Arthur J. Gallagher & Co. Announces Third Quarter 2024 Financial Results
ROLLING MEADOWS, Ill., Oct. 24, 2024 /PRNewswire/ -- Arthur J. Gallagher & Co. (NYSE:AJG) today reported its financial results for the quarter ended September 30, 2024. Management will host a webcast conference call to discuss these results on Thursday, October 24, 2024 at 5:15 p.m. ET/4:15 p.m. CT. To listen to the call, and for printer-friendly formats of this release and the "CFO Commentary" and "Supplemental Quarterly Data," which may also be referenced during the call, please visit ajg.com/IR. These documents contain both GAAP and non-GAAP measures. Investors and other users of this information should read carefully the section entitled "Information Regarding Non-GAAP Measures" beginning on page 9.
Summary of Financial Results - Third Quarter
Revenues Before
Diluted Net Earnings
Reimbursements
Net Earnings (Loss)
EBITDAC
(Loss) Per Share
Segment
3rd Q 24
3rd Q 23
3rd Q 24
3rd Q 23
3rd Q 24
3rd Q 23
3rd Q 24
3rd Q 23
(in millions)
(in millions)
(in millions)
Brokerage, as reported
$ 2,396.4
$ 2,122.1
$ 383.0
$ 339.0
$ 691.5
$ 611.5
$ 1.70
$ 1.53
Net (gains) on divestitures
(22.5)
(0.4)
(16.8)
(0.3)
(22.5)
(0.4)
(0.07)
-
Acquisition integration
-
-
36.3
43.0
48.7
57.1
0.16
0.20
Workforce and lease termination
-
-
36.2
5.4
48.5
7.1
0.16
0.02
Acquisition related adjustments
-
-
1.8
(5.8)
31.5
12.7
0.01
(0.03)
Amortization of intangible assets
-
-
120.0
95.8
-
-
0.54
0.43
Effective income tax rate impact
-
-
-
(0.8)
-
-
-
-
Levelized foreign currency
translation
-
12.6
-
(0.4)
-
0.2
-
-
Brokerage, as adjusted *
2,373.9
2,134.3
560.5
475.9
797.7
688.2
2.50
2.15
Risk Management, as reported
369.7
331.0
44.6
41.5
74.1
66.8
0.20
0.19
Net (gains) on divestitures
(0.1)
(0.1)
(0.1)
(0.1)
(0.1)
(0.1)
-
-
Acquisition integration
-
-
0.6
-
0.9
-
-
-
Workforce and lease termination
-
-
1.4
0.6
2.0
0.8
0.01
-
Acquisition related adjustments
-
-
-
0.1
-
0.1
-
-
Amortization of intangible assets
-
-
2.7
1.2
-
-
0.01
0.01
Levelized foreign currency
translation
-
2.4
-
0.5
-
0.6
-
-
Risk Management, as adjusted *
369.6
333.3
49.2
43.8
76.9
68.2
0.22
0.20
Corporate, as reported
0.4
0.5
(113.5)
(97.3)
(74.7)
(72.2)
(0.51)
(0.44)
Transaction-related costs
-
-
6.6
1.9
8.9
2.6
0.03
0.01
Legal and tax related
-
-
3.5
17.8
-
20.5
0.02
0.08
Corporate, as adjusted *
0.4
0.5
(103.4)
(77.6)
(65.8)
(49.1)
(0.46)
(0.35)
Total Company, as reported
$ 2,766.5
$ 2,453.6
$ 314.1
$ 283.2
$ 690.9
$ 606.1
$ 1.39
$ 1.28
Total Company, as adjusted *
$ 2,743.9
$ 2,468.1
$ 506.3
$ 442.1
$ 808.8
$ 707.3
$ 2.26
$ 2.00
Total Brokerage & Risk
Management, as reported
$ 2,766.1
$ 2,453.1
$ 427.6
$ 380.5
$ 765.6
$ 678.3
$ 1.90
$ 1.72
Total Brokerage & Risk
Management, as adjusted *
$ 2,743.5
$ 2,467.6
$ 609.7
$ 519.7
$ 874.6
$ 756.4
$ 2.72
$ 2.35
*
For third quarter 2024, the pretax impact of the Brokerage segment adjustments totals $238.1 million, mostly due to non‑cash period expenses related to intangible amortization, with a corresponding adjustment to the provision for income taxes of $60.6 million relating to these items. For third quarter 2024, the pretax impact of the Risk Management segment adjustments totals $6.5 million, with a corresponding adjustment to the provision for income taxes of $1.9 million relating to these items. For third quarter 2024, the pretax impact of the Corporate segment adjustments totals $8.9 million, with a corresponding adjustment to the benefit for income taxes of $1.2 million relating to these items. A detailed reconciliation of the 2024 and 2023 provision (benefit) for income taxes is shown on pages 14 and 15.
