Arthur J. Gallagher & (AJG) - 2025 Q4 - Annual Results

Revenue Growth - Fourth quarter revenue for the combined Brokerage and Risk Management segments exceeded 30%, with organic revenue growth of 5%[5] - For the full year 2025, total revenue grew by 21%, with 6% organic growth and 26% growth in adjusted EBITDAC[6] - Total Company revenue for 2025 was reported at $13.778 billion, compared to $11.401 billion in 2024, representing a growth of 20.8%[6] - The Brokerage segment reported revenues of $12.192 billion for 2025, up from $9.934 billion in 2024, marking a 22.7% increase[6] - The Risk Management segment reported revenues of $1.585 billion for 2025, compared to $1.451 billion in 2024, reflecting a growth of 9.2%[6] - Total revenues for the year ended December 31, 2025, were $12,192 million, compared to $9,934 million for the previous year, reflecting a growth of 23%[49] - Total reported commissions, fees, supplemental revenues, and contingent revenues for Q4 2025 reached $3,056 million, up from $2,174 million in Q4 2024[9] Earnings Performance - Net earnings for the fourth quarter were $154 million, with a diluted earnings per share of $0.58, down from $1.12 in the same quarter of 2024[3] - Net earnings for Q4 2025 were reported at $317 million, consistent with Q4 2024, while net earnings for the year increased to $2,052 million from $1,686 million, a rise of 22%[49] - The total adjusted earnings per share for the year was $10.69, compared to $10.10 in 2024, indicating a growth of 5.8%[6] - Gallagher's reported net earnings margin for Q4 2025 was 11.8%, slightly up from 11.7% in Q4 2024, while the adjusted EBITDAC margin improved to 21.6% from 20.7%[24] - Net earnings for Q4 2025 were reported at $49 million, up from $43 million in Q4 2024, with adjusted EBITDAC increasing to $90 million from $77 million year-over-year[24] Expenses and Costs - Compensation expense for Q4 2025 was $1,868 million, an increase from $1,291 million in Q4 2024, with adjusted compensation expense ratios rising to 53.0%[13] - Operating expenses for Q4 2025 totaled $527 million, compared to $344 million in Q4 2024, with an adjusted operating expense ratio of 14.8%[14] - Reported operating expenses for Q4 2025 were $78 million, an increase from $72 million in Q4 2024, while adjusted operating expenses were $74 million compared to $71 million in the previous year[22] - The adjusted operating expense ratio for Q4 2025 was 17.8%, down 1.3 percentage points from 19.1% in Q4 2024, primarily due to savings in client-related expenses and lower business insurance costs[23] Acquisitions - The company completed 33 mergers in 2025, contributing to more than $3.5 billion in estimated annualized revenue[6] - The acquisition of AssuredPartners was completed for approximately $13.8 billion, funded by $8.5 billion from a stock offering and $5.0 billion from senior notes[12] - The company incurred acquisition costs of $139 million for the year ended December 31, 2025, compared to $51 million in 2024, reflecting ongoing investment in growth through acquisitions[26] - The company closed 6 acquisitions in Q4 2025, with estimated annualized revenues acquired amounting to $118 million[9] Tax and Financial Position - The consolidated effective tax rate for Q4 2025 was 14.3%, a decrease from 22.5% in Q4 2024, while the effective tax rate for the year ended December 31, 2025, was 19.7% compared to 21.5% in 2024[33] - Gallagher's total borrowings as of December 31, 2025, included $9,550 million from public debt and $3,323 million from private placements, with no borrowings under its line of credit facility[29] - Total assets increased to $70,665 million as of December 31, 2025, up from $64,255 million in 2024[53] Workforce and Dividends - The workforce at the end of the period increased to 71,776 employees, up from 55,977 in 2024, largely due to the acquisition of AssuredPartners[55][56] - The company declared dividends of $0.65 per share for the fourth quarter, compared to $0.60 per share in the fourth quarter of 2024[51] Future Outlook - The company plans to host a webcast conference call on January 29, 2026, to discuss its financial results and future outlook[33] - Gallagher's investments in clean energy projects contributed to operating results, focusing on fusion and carbon sequestration initiatives[30] Non-GAAP Measures - The company emphasizes the importance of non-GAAP measures to provide a clearer picture of financial performance and trends[39] - Gallagher's effective tax rate adjustments and other non-recurring items are accounted for in the adjusted earnings metrics to enhance comparability[40] - Organic revenue growth is a key focus, with measures taken to exclude revenues from acquisitions and divestitures for a clearer performance analysis[44]