corporate segment (in millions):
Pretax
Loss
Income
Tax
Benefit
Net Earnings
(Loss)
Attributable to
Controlling
Interests
Pretax
Loss
Income
Tax
Benefit
Net Earnings
(Loss)
Attributable to
Controlling
Interests
Components of Corporate Segment, as reported
Interest and banking costs
Clean energy related
Acquisition costs (1)
Corporate (2)
Reported Year Ended
Adjustments
Clean energy related
Transaction-related costs (1)
Legal and tax related (3)
Benefit plan related (4)
Components of Corporate Segment, as adjusted
Interest and banking costs
Clean energy related
Acquisition costs
Corporate (2)
Adjusted Year Ended
(1) We incurred transaction-related costs, which include legal, consulting, employee compensation and other professional fees associated with completed, future and terminated acquisitions. Adjustments primarily relate to our acquisitions of Willis Re, Buck, Cadence Insurance, Eastern Insurance, all of which closed in 2023, as well as Woodruff Sawyer and AssuredPartners, which closed in April 2025 and August 2025, respectively.
(2) Corporate pretax loss includes a net unrealized foreign exchange remeasurement loss of $(47) million in the year ended December 31, 2025 and a net unrealized foreign exchange remeasurement loss of zero in the year ended December 31, 2024.
(3) Adjustments in 2025 and 2024 include costs associated with legal and tax matters.
(4) Adjustments in 2025 include costs associated with the termination of the Gallagher U.S defined pension plan and other benefit plan changes.
Interest and banking costs and debt - Interest and banking costs includes expenses related to our debt.
Clean energy related - For 2025, this consists of operating results related to our investments in new clean energy projects, primarily fusion and carbon sequestration projects.
Acquisition costs - Consists mostly of external professional fees and other due diligence costs related to acquisitions. On occasion, we enter into forward currency hedges for the purchase price of committed, but not yet funded, acquisitions with funding requirements in currencies other than the U.S. dollar. The gains or losses, if any, associated with these hedge transactions are also included in acquisitions costs.
Corporate - Consists of overhead allocations mostly related to corporate staff compensation, other corporate level activities, and net unrealized foreign exchange remeasurement. In addition, corporate includes the tax expense related to
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partial taxation of foreign earnings, nondeductible executive compensation and entertainment expenses, the tax benefit from vesting of employee equity awards, as well as other permanent or discrete tax items not reflected in the provision for income taxes in the brokerage and risk management segments. The income tax benefit of stock based awards that vested or were settled in the years ended December 31, 2025 and 2024 was $121 million and $89 million, respectively, and is included in the table above in the Corporate line.
Liquidity and Capital Resources
Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations. The insurance brokerage and risk management industries are not capital intensive. Historically, our capital requirements have primarily included dividend payments on our common stock, repurchases of our common stock, funding of our investments, acquisitions of brokerage and risk management operations and capital expenditures, including investments being made in IT and software development projects.
On August 18, 2025, we acquired all of the issued and outstanding stock of Dolphin TopCo., the holding company of AssuredPartners for gross consideration of $13.8 billion, which we funded with proceeds from the AssuredPartners Financing. On January 7, 2025, we received an additional $1.3 billion of cash due to the exercise by the underwriters of the overallotment provision related to the follow-on common stock offering. Refer to Note 3 for more information regarding the AssuredPartners Financing. Total expected expense to integrate AssuredPartners into our operations is approximately $575 million over three years.
On April 10, 2025, we acquired all of the issued and outstanding stock of Woodruff Sawyer for a gross consideration of $1.2 billion. We funded the transaction using cash on hand. Total expected expense to integrate Woodruff Sawyer into our operations is approximately $150 million over three years.
Operating Cash Flows
Historically, we have depended on our ability to generate positive cash flow from operations to meet a substantial portion of our cash requirements. We believe that our cash flows from operations and borrowings under our Credit Agreement (as defined below) will provide us with adequate resources to meet our liquidity needs in the foreseeable future. To fund acquisitions made during 2025 and 2024, we relied on a combination of net cash flows from operations, proceeds from borrowings under our Credit Agreement, proceeds from issuances of senior unsecured notes and issuance of our common stock.
Cash provided by operating activities was $1,930 million and $2,583 million for 2025 and 2024, respectively. The decrease in cash provided by operating activities during 2025 compared to the same period in 2024 was primarily due to an increase in payments on acquisition earnouts in excess of original estimates (primarily related to the acquisition of the Willis Towers Watson treaty reinsurance brokerage operations) and timing differences between periods with cash receipts and disbursements related to accounts receivables and accrued compensation and other current liabilities, partially offset by the growth in 2025 compared to 2024 in our reported net earnings, adjusted for non-cash items (i.e., EBITDAC). In April 2025, we made a $750 million earnout payment to the sellers related to the acquisition of the Willis Towers Watson treaty reinsurance brokerage operations in December 2021.
Total cash and cash equivalents, restricted cash and fiduciary cash at December 31, 2025 and 2024, include $2,916 million and $15,372 million, respectively, of income earning money market accounts. The decrease in cash invested in money market accounts between years is primarily due to the proceeds received from the AssuredPartners Financing ($13.5 billion) and proceeds received in January 2025 from the exercise by the underwriters of the overallotment provision related to the follow-on-common stock offering ($1.3 billion) which were used to fund the acquisition of AssuredPartners that closed on August 18, 2025. The dividend income on money market accounts was recorded in interest income, premium finance and other income in our consolidated statement of earnings, which increased $296 million during 2025 ($363 million of which related to the proceeds from the AssuredPartners financing) to $769 million for the year ended December 31, 2025 compared to $473 million for the year ended December 31, 2024.
