Arthur J. Gallagher & Co. Q4 Earnings Call Highlights

Key Points

• Strong Q4 and FY‑2025 results: AJG reported more than 30% revenue and adjusted EBITDA growth in Q4 (including ~5% organic growth) and marked its 23rd consecutive quarter of double‑digit adjusted EBITDA growth, while guiding 2026 organic growth of about 5.5% for brokerage and ~7% for risk management with continued margin expansion.
• AssuredPartners integration and synergy targets: U.S. retail rebranding and back‑office integration are ahead of plan, with management expecting $160 million of annualized run‑rate synergies by end‑2026 and $260–$280 million by early‑2028 (with potential upside).
• Robust M&A pipeline and market backdrop: The firm closed seven deals in Q4 and added >$3.5 billion of annualized acquired revenue in 2025, has ~40 term sheets (~$350M) in the pipeline and said it may have roughly $10 billion of capacity for M&A over the next two years, while noting a softer property market, casualty pricing up (expected 7–8% in 2026) and reinsurance rates down “in the teens” with a buyer’s market likely to persist.

Arthur J. Gallagher & Co. NYSE: AJG executives highlighted strong fourth-quarter and full-year 2025 performance on the company’s earnings call, citing continued momentum in organic growth, a robust acquisition engine, and progress integrating AssuredPartners. Management also offered an outlook for 2026 that maintained expectations for mid-single-digit organic growth in brokerage and higher organic growth in risk management, alongside continued underlying margin expansion.

Fourth-quarter results and segment performance

Chairman and CEO J. Patrick Gallagher, Jr. described the quarter as “excellent,” saying the firm’s “two-pronged revenue growth strategy” of organic growth plus M&A drove more than 30% revenue growth in the fourth quarter, including 5% organic growth. Adjusted EBITDA also grew 30%, which the company said marked its 23rd consecutive quarter of double-digit adjusted EBITDA growth.

In the brokerage segment, management reported 38% revenue growth and 5% organic growth, in line with December commentary. The segment’s adjusted EBITDA margin was 32.2%, which management said was ahead of expectations, with underlying margin expansion of about 50 basis points.

Gallagher provided detail on organic growth performance across brokerage subcategories, including:

• Americas retail P&C organic growth of 5%
• UK and EMEA up 7%
• APAC up 3%
• U.S. wholesale up 7%
• Reinsurance up 8%
• Benefits up 1%

In the risk management segment (Gallagher Bassett), the company posted 13% revenue growth in the fourth quarter, including 7% organic growth. Management said results reflected strong new business and excellent retention. Adjusted EBITDA margin was 21.6%, slightly better than expectations shared in December. For 2026, management reaffirmed expectations for risk management organic growth around 7% and margins in the 21% to 22% range.

Pricing, renewals, and reinsurance market conditions

Gallagher discussed a pricing environment where overall renewal premium changes (rate plus exposure) were up in the “low single digits” during the quarter, with property declines offset by casualty increases. He said property lines were down about 5%, while casualty lines were up about 5% (with U.S. casualty up 7%). Other reported renewal premium changes included package up 3%, D&O down 1 point, workers’ compensation up 1%, and personal lines up 5%.

CFO Doug Howell said the company was not seeing “any big pullback in casualty pricing,” and that the firm was assuming casualty rates would be up in the 7% to 8% range for 2026. Management repeatedly characterized the environment as “cycles within the cycles,” with property softer and casualty still pressured by loss cost concerns and reserving uncertainty.

In reinsurance, management described ample capacity at the January 1 renewal season following strong carrier underwriting results and a quiet U.S. wind season. The company said property reinsurance rates decreased “in the teens,” but premiums declined only in the mid- to high-single digits year over year due to increased purchasing and demand for more cover. Management said it expects the buyer’s market to persist through 2026 absent outsized losses, while noting some carriers may explore buying additional protection to reduce earnings volatility or support growth.

AssuredPartners integration, synergies, and margin framework

Management emphasized progress integrating AssuredPartners, including back-office integration that is “ahead of plan,” and said all U.S. retail operations were rebranded Gallagher more than a week before the call. Leadership said 2026 would include full-scale work on integrating “300+ tuck-ins,” agency management system conversions, and middle-office training.

Howell told investors AssuredPartners’ fourth-quarter revenues were in line with expectations, with expenses “a little better than expected,” noting some timing effects. He also cautioned that AssuredPartners budgeting for 2026 was still being finalized, with any refinements expected to be small and to be updated at the company’s March investor day.

The CFO reiterated synergy expectations described in the company’s materials, stating the company still expects annualized run-rate synergies of $160 million by the end of 2026, rising to $260 million to $280 million by early 2028. Howell said he was “more and more comfortable” there could be upside, but the company wanted additional time before updating estimates.

Howell also spent time on brokerage margin comparability, noting headline margin comparisons were affected by the end of interest income earned on funds previously held for the AssuredPartners purchase, along with rolling impacts from M&A and foreign exchange. He said underlying brokerage margins expanded about 50 basis points in the fourth quarter due to cost control. For 2026, management maintained its view that underlying brokerage margins should expand by 40 to 60 basis points, with synergy benefits beginning to contribute.

M&A pipeline, capital capacity, and 2026 outlook

Gallagher said the company completed seven new mergers during the fourth quarter representing about $145 million of estimated annualized revenue. For full-year 2025, the company reported more than $3.5 billion of annualized acquired revenue. The CEO said the pipeline included more than 40 term sheets signed or being prepared, representing around $350 million of annualized revenue.

Howell said that considering cash on hand, expected free cash flow, and potential investment-grade borrowings, the company “might have close to $10 billion” to fund M&A over the next two years before using stock. He also pointed to tax credit carryforwards of $713 million at year-end 2025, plus “another $1 billion of future tax benefits” related to the AssuredPartners purchase, and suggested investors assume cash taxes paid will be about 10% of EBITDA “for the foreseeable future” when modeling cash flows.

For 2026, management maintained expectations for brokerage segment organic growth of around 5.5% and risk management organic growth around 7%. The CEO said the company’s proprietary client activity indicators remained “nicely positive” in the fourth quarter and continued through the first three weeks of January, adding that the firm was “not seeing signs of economic weakness.”

During Q&A, the CEO also addressed producer retention, saying it had not changed from historical norms, and discussed the company’s view that AI is more likely to enhance efficiency and service than replace the trusted-advisor model in insurance distribution. Executives also said they were seeing acquisition valuations come down, with the CEO noting he could not remember the last time he saw an “ask for 16,” describing larger deals trending toward 12 to 13 times.

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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