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What changed in Arthur J. Gallagher & Co.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Arthur J. Gallagher & Co.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+592 added−527 removedSource: 10-K (2024-02-09) vs 10-K (2023-02-10)

Top changes in Arthur J. Gallagher & Co.'s 2023 10-K

592 paragraphs added · 527 removed · 434 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

202 edited+68 added−39 removed142 unchanged
Biggest changeWe may not be able to continue such an acquisition strategy in the future and there are risks associated with such acquisitions, which could adversely affect our growth and results of 10 operations. • Damage to our reputation could have a material adverse effect on our business. • Our ESG-related aspirations, goals and initiatives, and our public statements and disclosures regarding them, expose us to numerous risks. • If we are unable to apply technology and data analytics effectively in driving value for our clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of technology and related tools, our operating results, client relationships, growth and compliance programs could be adversely affected. • Our success depends, in part, on our ability to attract and retain qualified talent, including our senior management team. • Sustained increases in compensation expense and the cost of employee benefits could reduce our profitability. • Our substantial operations outside the U.S. expose us to risks different than those we face in the U.S. • Changes in tax laws could adversely affect us. • The COVID-19 pandemic has and could continue to adversely affect our business, results of operations and financial condition. • The substantial increase in remote work among our employees subjects us to certain challenges and risks. • We face significant competitive pressures in each of our businesses. • Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability. • Contingent and supplemental revenues we receive from underwriting enterprises are less predictable than standard commission revenues, and any decrease in the amount of these forms of revenue could adversely affect our results of operations. • We face a variety of risks in our benefit consulting operations distinct from those we face in our insurance brokerage operations. • We face a variety of risks in our third-party claims administration operations that are distinct from those we face in our brokerage and benefit consulting operations. • Climate risks, including the risk of an economic crisis, risks associated with the physical effects of climate change and disruptions caused by the transition to a low-carbon economy, could adversely affect our business, results of operations and financial condition.
Biggest changeWe may not be able to continue such an acquisition strategy in the future and there are risks associated with such acquisitions, which could adversely affect our growth and results of operations. • We face additional risks relating to acquisitions that are larger than our usual tuck-in acquisitions, including that these acquisitions will not perform as expected and that we cannot successfully integrate complex operations. • Damage to our reputation could have a material adverse effect on our business. • Our sustainability and ESG-related aspirations, goals and initiatives, and our public statements and disclosures regarding them, expose us to numerous risks. • If we are unable to apply technology and data analytics effectively in driving value for our clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of technology and related tools, our operating results, client relationships, growth and compliance programs could be adversely affected. • We are subject to risks associated with AI. • Our success depends, in part, on our ability to attract and retain qualified talent, including our senior management team. • The substantial increase in remote work among our employees subjects us to certain challenges and risks. • Business disruptions could have a material adverse effect on our operations, damage our reputation and impact client relationships. • Sustained increases in compensation expense and the cost of employee benefits could reduce our profitability. • Our substantial operations outside the U.S. expose us to risks different than those we face in the U.S. • Changes in tax laws could adversely affect us. • We face significant competitive pressures in each of our businesses. • Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability. • Contingent and supplemental revenues we receive from underwriting enterprises are less predictable than standard commission revenues, and any decrease in the amount of these forms of revenue could adversely affect our results of operations. • We face a variety of risks in our benefit consulting operations distinct from those we face in our insurance brokerage operations. • We face a variety of risks in our third-party claims administration operations that are distinct from those we face in our brokerage and benefit consulting operations. • Climate risks, including the risk of an economic crisis, risks associated with the physical effects of climate change and disruptions caused by the transition to a low-carbon economy, could adversely affect our business, results of 11 operations and financial condition.
Unless expressly noted, the information on our website, including our investor relations website, or any other website is not incorporated by reference in this Form 10-K and should not be considered part of this Form 10-K or any other filing we make with the S EC. Item 1A . Ris k Factors.
Unless expressly noted, the information on our website, including our investor relations website, or any other website is not incorporated by reference in this Form 10-K and should not be considered part of this Form 10-K or any other filing we make with the S EC. 10 Item 1A . Ris k Factors.
Although we have actively sought to control increases compensation expense and the cost of employee benefits, we can make no assurance that we will succeed in limiting future cost increases, and continued upward pressure in these costs could reduce our profitability. Our substantial operations outside the U.S. expose us to risks different than those we face in the U.S.
Although we have actively sought to control increases in compensation expense and the cost of employee benefits, we can make no assurance that we will succeed in limiting future cost increases, and continued upward pressure in these costs could reduce our profitability. Our substantial operations outside the U.S. expose us to risks different than those we face in the U.S.
The global nature of our operations increases the complexity and cost of compliance with laws and regulations, including increased staffing needs, the development of new policies, procedures and internal controls and providing training to employees in multiple locations, adding to our cost of doing business.
The global nature of our operations increases the complexity and cost of compliance with laws and regulations, including increased staffing needs, the development of new policies, procedures and internal controls and providing training to employees in multiple locations, adding to our cost of doing business.
Many of these laws and regulations may have differing or conflicting legal standards across jurisdictions, increasing further the complexity and cost of compliance.
Many of these laws and regulations may have differing or conflicting legal standards across jurisdictions, increasing further the complexity and cost of compliance.
Pillar 2 will establish a global minimum tax rate of 15%, such that multinational enterprises with an effective tax rate in a jurisdiction below this minimum rate will need to pay additional tax, which could be collected by the parent company’s tax authorities if that parent country adopts Pillar 2 or by those in other countries, depending on whether and how each country implements the OECD’s approach in its tax treaties and domestic tax legislation.
Pillar 2 will establish a global minimum tax rate of 15%, such that multinational 18 enterprises with an effective tax rate in a jurisdiction below this minimum rate will need to pay additional tax, which could be collected by the parent company’s tax authorities if that parent country adopts Pillar 2 or by those in other countries, depending on whether and how each country implements the OECD’s approach in its tax treaties and domestic tax legislation.
We have historically acquired large numbers of insurance brokers, benefit consulting firms and, to a lesser extent, third party claims administration and risk management firms. We may not be able to continue such an acquisition strategy in the future and there are risks associated with such acquisitions, which could adversely affect our growth and results of operations.
We have historically acquired large numbers of insurance brokers, benefit consulting firms and, to a lesser extent, third party claims administration and risk management firms. We may not be able to continue such acquisition strategy in the future and there are risks associated with such acquisitions, which could adversely affect our growth and results of operations.