During 2025 and 2024, employee matching contributions to the 401(k) plan of $115 million and $105 million, respectively, relating to 2024 and 2023 were funded using common stock.
Our cash flows from operating activities are primarily derived from our earnings from operations, as adjusted, for our non-cash expenses, which include depreciation, amortization, change in estimated acquisition earnout payables, deferred compensation, restricted stock, and stock-based and other non-cash compensation expenses. Historically, cash provided by operating activities was unfavorably impacted if the amount of IRC Section 45 tax credits generated (which is the amount
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we recognized for financial reporting purposes) was greater than the amount of tax credits utilized to reduce our tax cash obligations. Excess tax credits produced in 2021 and 2020 resulted in an increase to our deferred tax assets, which was a net use of cash related to operating activities. In 2023, IRC Section 45 credits were no longer generated due to the IRC Section 45 program expiring as of December 31, 2021, and therefore the IRC Section 45 credit utilization against our cash tax obligation resulted in favorable cash flow in 2023.
When assessing our overall liquidity, we believe that the focus should be on net earnings as reported in our consolidated statement of earnings, adjusted for non-cash items (i.e., EBITDAC), and cash provided by operating activities in our consolidated statement of cash flows. Consolidated EBITDAC was $3,678 million and $3,125 million for 2025 and 2024, respectively. Net earnings attributable to controlling interests were $1,494 million and $1,463 million for 2025 and 2024, respectively. We believe that EBITDAC items are indicators of trends in liquidity.
Defined Benefit Pension Plan
In 2025 we initiated a process to fully terminate the plan. In fourth quarter 2025, substantially all of the future obligations under the plan were settled through a combination of lump sum payments to eligible, electing participants and a transfer of the remaining liability through the purchase of a group annuity contract to a highly-rated third-party insurance company. As of December 31, 2025, the only remaining obligations are payments to the Pension Benefit Guaranty Corporation (which we refer to as the PBGC) for missing participants and the distribution of the surplus assets to plan participants. In 2026, after the liability for the missing participants has been transferred to the PBGC and the remaining assets have been distributed, the final plan termination accounting will be completed. In fourth quarter 2025, we recognized a non-cash, pre-tax loss of approximately $16 million to operating expense in the consolidated statement of earnings that was offset by an approximate $12 million adjustment to consolidated statement of comprehensive earnings and a $4 million reversal of a deferred tax asset. In 2026, based on estimates as of December 31, 2025, we expect to recognize a non-cash, pre-tax loss of approximately $17 million to operating expense in the consolidated statement of earnings related to the final plan termination accounting. We did not make any additional funding to the plan related to this plan termination process.
Our policy for funding our defined benefit pension plan is to contribute amounts at least sufficient to meet the minimum funding requirements under the IRC. The Employee Retirement Security Act of 1974, as amended (which we refer to as ERISA), could impose a minimum funding requirement for our plan. We were not required to make any minimum contributions to the plan for the 2025 and 2024 plan years. Funding requirements are based on the plan being frozen and the aggregate amount of our historical funding. The plan’s actuaries determine contribution rates based on our funding practices and requirements. Funding amounts may be influenced by future asset performance, the level of discount rates and other variables impacting the assets and/or liabilities of the plan. In addition, amounts funded in the future, to the extent not due under regulatory requirements, may be affected by alternative uses of our cash flows, including dividends, acquisitions and common stock repurchases. During 2025 and 2024 we did not make discretionary contributions to the legacy Company defined benefit plan.
See Note 12 to our 2025 consolidated financial statements for additional information required to be disclosed relating to our defined benefit pension plan. We are required to recognize a prepaid pension asset for our overfunded defined benefit pension plan (which we refer to as the Plan). The offsetting adjustment to the asset required to be recognized for the Plan is recorded in “Accumulated Other Comprehensive Loss,” net of tax, in our consolidated balance sheet. We will recognize subsequent changes in the funded status of the Plan through the income statement and as a component of comprehensive earnings, as appropriate, in the year in which they occur. Numerous items may lead to a change in funded status of the Plan, including actual results differing from prior estimates and assumptions, as well as changes in assumptions to reflect information available at the respective measurement dates.
The net change in the funded status of the Plan in 2025 resulted in an increase in noncurrent assets in 2025 of $1 million. In 2025, the funded status of the Plan was unfavorably impacted by other assumption changes, the net impact of which was approximately $3 million. In addition, the funded status was favorably impacted by returns on the plan’s assets being higher in 2025 than anticipated by approximately $4 million. The net change in the funded status of the Plan in 2024 resulted in an increase in noncurrent assets in 2024 of $4 million. In 2024, the funded status of the Plan was favorably impacted by an increase in the discount rates used in the measurement of the pension liabilities at December 31, 2024 and other assumption changes, the net impact of which was approximately $4 million. In addition, the funded status was unfavorably impacted by returns on the plan’s assets being lower in 2024 than anticipated.
