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The 300 companies on this year’s list brought in over $12.5 trillion in revenue for the latest 12 months, with the median revenue figure at $24 billion.

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Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

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The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

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One of the largest insurance brokers in the world, the firm offers brokerage and risk management services to various clients.

This year's Fortune 500 marks the 66th running of the list.

F500 2020-429-Arthur J Gallagher

A Rolling Meadows, Ill.-based insurance brokerage, Arthur J. Gallagher has 33,300 employees.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Arthur J. Gallagher &amp; Co. is a global insurance brokerage, risk management, and consulting firm. The company provides customized property and casualty insurance, risk management, and consulting services to a wide range of clients worldwide. Founded in 1927, the company operates in 130 countries and territories.

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Arthur J. Gallagher (AJG): Company Profile, Stock Price, News, Rankings

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Arthur J. Gallagher

arthur j. gallagher

Good afternoon, and welcome to Arthur J. Gallagher & Co.'s Third Quarter 2026 earnings conference call. Participants have been placed on a listen-only mode. Your lines will be open for questions following the presentation. Today's call is being recorded. If you have any objections, you may disconnect at this time. Some of the comments made during this conference call, including answers given in response to questions, may constitute forward-looking statements within the meanings of the securities laws. The company does not assume any obligation to update forward-looking statements provided on this call. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the Information Concerning Forward-Looking Statements and Risk Factors sections contained in the company's most recent 10-K, 10-Q, and 8-K filings for more details on such risks and uncertainties.

In addition, for reconciliations of non-GAAP measures discussed on this call, as well as other information regarding these measures, please refer to the earnings release and other materials in the Investor Relations section of the company's website. It is now my pleasure to introduce J. Patrick Gallagher Jr., Chairman and CEO of Arthur J. Gallagher & Co. Mr. Gallagher, you may begin.

Thank you. Good afternoon. Thank you for joining us for our third quarter 2026 earnings call. On the call with me today is Doug Howell, our CFO, and other members of our management team. We had an outstanding third quarter. Our team delivered strong revenue growth and excellent profitability. For our combined brokerage and risk management segments, our two-pronged revenue growth strategy, growing both organically and through acquisitions, delivered total revenue growth of 18% in the third quarter. Organic growth was also strong at 5%, reflecting excellent new business, strong retention, positive exposure growth, and the diversity of our business. And we continue to generate outstanding profits. Net earnings grew 25% and adjusted EBITDAC also grew 25%. That marks 26 consecutive quarters of double-digit adjusted EBITDAC growth, along with another quarter of margin expansion. Doug will break that down for you in a few minutes.

On a segment basis, brokerage revenues were up 19%, of which organic was 5%. We saw excellent growth across our retail, P&C, wholesale, and reinsurance businesses. We're now more than a year into the AssuredPartners combination. The business is living up to our high expectations. Client retention remains strong and the teams are working very well together. Our risk management segment, Gallagher Bassett, posted revenue growth of 14%, which includes organic of 10%, driven by excellent new business and strong client retention. Our consistent top and bottom line growth is driven by the four strategic pillars that have guided Gallagher for decades, growing organically, growing through M&A, improving our productivity and quality, and maintaining our culture. I'll comment on each of these. First, organic growth.

We have a diversified revenue model, but common across that are our client retention remains strong, new business is excellent, and our clients' underlying business activity continues to be positive. It is well known that insurance rates are currently contributing less to growth than they have over the past several years. Call it about a point of organic growth today is tied to rates. This reinforces that rates are just one part of the equation. The bigger drivers of organic growth continue to be new business, strong retention, exposure growth, as well as the diversity of our model across P&C, benefits, reinsurance, and claims. This shows our business performs well through a wide range of economic interest rate and insurance pricing environments. And we believe our diversified model and breadth of capabilities position us well to continue growing as the market conditions evolve.

We're also benefiting from favorable macro tailwinds. The need for insurance is growing around the world, and risks are becoming more complex, thus requiring broader capabilities and more sophisticated solutions. Think about construction, infrastructure, energy, and data centers, as well as the growing need for clients to understand, mitigate, and insure emerging risks from AI, just to name a few examples. These are the areas where clients need more advice and deeper expertise. That plays directly to Gallagher's advisory strengths and creates a tailwind for durable organic growth. Let me go back to rates for a few minutes. Overall, we continue to see a very segmented P&C market. Property is competitive, casualty varies considerably by line and account, and there's plenty of capacity looking for attractive risks. Carriers want to grow, but they still need the right risks at the right returns.