These include, among others, risks relating to: • Maintaining awareness of and complying with a wide variety of labor practices and foreign laws, including those relating to labor and employment, data privacy requirements, prohibitions on corrupt payments to government officials, export and import duties, environmental policies, sustainability disclosures, as well as laws and regulations applicable to U.S. business operations abroad.
These include, among others, risks relating to: • Maintaining awareness of and complying with a wide variety of labor practices and foreign laws, including those relating to labor and employment, data privacy requirements, AI prohibitions on corrupt payments to government officials, export and import duties, environmental policies, sustainability disclosures, as well as laws and regulations applicable to U.S. business operations abroad.
In emerging markets and other jurisdictions with less 23 developed legal systems, local laws and regulations may not be established with sufficiently clear and reliable guidance to provide us with adequate assurance that we are aware of all necessary licenses to operate our business, that we are operating our business in a compliant manner, or that our rights are otherwise protected.
In emerging markets and other jurisdictions with less developed legal systems, local laws and regulations may not be established with sufficiently clear and reliable guidance to provide us with adequate assurance that we are aware of all necessary licenses to operate our business, that we are operating our business in a compliant manner, or that our rights are otherwise protected.
Future changes in the regulatory environment may impact our ability to collect these amounts. Adverse regulatory, legal or other developments regarding these revenues could have a material adverse effect on our business, results of operations or financial condition, expose us to negative publicity and reputational damage and harm our relationships with clients, underwriting enterprises or other business partners.
Future changes in the regulatory environment may impact our ability to collect these revenues. Adverse regulatory, legal or other developments regarding these revenues could have a material adverse effect on our business, results of operations or financial condition, expose us to negative publicity and reputational damage and harm our relationships with clients, underwriting enterprises or other business partners.
We periodically evaluate our estimates and assumptions, including those relating to the valuation of goodwill and other intangible assets, investments, income taxes, revenue recognition, deferred costs, stock-based compensation, claims handling obligations, retirement plans, litigation and contingencies. We base our estimates on historical experience and various assumptions that we believe to be reasonable based on specific circumstances.
We periodically evaluate our estimates and assumptions, including those relating to the valuation of goodwill and other intangible assets, investments, income taxes, revenue recognition, deferred costs, stock-based compensation, claims handling obligations, retirement plans, litigation and contingencies. We base our estimates on historical experience and various assumptions that we 26 believe to be reasonable based on specific circumstances.
If we cannot service our indebtedness, we may have to take actions such as selling assets, issuing additional equity or reducing or delaying capital expenditures, strategic acquisitions, and 27 investments, any of which could impede the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business.
If we cannot service our indebtedness, we may have to take actions such as selling assets, issuing additional equity or reducing or delaying capital expenditures, strategic acquisitions, and investments, any of which could impede the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business.
Management’s Discussion and Analysis of Financial Condition and Results of Operations. While many of our new employees come to us through mergers and acquisitions and traditional hiring, “growing our own” has long been a key part of our human capital strategy. Our summer internship program began more than fifty years ago with a single intern.
Management’s Discussion and Analysis of Financial Condition and Results of Operations. Hiring and Retention While many of our new employees come to us through mergers and acquisitions and traditional hiring, “growing our own” has long been a key part of our human capital strategy. Our summer internship program began more than fifty years ago with a single intern.
In the past, we have occasionally experienced significant increases in these costs as a result of macro-economic factors beyond our control, including wage inflation, increases in health care costs, declines in investment returns on pension assets and changes in discount rates 15 and actuarial assumptions used to calculate pension and related liabilities.
In the past, we have occasionally experienced significant increases in these costs as a result of macro-economic factors beyond our control, including wage inflation, increases in health care costs, declines in investment returns on pension assets and changes in discount rates and actuarial assumptions used to calculate pension and related liabilities.
Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability. We derive much of our revenue from commissions and fees for our brokerage services. We do not determine the premiums on which our commissions are generally based. Moreover, premiums are cyclical in nature and may vary widely based on market conditions.
Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability. We derive much of our revenue from commissions and fees for our brokerage services. We do not determine the premiums on which our commissions are generally based. Moreover, premiums are cyclical in nature and may vary widely based on market 19 conditions.
We may also incur future debt obligations that might subject us to additional or more restrictive covenants that could affect our financial and operational flexibility, including our ability to pay dividends. We cannot make any assurances that we will be able to refinance our debt or obtain additional financing on terms acceptable to us, or at all.
We may also incur future debt obligations 28 that might subject us to additional or more restrictive covenants that could affect our financial and operational flexibility, including our ability to pay dividends. We cannot make any assurances that we will be able to refinance our debt or obtain additional financing on terms acceptable to us, or at all.
If we are unable to effectively maintain and enhance our system safeguards in line with evolving cyber threats, including in connection with the integration of acquisitions, we may incur unexpected costs, regulatory enforcement action, loss of clients, reputational damage and certain of our systems may become more vulnerable to unauthorized access.
If we are unable to effectively maintain and enhance our system safeguards in line with evolving cyber threats, including in connection with the integration of acquisitions, we may incur unexpected costs, including litigation costs, regulatory enforcement action, loss of clients, reputational damage, and certain of our systems may become more vulnerable to unauthorized access.
These laws apply to transfers of personal information among our affiliates, as well as to transactions we enter into with third party vendors and clients. Significant uncertainty exists as privacy and data protection laws evolve and may be interpreted and applied differently from country to country, and may create inconsistent or conflicting requirements.
These laws apply to transfers of personal information among our affiliates, as well as to transactions we enter into with third party vendors and clients. Significant uncertainty exists as privacy and data protection laws evolve and may be interpreted and applied differently from country to country and state to state, and may create inconsistent or conflicting requirements.
Our activities are also subject to a variety of other laws, rules and regulations addressing licensing, data privacy, wage-and-hour standards, employment and labor relations, anti-competition, anti-corruption, currency, the conduct of our business, reserves and the amount of local investment with respect to our operations in certain countries.
Our activities are also subject to a variety of other laws, rules and regulations addressing licensing, data privacy, AI, wage-and-hour standards, employment and labor relations, competition, anti-corruption, currency, the conduct of business, reserves and the amount of local investment with respect to our operations in certain countries.