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Investing Cash Flows
Capital Expenditures - Capital expenditures were $145 million and $142 million for 2025 and 2024, respectively. In 2025 and 2024 capital expenditures include amounts incurred related to office moves, investments made in IT and software development projects. Relating to the development of our corporate headquarters, we received property tax related credits under a tax-increment financing note from Rolling Meadows, Illinois and an Illinois state EDGE tax credit. Incentives from these two programs could total between $89 million and $100 million over a fifteen-year period. In 2026, we expect total expenditures for capital improvements to be approximately $227 million, (includes impact of acquisitions closed through December 31, 2025) part of which is related to expenditures on office moves and investments being made in IT and software development projects. The increase in the expected capital expenditures in 2026 compared to 2025 is primarily due to such projects.
Acquisitions - Cash paid for acquisitions, net of cash and restricted cash acquired, was $15,766 million and $1,462 million in 2025 and 2024, respectively. The increased use of cash for acquisitions in 2025 compared to 2024 was primarily due to our acquisition of AssuredPartners. In addition, during 2025 and 2024 we issued 0.1 million shares ($30 million) and 0.6 million shares ($141 million), respectively, of our common stock as payment for a portion of the total consideration paid for acquisitions and earnout payments. We completed 33 and 48 acquisitions in 2025 and 2024, respectively. Annualized revenues of businesses acquired in 2025 and 2024 totaled approximately $3,562 million and $387 million, respectively. In 2026, we expect to use cash on hand, new debt, our Credit Agreement (as defined below), cash from operations and our common stock, or a combination thereof to fund all of the acquisitions we complete.
If liquidity concerns arise, we may be more likely to use common stock to fund acquisitions.
Dispositions - During 2025 and 2024, we sold several books of business and recognized one-time gains of $26 million and $24 million, respectively. We received cash proceeds of $17 million and $20 million for 2025 and 2024, respectively, related to these transactions.
Financing Cash Flows
At December 31, 2025, we had $9,550 million of Senior Notes, $3,323 million of corporate‑related borrowings outstanding under separate note purchase agreements entered into during the period from 2014 to 2021, there were no borrowings outstanding under our Credit Agreement, $226 million outstanding under our Premium Financing Debt Facility and a cash and cash equivalent balance of $1,396 million. See Note 7 to our 2025 consolidated financial statements for a discussion of the terms of the Senior Notes, Note purchase agreements, the Credit Agreement (as defined below) and the Premium Financing Debt Facility.
Consistent with past practice, as of December 31, 2025 we had pre-issuance hedges open for $1,500 million for 2026.
The Senior Notes, Note Purchase Agreements, the Credit Agreement and the Premium Financing Debt Facility contain various financial covenants that require us to maintain specified financial ratios. We were in compliance with these covenants as of December 31, 2025.
Senior Notes - On December 19, 2024, we closed and funded an offering of $5,000 million of unsecured senior notes in five tranches. The $750 million aggregate principal amount of 4.60% Senior Notes is due in 2027, $750 million aggregate principal amount of 4.85% Senior Notes is due in 2029, $500 million aggregate principal amount of 5.00% Senior Notes is due in 2032, $1,500 million aggregate principal amount of 5.15% Senior Notes is due in 2035, $1,500 million aggregate principal amount 5.55% Senior Notes is due in 2055. The weighted average interest rate is 5.25% per annum after giving effect to underwriting costs and a net hedge gain. During 2024, we entered into a pre-issuance interest rate hedging transaction related to these notes. We realized a net cash gain of approximately $4 million on the hedging transactions that will be recognized on a pro rata basis as a decrease to our reported interest expense over ten years. We used the net proceeds of this offering to fund a portion of the cash consideration payable in connection with the AssuredPartners acquisition and for general corporate purposes including other acquisitions.
On February 12, 2024, we closed and funded an offering of $1,000 million of unsecured senior notes in two tranches. The $500 million aggregate principal amount of 5.45% Senior Notes is due in 2034 and $500 million aggregate principal amount of 5.75% Senior Notes is due in 2054. The weighted average interest rate is 5.71% per annum after giving effect to underwriting costs and a net hedge loss. During 2024, we entered into a pre-issuance interest rate hedging transaction related to these notes. We realized a net cash loss of approximately $1 million on the hedging transactions that will be
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recognized on a pro rata basis as an increase to our reported interest expense over ten years. We used the proceeds of these offerings to fund acquisitions, earnout payments related to acquisitions and general corporate purposes.
Note Purchase Agreement - During June 2025, we used operating cash to fund the $200 million Series O note maturity that had a fixed rate of 4.31% that was due June 24, 2025.
During February 2024, we used operating cash to fund the $100 million Series HH note maturity that had a fixed rate of 4.72% that was due February 13, 2024 and the $325 million Series H note maturity that had a fixed rate of 4.58% that was due February 27, 2024.
Credit Agreement - On April 3, 2025, we entered into an amendment and restatement to our Credit Agreement dated June 22, 2023 (which, as amended and restated, refer to as the Credit Agreement). The Credit Agreement provides for a five-year unsecured revolving credit facility in the amount of $2,500 million, which is also available in Pounds Sterling, Canadian Dollars, Australian Dollars, New Zealand Dollars, Euros, Japanese Yen and any other currencies agreed by the lenders. The Credit Agreement also includes a $75 million letter of credit sub-facility and a $250 million Euro swingline sub-facility. We may also, upon the agreement of either one or more then-existing lenders or of additional banks not currently party to the Credit Agreement, increase the commitments under the Credit Agreement up to $3,000 million. The amendment and restatement, among other things, also extended the maturity date from June 22, 2028 to April 3, 2030 and updated the facility fee and applicable margin as determined by reference to the rating of our long-term senior unsecured debt.