And for us, that creates opportunities to help clients navigate more choices and find the right solutions. Let me break this down by business. I'll start with our global retail P&C business. Property remains competitive, with renewal premiums declining 6% compared with down 10% in the second quarter. As we discussed in September, that sequential improvement largely reflects the mix and seasonality of renewals rather than a change in the underlying property market. However, casualty remained firmer overall. Even with competition slightly increasing, conditions still varied considerably by line, account, and geography. In the third quarter, casualty renewal premiums, which includes general liability, commercial auto, and umbrella, were up 4% overall. Professional lines, including D&O and cyber, were up 2%. Workers' comp was up 1%, personal lines was up 3%, and package was also up 3%.

Excluding property, renewal premium changes increased 3% in the third quarter, with higher increases in the U.S. versus international markets. And it's important to remember, premium changes in Gallagher's revenues do not move one for one. Renewal premium changes include exposures, changes in limits, coverage, and mix, not just rate. In other words, as property pricing eases, we're seeing clients opting in and using the saving to buy back coverage, increase limits, or improve structure after several years of opting out and making difficult trade-offs. They're also revisiting how much risk they retain, what they transfer, and how they structure their overall programs. And that makes the value of our advice, advocacy, and market access even more important. In the U.S. excess and surplus, property remains very competitive, particularly cat-exposed property. But lower pricing doesn't necessarily mean the business leaves E&S.

Rates are clearly down, but for us, our teams continue to win new business, helping to offset rate decline. Within casualty, capacity is increasing, but loss costs remain an important consideration, so conditions vary by line and risk. In this case, we continue to see tailwinds, rate tailwinds, and strong growth in casualty. In our renewal book, we are not seeing any meaningful movement back to the admitted market. We are seeing new business still using the E&S market at levels broadly consistent with what we saw over the last couple of years. This shows that it is a different marketplace today. For us, the E&S market is here to stay. It provides important capacity and deep expertise with flexibility on terms and creative structures. All that is critical to delivering customized solutions to our customers. We are seeing a similar story in London specialty.

Competitive North American cat property has been more than offset by certain marine, aviation, and political violence risks. These risks remain more challenging, and they require careful structure and coordinated execution across markets. In reinsurance, the market has plenty of capacity. Property cat pricing remains competitive while casualty is more nuanced given loss cost trends. Reinsurance is another example where price is only one part of the story. New business, the amount of protection clients buy, and how they structure their programs all matter. Our expert capabilities across facultative, casualty, life, and capital advisory give Gallagher multiple ways to grow. Moving to employee benefits. We have seen solid organic growth in our core health and welfare business so far this year. But in the third quarter, however, a few larger consulting projects were pushed out as clients focused on controlling rapidly rising medical and prescription costs.

Employers still want competitive benefits to attract and retain people, but managing those rapidly rising costs is their immediate priority. That is where our people really help, working side by side with clients to manage costs and keep their benefits competitive. Let me turn to Gallagher Bassett. It was another terrific quarter with organic growth of 10% driven by excellent new business and strong client retention. Our investments in GB are paying off in both growth and margins. Clients are benefiting from our expanded capabilities, deeper data, and more robust technology. Each of these improves our advice and service and helps drive better claim outcomes. Those investments, together with the depth and experience of our people, continue to strengthen GB's competitive position. With a good pipeline of opportunities, we feel terrific about where the business is positioned. Now a quick comment on what we are seeing in the economy.

Our daily revenue indications from our clients' underlying insurance activity, such as audits, endorsements, and cancellations, have historically given us a good and practically real-time window into broader economic conditions. When I look at yesterday's report, those indicators continue to be nicely positive, pointing to solid business activity and steady underlying exposure growth. To wrap up my thoughts on organic growth, property pricing is moderating, and that is well understood. But property is only one part of our very large and very diverse business. Retention remains strong, new business is excellent, and client activity continues to be positive. As pricing changes, clients are buying more coverage, increasing limits, lowering deductibles, and turning to us for advice on how to structure their risk programs. Those are bigger drivers of organic growth, even as pricing continues to change. We also have a very diverse business.

Our growth is not tied to one product, one geography, or one client segment. We have many ways to grow across P&C, benefits, reinsurance, and claims. We are large, yet we still have very little market share, and we operate in an industry where demand for advice, expertise, and risk solutions continues to expand. When I look forward, I remain confident in our 2026 full year organic growth outlook of approximately 6% for our combined brokerage and risk management segments. Looking to 2027, we see many of the same drivers: strong new business, excellent client retention, positive exposure growth, and our diversified business mix. Those support another year of strong organic growth. Now shifting to our second strategic pillar, mergers and acquisitions. We continue to see good opportunities, and as always, we're staying disciplined on strategic fit, culture, valuation, and returns.

