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Arthur J. Gallagher & (AJG) - 2024 Q2 - Quarterly Report

Revenue and Earnings Performance - For the six-month period ended June 30, 2024, approximately 64% of revenues were generated domestically and 36% internationally, with the brokerage and risk management segments contributing approximately 87% and 13% to revenues, respectively [147]. - Brokerage segment revenues for Q2 2024 reached $2,376.3 million, a 14% increase from $2,088.4 million in Q2 2023 [151]. - Organic revenues in the brokerage segment for Q2 2024 were $2,145.9 million, up 7.7% from $1,993.4 million in Q2 2023 [151]. - Net earnings for the total company in Q2 2024 were $332.8 million, reflecting a 15% increase compared to $290.3 million in Q2 2023 [151]. - For the six-month period ended June 30, 2024, total revenues were $5,241.2 million, a 17% increase from $4,463.6 million in the same period of 2023 [153]. - Organic revenues for the six-month period in 2024 were $4,672.4 million, representing an 8.3% increase from $4,313.5 million in 2023 [153]. - Net earnings for the six-month period in 2024 were $985.4 million, a 22% increase from $805.6 million in 2023 [153]. - Total revenues before reimbursements increased to $2,736.0 million, up 13.7% from $2,406.9 million in the same period of 2023 [156]. - The total company reported net earnings for the three-month period ended June 30, 2024, were $285.4 million, compared to $235.8 million in 2023, marking an increase of 21% [156]. - The total company adjusted revenues for the six-month period ended June 30, 2024, were $5,925.7 million, a 17% increase from $5,069.6 million in 2023 [159]. Segment Performance - The risk management segment reported revenues before reimbursements of $358.6 million in Q2 2024, a 13% increase from $318.6 million in Q2 2023 [151]. - The risk management segment accounted for 13% of total revenue during the six-month period ended June 30, 2024, with total revenues of $789.4 million, up from $684.4 million in the same period of 2023 [185][186]. - Adjusted EBITDAC for the brokerage segment in Q2 2024 was $784.8 million, an 18% increase from $665.7 million in Q2 2023 [151]. - The risk management segment, as adjusted for the six-month period ended June 30, 2024, reported net earnings of $94.5 million, with a diluted net earnings per share of $0.42 [162]. Tax and Compensation - The effective tax rate is expected to be approximately 24.5% to 26.5% in the brokerage segment and 25.0% to 27.0% in the risk management segment for the foreseeable future [145]. - The effective income tax rate for both the three and six-month periods ended June 30, 2024, was 25%, down from 26% in the same periods of 2023 [166]. - The effective income tax rate for the brokerage segment was 25.4% for the three-month period and 25.5% for the six-month period ended June 30, 2024, with an anticipated future effective tax rate of approximately 24.5% to 26.5% [183]. - Reported compensation expense for the three-month period ended June 30, 2024, was $1,370.3 million, up from $1,196.4 million in 2023, marking a $173.9 million increase [173]. Organic Growth and Business Generation - Organic revenue growth is viewed as an important indicator for assessing performance in the brokerage and risk management segments [143]. - The company expects strong new business generation and solid retentions to result in further organic growth opportunities globally [149]. - The company anticipates continued strong customer retention and higher new business generation in its property/casualty brokerage operations for the remainder of 2024 [169]. Acquisitions and Capital Expenditures - The company completed twenty-four acquisitions in the six-month period ended June 30, 2024, compared to twenty-five in the same period of 2023 [230]. - Cash paid for acquisitions was $518.6 million in the six-month period ended June 30, 2024, down from $1,049.5 million in the same period of 2023 [230]. - The company expects total capital expenditures for 2024 to be approximately $150.0 million, focusing on office moves and IT software development projects [229]. Financial Position and Cash Flow - The company had a cash and cash equivalent balance of $1,415.3 million as of June 30, 2024 [232]. - Cash provided by operating activities increased to $908.8 million for the six-month period ended June 30, 2024, up from $440.9 million in 2023, indicating significant growth in core operations [224]. - The company believes it has sufficient capital and access to additional capital to meet its short- and long-term cash flow needs [251]. Market Risks and Foreign Currency - The company is exposed to foreign currency exchange rate risks from various international operations, including those in the U.K., Australia, Canada, and India [259]. - The company manages foreign currency risks by matching foreign liabilities with equal foreign assets to minimize currency fluctuation effects [259]. - A 10% adverse change in foreign currency exchange rates would increase earnings before income taxes by approximately $41.1 million, while a favorable change would decrease it by approximately $44.3 million [259].