The Credit Agreement permits us to designate wholly-owned subsidiaries located in certain jurisdictions as additional borrowers, the obligations of which under the Credit Agreement will be guaranteed by the Company, subject to the terms and conditions set forth in the Credit Agreement. Any subsidiary that guarantees any notes under the Company’s existing note purchase agreements is required to guarantee the obligations under the Credit Agreement. There are currently no subsidiary borrowers or guarantors under the Credit Agreement.
Loans borrowed under the Credit Agreement bear interest at a variable annual rate based on a customary benchmark rate for each available currency including Secured Overnight Financing Rate (which we refer to as SOFR) for loans in U.S. Dollars, or at our election solely for loans in U.S. Dollars, the base rate, plus in each case an applicable margin. Interest rates on base rate loans and outstanding drawings on letters of credit under the Credit Agreement will be based on the Base Rate, as defined in the Credit Agreement, plus a margin of 0.00% to 0.375%, depending on the rating of our long-term senior unsecured debt. Interest rates for SOFR loans and loans in currencies other than U.S. dollars under the Credit Agreement will be based on, as applicable, a SOFR Daily Floating Rate, Term SOFR, Alternative Currency Daily Rate or Alternative Currency Term Rate, as defined in the Credit Agreement, plus a margin of 0.775% to 1.375%, depending on the rating of our long-term senior unsecured debt. The annual facility fee related to the Credit Agreement is between 0.100% and 0.250% of the revolving credit commitment, depending on the rating of our long-term senior unsecured debt. Subject to certain conditions stated in the Credit Agreement, we may borrow, prepay and reborrow amounts under the Credit Agreement at any time during the term of the Credit Agreement. Funds borrowed under the Credit Agreement may be used for general corporate and working capital purposes of the Company and its subsidiaries.
The Credit Agreement also contains customary representations and warranties and affirmative and negative covenants, including financial covenants, as well as customary events of default, with corresponding grace periods, including, without limitation, payment defaults, cross-defaults to other agreements evidencing indebtedness and bankruptcy-related defaults. We were in compliance with these covenants as of December 31, 2025.
There were no borrowings outstanding under the Credit Agreement at December 31, 2025. Due to the outstanding borrowing and letters of credit, $2,498 million remained available for potential borrowings under the Credit Agreement at December 31, 2025.
We use the Credit Agreement to post letters of credit and to borrow funds to supplement our operating cash flows from time to time. During 2025, we borrowed an aggregate of $2,546 million and repaid $2,546 million under our Credit Agreement. During 2024, we borrowed an aggregate of $1,663 million and repaid $1,907 million under our Credit Agreement. Principal uses of the 2025 and 2024 borrowings under the Credit Agreement were to fund acquisitions, earnout payments related to acquisitions and general corporate purposes.
Premium Financing Debt Facility - On November 17, 2025, we entered into an amendment to our revolving loan facility (which we refer to as the Premium Financing Debt Facility) that provides funding for the three Australian (AU) and New Zealand (NZ) premium finance subsidiaries. The Premium Financing Debt Facility is comprised of: (i) Facility B is separated into AU$390 million and NZ$25 million tranches (the AU$ tranche will be decreased on March 2, 2026 to
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AU$310 million and the NZ$ tranche will be decreased as of March 2, 2026 to NZ$10 million), (ii) Facility C, an AU$60 million equivalent multi‑currency overdraft tranche and (iii) Facility D, a NZ$15 million equivalent multi-currency overdraft tranche.
The interest rates on Facility B are Interbank rates, which vary by tranche, duration and currency, plus a margin of 1.300% and 1.850% for the AU$ and NZ$ tranches, respectively. The interest rates on Facilities C and D are 30 day Interbank rates, plus a margin of 0.780% and 0.990% for the AU$ and NZ$ tranches, respectively. The annual fee for Facility B is 0.52% and 0.8325% for the undrawn commitments for the AU$ and NZ$ tranches, respectively. The annual fee for Facility C is 0.77% and for Facility D is 0.90% of the total commitments of the facilities.
The terms of our Premium Financing Debt Facility include various financial covenants, including covenants that require us to maintain specified financial ratios. We were in compliance with these covenants as of December 31, 2025. The Premium Financing Debt Facility also includes customary provisions for transactions of this type, including events of default, with corresponding grace periods and cross-defaults to other agreements evidencing our indebtedness. Facilities B, C and D are secured by the premium finance receivables of the Australian and New Zealand premium finance subsidiaries.
At December 31, 2025, AU$325 million and NZ$0 million of borrowings were outstanding under Facility B, AU$0 million of borrowings outstanding under Facility C and NZ$15 million of borrowings were outstanding under Facility D, which in aggregate amount to US$226 million of borrowings outstanding under the Premium Financing Debt Facility. Accordingly, as of December 31, 2025, AU$65 million and NZ$25 million remained available for potential borrowing under Facility B, and AU$60 million and NZ$0 million under Facilities C and D, respectively.
Dividends - Our board of directors determines our dividend policy. Our board of directors determines dividends on our common stock on a quarterly basis after considering our available cash from earnings, our anticipated cash needs and current conditions in the economy and financial markets.
