Arthur J. Gallagher Investor update

Thank you. Good afternoon, everyone, and thanks for joining us today. These investor meetings are a chance to hear directly from our business leaders, understand how the different parts of Gallagher fit together, and spend a little more time on what drives Gallagher's growth over the long term. For those who may be newer to our story, today should also give a good view of why we believe Gallagher can grow across all insurance market environments. A lot of investor questions right now come back to property pricing and what that means for growth. That's understandable. Property's been a meaningful tailwind over the last several years, and conditions are changing. But when we look across Gallagher, retention is strong, new business is excellent, and client activity remains positive. We also have a very diverse business, so our growth is not tied to one product, one geography, or one market condition.

I want to start by stepping back and talking about why the same four strategies that guided Gallagher for decades will continue to work. I'll also give an update on the insurance market and economic conditions. Then you'll hear directly from our business leaders about what they're seeing in their markets and how they are using talent, expertise, data, technology, and AI to keep growing and serving clients. Doug will bring it all together financially and take you through the third quarter and a full-year outlook. Our prepared remarks should last around an hour. Then we'll open the line for questions. Our confidence starts with the same four strategies that have guided Gallagher for decades. Number one, grow organically. Number two, growth through mergers and acquisitions. Number three, increase our productivity and raise our quality. And number four, maintain and promote our culture.

Those strategies have been tested through economic cycles, employment cycles, interest rate cycles, and insurance pricing cycles, and they continue to serve us well. The first two strategies work together. We grow organically, and we grow through mergers and acquisitions. Organic growth strengthens our clients' relationships, helps us attract and develop great people, and builds our capabilities. Mergers add talent, expertise, and new client relationships. Together, they make Gallagher stronger and a more attractive home for merger partners. Our strategy has created tremendous scale, but scale is not the objective by itself. What matters is that it gives our people deeper expertise, stronger market relationships, more data, and better tools to serve our clients. When a client has a claim, it gives our people more resources to advocate for that client and help get the best possible outcome.

For merger partners, it also brings resources and capabilities that would be very difficult to build on their own. Even with all the growth we've had, the opportunity in front of us remains enormous. Since 2020, we have grown organically over $3 billion and acquired more than $6 billion of annualized revenue, and we still touch less than 5% of the global insurance market. That gives us a very long runway to win new business organically and add talented merger partners who make Gallagher stronger. We've also shown that growth can translate into stronger profitability. Our EBITDAC margins have improved by nearly 800 basis points since January 2020, and we continue to see opportunities to improve productivity, raise quality, and invest for future growth. Underpinning all this is our culture, the way our people work together, serve clients, put new capabilities to use across the organization.

That is how we turn growth and continued operating improvement into long-term value for clients, colleagues, and shareholders. Let's start with organic growth. Insurance pricing still contributes to growth, but not as much as it has over the last several years. Organic growth also benefits from stronger retention, excellent new business, exposure growth, and the breadth of our operations across PC, benefits, reinsurance, and claims. In this market, we are also seeing clients use property savings to buy back coverage, increase limits, and improve program structure. Renewal premium and revenue trends do not move one-for-one. Our teams are helping clients use those savings to strengthen their risk programs. Looking to the balance of the year, we expect strong growth supported by renewal activity, continued new business momentum, and strength across both brokerage and risk management.

Doug and the business leaders will give you the specifics later, but the most important point is that we continue to see multiple drivers of organic growth across Gallagher. When you step back, the opportunity in front of us is tremendous. We operate in a large and growing market. We have capabilities in approximately 130 countries and touch about $200 billion of premium each year out of the $7 trillion marketplace. The risks our clients face continue to grow more complex. Data centers, cyber, energy transition, and changing liability exposures are all creating a greater need for advice and expertise. We have a large and growing market, increasing demand for what we do, and a team with the expertise to help clients navigate those risks. That gives us a terrific opportunity to continue to grow organically. The other important part of our growth strategy is mergers and acquisitions.

