Arthur J. Gallagher & (AJG) - 2023 Q3 - Quarterly Report

Revenue Distribution and Segment Performance - The company generated approximately 64% of its revenues domestically and 36% internationally during the nine-month period ended September 30, 2023[175] - The brokerage, risk management, and corporate segments contributed approximately 86%, 14%, and 0% to revenues, respectively, during the nine-month period ended September 30, 2023[175] - Brokerage segment revenues increased by 22% to $2,122.1 million in Q3 2023 compared to $1,736.2 million in Q3 2022[180] - Organic revenues in the brokerage segment grew by 9.3% to $1,875.9 million in Q3 2023[180] - Risk management segment revenues before reimbursements rose by 20% to $331.0 million in Q3 2023[180] - Nine-month brokerage segment revenues increased by 18% to $6,585.7 million in 2023[183] - Risk management segment organic revenues grew by 16.8% to $926.7 million in the nine-month period of 2023[183] - Brokerage segment revenues increased to $2,122.1 million in 2023, up from $1,736.2 million in 2022, representing a 22.2% growth[187] - Risk Management segment revenues increased to $331.0 million in 2023, up from $275.5 million in 2022, a 20.1% growth[187] - Total Company revenues increased to $2,453.6 million in 2023, up from $2,012.0 million in 2022, a 22.0% growth[187] - Brokerage segment revenues increased to $6,585.7 million in 2023, up from $5,599.5 million in 2022, representing a growth of 17.6%[191] - Risk Management segment revenues increased to $947.2 million in 2023, up from $802.0 million in 2022, a growth of 18.1%[191] - Total Company revenues increased to $7,533.4 million in 2023, up from $6,424.9 million in 2022, representing a growth of 17.3%[191] - Brokerage segment accounted for 86% of the company's revenues during the nine-month period ended September 30, 2023[203] - Total revenues for the three-month period ended September 30, 2023, increased by 22% to $2,122.1 million compared to $1,736.2 million in the same period in 2022[208] - Total revenues for the nine-month period ended September 30, 2023, increased by 18% to $6,585.7 million compared to $5,599.5 million in the same period in 2022[208] - Total revenues for the three-month period ended September 30, 2023, were $369.4 million, a 20% increase from $307.5 million in the same period in 2022[234] - Total revenues for the three-month period ended September 30, 2023, were $0.5 million, compared to $0.3 million in the same period in 2022, representing an increase of $0.2 million[250] - Total revenues for the nine-month period ended September 30, 2023, were $0.5 million, compared to $23.4 million in the same period in 2022, representing a decrease of $22.9 million[250] Earnings and Profitability - Adjusted EBITDAC for the brokerage segment increased by 23% to $688.0 million in Q3 2023[180] - Diluted net earnings per share for the total company grew by 19% to $2.00 in Q3 2023[180] - Adjusted EBITDAC for the risk management segment increased by 29% to $186.4 million in the nine-month period of 2023[183] - Total company diluted net earnings per share grew by 14% to $6.92 in the nine-month period of 2023[183] - Net earnings for the brokerage segment rose to $339.0 million in 2023, compared to $282.5 million in 2022, a 20.0% increase[187] - EBITDAC for the brokerage segment grew to $611.5 million in 2023, up from $488.5 million in 2022, a 25.2% increase[187] - Net earnings for the Risk Management segment rose to $41.5 million in 2023, compared to $26.9 million in 2022, a 54.3% increase[187] - Total Company net earnings rose to $283.2 million in 2023, compared to $256.3 million in 2022, a 10.5% increase[187] - Total Company EBITDAC grew to $606.1 million in 2023, up from $508.7 million in 2022, a 19.1% increase[187] - Net earnings for the brokerage segment rose to $1,144.6 million in 2023, compared to $1,058.5 million in 2022, an increase of 8.1%[191] - EBITDAC for the brokerage segment grew to $2,055.9 million in 2023, up from $1,781.6 million in 2022, a 15.4% increase[191] - Net earnings for the Risk Management segment rose to $111.7 million in 2023, compared to $79.4 million in 2022, an increase of 40.7%[191] - Total Company net earnings rose to $1,005.6 million in 2023, compared to $980.5 million in 2022, an increase of 2.6%[191] - Total Company EBITDAC grew to $2,041.3 million in 2023, up from $1,814.4 million in 2022, a 12.5% increase[191] - Diluted net earnings per share for the Total Company increased to $4.58 in 2023, compared to $4.57 in 2022, a 0.2% increase[191] - Brokerage segment reported earnings of $454.0 million, with net earnings attributable to controlling interests at $335.9 million, and diluted earnings per share of $1.53[194] - Risk Management segment reported earnings of $56.4 million, with net earnings attributable to controlling interests at $41.5 million, and diluted earnings per share of $0.19[194] - Corporate segment reported a loss of $146.3 million, with net loss attributable to controlling interests at $96.7 million, and diluted loss per share of $0.44[194] - Brokerage