(1 of 15)
"Our excellent financial performance continued during the third quarter! For our combined brokerage and risk management segments, total revenues increased 13%, organic revenues increased 6%, we completed four new mergers, grew net earnings 12%, delivered 123 basis points of adjusted EBITDAC margin expansion, and most importantly, our bedrock culture is thriving." said J. Patrick Gallagher, Jr., Chairman, President and CEO. "Through the first nine months of the year, revenues have increased 16%, organic growth is 8%, net earnings have increased 19% and adjusted EPS is up 17%.
"Global third quarter renewal premiums increases were little changed from our September IR day update a few weeks ago. The recent U.S. Hurricanes have not yet had a significant impact on insurance pricing in October, but are adding some complexity to January 1st property reinsurance renewals. Client exposure changes, including mid-term policy endorsements, continue to be positive, and new arising claim counts are growing; both indicating solid economic activity across our clients' businesses.
"Our thoughts are with those impacted by the recent storms and floods, including our own Gallagher colleagues. Our professionals are hard at work helping clients sort through their coverages, file claims and ultimately get losses paid.
"Looking ahead, we are very well positioned. Our net new business is up from prior year, renewal premiums continue to increase and our M&A pipeline is robust. The opportunities ahead of us are immense and I am very excited about our long-term prospects!"
Summary of Financial Results - Nine-Months ended September 30,
Revenues Before
Diluted Net Earnings
Reimbursements
Net Earnings (Loss)
EBITDAC
(Loss) Per Share
Segment
9 Mths 24
9 Mths 23
9 Mths 24
9 Mths 23
9 Mths 24
9 Mths 23
9 Mths 24
9 Mths 23
(in millions)
(in millions)
(in millions)
Brokerage, as reported
$ 7,637.6
$ 6,585.7
$ 1,368.4
$ 1,144.6
$ 2,408.3
$ 2,055.9
$ 6.10
$ 5.21
Net (gains) on divestitures
(25.0)
(5.6)
(18.6)
(4.3)
(25.0)
(5.6)
(0.08)
(0.02)
Acquisition integration
-
-
112.7
133.9
151.0
176.4
0.51
0.61
Workforce and lease termination
-
-
65.6
40.9
88.0
54.1
0.29
0.19
Acquisition related adjustments
(26.0)
-
24.3
20.5
92.5
34.9
0.11
0.09
Amortization of intangible assets
-
-
364.2
285.1
-
-
1.63
1.30
Effective income tax rate impact
-
-
-
(3.5)
-
-
-
(0.02)
Levelized foreign currency
translation
-
9.6
-
(4.2)
-
(4.3)
-
(0.02)
Brokerage, as adjusted *
7,586.6
6,589.7
1,916.6
1,613.0
2,714.8
2,311.4
8.56
7.34
Risk Management, as reported
1,081.1
947.2
131.7
111.7
216.9
183.2
0.59
0.51
Net (gains) on divestitures
-
(0.3)
-
(0.3)
-
(0.3)
-
-
Acquisition integration
-
-
1.3
0.5
1.8
0.8
-
-
Workforce and lease termination
-
-
3.4
1.8
4.6
2.4
0.02
0.01
Acquisition related adjustments
-
-
0.1
0.3
0.2
0.3
-
-
Amortization of intangible assets
-
-
7.2
3.3
-
-
0.03
0.02
Levelized foreign currency
translation
-
0.6
-
0.4
-
0.3
-
-
Risk Management, as adjusted *
1,081.1
947.5
143.7
117.7
223.5
186.7