To date, the dispute between India and Pakistan involving the Kashmir region, rising tensions between India and China, incidents of terrorism in India, the potential for civil unrest and general geopolitical uncertainties have not adversely affected our operations in India. However, such factors could potentially affect our operations there in the future.
To date, the dispute between India and Pakistan involving the Kashmir region, rising tensions between India and China, incidents of terrorism in India, the potential for civil unrest and general geopolitical uncertainties have not adversely affected our operations in India. However, such factors could potentially affect our operations 16 there in the future.
Our reputation could also be harmed by negative perceptions or publicity regarding ESG, including concerns with environmental matters, climate change, workforce diversity, political spending, pay equity, harassment, racial justice, cybersecurity and data privacy, as well as backlash against ESG initiatives generally.
Our reputation could also be harmed by negative perceptions or publicity regarding sustainability or ESG matters, including concerns with environmental, climate change, workforce diversity, political spending, pay equity, harassment, racial justice, cybersecurity and data privacy matters, as well as backlash against sustainability or ESG initiatives generally.
Significant lines of insurance coverage and consultant capabilities are as follows: Aviation Disability General Liability Products Liability Casualty Earthquake Health & Welfare Professional Liability Claims Advocacy Errors & Omissions Healthcare Analytics Property Commercial Auto Exchange Solutions Human Resources Retirement Compensation Executive Benefits Institutional Investment Surety Bond Cyber Liability Fiduciary Services Loss Control Voluntary Benefits Dental Fine Arts Marine Wind Directors & Officers Liability Fire Medical Workers’ Compensation Our retail brokerage operations are organized and operate within certain key niche/practice groups, which account for approximately 84% of our retail brokerage revenues.
Significant lines of insurance coverage and consultant capabilities are as follows: Aviation Disability General Liability Products Liability Casualty Earthquake Health & Welfare Professional Liability Claims Advocacy Errors & Omissions Healthcare Analytics Property Commercial Auto Exchange Solutions Human Resources Retirement Compensation Executive Benefits Institutional Investment Surety Bond Cyber Liability Fiduciary Services Loss Control Voluntary Benefits Dental Fine Arts Marine Wind Directors & Officers Liability Fire Medical Workers’ Compensation Our retail brokerage operations are organized and operate within certain key niche/practice groups, which account for approximately 78% of our retail brokerage revenues.
In the case of contingent revenues, under revenue recognition accounting standards, this could lead to the reversal of revenues in future periods that were recognized in prior periods. 19 We face a variety of risks in our benefit consulting operations distinct from those we face in our insurance brokerage operations.
In the case of contingent revenues, under revenue recognition accounting standards, this could lead to the reversal of revenues in future periods that were recognized in prior periods. We face a variety of risks in our benefit consulting operations distinct from those we face in our insurance brokerage operations.
If this occurred, not only would our business be negatively impacted by the general economic decline, but a drop in the stock market affecting our stock price could negatively impact our ability to grow through mergers and acquisitions financed using our common stock.
If this occurred, not only would our business be negatively impacted by the general economic decline, but a drop in the stock 21 market affecting our stock price could negatively impact our ability to grow through mergers and acquisitions financed using our common stock.
We are subject to the risk that we, our employees, our agents, or our affiliated entities, or their respective officers, directors, employees and agents, may take actions determined to be in violation of any of these laws, regulations or policies, for which we might be held responsible.
We are subject to the risk that we, our employees, our agents, or our affiliated entities, or their respective officers, directors, employees and agents, take actions determined to be in violation of any of these laws, regulations or policies, for which we might be held responsible.
One of these partnerships received a notice from the IRS disallowing our co-investors from claiming tax credits. The partnership defended its position in tax court and prevailed in August 2019. The decision was affirmed by the D.C. Court of Appeals.
Additionally, one of these partnerships received a notice from the IRS disallowing our co-investors from claiming tax credits. The partnership defended its position in tax court and prevailed in August 2019. The decision was affirmed by the D.C. Court of Appeals.
These developments include: • Increased capital-raising by underwriting enterprises, which could result in new risk-taking capital in the industry, which in turn may lead to lower insurance premiums and commissions; • Underwriting enterprises selling insurance directly to insureds without the involvement of a broker or other intermediary; • Changes in our business compensation model as a result of regulatory developments; 18 • Federal and state governments establishing programs to provide health insurance (such as a single-payer system being discussed by some in the U.S.) or, in certain cases, property insurance in catastrophe-prone areas or other alternative market types of coverage, that compete with, or completely replace, insurance products currently offered by underwriting enterprises; • Climate-change regulation in the U.S. and around the world moving us toward a low-carbon economy, which could create new competitive pressures around climate resilience consulting services and innovative insurance solutions; • Continued consolidation in the financial services industry, leading to larger financial services institutions offering a wider variety of services including insurance brokerage and risk management services; • Increased competition from new market participants such as banks, accounting firms, consulting firms and Internet or other technology firms offering risk management or insurance brokerage services, or new distribution channels for insurance such as payroll firms and professional employer organizations; and • Third party capital providers have entered the insurance and reinsurance risk transfer market offering products and capital directly to our clients.
These developments include: • Increased capital-raising by underwriting enterprises, which could result in new risk-taking capital in the industry, which in turn may lead to lower insurance premiums and commissions; • Underwriting enterprises selling insurance directly to insureds without the involvement of a broker or other intermediary; • Changes in our business compensation model as a result of regulatory developments; • Federal and state governments establishing programs to provide health insurance (such as a single-payer system) or, in certain cases, property insurance in catastrophe-prone areas or other alternative market types of coverage, that compete with, or completely replace, insurance products currently offered by underwriting enterprises; • Climate-change regulation in the U.S. and around the world moving us toward a low-carbon economy, which could create new competitive pressures around climate resilience consulting services and innovative insurance solutions; • Continued consolidation in the financial services industry, leading to larger financial services institutions offering a wider variety of services including insurance brokerage and risk management services; • Increased competition from new market participants such as banks, accounting firms, consulting firms and Internet or other technology firms offering risk management or insurance brokerage services, or new distribution channels for insurance such as payroll firms and professional employer organizations; and • Third party capital providers have entered the insurance and reinsurance risk transfer market offering products and capital directly to our clients.
In addition, the transition to a low-carbon economy could give rise to the need for innovative insurance and risk management solutions for entirely new industries and companies, as well as advice and services to bolster climate resilience for existing companies.