During the third quarter, we completed five new tuck-in acquisitions, representing approximately $100 million of estimated annualized revenue. That brings us to 21 so far this year, with approximately $225 million of estimated annualized revenue. Our pipeline remains active with over 30 term sheets signed or being prepared, representing around $300 million of annualized revenue. These mergers continue to add terrific people and capabilities across our businesses and geographies. AssuredPartners, Woodruff Sawyer, and dozens of others that have joined us are great examples of that strategy at work. We're connecting teams, sharing capabilities, and bringing Gallagher's tools, data, and expertise across the combined team. In turn, these mergers accelerate our opportunities for future organic growth as we become better together. To all of our new merger partners, I'd like to extend a very warm welcome to the Gallagher family of professionals.

Turning to our third strategic pillar, continuously improving our productivity and quality. For more than two decades, we've been focused on improving productivity and quality through standardized workflows and a common data and digital strategy across the company and building out our Centers of Excellence. Today, our Centers of Excellence are 20,000 colleagues strong, and our goal has remained the same, reduce repetitive work, improve quality, and give our people more time to serve and advise clients. AI and automation helps to accelerate that journey and helps us capitalize on our scale. We're continuing to invest where it strengthens client service and growth while improving efficiency and margins over time. Let me wrap up with our fourth strategic pillar, our culture. We're a team first company. Our people help each other, share their expertise, and work together to do the right thing for our clients.

That's what makes Gallagher special. As we grow, that matters even more. We're bringing new colleagues into Gallagher, giving them more people, more expertise, and more capabilities to help their clients and win new business. The 25 tenets of the Gallagher way guide how we work and how we treat one another. It's about serving our clients, supporting each other, and growing together. That's the Gallagher way. So another outstanding quarter behind us. Our strategy is working, our team is executing, and the opportunities ahead of Gallagher have never been greater. I'll stop now and turn it over to Doug to walk through the financial details. Doug?

Thanks, Pat, and hello, everyone. We had a fantastic quarter. Nearly every metric was at or better than the outlook we provided at our September Investor Day. Incredible total revenue growth, strong organic growth, excellent margin expansion, and terrific earnings growth. Let's go to page one of the earnings release. Our two-pronged revenue growth strategy continued to deliver. When you do the math, you will see our combined brokerage and risk management segments posted adjusted revenue growth of 17%, adjusted EBITDA growth of 25%, and adjusted EPS growth of 26%. Then it gets even better when you levelize to remove the $76 million of interest income we earned in the third quarter 2025 on the funds we are holding to buy AssuredPartners. On that basis, adjusted revenues were up 20%, adjusted EBITDA grew 34%, adjusted EPS grew 37%, and adjusted EBITDA per share grew 35%.

Like I said earlier, in a word, it is incredible. Flipping to page two, again, levelizing for the interest income earned on the funds held to buy AP for our combined brokerage and risk management segments, nine-month adjusted revenues were up 27%, adjusted EBITDA grew 32%, adjusted EPS grew 34%, and adjusted EBITDA per share grew 33%. The strength we are seeing is not just a one quarter story. I will call it a fantastic nine months, too. Let's move to page three. Brokerage organic growth was at 5% in the third quarter, right in line with our September IR day forecast and a strong result in a competitive pricing environment. We posted solid organic growth in our base commissions and fees, plus another strong quarter of combined supplemental and contingent revenue growth.

Moving to the brokerage margin table at the top of page five, our adjusted EBITDA margin was 35.3% in the third quarter. At the upper end of the range, we noted on our September IR day. Headline margin expansion of 200 basis points, and the underlying expansion story is really terrific. I will unpack that a little bit more when we get to page seven of the CFO commentary document. Let's move now to the bottom of page five. Risk management organic growth was 10% in the third quarter, again, right in line with our September IR day forecast. It is another excellent quarter reflecting strong new business, excellent client retention, and continued momentum across Gallagher Bassett. When you flip over to page six, risk management third quarter adjusted EBITDA grew 17% with margin landing at 22.8%, up 90 basis points over last year.