0.64
0.54
Corporate, as reported
1.9
0.5
(287.9)
(250.7)
(187.5)
(197.8)
(1.29)
(1.14)
Transaction-related costs
-
-
11.6
7.6
14.9
10.2
0.05
0.03
Legal and tax related
-
-
3.5
22.8
-
26.0
0.02
0.11
Corporate, as adjusted *
1.9
0.5
(272.8)
(220.3)
(172.6)
(161.6)
(1.22)
(1.00)
Total Company, as reported
$ 8,720.6
$ 7,533.4
$ 1,212.2
$ 1,005.6
$ 2,437.7
$ 2,041.3
$ 5.40
$ 4.58
Total Company, as adjusted *
$ 8,669.6
$ 7,537.7
$ 1,787.5
$ 1,510.4
$ 2,765.7
$ 2,336.5
$ 7.98
$ 6.88
Total Brokerage & Risk
Management, as reported
$ 8,718.7
$ 7,532.9
$ 1,500.1
$ 1,256.3
$ 2,625.2
$ 2,239.1
$ 6.69
$ 5.72
Total Brokerage & Risk
Management, as adjusted *
$ 8,667.7
$ 7,537.2
$ 2,060.3
$ 1,730.7
$ 2,938.3
$ 2,498.1
$ 9.20
$ 7.88
(2 of 15)
*
For the nine-month period ended September 30, 2024, the pretax impact of the Brokerage segment adjustments totals $734.1 million, mostly due to non‑cash period expenses related to intangible amortization, with a corresponding adjustment to the provision for income taxes of $185.9 million relating to these items. For the nine-month period ended September 30, 2024, the pretax impact of the Risk Management segment adjustments totals $16.6 million, with a corresponding adjustment to the provision for income taxes of $4.6 million relating to these items. For the nine-month period ended September 30, 2024, the pretax impact of the Corporate segment adjustments totals $14.9 million, with a corresponding adjustment to the benefit for income taxes of $0.2 million relating to these items. A detailed reconciliation of the 2024 and 2023 provision (benefit) for income taxes is shown on pages 14 and 15.
Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):
Organic Revenues (Non-GAAP)
3rd Q 2024
3rd Q 2023
9 Mths 2024
9 Mths 2023
Base Commissions and Fees
Commissions and fees, as reported
$ 2,123.0
$ 1,904.2
$ 6,862.7
$ 5,953.2
Less commissions and fees from acquisitions
(133.3)
-
(508.2)
-
Less divested operations
-
(27.3)
-
(40.5)
Levelized foreign currency translation
-
10.6
-
8.9
Organic base commissions and fees
$ 1,989.7
$ 1,887.5
$ 6,354.5
$ 5,921.6
Organic change in base commissions and fees
5.4 %
7.3 %
Supplemental Revenues
Supplemental revenues, as reported
$ 79.1
$ 70.8
$ 261.7
$ 223.6
Less supplemental revenues from acquisitions
(1.6)
-
(6.7)
-
Levelized foreign currency translation
-
0.6
-
1.0
Organic supplemental revenues
$ 77.5
$ 71.4
$ 255.0
$ 224.6
Organic change in supplemental revenues
8.5 %
13.5 %
Contingent Revenues
Contingent revenues, as reported
$ 69.3
$ 53.9
$ 215.1
$ 179.9
Less contingent revenues from acquisitions
(6.1)
-
(21.8)
-
Less divested operations
-
(3.0)
-
(3.0)
Levelized foreign currency translation
-
(0.1)
-
0.1
Organic contingent revenues
$ 63.2
$ 50.8
$ 193.3
$ 177.0
Organic change in contingent revenues
24.4 %
9.2 %
Total reported commissions, fees, supplemental
revenues and contingent revenues
$ 2,271.4
$ 2,028.9
$ 7,339.5
$ 6,356.7
Less commissions, fees, supplemental revenues
and contingent revenues from acquisitions