In addition, the transition to a low-carbon economy could give rise to the need for innovative insurance, reinsurance and risk management solutions for entirely new industries and companies, as well as advice and services to bolster climate resilience for existing companies.
These include, among others, the “placed-in-service” condition and requirements relating to qualified 25 emissions reductions, coal sales to unrelated parties and at least one of the operations’ owners qualifying as a “producer” of refined coal.
These include, among others, the “placed-in-service” condition and requirements relating to qualified emissions reductions, coal sales to unrelated parties and at least one of the operations’ owners qualifying as a “producer” of refined coal.
We are subject to a variety of continuously evolving and developing laws and regulations globally regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.
We are subject to a variety of continuously evolving and developing laws and regulations globally regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, destruction, and security of personal data.
These and other international regulatory risks and labor related risks are described below under “Regulatory, Legal and Accounting Risks”; • We own interests in firms where we do not exercise management control (such as Casanueva Perez S.A.P.I. de C.V. in Mexico) and are therefore unable to direct or manage the business to realize the anticipated benefits, including mitigation of risks, that could be achieved through full ownership; • The potential costs, difficulties and risks associated with local regulations across the globe, including the risk of personal liability for directors and officers (for example, in the U.K.) and “piercing the corporate veil” risks under the corporate law regimes of certain countries; • Difficulties in staffing and managing foreign operations.
These and other international regulatory risks and labor related risks are described below under “Regulatory, Legal and Accounting Risks”; • We own interests in firms where we do not exercise management control (such as Casanueva Perez S.A.P.I. de C.V. in Mexico and Renomia, A.S. in the Czech Republic) and are therefore unable to direct or manage the business to realize the anticipated benefits, including mitigation of risks, that could be achieved through full ownership; • The potential costs, difficulties and risks associated with local regulations across the globe, including the risk of personal liability for directors and officers (for example, in the U.K.) and “piercing the corporate veil” risks under the corporate law regimes of certain countries; • Difficulties in staffing and managing foreign operations.
It is possible that, if the outcomes of these contingencies and legal proceedings were not favorable to us, it could materially adversely affect our future financial results.
It is possible that, if the outcomes of these contingencies and legal proceedings 23 were not favorable to us, it could materially adversely affect our future financial results.
We believe that our major strength is our ability to deliver comprehensively structured insurance, insurance and risk management solutions, superior claim outcomes and comprehensive consulting services to our clients.
We believe that our major strength is our ability to deliver comprehensively structured insurance, reinsurance and risk management solutions, superior claim outcomes and comprehensive consulting services to our clients.
We own 46.5% of Chem-Mod LLC 7 and are its controlling managing member. We also have a 12.0% noncontrolling interest in dormant, privately-held, enterprises, C-Quest Technology LLC and C-Quest Technologies International LLC (which we refer to together as, C-Quest), which own technologies that reduce carbon dioxide emissions created by burning fossil fuels.
We own 46.5% of Chem-Mod LLC and are its controlling managing member. We also have a 12.0% noncontrolling interest in two dormant, privately-held, enterprises, C-Quest Technology LLC and C-Quest Technologies International LLC (which we refer to together as, C-Quest), which own technologies that reduce carbon dioxide emissions created by burning fossil fuels.
Since our founding in 1927, we have grown from a one-person insurance agency to the world’s fourth largest insurance broker/risk manager based on revenues, according to Business Insurance magazine’s July/August 2022 edition, to the world’s third largest insurance broker/risk manager based on market capitalization as of December 31, 2022, and one of the world’s largest property/casualty third party claims administrators, according to Business Insurance magazine’s May 2022 edition.
Since our founding in 1927, we have grown from a one-person insurance agency to the world’s third largest insurance broker/risk manager based on market capitalization as of December 31, 2023 and, according to Business Insurance magazine’s July/August 2023 edition, to the world’s fourth largest insurance broker based on revenues, and one of the world’s largest property/casualty third party claims administrators, according to Business Insurance magazine’s May 2023 edition.
We rely on information technology and third party vendors to support our business activities, including our secure processing of personal, confidential, sensitive, proprietary and other types of information. Despite ongoing efforts to improve our and our vendors’ ability to protect and defend against cyber-attacks, we may not be able to protect all of our data.
We rely on IT and third party vendors to support our business activities, including our secure processing of personal, confidential, sensitive, proprietary and other types of information. Despite ongoing efforts to improve our and our vendors’ ability to protect and defend against cyber-attacks, we may not be able to protect all of our data.
Our policies mandate strict compliance with such laws and we devote substantial resources to programs to ensure compliance, including investigating business practices and taking steps to address the risk that our employees, third party partners or agents will engage in business practices that are prohibited by our policies and/or such laws and regulations.
Our policies mandate strict compliance with such laws and we devote substantial resources to programs designed to ensure compliance, including investigating business practices and taking steps to address the risk that our employees, third party representatives, partners or agents will engage in business practices that are prohibited by our policies and/or such laws and regulations.
No assurances can be given that contractual arrangements and precautions taken to ensure assumption of these risks by facility owners or operators, or other end users, will result in that facility owner or operator, or other end user, accepting full responsibility for any environmental or product liability claim.
No assurances can be given that contractual arrangements and precautions taken to provide for assumption of these risks by facility owners or operators, or other end users, will result in that facility owner or operator, or other end user, accepting full responsibility for any environmental or product liability claim.
Although we have used foreign currency hedging strategies in the past and currently have some in place, such risks cannot be eliminated entirely, and significant changes in exchange rates may adversely affect our results of operations; • Conflicting regulations in the countries in which we do business; • Political and economic instability (including risks relating to undeveloped or evolving legal systems, unstable governments, acts of terrorism and outbreaks of war, including the military conflict between Russia and Ukraine); • Coordinating our communications, policies and logistics across geographic distances, multiple time zones and in different languages, including during times of crisis management; • Risks relating to our post-Brexit plan to address the loss of passporting rights between the U.K. and EU with respect to insurance brokerage services.
Although we 17 have used foreign currency hedging strategies in the past and currently have some in place, such risks cannot be eliminated entirely, and significant changes in exchange rates may adversely affect our results of operations; • Conflicting regulations in the countries in which we do business; • Political and economic instability (including risks relating to undeveloped or evolving legal systems, unstable governments, acts of terrorism and outbreaks of war, including between Russia and Ukraine, and in the Middle East); • Coordinating our communications, policies and logistics across geographic distances, multiple time zones and in different languages, including during times of crisis management; • Risks relating to our post-Brexit plan to address the loss of passporting rights between the U.K. and EU with respect to insurance brokerage services.
