• Revenue Growth: 12% growth in revenue for combined brokerage and risk management segments.
• Organic Growth: 7% organic growth in combined segments.
• Net Earnings Margin: 13.5% reported net earnings margin.
• Adjusted EBITDAC Growth: 17% growth in adjusted EBITDAC.
• Adjusted EBITDAC Margin: 31.4%, up 145 basis points year-over-year.
• GAAP Earnings Per Share: $1.56.
• Adjusted Earnings Per Share: $2.51, up 50% year-over-year.
• Brokerage Segment Revenue Growth: 12% reported revenue growth.
• Brokerage Segment Organic Growth: 7.1% organic growth.
• Adjusted EBITDAC Margin for Brokerage: 33.1%, expanded 168 basis points.
• Risk Management Segment Revenue Growth: 9% growth, including 6% organic growth.
• Adjusted EBITDAC Margin for Risk Management: 20.6%.
• Mergers and Acquisitions: 20 new tuck-in mergers completed, representing around $200 million of estimated annualized revenue.
• Full Year Revenue Growth: 15% growth in revenue for brokerage and risk management combined.
• Full Year Organic Growth: 7.6% organic growth for the year.
• Full Year Adjusted EBITDAC Growth: 18% growth.

• Warning! GuruFocus has detected 9 Warning Signs with AJG.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Arthur J. Gallagher & Co (NYSE:AJG) reported a 12% growth in revenue for its combined brokerage and risk management segments, marking the 16th consecutive quarter of double-digit revenue growth.
• The company achieved a 7% organic growth and an adjusted EBITDAC growth of 17%, with an adjusted EBITDAC margin of 31.4%, up 145 basis points year-over-year.
• GAAP earnings per share increased to $1.56, and adjusted earnings per share rose to $2.51, up 50% year-over-year.
• The acquisition of AssuredPartners is expected to enhance AJG's commercial market focus and expand its M&A reach, creating more revenue opportunities.
• AJG completed 20 new tuck-in mergers in the fourth quarter, representing around $200 million of estimated annualized revenue, and signed a definitive agreement to acquire AssuredPartners, which is expected to close in the first quarter of 2025.

Negative Points

• The company's Canadian operations experienced a decline in organic growth, impacted by lower contingents.
• Contingent commissions were lower than expected, resulting in a $7 million shortfall compared to previous forecasts.
• The reinsurance market faced some expected market headwinds, particularly in the global aerospace business.
• The risk management segment's organic growth guidance for 2025 was reduced to 6% to 8%, down from the previous year's guidance of 9% to 11%.
• The acquisition of AssuredPartners introduced some noise in the financial results due to the December capital raise and associated interest expenses.

Q & A Highlights

Q: Can you discuss the expected cadence of organic growth for the Brokerage segment in 2025, considering potential seasonality and market conditions? A: Douglas Howell, CFO, explained that while reinsurance pricing has seen some changes, customers are purchasing more reinsurance, which offsets any potential decrease in spend. The first quarter typically sees stronger reinsurance activity, which could lead to better organic growth early in the year. Additionally, health and welfare renewals in Q1 may mitigate some of the reinsurance seasonality effects.

Q: How might the California wildfires impact your operations, particularly in the wholesale market? A: J. Patrick Gallagher, CEO, stated that they have reached out to thousands of clients to assist with claims and are actively tracking hundreds of claims. While the situation is still unfolding, Gallagher is a significant player in California and expects to be busy for months. The company is well-positioned to help clients, with minimal impact on their own employees.

Q: What caused the lower contingents in the fourth quarter, and what is the outlook for 2025? A: Douglas Howell, CFO, noted that the lower contingents were due to slightly higher year-end loss ratio estimates from carriers, resulting in a $7 million shortfall. This is not seen as a trend, and contingents are expected to bounce back in 2025. The shortfall was spread across hundreds of contracts, with a few specific programs in Canada underperforming.

Q: Why is the risk management segment's organic growth guidance for 2025 lower than last year's? A: Douglas Howell, CFO, explained that the risk management business can be lumpy due to large contracts. While they have some new business in the pipeline for 2025, the growth is expected to be in the mid-single digits. The segment has opportunities in government programs and is proving its value to carriers, but growth can vary based on large contract wins.

Q: How will the AssuredPartners acquisition impact your operations in India, and do you expect to add more employees? A: J. Patrick Gallagher, CEO, mentioned that while technology will improve efficiency, organic and acquisition growth will increase demand on their structure. They expect to add thousands of employees in India over the next year, leveraging technology to enhance service and standardization, which aids in implementing AI and improving margins.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.