Arthur J. Gallagher & Co. (AJG)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 delivered 20% combined Brokerage & Risk Management revenue growth with 4.8% organic, +22% adjusted EBITDAC, and adjusted segment margins of 33.5% (Brokerage) and 21.8% (Risk Management) as the AssuredPartners (AP) acquisition first flowed into results .
• Versus S&P Global consensus, adjusted EPS of $2.32 missed $2.54, and revenue missed as well; GAAP EPS was $1.04. Management attributed shortfalls primarily to AP’s intra-quarter seasonality and modest contingent/supplemental variance, not underlying demand * .
• Mix and macro: property renewal premium changes were down 5% while casualty rose ~6%; management sees Q4 Brokerage organic ~5% (FY >6%) and Risk Management Q4 ~7% with full-year margins ~21% .
• Key catalysts: early integration with AP progressing well, synergy runway intact ($160M run-rate by end-2026; $260–$280M by early 2028), strong M&A pipeline, and durable casualty pricing; near-term watch items include property softness, AP timing effects, and contingent revenue sensitivity .

What Went Well and What Went Wrong

• What Went Well

  • Durable growth and margin: Combined segments delivered 20% total revenue growth (19th straight quarter of double-digit top-line) with 22% adjusted EBITDAC growth; Brokerage adjusted EBITDAC margin held at 33.5%, Risk Management at 21.8% .
  • AP integration momentum: “Early days of AssuredPartners professionals joining the Gallagher team is off to a terrific start!” and collaboration already producing new wins together .
  • Resilient market backdrop and pipeline: Casualty pricing still positive (+6% overall in Q3), Retail U.S. P&C up >7% and Reinsurance high single digits in a small quarter; ~35 term sheets ($~400M annualized) and ongoing bolt-ons .

• What Went Wrong

  • Estimates miss and seasonality surprise: Adjusted EPS ($2.32) and revenue missed S&P Global consensus as AP intra-quarter seasonality meant only ~40% of owned-quarter policy inceptions fell into Q3, creating ~$80M revenue shortfall to the earlier IR Day framing *.
  • Property/contingent pressure: Property RPC down 5%; contingents/supplementals saw unfavorable estimate change on one international program and some lumpy large-life case timing shifting out of Q3 .
  • Higher corporate cost of capital: Interest and banking costs up sharply YoY on December 2024 debt; corporate GAAP loss widened (net interest burden) .

Financial Results

Segment breakdown (Q3 2025 vs Q3 2024)

• Brokerage: Revenues $2,922.9MM vs $2,396.4MM; Net earnings $410.4MM vs $383.0MM; Adjusted EBITDAC $981.6MM vs $800.2MM; Adjusted EBITDAC margin 33.5% (flat YoY) .
• Risk Management: Revenues before reimbursements $402.1MM vs $369.7MM; Net earnings $49.5MM vs $44.6MM; Adjusted EBITDAC $87.6MM vs $76.7MM; Adjusted EBITDAC margin 21.8% (+100 bps YoY) .

KPIs and mix

• Brokerage organic growth (total reported commissions/fees/supplemental/contingent): +4.5% YoY; supplemental organic +36.4% YoY; contingent organic -13.3% YoY .
• Risk Management organic fee growth: +6.7% YoY .
• Pricing: Property RPC -5%; casualty +6% (GL +4%, Auto +5%, Umbrella +8%); D&O -2%; Workers’ Comp +1% .
• AP financing interest included in adjusted Brokerage margin: ~$76MM in Q3 (vs ~$144MM in Q2), fading as AP closed Aug 18 .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We delivered 20% total revenue growth; our 19th straight quarter of double-digit top-line growth… Organic revenue growth was 4.8%… adjusted EBITDAC grew 22%” — J. Patrick Gallagher, Jr., CEO .
• “Only about 40% of [AP] policy inception dates were between Aug 18 and Sept 30… producing an ~$80M revenue difference vs our IR Day estimate” — CFO Doug Howell .
• “We still see annualized run-rate synergies of $160 million by the end of 2026 and $260 to $280 million by early 2028” — CFO .
• “Global insurance renewal premium changes remain in positive territory and we are not seeing indications of economic slowdown” — CEO .

Q&A Highlights

• AP seasonality and modeling: AP intra-quarter seasonality (40% of owned-period inceptions) lowered Q3 revenue vs September estimates; management emphasized no change to annual revenue/EBITDA outlook from updated data .
• Property sensitivity: Each 2% drop in property rates equates to ~40 bps headwind to Brokerage organic (before exposure offsets), with storm season potentially muting cuts .
• Synergy composition: Roughly one-third revenue uplift, one-third workforce efficiency, one-third operating expense savings as integration matures .
• Channel strategy: Expect AP to reduce wholesale fragmentation over time with favored panels (including RPS), potentially aiding Wholesale organic; accounting will credit appropriate books .
• Risk Management: Q4 organic ~7% and full-year margins around ~21% (better than prior ~20.5%) .

Estimates Context

Consensus vs actual (S&P Global; AJG “Primary EPS” and “Revenue”)

• Q3 2025: EPS $2.32 vs $2.54 est (miss); Revenue $3.16B vs $3.46B est (miss)*
• Q2 2025: EPS $2.33 vs $2.34 est (in line); Revenue $2.95B vs $3.17B est (miss)*
• Q1 2025: EPS $3.67 vs $3.58 est (beat); Revenue $3.44B vs $3.68B est (miss)*

Note: Company-reported “Revenues before reimbursements” were $3.33B in Q3; S&P Global revenue definitions may differ, which can create variance vs reported figures *.
*Values retrieved from S&P Global.

Key Takeaways for Investors

• Underlying demand remains solid (casualty strength, stable client activity), and organic growth should normalize at ~5% in Q4 with FY >6% despite property softness and AP timing dynamics .
• The Q3 miss appears transitory and largely technical (AP seasonality accounting and modest contingent/supplemental timing), not a deterioration in end-market health .
• Margin algorithm intact: Brokerage underlying expansion continues, Risk Management now tracking towards ~21% FY margins (raised); synergy levers and AI/operational efficiency provide multi-year upside .
• Watch list: property rate trajectory through storm season, contingent/supplemental performance, and pace of AP channel harmonization; each can swing quarterly prints .
• Capital and M&A: Dividend maintained ($0.65), ample capacity to continue accretive tuck-ins; AP integration expands cross-selling and scale benefits .
• For modeling: recognize AP’s heavier Q1/Q4 seasonality and that only ~40% of intra-quarter inceptions were captured post-close in Q3; AP-related interest income tailwind fades from Q4 onward .

Sources: Company press releases and 8-K/Ex. 99.1 (financials, non-GAAP reconciliations, segment data) ; Q3 2025 earnings call transcript (market/pricing, integration, guidance) ; Q2 and Q1 2025 releases/calls for trends ; Dividend release .
Estimates: S&P Global consensus and actuals for EPS/Revenue (Primary EPS Consensus Mean, Revenue Consensus Mean) [GetEstimates]*.