Arthur J. Gallagher & Co. (AJG) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. Arthur J. Gallagher & Co. is a global insurance brokerage, risk management, and consulting firm operating in approximately 130 countries. The company operates through three segments: Brokerage (retail, wholesale, reinsurance, benefits), Risk Management (claims administration, loss control), and Corporate (debt, clean energy investments, corporate costs). The company is a large accelerated filer with approximately 256.9 million shares of common stock outstanding as of the period end.
Key Financial Metrics
| Metric (in millions, except per share) | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenues | $4,758 | $3,727 |
| Net Earnings (Attributable to Controlling Interests) | $822 | $704 |
| Diluted EPS | $3.16 | $2.72 |
| Operating Cash Flow | $957 | $872 |
| EBITDAC (Non-GAAP) | $1,557 | $1,301 |
| Total Debt (Corporate & Other) | $12,999 | $13,099 |
| Cash and Cash Equivalents | $1,413 | $1,396 |
Note: EBITDAC is defined as net earnings before interest, income taxes, depreciation, amortization, and change in estimated acquisition earnout payables.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 28% year-over-year, driven primarily by the Brokerage segment which grew 30% to $4.29 billion. This growth reflects the impact of acquisitions completed in the prior 12 months and 4% organic growth in commissions and fees.
- Profitability: Net earnings attributable to controlling interests rose 17% to $822 million. Diluted EPS increased 16% to $3.16.
- Interest Income Decline: Interest income, premium finance revenues, and other income decreased significantly from $247 million in Q1 2025 to $86 million in Q1 2026. This is primarily due to the deployment of cash proceeds from the AssuredPartners financing in late 2024/early 2025, which generated approximately $143 million in interest income in the prior year period.
- Acquisition Activity: The company completed nine acquisitions in Q1 2026 with an estimated annualized revenue of $59 million. The company continues to integrate the $13.8 billion AssuredPartners acquisition (closed August 2025), resulting in provisional adjustments to goodwill and intangible assets.
- Share Repurchases: The company repurchased 1.4 million shares for $310 million in Q1 2026, compared to no repurchases in Q1 2025.
Guidance, Outlook, and Risks
- Outlook: Management anticipates an effective tax rate of approximately 24.5% to 26.5% for the Brokerage segment and 25.0% to 27.0% for the Risk Management segment. The company expects to use cash on hand, new debt, credit facilities, and common stock to fund future acquisitions.
- Dividends: A quarterly dividend of $0.70 per share was declared for Q1 2026 (an 8% increase from the prior year). The Q2 2026 dividend was also announced at $0.70 per share.
- Key Risks:
- Acquisition Integration: Risks related to the integration of large acquisitions (AssuredPartners, Woodruff Sawyer), including failure to realize expected benefits and integration costs.
- Market Conditions: Exposure to global economic conditions, interest rate fluctuations, and insurance industry volatility (catastrophe losses, underwriting trends).
- Regulatory & Legal: Ongoing IRS investigation regarding IRC 831(b) micro-captive advisory services (promoter investigation since 2013). The company states it is not a target of the related criminal investigation.
- Clean Energy Investments: Risks related to legacy clean energy investments, including potential write-downs (a $5 million write-down was recorded in Q1 2026).
- Technology & AI: Risks associated with the effective application of AI, data privacy, and cybersecurity.
Investor Verification Checklist
- Interest Income Sustainability: Verify the trajectory of interest income as the company deploys remaining cash from the AssuredPartners financing; the Q1 2026 figure is not comparable to Q1 2025 due to the timing of cash deployment.
- Acquisition Adjustments: Monitor the finalization of the AssuredPartners purchase price allocation, specifically the provisional goodwill and intangible asset valuations which may be adjusted in Q2 2026.
- Organic Growth Rates: Distinguish between reported revenue growth (driven by M&A) and organic growth (reported as 4% for Brokerage commissions/fees) to assess underlying business performance.
- IRS Investigation Status: Track updates on the IRS promoter investigation regarding micro-captive advisory services for potential contingent liabilities.
- Debt Covenants: Confirm continued compliance with financial covenants in Senior Notes and Credit Agreements, particularly as the company manages debt maturities and new borrowings.