In 2025, we declared $674 million in cash dividends on our common stock, or $2.60 per common share. On December 19, 2025, we paid a fourth quarter dividend of $0.65 per common share to shareholders of record as of December 5, 2025. On January 28, 2026, we announced a quarterly dividend for first quarter 2026 of $0.70 per common share. If the dividend is maintained at $0.70 per common share throughout 2026, this dividend level would result in an annualized net cash used by financing activities in 2026 of approximately $719 million (based on the outstanding shares as of December 31, 2025), or an anticipated increase in cash used of approximately $52 million compared to 2025. We can make no assurances regarding the amount of any future dividend payments.
Shelf Registration Statement - On February 12, 2024, we filed a shelf registration statement on Form S-3 with the SEC, registering the offer and sale from time to time, of an indeterminate amount of debt securities, guarantees, common stock, preferred stock, warrants, depositary shares, purchase contracts, or units. The availability of the potential liquidity under this shelf registration statement depends on investor demand, market conditions and other factors. We make no assurances regarding when, or if, we will issue any securities under this registration statement. On November 15, 2022, we filed a second shelf registration statement on Form S-4 with the SEC, registering 7.0 million shares of our common stock that we may offer and issue from time to time in connection with future acquisitions of other businesses, assets or securities. At December 31, 2025, 5.5 million shares remained available for issuance under this registration statement.
Common Stock Repurchases - We have in place a common stock repurchase plan approved by our board of directors in July 2021 that authorizes the repurchase of up to $1.5 billion of common stock. During the years ended December 31, 2025 and 2024, we did not repurchase shares of our common stock. The plan authorizes the repurchase of our common stock at such times and prices, as we may deem advantageous, in transactions on the open market or in privately negotiated transactions. We are under no commitment or obligation to repurchase any particular number of shares, and the plan may be suspended at any time at our discretion. Management may consider repurchasing common stock during 2026 to the extent that our available cash exceeds acquisition opportunities. Funding for share repurchases may come from a variety of sources, including cash from operations, short-term or long-term borrowings under our Credit Agreement or other sources.
Public Offering of Common Stock - On December 9, 2024, we entered into an Underwriting Agreement with Morgan Stanley & Co. LLC and BofA Securities, Inc., as representatives of the several underwriters listed thereto, pursuant to which we agreed to sell 30.4 million shares of our common stock for a public per share offering price of $280.00, for an aggregate price purchase price of $8.5 billion. The offering closed on December 11, 2024 and 30.4 million shares of our common stock were issued for net proceeds, after underwriting discounts, of $8.3 billion. We also granted the underwriters a 30-day option to purchase up to an additional 4.6 million shares of our common stock at the same price, which was
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exercised in full by the underwriters on January 6, 2025. The option closed on January 7, 2025 and 4.6 million shares of our common stock were issued for net proceeds, after underwriting discounts, of $1.3 billion of cash. We used the proceeds of this offering to fund a portion of the cash consideration payable in connection with the AssuredPartners transaction and for other general corporate purposes including other acquisitions.
At-the-Market Equity Program - On March 14, 2024, we entered into an Equity Distribution Agreement with Morgan Stanley & Co. LLC, pursuant to which we may offer and sell, from time to time, up to 3.0 million shares of our common stock through Morgan Stanley as sales agent. We intend to use the net proceeds of sales under this program to fund future acquisitions from time to time or for general corporate purposes. Pursuant to the agreement, shares may be sold by means of ordinary brokers’ transactions, including on the New York Stock Exchange, at market prices prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices, in block transactions, or as otherwise agreed upon by us and Morgan Stanley. During the quarter ended December 31, 2025, we did not sell shares of our common stock under the program.
Common Stock Issuances - Another source of liquidity to us is the issuance of our common stock pursuant to our stock option and employee stock purchase plans. Proceeds from the issuance of common stock under these plans were $192 million and $163 million in 2025 and 2024, respectively. On May 10, 2022, our stockholders approved the 2022 Long-Term Incentive Plan (which we refer to as the LTIP), which replaced our previous stockholder-approved 2017 LTIP. All of our officers, employees and non‑employee directors are eligible to receive awards under the LTIP. Awards which may be granted under the LTIP include non‑qualified and incentive stock options, stock appreciation rights, restricted stock units and performance units, any or all of which may be made contingent upon the achievement of performance criteria. Stock options with respect to 10.2 million shares (less any shares of restricted stock issued under the LTIP - 2.1 million shares of our common stock were available for this purpose as of December 31, 2025) were available for grant under the LTIP at December 31, 2025. Our employee stock purchase plan allows our employees to purchase our common stock at 95% of its fair market value. Proceeds from the issuance of our common stock related to these plans have contributed favorably to net cash provided by financing activities in the years ended December 31, 2025 and 2024, and we believe this favorable trend will continue in the foreseeable future.
