Executive Summary

Q2 delivered strong top-line and margin expansion: revenues before reimbursements rose 16.1% YoY to $3.178B, adjusted EBITDAC grew 23.3% to $1.013B, and combined Brokerage & Risk Management adjusted EBITDAC margin expanded 307 bps to 34.5% .
S&P Global consensus: slight miss on adjusted EPS ($2.33 actual vs $2.34 est) and a larger miss on S&P-defined revenue ($2.95B actual vs $3.17B est); GAAP diluted EPS was $1.40. Margin outperformance was aided by ~$144M of interest income from AssuredPartners (AP) financing, adding ~340 bps to Brokerage margin * * .
Operating trends: brokerage organic growth 5.3% (retail ~4%, wholesale/specialty >7%, reinsurance ~5%); GB organic 6.2% with adjusted margin at 21.0% . Property renewal premiums declined 7% while casualty increased 8% (GL +4%, auto +7%, umbrella +11%), with no broad weakening in client activity .
Outlook/catalysts: management raised full-year Brokerage organic outlook to 6.5%–7.5% (from 6%–8%), reaffirmed GB organic 6%–8% and ~20.5% margin, and reiterated expectations to close AP in Q3—key stock narrative drivers include AP timing, property/casualty pricing trajectory, and durability of margin expansion as AP cash-interest tailwind tapers post-close .

What Went Well and What Went Wrong

What Went Well

Margin expansion and consistent double-digit adjusted earnings growth: “Adjusted EBITDAC grew year over year by 26%, the 21st consecutive quarter of double-digit growth,” with combined adjusted margin up 307 bps to 34.5% .
Balanced organic growth across businesses: Brokerage organic 5.3% (retail ~4%; wholesale/specialty >7%; reinsurance ~5%); GB organic 6.2% with 21.0% adjusted margin, “a bit better” than expectations .
Clear execution on M&A and AP progress: 9 mergers closed (~$291M annualized revenue) and “on track to close” AP in Q3; margin math transparency—~340 bps Brokerage margin tailwind from interest on AP cash this quarter .

What Went Wrong

Consensus misses: Slight adjusted EPS miss and more pronounced S&P revenue shortfall vs Street; GAAP EPS diluted at $1.40 reflecting higher interest and corporate costs * *.
Property pricing headwinds: Property renewal premiums declined 7% (June likely -8% to -9%), though partially offset by increased limits purchased; management sensitivity notes ~40 bps organic hit per additional 2% drop in property rates .
Corporate noise: Larger non-cash FX remeasurement loss weighed on Corporate; management highlighted quarter-to-quarter volatility in the Corporate line (largely reversed in July) .

Financial Results

Headline results vs prior periods (company-reported)

Metric	Q2 2024	Q1 2025	Q2 2025
Revenues before reimbursements ($B)	$2.736	$3.688	$3.178
Total revenues ($B)	$2.775	$3.727	$3.221
GAAP Diluted EPS	$1.27	$2.72	$1.40
Adjusted Diluted EPS (Total Company)	$2.29	$3.67	$2.33
Adjusted EBITDAC ($B, Total Company)	$0.822	$1.414	$1.013
Adjusted EBITDAC Margin (Brokerage+GB)	31.4% (calc)	41.1%	34.5%

Notes: Q2’24 combined Brokerage & GB adjusted margin ≈ $869.0M/$2,762.6M = 31.4% (from press release tables) . Q1’25 margin 41.1% per management . Q2’25 margin 34.5% per management .

Q2 2025 vs S&P Global consensus

Metric (S&P definition)	Consensus	Actual	Surprise
Adjusted EPS	$2.34*	$2.33*	-$0.01 (in line to slight miss)*
Revenue ($B)	$3.169*	$2.945*	-$0.224B (miss)*

S&P “Revenue” aligns with commissions + fees + supplemental + contingent (excludes interest/other and reimbursements), which reconciles to $2.945B for Q2’25 using company line items . Values retrieved from S&P Global.*

Segment performance snapshot

Segment (Before reimbursements)	Q2 2024	Q1 2025	Q2 2025
Brokerage Revenues ($B)	$2.376	$3.315	$2.786
Brokerage Adjusted EBITDAC ($M)	$795.9	$1,436.6	$1,012.9
Brokerage Adjusted EBITDAC Margin	33.1%	43.4%	36.4%
Risk Mgmt (GB) Revenues ($M)	$358.6	$373.4	$391.9
Risk Mgmt Adjusted EBITDAC ($M)	$73.1	$76.5	$82.1
Risk Mgmt Adjusted EBITDAC Margin	20.4%	20.5%	21.0%

KPIs and operating drivers

KPI	Q2 2024	Q1 2025	Q2 2025
Brokerage organic total (commissions/fees + supp + contingent)	—	9.5%	5.3%
Organic base commissions/fees	—	9.1%	4.7%
Organic supplemental revenues	—	21.6%	10.5%
Organic contingent revenues	—	7.0%	16.5%
GB organic fees	—	3.9%	6.2%
Renewal premium change: Property	—	-2% (Q1)	-7% (Q2)
Renewal premium change: Casualty	—	+8% (Q1)	+8% (Q2)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Brokerage organic growth	FY 2025	6%–8% (prior framework)	6.5%–7.5%	Raised midpoint
GB organic growth	FY 2025	6%–8%	6%–8%	Maintained
GB adj. EBITDAC margin	FY 2025	~20.5%	~20.5%	Maintained
Brokerage underlying margin expansion	FY 2025	+50–100 bps at 6%–8% organic (framework)	Reiterated; at 6.5% ~+70 bps, at 7.5% ~+90 bps (underlying)	Maintained framework
Investment income on AP cash	2H 2025	Not specified in Q1 PR	Continues through Q3; declines upon AP close	Clarified timing
AP acquisition timing	2025	2H close expected	On track to close in Q3 2025	Narrowed timing
Quarterly dividend	3Q 2025	—	$0.65 payable Sept 19, 2025 (record Sept 5)	Declared