We offer client service capabilities in more than 130 countries around the world through our direct operations as well as through a network of correspondent brokers and consultants. Domestic Retail Insurance Brokerage Operations Our retail insurance brokerage operations accounted for 73% of our brokerage segment revenues in 2022.
We offer client service capabilities in more than 130 countries around the world through our direct operations as well as through a network of correspondent brokers and consultants. Domestic Retail Insurance Brokerage Operations Our retail insurance brokerage operations accounted for 73% of our brokerage segment revenues in 2023.
Our retirement-related consulting and investment services are subject to pension law and financial regulation in many countries.
Our retirement-related consulting and investment advisory services are subject to pension law and financial regulation in many countries.
As more fully described in Note 17 to our 2022 consolidated financial statements, we are a defendant in various legal actions incidental to our business, including but not limited to matters related to employment practices, alleged breaches of non-compete or other restrictive covenants, theft of trade secrets, breaches of fiduciary duties, intellectual property infringement and related causes of 24 action.
As more fully described in Note 17 to our 2023 consolidated financial statements, we are a defendant in various legal actions incidental to our business, including but not limited to matters related to employment practices, alleged breaches of non-compete or other restrictive covenants, theft of trade secrets, breaches of fiduciary duties, intellectual property infringement and related causes of action.
We are also required to make certain judgments and estimates that affect the disclosed and recorded amounts of revenues and expenses related to revenue recognition and deferred costs - see Note 4 to our 2022 consolidated financial statements.
We are also required to make certain judgments and estimates that affect the disclosed and recorded amounts of revenues and expenses related to revenue recognition and deferred costs - see Note 4 to our 2023 consolidated financial statements.
Moreover, to the extent that we issue restricted stock units, performance stock units, options or warrants to purchase shares of our common stock in the future and those options or warrants are exercised or as the restricted stock units or performance stock units vest, our stockholders may experience further dilution.
Moreover, to the extent that we issue restricted stock units, performance stock units, options or warrants to purchase shares of our common stock in the future and those options or warrants are exercised or as the restricted stock units or performance stock units vest, our stockholders will experience further dilution.
Additionally, changes in accounting standards (see Note 2 to our 2022 consolidated financial statements) could increase costs to the organization and could have an adverse impact on our future financial position and results of operations.
Additionally, changes in accounting standards (see Note 2 to our 2023 consolidated financial statements) could increase costs to the organization and could have an adverse impact on our future financial position and results of operations.
The process of integrating information systems of businesses we acquire is complex and exposes us to additional risk as we might not adequately identify weaknesses in the targets’ information systems or information handling, privacy and security policies and protocols, which could expose us to unexpected liabilities or make our own systems and data more vulnerable to attack.
The process of integrating information systems of businesses we acquire is complex and exposes us to additional risk as we might not adequately identify weaknesses in the targets’ information systems or information handling, privacy and security policies and protocols, which could expose us to unexpected liabilities or make our own systems and data more vulnerable to cybersecurity incidents.
Our brokerage segment operates through a network of more than 460 sales and service offices located throughout the U.S. and more than 300 sales and service offices in approximately 60 countries, most of which are in the U.K., Australia, Canada and New Zealand. Most of these offices are fully staffed with sales and service 5 personnel.
Our brokerage segment operates through a network of more than 590 sales and service offices located throughout the U.S. and more than 300 sales and service offices in approximately 60 countries, most of which are in the Australia, Canada, New Zealand and the U.K. Most of these offices are fully staffed with sales and service personnel.
Department of Justice (DOJ), the IRS, the Office of Foreign Assets Control, the Federal Trade Commission (FTC) and the Financial Industry Regulatory Authority (FINRA) in the U.S., the Financial Conduct Authority in the U.K., the Australian Securities and Investments Commission in Australia and insurance regulators in nearly every jurisdiction in which we operate.
Department of Justice (DOJ), the IRS, the Office of Foreign Assets Control, the Federal Trade Commission (FTC) the Financial Industry Regulatory Authority (FINRA) and the Financial Crimes Enforcement Network in the U.S., the Financial Conduct Authority in the U.K., the Australian Securities and Investments Commission in Australia and insurance regulators in nearly every jurisdiction in which we operate.
Our risk management segment operations provide contract claim settlement, claim administration, loss control services and risk management consulting for commercial, not-for-profit, captive and public entities, and various other organizations that choose to self-insure property/casualty coverages or choose to use a third-party claims management organization rather than the claim services provided by an underwriting enterprise.
Our risk management segment operations provide contract claim settlement, claim administration, loss control services and risk management consulting for commercial, nonprofit, captive and public sector entities, and various other organizations that choose to self-insure property/casualty coverages or choose to use a third-party claims management organization rather than the claim services provided by an underwriting enterprise.
A material change in the tax laws, treaties, or regulations, or their interpretation, of any jurisdiction with which we do business, or in which we have significant operations, could adversely affect us. For example, in October 2021, the OECD announced that 136 countries and tax jurisdictions have agreed to implement a new “Pillar 2” approach to international taxation.
A material change in the tax laws, treaties, or regulations, or their interpretation, of any jurisdiction with which we do business, or in which we have significant operations, could adversely affect us. For example, in October 2021, the OECD announced that 136 countries and tax jurisdictions have agreed to implement a new Pillar 2 approach to international taxation.
In addition, our results of operations, financial condition or liquidity may be adversely affected if, in the future, our insurance coverage proves to be inadequate or unavailable or we experience an increase in liabilities for which we self-insure. We have purchased errors and omissions insurance and other insurance to provide protection against losses that arise in such matters.
In addition, our results of operations, financial condition or liquidity may be adversely affected if, in the future, our insurance coverage proves to be inadequate or unavailable or we experience an increase in liabilities for which we self-insure. We have purchased E&O insurance and other insurance to provide protection against losses that arise in such matters.
Item 1. B usiness. Overview Arthur J. Gallagher & Co. and its subsidiaries, collectively referred to herein as we, our, us or Gallagher, are engaged in providing insurance brokerage, reinsurance brokerage, consulting, and third-party property/casualty claims settlement and administration services to businesses and organizations around the world.