We have a qualified contributory savings and thrift 401(k) plan covering the majority of our domestic employees. For eligible employees who have met the plan’s age and service requirements to receive matching contributions, we historically have matched 100% of pre-tax and Roth elective deferrals up to a maximum of 5% of eligible compensation, subject to federal limits on plan contributions and not in excess of the maximum amount deductible for federal income tax purposes. Beginning with the match paid in 2021, the amount matched by the Company will be discretionary and annually determined by management. Employees must be employed and eligible for the plan on the last day of the plan year to receive a matching contribution, subject to certain exceptions enumerated in the plan document. Matching contributions are subject to a five-year graduated vesting schedule and can be funded in cash or common stock of the Company. We expensed (net of plan forfeitures) $115 million and $105 million related to the plan in 2025 and 2024, respectively. During 2024, management determined the 5% employer matching contributions on eligible compensation to the 401(k) plan for the 2024 plan year to be funded with our common stock, which was funded in February 2025. During 2025, management determined the 5% employer matching contributions on eligible compensation to the 401(k) plan for the 2025 plan year to be funded with our common stock, which is expected to be funded in February 2026
Other Liquidity Matters
Letters of Credit and Other Guarantees
We have entered into a number of arrangements whereby our performance on certain obligations is guaranteed by a third party through the issuance of a letter of credit. We had total letters of credit outstanding of $14 million as of December 31, 2025 and $23 million at December 31, 2024. These letters of credit secure our self-insurance deductibles on our own insurance programs, allow certain of our captive operations to meet minimum statutory surplus requirements, lease security deposits and collateral related to premium and claim funds held in a fiduciary capacity. See Note 15 to our 2025 consolidated financial statements for additional discussion of these obligations and commitments.
Earnout Obligations
Substantially all of the purchase agreements related to the acquisitions we do contain provisions for potential earnout obligations. For all of our acquisitions made in the period from 2022 to 2025 that contain potential earnout obligations, such obligations are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase
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price consideration for the respective acquisition. The amounts recorded as earnout payables are primarily based upon estimated future potential operating results of the acquired entities over a two- to three-year period subsequent to the acquisition date. The aggregate amount of the maximum earnout obligations related to these acquisitions was $1,518 million, of which $773 million was recorded in our consolidated balance sheet as of December 31, 2025 based on the estimated fair value of the expected future payments to be made, of which approximately $535 million can be settled in cash or common stock of the Company at our option and $238 million must be settled in cash.
Apart from commitments, guarantees, and contingencies, as disclosed herein and in Note 15 to our 2025 consolidated financial statements, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations or liquidity. Our cash flows from operations, borrowing availability and overall liquidity are subject to risks and uncertainties. See “Information Concerning Forward-Looking Statements” at the beginning of this report.
Contractual Obligations
Our contractual obligations and commitments as of December 31, 2025 are comprised of principal payments on debt, interest payments on debt, operating leases, pension benefit plan and purchase obligations.
Operating leases are primarily comprised of leased office space throughout the world. As leases expire, we do not anticipate difficulty in negotiating renewals or finding other satisfactory space if the premise becomes unavailable. In certain circumstances, we may have unused space and may seek to sublet such space to third parties, depending upon the demands for office space in the locations involved. See Note 13 to our 2025 consolidated financial statements for additional discussion of these operating lease obligations.
Defined benefit pension plan obligations include estimates of our minimum funding requirements pursuant to the Employee Retirement Income Security Act and other regulations. We may make additional discretionary contributions. See Note 12 to our 2025 consolidated financial statements for additional information required to be disclosed relating to our defined benefit pension plan.
Purchase obligations are defined as agreements to purchase goods and services that are enforceable and legally binding on us, and that specifies all significant terms, including the goods to be purchased or services to be rendered, the price at which the goods or services are to be rendered, and the timing of the transactions. Most of our purchase obligations are related to purchases of information technology services, marketing arrangements or other service contracts. We had no other cash requirements from known contractual obligations and commitments that have, or are reasonably likely to have, a current or future material effect on the Company’s financial condition, results of operations, or liquidity. See Note 15 to our 2025 consolidated financial statements for additional discussion of these contractual obligations.
Outlook - We believe that we have sufficient capital and access to additional capital to meet our short- and long-term cash flow needs.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP, which require management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses, and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements. We periodically evaluate our estimates and assumptions, including those relating to the valuation of goodwill and other intangible assets, right-of-use assets, investments, income taxes, revenue recognition, deferred costs, stock-based compensation, claims handling obligations, retirement plans, litigation and contingencies. We base our estimates on historical experience and various assumptions that we believe to be reasonable based on specific circumstances. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. We believe the following significant accounting estimates may involve a higher degree of judgment and complexity. See Note 1 to our 2025 consolidated financial statements for other significant accounting policies. See Note 2 to our 2025 consolidated financial statements for a discussion of recently issued accounting pronouncements and their impact or potential future impact on our financial results, if determinable.
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Revenue Recognition
Description
The primary source of revenues for our brokerage services is commissions from underwriting enterprises, based on a percentage of premiums paid by our clients, or fees received from clients based on an agreed level of service usually in lieu of commissions. These commissions and fees revenues are substantially recognized at a point in time on the effective date of the associated policies when control of the policy transfers to the client, as well as deferring certain revenues to reflect delivery of services over the contract period. Whether we are paid a commission or a fee, the vast majority of our services are associated with the placement of an insurance (or insurance-like) contract. Accordingly, we recognize approximately 85% of our commission and fee revenues on the effective date of the underlying insurance contract. The amount of revenue we recognize is based on our costs to provide our services up and through that effective date, including an appropriate estimate of our profit margin on a portfolio basis. Based on the proportion of additional services we provide in each period after the effective date of the insurance contract, including an appropriate estimate of our profit margin, we recognize approximately 10% of our commission and fee revenues in the first three months, and the remaining 5% thereafter.