Insurance distribution remains highly fragmented, with an estimated 30,000 agents and brokers here in the U.S. and another 30,000 internationally. When a high-quality firm joins Gallagher, we add talent, expertise, and client relationships, while the firm immediately gets access to capabilities that can help it service clients and grow faster. These are niche experts, digital and AI tools, carrier relationships, a recognized brand, and support for our centers of excellence, to name a few. That combination creates value in several ways. Clients receive broader capabilities and better advice. Colleagues get more tools and career opportunities. Merger partners can grow faster as part of Gallagher, and shareholders benefit as those businesses grow, become more productive, and contribute to long-term earnings and cash flow. AssuredPartners is a great example. A year in, performance is terrific.

The integration is on plan, and our teams are already working together to serve clients and grow. We are better together. So far this year, we've completed 21 mergers representing around $225 million of estimated annualized revenue. Looking at our pipeline, we have over 30 term sheets signed or being prepared, representing around $400 million of annualized revenue. We remain disciplined on valuation and focused on culture fit, and our ability to help high-quality firms serve clients, develop their people, and grow faster continues to strengthen our position as a preferred acquirer. The third objective of our strategy is to increase productivity and raise quality, and that has been a long-standing focus for Gallagher. More than two decades ago, we began building our centers of excellence. Today, more than 19,000 colleagues support many of our back-office and client-serving activities.

That investment has helped us standardize processes, improve our data, and build capabilities across Gallagher that would be difficult to replicate. It also gives us a strong foundation for AI. We are using AI to reduce repetitive work, improve access to information, and help our brokers, consultants, and claims professionals work more efficiently. That means our people can spend more time serving clients, solving problems, and growing the business. AI complements their experience and judgment and helps them be more effective at what they do. The fourth objective of our strategy is to maintain and promote our culture. Gallagher's culture is what makes the rest of the model work. As we have grown, we have stayed team-driven, client-focused, committed to doing business the right way. That matters when we are welcoming merger partners, investing in new tools, and changing the way work gets done.

Our people understand that better tools, better processes, and better data help them serve clients more effectively. That culture is one of the reasons Gallagher has been able to grow, integrate, and improve over such a long period of time. Now let's turn to the insurance market. Overall, we continue to see a segmented global PC insurance market. Carriers are working to grow in lines and geographies where they are earning acceptable returns while remaining disciplined for underwriting margins required for their support. Property conditions continue to ease as capacity is returned, while casualty remains firmer due to continued pressure on loss costs and underwriting margin. Across our PC brokerage businesses in July and August, we saw the following renewal premium changes. Property lines down 6%. Casualty lines up 5% overall, including general liability up 2%, commercial auto up 4%, and umbrella up 7%.

Professional lines, including D&O and cyber, were up 2%. Personal lines up 3%, and workers' compensation up 2%. Excluding property, renewal premium changes are up about 3%, with stronger increases in the U.S. than in international markets. Within our business, property remains the clear area of downward pressure, while renewal premium changes across the casualty classes remain positive. Although property conditions improved sequentially in July and August from the second quarter, it appears much of that improvement reflects seasonality and coverage mix, and I don't believe there's a change in market direction. It is important to remember that renewal premium changes in Gallagher's revenue do not move one for one. That relationship varies by line of business, client size, and compensation structure. As property pricing eases, some clients are using the savings to opt in to more coverage, increase their limits, and improve the program structure.

Pricing is only one component of organic growth. In this environment, clients need help structuring coverage, evaluating trade-offs, and accessing the right markets. Gallagher's expertise, market relationships, and data position us very well to help navigate those decisions and continue winning business. A quick word on the economy. Through yesterday, our daily revenue indications from audits, endorsements, and cancellations remain positive, pointing to continued underlying business growth. In the U.S., rising healthcare costs, including the impact of new treatments and prescription drugs, continue to create demand for the advice and solutions we provide across our employee benefits business. Overall, the economic backdrop continues to support growth across our businesses. All right. Let me preview what you'll hear from each of our business leaders, and then I'll turn it over to them.