Item 1. B usiness. Overview Arthur J. Gallagher & Co. and its subsidiaries, collectively referred to herein as we, our, us or Gallagher, are engaged in providing insurance brokerage, reinsurance brokerage, consulting, and third-party property/casualty claims settlement and administration services to entities and individuals around the world.
If this rule goes into effect, or if we fail to adequately address any of the issues referred to above, we could experience a material adverse effect on our business, operating results and financial condition. See also “The substantial increase in remote work among our employees subjects us to certain challenges and risks” below.
If this rule goes into effect, more states adopt similar rules or if we fail to adequately address any of the issues referred to above, we could experience a material adverse effect on our business, operating results and financial condition. See also “The substantial increase in remote work among our employees subjects us to certain challenges and risks” below.
If we lose a local leader, recruiting a replacement locally or finding an internal candidate qualified to transfer to such location could be difficult; • Less flexible employee relationships, which in certain circumstances has limited our ability to prohibit employees from competing with us after they are no longer employed with us or recover damages, and made it more difficult and expensive to terminate their employment; • Some of our foreign subsidiaries receive revenues or incur obligations in currencies that differ from their functional currencies.
If we lose a local key employee, hiring and retaining talent locally or finding an internal candidate qualified to transfer to such location could be difficult; • Less flexible employee relationships, which in certain circumstances has limited our ability to prohibit employees from competing with us after they are no longer employed with us or recover damages, and made it more difficult and expensive to terminate their employment; • Some of our foreign subsidiaries receive revenues or incur obligations in currencies that differ from their functional currencies.
The Organization for Economic Cooperation and Development (which we refer to as the OECD) continues to issue reports and recommendations as part of its Base Erosion and Profit Shifting project (which we refer to as BEPS), and in response many countries in which we do business are expected to adopt rules which may change various aspects of the existing framework under which our tax obligations are determined.
The Organization for Economic Cooperation and Development (which we refer to as the OECD) continues to issue reports and recommendations as part of its Base Erosion and Profit Shifting project (which we refer to as BEPS), and in response many countries in which we do business have adopted, or are expected to adopt, rules which will change various aspects of the existing framework under which our tax obligations are determined.
Significant niche/practice groups we serve are as follows: Affinity Equity Advisors Law Firms Real Estate/Hospitality Automotive Financial Institutions Life Sciences Religious Aviation Food/Agribusiness Marine Restaurant Construction Global Risks Not-for-Profit Technology Energy Healthcare Personal Trade Credit/Political Risk Entertainment Higher Education Private Client Transportation Environmental K12 Education Public Entity Our specialized focus on these niche/practice groups allows for highly-focused marketing efforts and facilitates the development of value-added products and services specific to those industries.
Significant niche/practice groups we serve are as follows: Affinity Equity Advisors Life Sciences Real Estate/Hospitality Automotive Financial Institutions Manufacturing Religious Aviation Food/Agribusiness Marine Restaurant Construction Global Risks Nonprofit Retail and Services Energy Healthcare Personal Technology & Communications Entertainment Higher/K12 Education Private Client Trade Credit/Political Risk Environmental Law Firms Public Sector Transportation Our specialized focus on these niche/practice groups allows for highly-focused marketing efforts and facilitates the development of value-added products and services specific to those industries.
Continuing consolidation in our industry and growing interest in acquiring insurance brokers on the part of private equity firms, private equity-backed consolidators and newly public insurance brokers has in some cases made and could in the future make appropriate acquisition targets more difficult to identify and more expensive.
Continuing consolidation in our industry and a high level of interest in acquiring insurance brokers on the part of private equity firms, private equity-backed consolidators and newly public insurance brokers has, in some cases, made, and could in the future make, appropriate acquisition targets more difficult to identify and more expensive.
Three of the firms we compete with in the global risk management and brokerage markets have larger revenues than ours.
Two of the firms we compete with in the global brokerage and risk management markets have larger revenues than ours.
New laws or regulations reducing employer-sponsored health insurance, by limiting or eliminating tax-advantaged employer-sponsored benefits or otherwise, could impact clients’ demand for our services. If we are unable to adapt our services to changes in the legal and regulatory landscape around employer-sponsored benefits, our results of operations could be adversely impacted.
New laws or regulations reducing employer-sponsored health insurance, by limiting or eliminating tax-advantaged employer-sponsored benefits or otherwise, could impact clients’ demand for our services. If we are unable to adapt our services to changes in the legal and regulatory landscape around employer-sponsored benefits, our results of operations could be adversely impacted. We closed the acquisition of Buck in April 2023.
The timing of acquisitions, recognition of books of business gains and losses and, prior to 2022, the variability in the recognition of tax credits generated by our clean energy investments also impact the trends in our quarterly operating results. Brokerage Segment The brokerage segment accounted for 85% of our revenues in 2022.
The timing of acquisitions, recognition of books of business gains and losses and, prior to 2022, the variability in the recognition of tax credits generated by our clean energy investments also impact the trends in our quarterly operating results. 5 Brokerage Segment The brokerage segment accounted for 86% of our revenues in 2023.
For example, we are building our Latin American operations through acquisitions of local family-owned insurance brokerage firms.
For example, we are growing our Latin American operations through acquisitions of local family-owned insurance brokerage firms.
This and other forms of regulatory supervision could reduce our profitability or growth by increasing the costs of compliance, increasing the risk of costly enforcement actions, restricting the products or services we sell, the markets we enter, the methods by which we sell our products and services, or the prices we can charge for our services and the form of compensation we can accept from our clients, underwriting enterprises and third parties.
These and other forms of regulatory action could reduce our profitability or growth by increasing the costs of compliance, increasing the risk of costly enforcement actions, restricting the products or services we sell, the markets we enter, the methods by which we sell our products and services, or the prices we can charge for our services and the form of compensation we can accept from our clients, underwriting 25 enterprises and third parties.
In 2022, we generated approximately 35% of our combined brokerage and risk management revenues outside the U.S. Our business outside the U.S. presents operational, economic and other risks that are different from, or greater than, the risks we face doing comparable business in the U.S.
In 2023, we generated approximately 36% of our combined brokerage and risk management revenues outside the U.S. Our business outside the U.S. presents operational, economic and other risks that are different from, or greater than, the risks we face doing comparable business in the U.S.