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24, Q1’25)	Current Period (Q2’25)	Trend
AI/technology productivity	Scaling centers of excellence; standardization accelerates AI adoption	“Terrific results” in claims summarization and policy review; broader enablement to be detailed in Sept	Building momentum
Macro/tariffs/client activity	No broad slowdown; tariffs not impacting activity	No meaningful change; daily revenue/claim counts steady	Stable demand
Pricing: Property vs Casualty	4Q: property flat; casualty up mid-high single digits	Property -7% (June worse), casualty +8%; sensitivity ~40 bps organic per 2% property drop	Property easing; casualty firm
Reinsurance dynamics	1/1 favored buyers; casualty reinsurance cautious	Similar—property still buyer-favorable; casualty reinsurance flat to modestly higher	Balanced; cautious on casualty
E&S/Wholesale	Strong U.S./UK specialty; submissions up	E&S up ~7%; MGAs growing faster; submissions rising	Healthy
M&A and AP	$14B+ cash raised; AP targeted early ’25	9 deals closed; AP on track for Q3; ~~40 term sheets (~~$500M rev)	Pipeline robust

Management Commentary

“We had a great second quarter…combined to deliver 16% revenue growth…adjusted EBITDAC margin increased 307 basis points to 34.5%...adjusted EBITDAC grew…26%.” — J. Patrick Gallagher, Jr., CEO .
“Interest income on the cash we’re holding for AssuredPartners added about 340 basis points of margin this quarter.” — CFO Doug Howell .
“Property [renewal premiums] down 7%…casualty increasing 8%…Our daily revenue indications and claim counts…are not indicating a meaningful change in our customers’ business activity.” — CEO .
“We now see full year 2025 brokerage segment organic in the 6.5% to 7.5% range.” — CEO .
“AssuredPartners…believe we will be in a position to complete this transaction here in the third quarter.” — CEO .

Q&A Highlights

Property pricing sensitivity: Assuming June property trends continue; each additional 2% property rate drop equates to ~40 bps hit to organic (net of exposure effects) .
AP integration: Only a couple of workstreams paused; planning progressed within allowed bounds; still accretive in year one; ready to “hit the ground running” on close .
E&S marketplace: MGAs/programs growing faster than open brokerage; submissions increasing; not seeing wholesale business broadly shifting back to admitted .
All-in RPC: With 3Q/4Q mix instead of 2Q, all-in renewal premium change around ~4% .
M&A capacity: ~$1.4B cash on hand at 6/30, no revolver borrowings; capacity to fund ~$2B of M&A in 2025 and ~$5B in 2026 while maintaining IG rating .

Estimates Context

Q2 2025 vs S&P Global consensus: Adjusted EPS $2.33 vs $2.34; S&P revenue $2.945B vs $3.169B; both modest misses. Company’s adjusted EBITDAC and margins were strong, aided by ~$144M of AP financing interest income this quarter * .
Prior quarter (Q1 2025): Beat on adjusted EPS ($3.67 vs $3.58) but missed S&P revenue ($3.44B vs $3.68B), reflecting S&P’s narrower revenue definition (ex interest/other/reimbursements) *.
Estimate implications: Street may trim 2H revenue if property rate easing persists; margin trajectory should consider step-down in AP cash-interest tailwind post-AP close (timing: Q3), partially offset by underlying productivity/AIs and organic mix .

Values retrieved from S&P Global.*

Key Takeaways for Investors

Core fundamentals solid: balanced organic growth and record combined margins; but Q2 prints masked by AP-cash interest tailwind that will fade post-close—underwrite underlying margin expansion rather than reported .
Mixed scorecard vs Street: Slight adjusted EPS miss and revenue miss on S&P revenue definition; however, operating leverage remained strong—watch Street recalibration for property sensitivity and AP timing * * .
Pricing backdrop supportive ex-property: casualty up 8% with signs of stability or firming in lines; property relief encourages limit buy-ups, cushioning revenue; reinsurance stable to favorable for buyers .
AP is the near-term catalyst: closing in Q3 could reshape revenue scale, tuck-in pipeline, and fiduciary income optimization; integration preparedness and limited workstream pauses reduce execution risk .
GB durable: 6%–8% organic and ~20.5% margin for FY25 remain intact, indicating stability in claims outsourcing demand and operational efficiency .
Capital deployment remains a tailwind: ample capacity for M&A in ’25/’26 while maintaining IG balance sheet; tuck-ins plus AP cross-sell should support mid-term EPS compounding .
Risk monitor: property rate trajectory through wind season, casualty reserve trends, FX noise in Corporate, and the step-down of AP cash-interest tailwind post-close .

Footnotes:

S&P Global metrics are based on S&P’s definitions. Values retrieved from S&P Global.*

Sources: Company press releases and 8-K for Q2 2025 results and reconciliations ; Q2 2025 earnings call transcript for outlook, sensitivities, and Q&A ; Q1 2025 press release for prior-quarter comparatives .

Arthur J. Gallagher & Co. (AJG)·Q2 2025 Earnings Summary