segment adjusted earnings increased to $637.4 million, with net earnings attributable to controlling interests at $474.0 million, and diluted earnings per share of $2.15[194] - Risk Management segment adjusted earnings increased to $58.7 million, with net earnings attributable to controlling interests at $43.3 million, and diluted earnings per share of $0.20[194] - Corporate segment adjusted loss improved to $123.2 million, with net loss attributable to controlling interests at $77.0 million, and diluted loss per share of $0.35[194] - Brokerage segment in Q3 2022 reported earnings of $370.7 million, with net earnings attributable to controlling interests at $281.3 million, and diluted earnings per share of $1.31[194] - Risk Management segment in Q3 2022 reported earnings of $36.6 million, with net earnings attributable to controlling interests at $26.9 million, and diluted earnings per share of $0.13[194] - Corporate segment in Q3 2022 reported a loss of $92.3 million, with net loss attributable to controlling interests at $52.4 million, and diluted loss per share of $0.25[194] - Brokerage segment adjusted earnings in Q3 2022 increased to $514.1 million, with net earnings attributable to controlling interests at $386.0 million, and diluted earnings per share of $1.79[194] - Brokerage, as adjusted, reported earnings of $2,167.9 million for the nine-month period ended September 30, 2023, with net earnings attributable to controlling interests of $1,614.8 million[197] - Risk Management, as adjusted, reported earnings of $159.5 million for the nine-month period ended September 30, 2023, with net earnings attributable to controlling interests of $117.3 million[197] - Corporate, as adjusted, reported a loss of $383.7 million for the nine-month period ended September 30, 2023, with a net loss attributable to controlling interests of $218.3 million[197] - Net earnings for the three-month period ended September 30, 2023, increased by 20% to $339.0 million compared to $282.5 million in the same period in 2022[210] - EBITDAC for the three-month period ended September 30, 2023, increased by 25% to $611.5 million compared to $488.5 million in the same period in 2022[210] - Net earnings for the nine-month period ended September 30, 2023, increased by 8% to $1,144.6 million compared to $1,058.5 million in the same period in 2022[210] - EBITDAC for the nine-month period ended September 30, 2023, increased by 15% to $2,055.9 million compared to $1,781.6 million in the same period in 2022[210] - Net earnings for the three-month period ended September 30, 2023, were $41.5 million, a 54% increase from $26.9 million in the same period in 2022[237] - EBITDAC for the three-month period ended September 30, 2023, was $66.8 million, a 41% increase from $47.3 million in the same period in 2022[237] - Adjusted EBITDAC for the three-month period ended September 30, 2023, was $67.6 million, a 35% increase from $50.2 million in the same period in 2022[237] - Net earnings margin (before reimbursements) for the three-month period ended September 30, 2023, was 12.5%, an increase of 278 basis points from 9.8% in the same period in 2022[237] - EBITDAC margin (before reimbursements) for the three-month period ended September 30, 2023, was 20.4%, an increase of 219 basis points from 18.2% in the same period in 2022[237] - Total EBITDAC for the nine-month period ended September 30, 2023, was $183.2 million, a 31% increase from $140.0 million in the same period in 2022[237] - Net loss for the three-month period ended September 30, 2023, was $(97.3) million, compared to $(53.1) million in the same period in 2022, representing an increase in loss of $(44.2) million[250] - Net loss for the nine-month period ended September 30, 2023, was $(250.7) million, compared to $(157.4) million in the same period in 2022, representing an increase in loss of $(93.3) million[250] - Pretax loss for the three-month period ended September 30, 2023 was $73.4 million, compared to $65.0 million in the same period in 2022[261] - Net loss attributable to controlling interests for the three-month period ended September 30, 2023 was $54.3 million, compared to $48.1 million in the same period in 2022[261] - Pretax loss for the nine-month period ended September 30, 2023 was $220.6 million, compared to $194.7 million in the same period in 2022[263] - Net loss attributable to controlling interests for the nine-month period ended September 30, 2023 was $163.2 million, compared to $144.1 million in the same period in 2022[263] - Consolidated EBITDAC for the nine-month period ended September 30, 2023 was $2,041.3 million, compared to $1,814.4 million for the same period in 2022[273] - Net earnings attributable to controlling interests for the nine-month period ended September 30, 2023 were $1,001.7 million, compared to $978.7 million for the same period in 2022[273] Acquisitions and Investments - The company signed a definitive agreement to acquire Cadence Insurance for approximately $749 million, net of a discounted tax benefit of $155 million, with integration costs