That reflects strong organic growth and continued operating efficiencies. Looking ahead, we see fourth quarter and full year 2026 adjusted EBITDA margin again north of 22%. That would cap off another very strong year for Gallagher Bassett. Flipping now to the corporate segment, on page seven, not really much here. Adjusted corporate results were a bit better than our September Investor day outlook, but that is primarily because the non-cash unrealized FX loss came in smaller than estimated. When you turn to page seven, about halfway down, you will read that we repurchased about 400,000 shares for approximately $100 million in the third quarter. That brings repurchases to about $580 million through September 30th. Okay, let's leave the earnings release and turn to the CFO commentary document. This document includes details that can meaningfully affect your models, so I would encourage you to give it a careful look.

Starting on page three, most third quarter items came in very close to what we provided in September. As you model the fourth quarter, please consider the FX impact and non-cash expenses as these have been updated to reflect the latest exchange rates. Turning to page four, a few business level organic growth highlights, then the outlook. Third quarter brokerage organic was 5%, meeting our September midpoint estimate. A few business level call-outs. Reinsurance growth was 7%, reflecting another quarter of strong new business and retention, more than overcoming the competitive pricing environment. Our U.K. and EMEIA businesses had a great quarter, which was somewhat benefited from lower risk premiums. Benefits did come in a bit below our September forecast. Most of that reflects a contingent commission true-up and the timing of several consulting projects that Pat mentioned earlier, and admittedly, little relates to some rounding in the percentages.

Underlying core health and welfare growth remained solid and in line with our expectations. You will see on this page another outstanding quarter for Gallagher Bassett's third quarter coming in at 10% organic growth. Moving right on this page, our outlook. We continue to see fourth quarter and full year 2026 brokerage organic growth of around 5%. It is worth a quick reminder of what we discussed in September at our IR day. Fourth quarter brokerage organic will include AP for the first time. The math behind that inclusion gives you roughly only 20 to 25 basis points of headwind. That is another really good story here. Our early view of 2027 is also encouraging.

Our early planning indicates legacy brokerage organic growth could look a lot like 2026, and it is also indicating that our early successes of being better together, the roll-in of AP is looking like maybe only impacting that by about 40 to 50 basis points for the full year 2027. As I provide all this information, please know we are assuming broadly similar market conditions in 2027 as we saw in 2026. One other soundbite here. Improving AP, AssuredPartners' base organic growth was not, and is still not included in our synergy assumptions. Progress towards Gallagher growth levels over the coming year to two years would represent additional upside. Moving down a few lines of the risk management segment, you will see our outlook remains strong.

A 9% organic year would be another impressive result for Gallagher Bassett and reflects the momentum from our continued investments in the business. As for 2027, our early look at the pipeline suggests the momentum should continue. So 2027 also could look a lot like this year for Gallagher Bassett. Moving to the investment income table at the top of page five. Our fourth quarter investment income estimates reflect current exchange rates, estimated fiduciary cash balances, and the September rate increase. Staying on this page, but shifting down to the rollover revenue table. Third quarter rollover revenues came in pretty close to our estimates provided in September. For the fourth quarter, acquisitions closed through yesterday could add about $65 million to brokerage revenue and about $5 million to risk management revenues. You will also need to make a pick for future M&A.

However, realize we are already well into the quarter, so practically speaking, that fourth quarter number shouldn't meaningfully increase all that much. This seems to be another place for the closer look in your models. Finally, as a reminder, fifth line up from the bottom, please remember to adjust the prior year revenue base for this divestiture and other line before applying your fourth quarter organic growth assumption. Let's turn over to talk about AssuredPartners on page six. We discussed in our last few investor days that integration is progressing very well. There is no need to repeat today, other than to add that all back office systems are integrated and up and running, and by year end, close to half of AP's revenues will be up and running on their designated agency management system. That is great work by the team. Just a few call-outs from this page.

AP did deliver $285 million of adjusted EBITDAC in the quarter. That is right in line with our September estimate. We remain on track for $160 million of annualized run rate synergies by year-end 2026, and that goes up to $325 million by early 2028. Just one modeling helper here. When I get to page seven in a second, we give you our estimated fourth quarter margin expansion from AP synergies. So do not, again, add synergies from this page. If you do that, you will double count. Let's go now to page seven. This really shows the power of our model when it comes to our margins. First, underlying brokerage margins expanded 60 basis points in the quarter. That is at the top end of our September range.

