Arthur J. Gallagher & (AJG) - 2025 Q1 - Quarterly Report

Part I. Financial Information Financial Statements (Unaudited) Presents unaudited consolidated financial statements for Q1 2025 and Q1 2024, detailing earnings, assets, cash flows, and equity Q1 2025 vs Q1 2024 Consolidated Earnings | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $3,727.4 | $3,256.7 | +14.5% | | Earnings Before Income Taxes | $872.7 | $772.7 | +12.9% | | Net Earnings | $708.9 | $612.7 | +15.7% | | Diluted Net Earnings Per Share | $2.72 | $2.74 | -0.7% | Consolidated Balance Sheet Highlights | Metric | March 31, 2025 (in millions) | Dec 31, 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | $16,691.8 | $14,987.3 | +11.4% | | Total Assets | $74,095.7 | $64,255.2 | +15.3% | | Total Liabilities | $51,742.0 | $44,075.6 | +17.4% | | Total Stockholders' Equity | $22,353.7 | $20,179.6 | +10.8% | Q1 2025 vs Q1 2024 Consolidated Cash Flows | Cash Flow Activity | Q1 2025 (in millions) | Q1 2024 (in millions) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $871.8 | $789.3 | | Net Cash used by Investing Activities | $(275.4) | $(191.9) | | Net Cash from Financing Activities | $1,107.0 | $(5.4) | - During Q1 2025, the company acquired 11 firms for a total purchase price of $438.3 million and signed definitive agreements to acquire AssuredPartners for $13.45 billion and Woodruff Sawyer for $1.2 billion[44][45] Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's analysis of Q1 2025 financial performance, segment results, non-GAAP measures, and liquidity Q1 2025 Adjusted (Non-GAAP) Performance Summary | Segment | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | :--- | | Brokerage | Adjusted Revenues | $3,308.2M | $2,820.6M | +17% | | | Organic Revenue Growth | 9.5% | N/A | N/A | | | Adjusted EBITDAC Margin | 43.4% | 39.8% | +359 bps | | Risk Management | Adjusted Revenues | $373.2M | $351.5M | +6% | | | Organic Revenue Growth | 3.9% | N/A | N/A | | | Adjusted EBITDAC Margin | 20.4% | 20.7% | -18 bps | | Total Company | Adjusted Diluted EPS | $3.67 | $3.45 | +6% | - The company highlights a positive outlook for 2025, expecting continued property/casualty rate increases and opportunities for organic growth through strong new business and client retention[138] Brokerage Segment Analysis Details the Brokerage segment's 16% revenue growth to $3.31 billion, driven by organic growth and acquisition contributions Brokerage Segment Financials (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $3,314.6 | $2,864.9 | +15.7% | | Earnings Before Income Taxes | $1,099.1 | $876.1 | +25.5% | | Net Earnings | $816.1 | $652.6 | +25.0% | | Adjusted EBITDAC | $1,436.6 | $1,123.8 | +27.8% | - Organic growth in base commissions and fees was 9.1%, driven by strong customer retention, new business, and increasing renewal premiums[152][155] - Interest income increased significantly to $238.4 million from $84.7 million YoY, with $142.6 million earned on proceeds from the AssuredPartners financing[157] Risk Management Segment Analysis Covers the Risk Management segment's 6% revenue increase to $373.4 million, led by organic fee growth Risk Management Segment Financials (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Revenues before reimbursements | $373.4 | $352.8 | +5.8% | | Net Earnings | $41.1 | $39.3 | +4.6% | | Adjusted EBITDAC | $76.5 | $72.7 | +5.2% | - Organic fee revenue grew 3.9% in Q1 2025, with favorable trends of strong client retention and positive new business expected to continue[172][173] - Compensation expense increased by $17.2 million, driven by acquisitions and higher base compensation to support organic growth[176] Corporate Segment Analysis Explains the Corporate segment's increased net loss of $148.3 million, driven by higher interest and operating expenses Corporate Segment Financials (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Total Expenses | $282.7 | $157.0 | +$125.7 | | Interest Expense | $158.4 | $92.2 | +$66.2 | | Operating Expense | $73.2 | $27.9 | +$45.3 | | Net Loss | $(148.3) | $(79.2) | +$69.1 | - The increase in interest expense was primarily due to $65.8 million of interest on senior notes funded for the AssuredPartners deal[189] - Operating expenses in Q1 2025 included $20.5 million in acquisition-related professional fees and a $23.0 million net unrealized foreign exchange loss[185] Liquidity and Capital Resources Details the company's strong liquidity, with $16.7 billion in cash and significant financing activities for acquisitions - Cash provided by operating activities increased to $871.8 million in Q1 2025 from $789.3 million in Q1 2024, driven by core business growth[199] - The company raised substantial capital for the AssuredPartners acquisition, including net proceeds of $8.35 billion from a stock offering[220] - On April 3, 2025, the company amended its Credit Agreement, increasing the facility size from $1.7 billion to $2.5 billion and extending the maturity to April 2030[213] Quantitative and Qualitative Disclosures About Market Risk Outlines exposure to market risks, primarily interest rate sensitivity on its $13.1 billion debt and foreign currency fluctuations - The company holds $13.1 billion in fixed-rate borrowings; a hypothetical 1% rate increase would decrease its fair value by approximately $1,679.6 million[229][230] - A hypothetical 10% adverse change in the average foreign exchange rate for Q1 2025 would have increased pre-tax earnings by approximately $37.2 million[233] - To manage currency risk, the company uses forward contracts and options to hedge a significant portion of future revenues and disbursements in key international markets[234] Controls and Procedures Confirms the effectiveness of disclosure controls and procedures as of March 31, 2025, with no material changes reported - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[235] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[236] Part II. Other Information Legal Proceedings Discloses an ongoing IRS promoter investigation into the company's 'micro-captive' advisory services business since 2013 - The company's IRC 831(b) ('micro-captive') advisory services business has been under an IRS promoter investigation since 2013, and the company is fully cooperating[108][149] Risk Factors Refers to the comprehensive risk factor discussion in the company's 2024 Annual Report on Form 10-K - The report refers to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024[238] Unregistered Sales of Equity Securities and Use of Proceeds Reports no shares were repurchased under the public plan in Q1 2025, with all purchases related to employee plans Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Plans | | :--- | :--- | :--- | :--- | | Jan 2025 | 5,503 | $288.96 | — | | Feb 2025 | 3,146 | $332.24 | — | | Mar 2025 | 84,746 | $327.82 | — | | Total | 93,395 | $325.68 | — | - The company did not repurchase any shares under its $1.5 billion common stock repurchase plan during the quarter, which remains in effect[239][243] Exhibits Lists all filed exhibits, including an amended credit agreement and required CEO/CFO certifications - An Amended and Restated Credit Agreement, dated April 3, 2025, was filed as an exhibit[242] - Certifications by the Chief Executive Officer and Chief Financial Officer under Rule 13a-14(a) and Section 1350 are included as exhibits[242]