When regulatory approval of acquisitions is required, our ability to complete acquisitions may be limited by an ongoing regulatory review or other issues with the relevant regulator. Our ability to finance and integrate acquisitions may also decrease if we complete a greater number of larger acquisitions than we have historically.
When regulatory approval of acquisitions is required, our ability to complete acquisitions may be limited by an ongoing regulatory review or other issues with the relevant regulator. Our ability to finance and integrate acquisitions may also decrease if we complete a greater number of larger acquisitions than we have historically. See the risk factor below regarding larger acquisitions.
We could be adversely affected by violations or alleged violations of laws that impose requirements for the conduct of our overseas operations, including the FCPA, the U.K. Bribery Act or other anti-corruption laws, sanctioned parties restrictions and FATCA.
We could be adversely affected by violations or alleged violations of laws that impose requirements for the conduct of our overseas operations, including the FCPA, the U.K. Bribery Act or other anti-corruption laws, sanctions laws and FATCA.
Violations by us or a third party acting on our behalf could result in significant internal investigation costs and legal fees, civil and criminal penalties, including prohibitions on the conduct of our business, and reputational harm.
Violations by us or our third party representatives could result in significant internal investigation costs and legal fees, civil and criminal penalties, including prohibitions on the conduct of our business, and reputational harm.
In addition, major political and legal developments in jurisdictions in which we do business may lead to new regulatory costs and challenges. For example, China adopted a “blocking” statute similar to that of the EU requiring compliance with certain Chinese laws if they conflict with U.S. laws. In 2022, we acquired Willis Re’s reinsurance operations in China.
In addition, major political and legal developments in jurisdictions in which we do business may lead to new regulatory costs and challenges. For example, China adopted a “blocking” statute similar to that of the EU requiring compliance with certain Chinese laws if they conflict with U.S. laws.
Bribery Act, risks relating to ensuring compliance with licensing and regulatory requirements, tax and accounting issues, the risk that an acquisition distracts management and personnel from our existing business, and integration difficulties relating to accounting, information technology, pay equity, human resources, or employee attrition, some or all of which could have an adverse effect on our results of operations and growth.
Bribery Act, risks relating to ensuring compliance with licensing and regulatory requirements, tax and accounting issues, the risk that an acquisition distracts management and personnel from our existing business, and integration difficulties relating to accounting, information technology (which we refer to as IT), pay equity, or 13 human resources, some or all of which could have an adverse effect on our results of operations and growth.
We provide sophisticated data analysis and other data and benchmarking insights through Gallagher Drive to help our clients make insurance decisions. Through our electronic platform, SmartMarket, we also provide insurance carriers with individualized preference setting and risk identification capabilities, as well as performance data and metrics.
We provide sophisticated data analysis and other data and benchmarking insights through a product offering we refer to as Gallagher Drive to help our clients make insurance decisions. Through our SmartMarket platform, we also provide insurance carriers with individualized preference setting and risk identification capabilities, as well as performance data and metrics.
We have investments in limited liability companies that own or have owned 35 commercial clean coal production facilities that are qualified to produce refined coal using Chem-Mod LLC’s proprietary technologies. These operations produced refined coal that we believe qualifies for tax credits under Internal Revenue Code Section 45 (which we refer to as IRC Section 45).
We have investments in limited liability companies that own or owned 35 commercial clean coal production facilities that are qualified to produce refined coal using Chem-Mod LLC’s proprietary technologies. These operations produced refined coal that we believe qualifies for tax credits under IRC Section 45.
A disruption affecting RISX-FACS®, third-party cloud services or any other infrastructure supporting our business, including key customer relationship management software, could have a material adverse effect on our operations, cause reputational harm and damage our employee and client relationships; • The favorable trend among both underwriting enterprises and self-insured entities toward outsourcing various types of claims administration and risk management services will reverse or slow, causing our revenues or revenue growth to decline; • Concentration of large amounts of revenue with certain clients results in greater exposure to the potential negative effects of lost business due to changes in management at such clients or changes in state government policies, in the case of our government-entity clients, or for other reasons; • Contracting terms will become less favorable or the margins on our services will decrease due to increased competition, regulatory constraints or other developments; • We will not be able to satisfy regulatory requirements related to third party administrators or regulatory developments (including those relating to security and data privacy) will impose additional burdens, costs or business restrictions that make our business less profitable; 20 • Volatility in our case volumes, which are dependent upon a number of factors and difficult to forecast accurately, could impact our revenues; • If we do not control our labor and technology costs (and beginning during the pandemic we have been experiencing wage inflation and difficulty attracting and retaining talent), we may be unable to remain competitive in the marketplace and profitably fulfill our existing contracts (other than those that provide cost-plus or other margin protection); • We may be unable to develop further efficiencies in our claims-handling business and may be unable to obtain or retain certain clients if we fail to make adequate improvements in technology or operations; and • Underwriting enterprises or certain large self-insured entities may create in-house servicing capabilities that compete with our third party administration and other administration, servicing and risk management products, and we could face additional competition from potential new entrants into the global claims management services market.
A disruption affecting RISX-FACS®, third-party cloud services or any other infrastructure supporting our business, including key client relationship management software, could have a material adverse effect on our operations, cause reputational harm and damage our employee and client relationships; • The favorable trend among both underwriting enterprises and self-insured entities toward outsourcing various types of claims administration and risk management services will reverse or slow, causing our revenues or revenue growth to decline; • Concentration of large amounts of revenue with certain clients results in greater exposure to the potential negative effects of lost business due to changes in management at such clients or changes in state government policies, in the case of our government-entity clients, or for other reasons; • Contracting terms will become less favorable or the margins on our services will decrease due to increased competition, regulatory constraints or other developments; • We do not satisfy regulatory requirements related to third party administrators or regulatory developments, including those relating to security, cybersecurity and data privacy as we manage a large amount of highly sensitive and confidential information including personally identifiable information, protected health information and financial information, will impose additional burdens, costs or business restrictions that make our business less profitable; • Volatility in our case volumes, which are dependent upon a number of factors and difficult to forecast accurately, could impact our revenues; • Wage inflation, difficulty attracting and retaining talent, and rising technology costs, all of which have been challenging to control since 2020, may impact our ability to remain competitive in the marketplace and profitably fulfill our existing contracts (other than those that provide cost-plus or other margin protection); • We may be unable to develop further efficiencies in our claims-handling business and may be unable to obtain or retain certain clients if we fail to make adequate improvements in technology or operations; and • Underwriting enterprises or certain large self-insured entities may create in-house servicing capabilities that compete with our third party administration and other administration, servicing and risk management products, and we could face additional competition from potential new entrants into the global claims management services market.