That is our vigilant work on process standardization, greater use of our Centers of Excellence, deploying technology and other productivity initiatives, all continuing to show up in our underlying results practically every quarter for the last five or more years. Second, AP added another 310 points of margin lift in the quarter. First line shows 220 basis points related to AP pre-synergies. Understand that 180 basis points of that relates to having full quarter of AP this year versus only a partial quarter of last year, third quarter. Then the next line shows another 90 basis points came from synergies. That is the integration work now showing up in our results. There is more ahead. As we look out to 2027, we see strong margin momentum and multiple levers to drive further improvement. Additional AP synergies, greater use of our lower cost Centers of Excellence, and continued technology and productivity initiatives.

We are not just a revenue growth story, we are also a profitability growth story too. Let's move to page eight to our corporate segment. Our fourth quarter outlook is very close to what we presented in September, and you will see again in the right lower box, it is just a reminder that we have $3.4 billion of future tax savings from tax credits and tax-deductible intangible amortization. That shows up in our cash flow statement rather than in the P&L. So for modeling, set your cash taxes paid at about 10% of EBITDAC, and that should get you close. Remember, those tax benefits give us more cash to put to work. Combined with cash on hand, expected free cash flow, and future investment-grade borrowings, we estimate more than $12 billion of acquisition capacity to deploy over the next two years. That is substantial capacity to continue executing our M&A strategy.

Our pipeline remains strong and we stay disciplined on fit and price. We continue to favor M&A, but we will continue to repurchase shares opportunistically. Another great quarter across the businesses. We are on track for a terrific full year. We are growing organically, executing on a strong M&A pipeline. We are expanding margins, realizing the benefits of AP, and deploying our capital to create long-term shareholder value. We have good momentum heading into 2027, and we are very excited about what is ahead. Those are my comments. Back to you, Pat.

Thanks, Doug. Sherry, I think we are ready for some questions and answers.

Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. We ask that you please limit to one question and one follow-up question. Our first question is from Elyse Greenspan with Wells Fargo. Please proceed.

Hi, thanks. Good evening. My first question, Pat, you said that you guys are generating, I think, around 1% organic in brokerage from the rating environment right now, right? When you think about 2027 and the pricing environment getting more competitive, when you guys say that you are looking for kind of a similar level of brokerage organic growth next year, are you assuming that 1% persists, or are you assuming maybe a little bit of a slowdown and then you get some additional contributions from some of the other factors that you mentioned, new business, retention, exposure, et cetera?

Okay. My second question is on margin for next year. As we think about just synergies from AP coming on, organic growth, what seems like it might be within range of 5%, maybe a little bit of a headwind from AP brings that down a little bit. But how are you thinking about just the level of margin improvement that you guys could see next year? Is it back to baseline, Doug, and then put the synergies in on top, so 50 basis points on organic and then synergies, or how should we be thinking about that for 2027 for brokerage?

I don't see it any different than we talked about before. I see margin expansion starting around that 4% range. If we're at 5%, you might see 50 to 75 basis points of expansion, and then you would get more synergies coming out of AP. We also have AI that we're starting to use. We also have other technologies. We're continuing to use our offshore Centers of Excellence. I feel pretty good about next year kind of looking like this year.

Our next question is from Mark Hughes with Truist Securities. Please proceed.

Yeah. Thank you very much. Doug, the divestitures, the $73 million in the quarter, or what you expect for the fourth quarter, I'm sorry. Is that a little elevated or is that kind of something we should think about for a run rate?

Yeah. Good catch on that, Mark. I probably should have baked that into my script. So this is a modeling helper that really helps you reset your baseline for last year. Let me break that down just from memory here a second. The easiest component to understand is we removed from last year in that number what we sold and is what is in runoff. Yes, it is a bit higher in the fourth quarter that we're showing here because when we bought AP, some of their business was already in runoff. And you know that from time to time, we also sell or run off some units too. Generally, that creates a book gain that we adjust out. We don't include that in our organic. So maybe in that $73 million, there's, call it, $25 million of runoff.

I am going a little bit from memory here, of runoff and sold businesses. Then we also put in this line kind of the impact of 606 accounting in the prior year quarter. We do not have as much of that in Q4 2025. Maybe that was $15 million-$20 million of that number. We should not be applying organic growth to a non-recurring accounting adjustment, so we put that in that line. We do also put the large life. That is actually performing pretty well this year, but I think maybe in the fourth quarter last year, we had $10 million or $15 million of that. We have actually had a pretty good year in that business, particularly earlier in the year. But again, in order to level set your baseline for next year to apply organic growth, you need to kind of factor that out in terms of doing that.

