Arthur J. Gallagher & Co. Q1 Earnings Call Highlights

Key Points

• Gallagher reported a "terrific" Q1 with 28% revenue growth (5% organic, 23% from M&A led by AssuredPartners), brokerage +30% and risk management +14%, driving 12% net earnings growth and 18% adjusted EBITA growth — its 24th consecutive quarter of double‑digit adjusted EBITA growth.
• Management said property pricing is moderating (global retail property renewals down 7%) while casualty and many specialty lines remain firm, and reiterated a full‑year 6% organic growth target with roughly 1.5% from rate, 2.5% from net new business and 1.5% from exposure, though deeper property declines could cost about a percentage point.
• AssuredPartners integration is on plan, Gallagher repurchased ~1.4 million shares for ~$310 million, completed nine tuck‑ins (~$60M annualized revenue) with a ~$400M pipeline, and said it may have nearly $10 billion available to fund M&A (before using stock) over the next two years.

Arthur J. Gallagher & Co. NYSE: AJG executives told investors the company delivered what CEO J. Patrick Gallagher Jr. called a “terrific” first quarter of 2026, driven by a mix of organic growth and a significant contribution from acquisitions led by AssuredPartners.

Revenue growth driven by organic gains and AssuredPartners

Gallagher said the company’s “two-pronged revenue growth strategy” produced 28% revenue growth in the first quarter across the combined brokerage and risk management segments, with 5% organic growth and 23% from M&A. Brokerage revenue rose 30% (5% organic), while the risk management segment (Gallagher Bassett) posted revenue growth of 14%, including 10% organic growth.

Gallagher highlighted strong client retention and new business wins, saying the company continued to generate “excellent profits.” He said the brokerage and risk management segments combined delivered 12% net earnings growth and 18% adjusted EBITA growth, marking “24 consecutive quarters of double-digit adjusted EBITA growth.”

Market conditions: property moderating, casualty and specialty areas firm

Gallagher described a pricing environment in which insurance rates are still supporting organic growth, “but to a lesser extent than over the last few years.” He said carriers are “continuing to behave rationally,” with premium relief for accounts with good loss experience and increases for poorer-performing accounts.

In global retail property and casualty (PC), renewal premium change (rate plus exposure) increased in the low single digits, with property decreases more than offset by increases in most casualty classes. Gallagher provided the following renewal premium change figures by product line for global PC retail:

• Property: down 7%
• Professional lines (including D&O and cyber): up 2%
• Workers’ comp: up 2%
• Personal lines: up 4%
• Package: up 2%
• Casualty lines (general liability, commercial auto, umbrella): up 4% overall

Gallagher said larger accounts were driving much of the downward pressure in premiums and noted a change in buying behavior: as prices decrease, customers are “opting in and buying more coverage,” compared with opting out when prices were rising.

In the U.S. excess and surplus (E&S) market, Gallagher said conditions remain “bifurcated,” with E&S property—particularly catastrophe-exposed risks—described as the most competitive area. He characterized this as “a pricing reset, not a demand issue,” adding that submissions remain healthy. He said E&S casualty remains firm, with renewal premiums up mid-single digits and disciplined capacity. E&S professional lines were described as largely stable, up low single digits.

Gallagher also pointed to emerging specialty risks—such as data centers and AI-related infrastructure—as the fastest-growing part of E&S, calling it a “structural multi-year growth opportunity.” In Q&A, CFO Douglas K. Howell said this area remains “a very small item” as a percentage of submissions, while Gallagher said it was “not earth shattering” as a share of the overall market.

In reinsurance, Gallagher said the market remains well-capitalized with ample capacity. He said the company saw strong growth and new business that overcame rate headwinds. At the 1/1 renewals, he noted rate decreases across property and specialty, while casualty pricing was “broadly stable,” with reinsurers cautious about U.S.-focused casualty risks due to loss cost trends and prior-year development.

On London specialty, Gallagher said pressure continues in North American catastrophe-exposed property, while competition in D&O, professional lines, financial institutions, and cyber is moderating. He highlighted war-related risks as a key exception, saying marine aviation and political violence exposures tied to conflict zones are seeing “significant repricing and more selective deployment of capacity.”

Asked whether Middle East conflict-driven repricing is a net organic tailwind for Gallagher, Gallagher replied, “Yes, it is,” while cautioning that shipper behavior and safety considerations matter. He added that capacity constraints were not limiting placements “at the present time.”

