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, 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 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 operations in each year presented. In order to 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 below. We currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially our financial position, results of operations or cash flows. However, legal proceedings and government are subject to inherent uncertainties, and rulings or other events could occur, including the payment of substantial monetary or an or other order prohibiting us from selling one or more products at all or in particular ways, particular business practices or requiring other remedies, which may result in a material 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 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 in operating results, of a significant component of the business or a sustained 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.