For supplemental revenues certain underwriting enterprises may pay us additional revenues for the volume of premium placed with them and for insights into our sales pipeline, our sales capabilities or our risk selection knowledge. These amounts are in excess of the commission and fee revenues discussed above, and not all business we place with underwriting enterprises is eligible for supplemental revenues. Unlike contingent revenues, discussed below, these revenues are primarily a fixed amount or fixed percentage of premium of the underlying eligible insurance contracts. For supplemental revenue contracts based on a fixed percentage of premium, our obligation to the underwriting enterprise is substantially completed upon the effective date of the underlying insurance contract and revenue is fully earned at that time. For supplemental revenue contracts based on a fixed amount, revenue is recognized ratably over the contract period consistent with the performance of our obligations, almost always over an annual term.
For contingent revenues certain underwriting enterprises may pay us additional revenues for our sales capabilities, our risk selection knowledge, or our administrative efficiencies. These amounts are in excess of the commission or fee revenues discussed above, and not all business we place with participating underwriting enterprises is eligible for contingent revenues. Unlike supplemental revenues, also discussed above, these revenues are variable, generally based on growth, the loss experience of the underlying insurance contracts, and/or our efficiency in processing the business. We generally operate under calendar year contracts, but we do not receive these revenues from the underwriting enterprises until the following calendar year, generally in the first and second quarters, after verification of the performance indicators outlined in the contracts. Accordingly, during each reporting period, we must make our best estimate of amounts we have earned using historical averages and other factors to project such revenues.
See Revenue Recognition and Contracts with Customers in Notes 1 and 4 to our 2025 consolidated financial statements.
Judgments and Uncertainties
For commissions and fees, these periods may be different than the underlying premium payment patterns of the insurance contracts, but the vast majority of our services are fully provided within one year of the insurance contract effective date. For supplemental and contingent commissions, we base our estimates each period on a contract-by-contract basis where available. In certain cases, it is impractical to assess a very large number of smaller contingent revenue contracts, so we use a historical portfolio estimate in aggregate. Because our expectation of the ultimate contingent revenue amounts to be earned can vary from period to period, especially in contracts sensitive to loss ratios, our estimates might change significantly from quarter to quarter.
For example, in circumstances where our revenues are dependent on a full calendar year loss ratio, adverse loss experience in the fourth quarter could not only negate revenue earnings in the fourth quarter, but also trigger the need to reverse revenues previously recognized during the prior quarters. Variable consideration is recognized when we conclude, based on all the facts and information available at the reporting date, that it is probable that a significant revenue reversal will not occur in future periods.
Effect if Actual Results Differ From Assumptions
We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to recognize revenue. As noted above, estimates are made based on historical experience and other factors. The vast majority of our brokerage contracts and service understandings are for a period of one year or less, and historically, the difference between actual experience compared to estimated performance has not been significant to the quarterly or annual financial statements. We have not made any material changes in the accounting methodology used to recognize revenue during the past three fiscal years.
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Income Taxes
Description
We estimate total income tax expense based on statutory tax rates and tax planning opportunities available to us in various jurisdictions in which we earn income. Income tax includes an estimate for withholding taxes on earnings of foreign subsidiaries expected to be remitted to the U.S. but does not include an estimate for taxes on earnings considered to be indefinitely invested in the foreign subsidiary. Deferred income taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse. Valuation allowances are recorded when it is likely a tax benefit will not be realized for a deferred tax asset. We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due. See Income Taxes in Notes 1 and 16 to our 2025 consolidated financial statements.
Judgments and Uncertainties
Changes in projected future earnings could affect the recorded valuation allowances in the future. Our calculations related to income taxes contain uncertainties due to judgment used to calculate tax liabilities in the application of complex tax regulations across the tax jurisdictions where we operate. Our analysis of unrecognized tax benefits contains uncertainties based on judgment used to apply the more likely than not recognition and measurement thresholds.
Effect if Actual Results Differ From Assumptions
Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future. Other than those potential impacts, we do not believe there is a reasonable likelihood there will be a material change in the tax related balances or valuation allowances. However, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. To the extent we prevail in matters for which unrecognized tax benefit liabilities have been established, or are required to pay amounts in excess of our recorded unrecognized tax benefit liabilities, our effective tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would require use of our cash and generally result in an increase in our effective tax rate in the period of resolution. A favorable tax settlement would generally be recognized as a reduction in our effective tax rate in the period of resolution.
Impairment of Goodwill
Description
Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, the fair value of the reporting unit may be more likely than not less than its carrying amount or if significant changes to macro-economic factors related to the reporting unit have occurred that could materially impact fair value, a quantitative goodwill impairment test would be required. The quantitative test compares the fair value of a reporting unit with its carrying amount. Additionally, we can elect to forgo the qualitative assessment and perform the quantitative test. Upon performing the quantitative test, if the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of goodwill. We have elected to make the first day of the fourth quarter the annual impairment assessment date for goodwill. However, we could be required to evaluate the recoverability of goodwill outside of the required annual assessment if, among other things, we experience disruptions to the business, unexpected significant declines in operating results, divestiture of a significant component of the business or a sustained decline in market capitalization.
Judgments and Uncertainties
We estimate the fair value of our reporting units considering the use of various valuation techniques, with the primary technique being an income approach (discounted cash flow method) and another technique being a market approach (guideline public
company method), which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. We include assumptions about revenue growth, operating margins, discount rates and valuation multiples which consider our budgets, business plans, economic projections and marketplace data, and are believed to reflect market participant views which would exist in an exit transaction. Assumptions are also made for varying perpetual growth rates for periods beyond the long-term business plan period. Generally, we utilize operating margin assumptions based on future expectations, operating margins historically realized in the reporting units’ industries and industry marketplace valuation multiples. See Intangible Assets in Notes 1 and 6 to our 2025 consolidated financial statements.