Guidance, organic growth mix, and property sensitivity

Gallagher said the company remained confident in its full-year 2026 organic growth outlook of 6%, citing solid exposure growth, stable retention, and strong new business wins across casualty, benefits, reinsurance, and Gallagher Bassett, even as property pricing moderates.

In Q&A, Howell discussed how the company is thinking about organic growth components, estimating that in a “6% year,” net contribution from rate could be about 1.5%, with around 2.5% from net new business and about 1.5% from exposure growth, while emphasizing it is not “a third, a third, a third.”

Howell said the company’s guidance assumes property price declines remain consistent with what was seen in the first quarter. When asked about a scenario in which property renewal premium change fell further (for example, to down 10% to 11%), Howell said it “might put a point of strain overall for a full year,” adding that some property is fee-based, which can mitigate the impact. Gallagher added that in some instances property pricing is approaching 2017 levels and said he did not think there would be “a structural big time jump further beyond that.”

Margins, investment income noise, and capital deployment

Howell said adjusted revenues, EBITAC, and EPS were all up 30% after removing $143 million of interest income earned on funds held to buy AssuredPartners in the prior-year comparison, calling the quarter “amazing.” He noted that the interest income creates comparability “noise,” and said it would continue to affect comparisons in upcoming quarters.

He highlighted nearly 10% growth in supplementals and contingents combined, noting first-quarter contract renegotiations can affect the mix between the two.

In Risk Management, Howell said Gallagher Bassett delivered 10% organic growth with another 2.5 points from M&A, and he pointed to “continuous compensation and operating expense ratio improvement,” with adjusted EBITAC margin up 130 basis points.

On brokerage margin, Howell referenced the company’s margin bridge disclosure and said underlying margin expanded 50 basis points in the quarter, in line with the company’s March investor day forecast. He reiterated a full-year expectation for 40 to 60 basis points of underlying margin expansion.

Howell also discussed tax-related disclosures, saying the company expects cash taxes paid to be “around 10% of EBITI for the foreseeable future.”

During the quarter, Gallagher repurchased about 1.4 million shares for approximately $310 million. Howell said the company had not repurchased shares in the second quarter due to being in a quiet period. He said management views the stock as “woefully undervalued,” describing the buyback as opportunistic.

On M&A, Gallagher completed nine tuck-in mergers in the quarter representing roughly $60 million of estimated annualized revenue. Gallagher said the pipeline includes more than 40 term sheets signed or being prepared, representing about $400 million of annualized revenues. Howell said acquisition multiples are “coming down,” and Gallagher tied the shift to the company’s own lower market multiple, adding, “We’re not here to dilute our shareholders.”

Howell said that based on cash, expected free cash flow, and potential investment-grade borrowings, the company “might have close to $10 billion to fund M&A before using any stock” over the next two years.

AssuredPartners integration and AI initiatives

Both executives said the AssuredPartners integration is proceeding to plan. Gallagher said the company is following its “proven integration playbook” and is “on plan without exception,” adding that cultural alignment has been as expected. Howell said the first quarter was excellent and close to investor day estimates, with “clients are happy,” “client retention is excellent,” and employee and producer retention “right at historical norms.”

Addressing a question about AssuredPartners revenue estimates moving down slightly while margins rose, Howell attributed the changes to accounting classification differences—such as co-broker expenses versus contra revenue—discovered as operations are moved onto Gallagher systems. Gallagher emphasized the company “purchased cash flow,” adding that revenue presentation may “bounce around a little bit” as accounting is standardized, while EBITDAC remains consistent.

Gallagher also reiterated the company’s view that AI will be “minimally disruptive” to the advisory-led brokerage model, arguing it should accelerate growth by improving advice quality, productivity, and client experience. In response to questions about new business performance relative to peers, Gallagher said the company’s tools and digitization efforts are improving retention and hit ratios, citing internal experience that digitizing relationships can lift retention by about a point and that using tools can move hit ratios toward 45% from around 32% previously.

About Arthur J. Gallagher & Co. NYSE: AJG

Arthur J. Gallagher & Co is a global insurance brokerage and risk management firm headquartered in Rolling Meadows, Illinois. Founded in 1927 by Arthur J. Gallagher, the company has grown from a regional broker into an international professional services organization that arranges insurance, provides consulting and designs risk-transfer solutions for commercial, industrial, public sector and individual clients.

The company's core activities include property and casualty insurance brokerage, employee benefits consulting and administration, and a range of risk management services.

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