(141.0)
-
(536.7)
-
Less divested operations
-
(30.3)
-
(43.5)
Levelized foreign currency translation
-
11.1
-
10.0
Total organic commissions, fees, supplemental
revenues and contingent revenues
$ 2,130.4
$ 2,009.7
$ 6,802.8
$ 6,323.2
Total organic change
6.0 %
7.6 %
Acquisition Activity
3rd Q 2024
3rd Q 2023
9 Mths 2024
9 Mths 2023
Number of acquisitions closed
3
12
27
37
Estimated annualized revenues acquired (in millions)
$ 32.7
$ 57.2
$ 173.9
$ 475.3
(3 of 15)
Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued) (dollars in millions):
Compensation Expense and Ratios
3rd Q 2024
3rd Q 2023
9 Mths 2024
9 Mths 2023
Compensation expense, as reported
$ 1,362.9
$ 1,189.7
$ 4,210.0
$ 3,592.2
Acquisition integration
(26.5)
(32.6)
(81.9)
(105.2)
Workforce and lease termination related charges
(46.2)
(5.7)
(81.5)
(48.3)
Acquisition related adjustments
(31.5)
(12.7)
(118.5)
(34.9)
Levelized foreign currency translation
-
7.0
-
10.8
Compensation expense, as adjusted
$ 1,258.7
$ 1,145.7
$ 3,928.1
$ 3,414.6
Reported compensation expense ratios using reported
revenues on pages 1 and 2
*
56.9 %
56.1 %
55.1 %
54.6 %
Adjusted compensation expense ratios using adjusted
revenues on pages 1 and 2
**
53.0 %
53.7 %
51.8 %
51.8 %
*
Reported third quarter 2024 compensation ratio was 0.8 pts higher than third quarter 2023. This ratio was primarily impacted by higher acquisition earnout related adjustments, workforce and lease termination costs, and increased employee benefit costs, partially offset by savings related to headcount controls and lower integration costs.
**
Adjusted third quarter 2024 compensation ratio was 0.7 pts lower compared to third quarter 2023. This ratio was primarily impacted by savings related to headcount controls, partially offset by increased employee benefit costs.
Operating Expense and Ratios
3rd Q 2024
3rd Q 2023
9 Mths 2024
9 Mths 2023
Operating expense, as reported
$ 342.0
$ 320.9
$ 1,019.3
$ 937.6
Acquisition integration
(22.2)
(24.5)
(69.1)
(71.2)
Workforce and lease termination related charges
(2.3)
(1.4)
(6.5)
(5.8)
Levelized foreign currency translation
-
5.4
-
3.1
Operating expense, as adjusted
$ 317.5
$ 300.4
$ 943.7
$ 863.7
Reported operating expense ratios using reported
revenues on pages 1 and 2
*
14.3 %
15.1 %
13.4 %
14.2 %
Adjusted operating expense ratios using adjusted
revenues on pages 1 and 2
**
13.4 %
14.1 %
12.4 %
13.1 %
*
Reported third quarter 2024 operating expense ratio was 0.8 pts lower than third quarter 2023. This ratio was primarily impacted by lower integration costs, savings in real estate expenses related to office consolidations, lesser business insurance costs, and lower professional fees, partially offset by the impact of foreign exchange.
**
Adjusted third quarter 2024 operating expense ratio was 0.7 pts lower than third quarter 2023. This ratio was primarily impacted by savings in real estate expenses related to office consolidations, lesser business insurance costs, and lower professional fees.