expected to total $70 million over the next 3 years[197] - The company signed a definitive agreement to acquire Eastern Insurance Group for approximately $510 million, net of agreed seller-funded expenses[198] - The company acquired Buck, a leading provider of retirement, human resources, and employee benefits consulting, with over 2,300 employees and more than 220 credentialed actuaries[201] - The company closed 12 acquisitions in Q3 2023, with estimated annualized revenues acquired of $57.2 million[214] - The company signed a definitive agreement to acquire Cadence Insurance for approximately $749 million, expected to close in Q4 2023[214] - The company acquired Eastern Insurance for approximately $510 million, with the transaction expected to close in Q4 2023[214] - Buck was acquired in April 2023, adding over 2,300 employees and expanding the company's service offerings in retirement and employee benefits[215] - The company acquired Buck on April 3, 2023, with total expected integration costs of approximately $125.0 million[268] - The company completed 37 acquisitions in the nine-month period ended September 30, 2023, compared to 20 acquisitions in the same period in 2022, with annualized revenues of acquired businesses totaling approximately $475.3 million and $105.2 million, respectively[277] - The company incurred transaction-related costs primarily associated with the acquisition of Willis Re and Buck, totaling $10.2 million for the nine-month period ended September 30, 2023[263] Expenses and Costs - Compensation expense rose by $203.9 million in Q3 2023, primarily due to hiring and acquisition-related costs[220] - Adjusted compensation expense ratios improved to 53.7% in Q3 2023 from 53.8% in Q3 2022[220] - Operating expense increased by $59.0 million for the three-month period ended September 30, 2023, compared to the same period in 2022, primarily due to acquisition-related expenses ($24.7 million), inflation in client-related expenses ($23.6 million), and increased acquisition integration costs ($10.7 million)[223] - Operating expense increased by $181.1 million for the nine-month period ended September 30, 2023, compared to the same period in 2022, driven by client-related expenses and technology investments ($90.8 million), acquisition-related expenses ($59.9 million), and acquisition integration costs ($30.4 million)[224] - Depreciation expense increased by $9.8 million and $14.7 million for the three and nine-month periods ended September 30, 2023, respectively, due to office consolidations, equipment purchases, and computer system upgrades[225] - Amortization expense increased in the three and nine-month periods ended September 30, 2023, primarily due to intangible assets from acquisitions, with $3.3 million and $0.4 million of amortizable assets written off in the nine-month periods of 2023 and 2022, respectively[226] - Change in estimated acquisition earnout payables resulted in $17.8 million and $57.1 million of expense recognized in the three and nine-month periods ended September 30, 2023, respectively, due to adjustments in fair value assumptions[227][228] - Reported compensation expense for the three-month period ended September 30, 2023, increased by 17.7% to $199.2 million compared to $169.3 million in the same period in 2022[241] - Reported compensation expense for the nine-month period ended September 30, 2023, increased by 16.9% to $569.3 million compared to $487.1 million in the same period in 2022[241] - Operating expense for the three-month period ended September 30, 2023, increased by 10.4% to $65.0 million compared to $58.9 million in the same period in 2022[243] - Operating expense for the nine-month period ended September 30, 2023, increased by 11.3% to $194.7 million compared to $174.9 million in the same period in 2022[243] - Depreciation expense decreased by $0.2 million and $2.3 million for the three and nine-month periods ended September 30, 2023, respectively, compared to the same periods in 2022[245] - Amortization expense decreased by $0.2 million for the nine-month period ended September 30, 2023, compared to the same period in 2022[245] - Compensation expense for the three-month period ended September 30, 2023, was $35.6 million, compared to $26.7 million in the same period in 2022, representing an increase of $8.9 million[252] - Compensation expense for the nine-month period ended September 30, 2023, was $91.5 million, compared to $76.4 million in the same period in 2022, representing an increase of $15.1 million[253] - Operating expense for the three-month period ended September 30, 2023, was $37.1 million, compared to $0.7 million in the same period in 2022, representing an increase of $36.4 million[250] - Operating expense for the nine-month period ended September 30, 2023, was $106.8 million, compared to $31.3 million in the same period in 2022, representing an increase of $75.5 million[250] - Interest expense for the three-month period ended September 30, 2023, was $72.8 million, compared to $64.4 million in the same period in 2022, representing an