Then, of course, what we have been talking about, if I remember the fourth component of this, is that when we convert onto our AP systems. We are getting more granular around gross revenues and co-brokerage amounts that are netted against each other. So for apples to apples, there is an adjustment down in that number. It is not a big item. I think it is around $10 million. So you are right to highlight, I mentioned that in my script, but those are kind of the four components that come to mind that add up to that $73 million.

Appreciate that. Anything on commission rates in the softer market if carriers are competing for premium? Is that good for you all?

Well, listen, I think our supplementals and contingents are showing that the carriers value the volume and the good business that we give them. So we are not seeing compression in our base rates at all.

Yeah. How about underlying commissions? My thought was maybe they are going up a little bit.

We try hard at that, but right now we are okay.

Commission rates are pretty steady, and what we do try to do is talk to customers about why we should take a pay cut and basically say, because we are very transparent on every dollar we make, we did a good job for you. Last year we made $10,000. If we stick with this, we are going to make $8,000. We would like to put a fee on it. And we sell that to some degree, but it's not across the board.

Our next question is from Dean Criscitiello with Wolfe Research. Please proceed.

Hi. Thanks for taking my question. When you guys announced the AP deal, you said there would be $160 million in run rate synergies with $60 million or a bit more than a third of that coming from revenue. Now your guidance today is for $325 million of run rate synergies, but I don't think you've split out the revenue and cost of that, so I was sort of hoping for an update on there. Then you guys sounded kind of bullish on some upside from the $325, so just curious what would get you to upside from that. Thanks.

All right. Let's work backwards. Just remember, when we talk about we bought a really nice growing business in AssuredPartners, but it was running a point to a point and a half less than like for like business inside of Gallagher. Therein lies a big opportunity as the great producers inside of AP get our tools and capability. Over a one to three year period, our goal is to get that up so that it's performing at the same level as the producers inside of Gallagher overall. All right. We're on track for that. We also know that we can get some enhanced compensation as we start using the AP distribution force. It gives a great opportunity for our wholesalers and our binding and our programs folks to start calling on those folks. We'll pick up some there.

But by and large, the revenue that we're talking about is the same in the $325 million number as it was when we did the secondary offer. We have not throttled revenue to get to that number. It's mostly in the expense line.

Got it. That's helpful. Last 4Q, I know your organic. You had headwinds from the large life sales and the deferred revenue assumption changes. I know that's not in your guidance for this year, but curious if you expect that to be a tailwind to the reported organic number in 4Q.

Well, no, it's not in our organic anymore the way we report it. I do not believe there's going to be a significant change in that accrual number when we come into the year, and I'll have an update on that. We update most of our 606 factors here basically beginning now. When we get together our December IR day, I'll be able to give you the impact of that, but it should not influence at all anything that you're seeing on page four in our organic growth numbers.

Our next question is from Mike Zaremski with BMO Capital Markets. Please proceed.

Hey, thanks. Good afternoon. Maybe just a quick clarification on the organic growth outlook for brokerage. I think, Doug, you said that a 40-50 basis point impact for next year. Since we're going to be including AP in the full year next year, are we saying you're thinking it's the same as 26 on legacy, but then we minus 40-50 basis points to take into account AP?

That's what I'm saying as we go into the year. I think that would be the level of a little bit of headwind. If AP continues to run in the 1.5 difference in organic than us, that would mathematically produce about a 40-50 basis point headwind in total Gallagher organic growth next year.

I would say it's almost a rounding when you get down to it.

Not to belabor, but AP's only been part of you guys for a short period of time. But would it be coming with AP's lower organic after a year or so of being with you all? Basically, it's not fully integrated, so there's new businesses running kind of below what you all as a legacy Gallagher are able to do, or is there another component?

That's exactly right. Typically when we do acquisitions like this, those people with our tools, our capabilities, and our vertical or niche capabilities in particular see a nice lift. I think that they're slightly behind us in organic, and I think we will see a pickup. They're coming on to the tools and the capabilities as well as working together. We keep talking about we're better together. We're seeing that over and over. We're not going to sit here and give you a list of new production for the month or the year, but it's very strong and it's really exciting. I think that, to me, is one of the most exciting things about the whole deal is we are selling a lot of stuff together.

Yeah, if you think about my timing-wise, we didn't close until August. By the time, and when that came up very quickly for us because we actually did push through the second request very quickly. We get it done, we get into the fall and start doing the Hearts and Minds campaign. That stretches into January and February. We have our sales conferences where we continue to roll out more tools. The tools are on their desks, but using that, the way I look at it from the CFO's desk, we've really only had the sales excitement going on for about seven or eight months. If you think about P&C business being and benefits being kind of an 18-month sales cycle, I think that we're just coming into our own on that.