(4 of 15)
Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued) (dollars in millions):
Net Earnings to Adjusted EBITDAC (Non-GAAP)
3rd Q 2024
3rd Q 2023
9 Mths 2024
9 Mths 2023
Net earnings, as reported
$ 383.0
$ 339.0
$ 1,368.4
$ 1,144.6
Provision for income taxes
128.9
115.0
465.9
390.8
Depreciation
34.0
32.9
99.1
91.4
Amortization
161.0
127.2
487.8
380.8
Change in estimated acquisition earnout payables
(15.4)
(2.6)
(12.9)
48.3
EBITDAC
691.5
611.5
2,408.3
2,055.9
Net (gains) on divestitures
(22.5)
(0.4)
(25.0)
(5.6)
Acquisition integration
48.7
57.1
151.0
176.4
Workforce and lease termination related charges
48.5
7.1
88.0
54.1
Acquisition related adjustments
31.5
12.7
92.5
34.9
Levelized foreign currency translation
-
0.2
-
(4.3)
EBITDAC, as adjusted
$ 797.7
$ 688.2
$ 2,714.8
$ 2,311.4
Net earnings margin, as reported using reported
revenues on pages 1 and 2
16.0 %
16.0 %
17.9 %
17.4 %
EBITDAC margin, as adjusted using adjusted
revenues on pages 1 and 2
33.6 %
32.2 %
35.8 %
35.1 %
Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):
Organic Revenues (Non-GAAP)
3rd Q 2024
3rd Q 2023
9 Mths 2024
9 Mths 2023
Fees
$ 359.1
$ 322.0
$ 1,048.0
$ 917.4
International performance bonus fees
0.7
1.1
5.8
10.7
Fees as reported
359.8
323.1
1,053.8
928.1
Less fees from acquisitions
(17.3)
-
(45.4)
-
Less divested operations
-
(2.3)
-
(2.3)
Levelized foreign currency translation
-
2.4
-
0.6
Organic fees
$ 342.5
$ 323.2
$ 1,008.4
$ 926.4
Organic change in fees
6.0 %
8.9 %
Acquisition Activity
3rd Q 2024
3rd Q 2023
9 Mths 2024
9 Mths 2023
Number of acquisitions closed
1
-
1
-
Estimated annualized revenues acquired (in millions)
$ 14.0
$ -
$ 14.0
$ -
(5 of 15)
Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued) (dollars in millions):
Compensation Expense and Ratios
3rd Q 2024
3rd Q 2023
9 Mths 2024
9 Mths 2023
Compensation expense, as reported
$ 224.6
$ 199.2
$ 657.7
$ 569.3
Acquisition integration
(0.4)
-
(1.0)
(0.8)
Workforce and lease termination related charges
(1.1)
(0.5)
(2.8)
(1.4)
Acquisition related adjustments
-
(0.1)
(0.2)
(0.3)
Levelized foreign currency translation
-
1.5
-
0.2
Compensation expense, as adjusted
$ 223.1
$ 200.1
$ 653.7
$ 567.0
Reported compensation expense ratios using reported
revenues (before reimbursements) on pages 1 and 2
*
60.7 %
60.2 %
60.8 %
60.1 %
Adjusted compensation expense ratios using adjusted
revenues (before reimbursements) on pages 1 and 2
*
60.3 %
60.0 %
60.5 %
59.8 %
*
Reported third quarter 2024 compensation ratio was 0.5 pts higher than third quarter 2023. Adjusted third quarter 2024 compensation ratio was 0.3 pts higher than third quarter 2023. Both ratios were primarily impacted by increased base compensation and higher employee benefit costs, partially offset by savings related to temporary help.
Operating Expense and Ratios
3rd Q 2024
3rd Q 2023
9 Mths 2024
9 Mths 2023
Operating expense, as reported
$ 71.0
$ 65.0
$ 206.5
$ 194.7