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Our impairment analysis contains uncertainties due to uncontrollable events that could positively or negatively impact the anticipated future economic and operating conditions.
Effect if Actual Results Differ From Assumptions
We have not made material changes in the accounting methodology used to evaluate impairment of goodwill during the last three years. During fiscal 2025, 2024 and 2023, all of our material reporting units passed the impairment analysis.
Some of the inherent estimates and assumptions used in determining fair value of the reporting units and indefinite life intangible assets are outside the control of management, including interest rates, cost of capital, tax rates, market EBITDAC comparables and credit ratings. While we believe we have made reasonable estimates and assumptions to calculate the fair value of the reporting units and indefinite life intangibles, it is possible a material change could occur. If our actual results are not consistent with our estimates and assumptions used to calculate fair value, it could result in material impairments of our goodwill.
Impairment of Amortizable Intangible Assets
Description
Amortizable intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. Examples include a significant adverse change in the extent or manner in which we use the asset, a change in its physical condition, or an unexpected change in financial performance.
When evaluating amortizable intangible assets for impairment, we compare the carrying value of the asset to the asset’s estimated undiscounted future cash flows. An impairment is indicated if the estimated future cash flows are less than the carrying value of the asset. The impairment is the excess of the carrying value over the fair value of the asset.
We recorded impairment charges related to amortizable intangible assets of $66 million, $19 million and $4 million in 2025, 2024 and 2023, respectively. See Intangible Assets in Notes 1 and 6 to our 2025 consolidated financial statements.
Judgments and Uncertainties
Our impairment analysis contains uncertainties due to judgment in assumptions, including useful lives and intended use of assets, observable market valuations, forecasted revenue growth, operating margins and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data that reflects the risk inherent in future cash flows to determine fair value.
Effect if Actual Results Differ From Assumptions
We have not made any material changes in the accounting methodology used to evaluate the impairment of amortizable intangible assets during the last three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate impairments or useful lives of amortizable intangible assets. However, if actual results are not consistent with our estimates and assumptions used to calculate estimated future cash flows, we may be exposed to impairment losses that could be material.
Earnout Obligations
Description
Substantially all of the purchase agreements related to the acquisitions we do contain provisions for potential earnout obligations. The amounts recorded as earnout payables, which are primarily based upon the terms of the purchase agreements and the estimated future operating results of the acquired entities over a two- to three-year period subsequent to the acquisition date, are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration. We will record subsequent changes in these estimated earnout obligations, including the accretion of discount, in our consolidated statement of earnings when incurred.
Judgments and Uncertainties
The fair value of these earnout obligations is based on the present value of the expected future payments to be made to the sellers of the acquired entities in accordance with the provisions outlined in the respective purchase agreements, which is a Level 3 fair value measurement. In determining fair value, we estimate the acquired entity’s future performance using financial projections developed by management for the acquired entity and market participant assumptions that were derived for revenue growth and/or profitability. Revenue growth rates generally ranged from 5% to 18% for our 2025 acquisitions. We estimated future payments using the earnout formula and performance targets specified in each purchase agreement and the financial projections just described. We then discounted these payments to present value using a risk-
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adjusted rate that takes into consideration market based rates of return that reflect the ability of the acquired entity to achieve the targets. The discount rates generally ranged from 8% to 9% for our 2025 acquisitions.
Effect if Actual Results Differ From Assumptions
While management believes those expectations and assumptions are reasonable, they are inherently uncertain. Changes in financial projections, market participant assumptions for revenue growth and/or profitability, or the risk-adjusted discount rate, would result in a change in the fair value of recorded earnout obligations. See Note 3 to our 2025 consolidated financial statements for additional discussion on our 2025 business combinations.
Business Combinations
Description
We account for acquired businesses using the acquisition method of accounting, which requires that once control of a business is obtained, 100% of the assets acquired and liabilities assumed, including amounts attributed to noncontrolling interests, be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.
We use various models to determine the value of assets acquired and liabilities assumed such as discounted cash flow to value amortizable intangible assets.
For significant acquisitions we may use independent third-party valuation specialists to assist us in determining the fair value of assets acquired and liabilities assumed. See Note 3 to our 2025 consolidated financial statements for additional discussion on our 2025 business combinations.
Judgments and Uncertainties
Significant judgment is often required in estimating the fair value of assets acquired and liabilities assumed, particularly intangible assets. We make estimates and assumptions about projected future cash flows including sales growth, operating margins, attrition rates, and discount rates based on historical results, business plans, expected synergies, perceived risk and marketplace data considering the perspective of marketplace participants.
Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives.
Effect if Actual Results Differ From Assumptions
While management believes those expectations and assumptions are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions, whic h could result in subsequent impairments.
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- Ticker
- AJG
- CIK
0000354190- Form Type
- 10-K
- Accession Number
0001628280-26-008662- Filed
- Feb 17, 2026
- Period
- Dec 31, 2025 (Q4 25)
- Industry
- Insurance Agents, Brokers & Service
External resources
Permalink
https://insiderdelta.com/issuers/AJG/10-k/0001628280-26-008662