I think that 2027 and 2028, those are the test years to basically take these tools and bring them up to our level. I'm very excited about where we are right now, but understanding how this isn't a call center type operation where you increase advertising today and sales come in tomorrow. It takes a while, but we are getting really great feedback from the field on how these tools and capabilities can make them better. That's what we saw in the other 1,000 acquisitions that we've done over the last 20 years, too. It takes a while to learn it, get it up and running, and then leverage it.

Got it. Just really quickly, reinsurance, you guys have continued to take market share. Great story there. You guys probably, your outlook is probably more bottom-up than top-down. But on a top-down level, if we were to say that the overall reinsurance marketplace was going to grow by 2-3 points less year-on-year 2027 versus 2026, do you think that would be taken into account in terms of your thought process on reinsurance next year, or you guys don't think about it that way?

Oh, we don't think about it that way. I think one of the things about reinsurance, it's very chunky. These are big deals, and they have a life of their own, and our team is very, very good. We feel good about next year.

Our next question is from Andrew Kligerman with TD Cowen. Please proceed.

Hey, good evening. This is a basic question, but it is important because I have been getting the question from investors, particularly newer ones. It is the question about differentiation as I see a number of your competitors, both private and public, starting to stumble in organic growth. Yet I look at Gallagher and year to date, it is just in brokerage, 5%, 5%, 5%, just solid all the way across. I know on this call you have touched on a bunch of stuff. Doug just said the words tools and capabilities. Pat, you were talking about productivity and quality with the digital and the Centers of Excellence, then you rounded it out with culture. But I hear that same kind of commentary from your competitors.

Maybe there is something even more tangible that you could give me here when I get that question, because I have been getting it quite a bit amidst this softening market.

All right. I will go out on a limb on this one, Andrew. I think that the differentiation is in the culture. I am the one guy that just if I do not get off the subject, they do not even go to the forum. But we had 600 interns last summer. I do not even know what the industry is doing, but nobody is even coming close to that. Year in, year out, bringing 600 people, young people in to learn about our business. We do not hire them all. We get a good percentage of the ones we want, and they are damn good. This idea that the younger generation cannot make it, they always need a trophy, that is just not even close. So that starts with that, ripples through the whole organization. We are brokers at our heart. We love to sell insurance.

Everyone at this table today would jump on an airplane tomorrow to go sell an account. We know what we are talking about when it comes to that stuff. We live our global capabilities, and the team works together. I think it is just one of those things that we are very sales-oriented. We are working hard to keep our pipeline up. We understand the sales game. We are not overcomplicating it. If you do not get in front of people, you do not make sales. If you get in front of people and you got a good story to tell about how you can actually help them, then you have a better than odds on chance. I will tell you, our tools, when I started a long time ago, our hit ratio was probably high 20s, low 30s on our opportunities we went out the door to propose.

I would say 10 years ago, that was probably the same, too. With our tools today, we have empirical evidence that if you will use the tools, those hit ratios are moving over 40% and up towards 50%. That just tells you the power of the tools combined with the power of the structure, and by that I mean our vertical capabilities, and then the culture to work together. I haven't had to get involved in a commission split argument in over 10 years. It just works. Guess what? We have fun doing it.

Got it. So the A+ team in the major leagues. I would like to know about M&A as my second question. You talked about a $300 million pipeline, and I would like you to square it with what I have been hearing that M&A in the brokerage area is starting to slow down.

Yeah, I think it is starting to slow down, and frankly, that $300 million is probably off with the numbers that we have told you in past years. The fact is, you have got a group of entrepreneurs out there that do not have to sell. They do a very good job of making money for their family. You do not need to have a $100 million agency to do that. Clearly, multiples are down. Pressure on revenues. There is not as much demand for those properties. I think that there is just a typical lull.

Now, if the tax law begins to look like it might change, if in fact, the aging population realizes that they have got to do something for their people and to capitalize their asset, we will be back into what we saw in 2006, 2007, 2008, 2009, 2010, with people who are out there helping them come to grips with the fact that this is not going to change back to the 18, 19 multiples overnight. You are not going to be able to babysit this thing and then end up getting the growth that you want. Let us get together and build it together. But that is going to take some time. Now, at the same time, there are still lots of opportunities. When we did the AssuredPartners deal, there were about 300 or more acquisitions they did. You will recall that we had looked at 6% of those.

94%, we never got a call in the race. One year, 15 months after that acquisition, I have met thousands of their people. Not hundreds, thousands. I am telling you, they all fit in this organization. It is incredible. They are salespeople. They love taking care of their clients. We would have done those deals. We just have to be better at getting out and telling our story. I think when we do that, we compete very well.

Our next question is from Greg Peters with Raymond James. Please proceed.

Hey, good afternoon. Pat, every quarter and every management meeting, you give us an update on endorsements and audits as sort of an indicator of what the underlying health of the businesses your clients look like. Could you spend a second and just give us I think you said nicely positive for what you're seeing most recently. Can you give us a sort of snapshot of how that's trended this year versus last year? Is it keeping pace? Is it down a little bit? Is it up a little bit? Just sort of the cadence of what's going on there.

Doug's got the sheet in front of him. I'll let him take it.

Boy, I need glasses for it, too. All right. Here is the way to think about it. If you think on a quarter-by-quarter basis, right? in 2025, let us just say first quarter was X. First quarter of 2026, it is X. If I do that again, the second quarter, it is X, then the second quarter of 2026, it was 150% of X. Let me go back to the first quarter. Sorry, I picked a bad number. First quarter, it was 85% of X. Second quarter is 150% of X. Third quarter here, it is almost 2X, guys. I mean, we are seeing the positive trend in the last couple of quarters. The net of all this together, it is still very positive, and it is still. Now, does it move our organic at all in terms of these numbers? No.

I am saying the indications when you add it all up, and that is kind of globally. I could probably go down by division. Let me work on that a little bit more and maybe give you a vignette in December. But it is pretty telling, and it has been pretty consistent. When the world was saying that there was a recession coming, we weren't seeing it. And our clients' activity is a terrific, almost daily indicator of what is happening with our. And remember, this is our middle market.

This is not personal lines and that. It wouldn't be that. The fee-based clients wouldn't be necessarily as big in here, but this is our core business, and I think that the health around the world is based in that mid-market bucket. Thus far, pretty damn good correlations, in my opinion.

Yeah. And just to clarify, this is middle market globally for your business, but it has got to skew heavily towards North America. Is that correct?

Yeah. That's what we have at like for like. We get rid of the stuff that isn't like for like, but yes, we scrape this. We've got a single global data collection strategy, and this is what we're getting from our agency management systems around the world. That's primarily Canada, the U.K., Australia, New Zealand, and the U.S.

Yeah. Great. The other question, just getting back to your record of expanding margins and at the September management meeting, you rolled out the concept of using technology, I think, to get a gross margin expansion of 600 after 200 of spend, maybe net 400 basis points of margin expansion over the three to five years. Then you're talking about AP raising it. Is part of that margin expansion inside AP part of this bigger tech initiative that you were thinking about? Or maybe you can just help square the two different programs.

AP synergies that provide you have very little impact from technology. Right? The AP, you got to kind of level set for AP, and then we'll be on our margin journey that between technologies and everything, we'll do that. I would say there's very little duplication in that.

Our next question is from Yaron Kinar with Mizuho Securities. Please proceed.

Thank you. Good evening. First question, I apologize in advance. It may be a little bit of a nitpicky one, but when I look at the AssuredPartners organic, I think like a quarter ago in second quarter, you talked about roughly 4%. Then in the investor meeting last month, you were talking about 3.5% to 4%. Now it sounds like it is 3.5%. Can you maybe talk about what is driving the pressure relative to expectations only a quarter ago?

I think it is just quarter-by-quarter mix of the business, Yaron. I would not say that there is any. There is no systemic shift in what the producers in AP are facing today versus what they were facing before. Again, you said that it was a nitpicky question. I do not believe it is. I think it is a fair question, but I think it is a pretty small differential. If you think about

$2.9 billion, a point and a half difference on $3.5 billion. Let's just say they revert to Gallagher, right? We get an extra point and a half of organic. That's $50 million more in revenue. Let's say we make 30 points on it, that's $15 million of EBITDA. Compared to a $5.5 or $6 billion company next year on EBITDA, it's a pretty small incremental. I think what it does is it signals more of giving producers a better home to toil and take care of their clients. For me, giving it up to Gallagher is not really a financial huge win for us. What it is, it's a cultural win. It proves that we can be better together. For me, that journey is as much about getting the culture right as it is to drop another $15 million of profit into the business.

Arthur J. Gallagher (AJG) Q3 2026 Earnings Call Transcript

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