The reinsurance securities business we acquired as part of the Willis Re acquisition serves from time to time as the underwriter and initial purchaser of securities (such as catastrophe bonds) issued by our reinsurance company clients. This involves us, acting as an intermediary, to use our capital on hand and short-term borrowings to cover the purchase price of the securities.
Our reinsurance securities business serves from time to time as the underwriter and initial purchaser of securities (such as catastrophe bonds) issued by our reinsurance company clients. This involves us, acting as an intermediary, to use our capital on hand and short-term borrowings to cover the purchase price of the securities.
See Note 3 to our 2022 consolidated financial statements for a summary of our 2022 acquisitions, the amount and form of the consideration paid and the dates of acquisitions. Clients Our client base is highly diversified and includes commercial, industrial, public entity, religious and not-for-profit entities, as well as underwriting enterprises in our reinsurance operations and risk management segment.
See Note 3 to our 2023 consolidated financial statements for a summary of our 2023 acquisitions, the amount and form of the consideration paid and the dates of acquisitions. Clients Our client base is highly diversified and includes commercial, industrial, public sector, religious and nonprofit entities, as well as underwriting enterprises in our reinsurance operations and risk management segment.
See Note 3 to our 2022 consolidated financial statements for information regarding the size of transactions in the reporting period.
See also Note 3 to our 2023 consolidated financial statements for information regarding the size of transactions in the reporting period.
Our benefit consulting operations face a variety of risks distinct from those faced by our brokerage operations. The portion of our revenue derived from consulting engagements and special project work is more vulnerable to reduction, postponement, cancellation or non-renewal during an economic downturn than traditional insurance brokerage commissions, and we did experience such a reduction earlier in the pandemic.
Our benefit consulting operations face a variety of risks distinct from those faced by our brokerage operations. The portion of our revenue derived from consulting engagements and special project work is more vulnerable to reduction, postponement, cancellation or non-renewal during an economic downturn than traditional insurance brokerage commissions.
We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and limitations that could significantly impact our ability to operate our business. As of December 31, 2022, we had total consolidated debt outstanding of approximately $6.1 billion. The level of debt outstanding each period could adversely affect our financial flexibility.
We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and limitations that could significantly impact our ability to operate our business. As of December 31, 2023, we had total consolidated debt outstanding of approximately $8.0 billion. The level of debt outstanding each period could adversely affect our financial flexibility.
Our brokerage segment operations provide brokerage and consulting services to businesses and organizations of all types, including commercial, not-for-profit, public entities, insurance companies and insurance capital providers, and, to a lesser extent, individuals, in the areas of insurance and reinsurance placements, risk of loss management, and management of employer sponsored benefit programs.
Our brokerage segment operations provide brokerage and consulting services to entities of all types, including commercial, nonprofit, public sector entities, insurance companies and insurance capital providers, and to a lesser extent, individuals, in the areas of insurance and reinsurance placements, risk of loss management, and management of employer sponsored benefit programs.
Our future success depends, in part, on our ability to anticipate and respond effectively to the threat and opportunity presented by digital disruption, “big data” and data analytics, and other developments in technology.
Our future success depends, in part, on our ability to anticipate and respond effectively to the risks and opportunities presented by digital disruption, “big data” and data analytics, AI and other developments in technology.
Holders of our common stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our stockholders.
Sales under our ATM 29 program will result in additional dilution for our stockholders. Holders of our common stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our stockholders.
These may include new applications or insurance-related services based on artificial intelligence, machine learning, robotics, blockchain, the metaverse or new approaches to data mining that impact the nature of how we generate revenue.
These may include new applications or insurance-related services based on AI (e.g., generative AI, machine learning), robotics, blockchain, the metaverse or new approaches to data mining that impact the nature of how we generate revenue.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition to minimum fixed rentals, a number of our leases contain annual escalation clauses generally related to increases in an inflation index. See Notes 15 and 17 to our 2022 consolidated financial statements for information with respect to our lease commitments as of December 31, 2022. Item 3. Legal Proceedings.
Biggest changeIn addition to minimum fixed rentals, a number of our leases contain annual escalation clauses generally related to increases in an inflation index. See 30 Notes 15 and 17 to our 2023 consolidated financial statements for information with respect to our lease commitments as of December 31, 2023. Item 3. Legal Proceedings.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeGallagher 64 Corporate Vice President since 2001, Chairman of our International Brokerage Operation 2010 ‑ 2016, President of our Global Property/Casualty Brokerage Operation beginning in 2017 Douglas K. Howell 61 Corporate Vice President, Chief Financial Officer since 2003 Scott R.
Biggest changeCavaness 62 Chairman, Americas Specialty (Wholesale Brokerage) since 2024, Corporate Vice President since 2000, President of our Wholesale Brokerage Operation since 1997 - 2024 Douglas K. Howell 62 Corporate Vice President, Chief Financial Officer since 2003 Scott R.
Ziebell 60 Corporate Vice President since 2011, regional leader in our Employee Benefit and Consulting Brokerage Operations 2004 - 2016, President beginning in 2017 With the exception of Mr. Bloom, we have employed each such person principally in management capacities for more than the past five years.
Ziebell 61 President of our Employee Benefit and Consulting Brokerage Operations since 2017, Corporate Vice President since 2011, regional leader in our Employee Benefit and Consulting Brokerage Operations 2004 - 2016 With the exception of Mr. Bloom, we have employed each such person principally in management capacities for more than the past five years.
Item 4. Mine Safe ty Disclosures. Not applicable. 29 Information About Our Executive Officers Set forth below are the names, ages, positions and business backgrounds of our executive officers as of the date hereof: Name Age Position and Year First Elected J. Patrick Gallagher, Jr. 70 Chairman since 2006, President since 1990, Chief Executive Officer since 1995 Walter D.
Item 4. Mine Safe ty Disclosures. Not applicable. Information About Our Executive Officers Set forth below are the names, ages, positions and business backgrounds of our executive officers as of the date hereof: Name Age Position and Year First Elected J. Patrick Gallagher, Jr. 71 Chairman since 2006, Chief Executive Officer since 1995, President 1990 - 2024 Thomas J.
Hudson Vishal Jain 61 61 Corporate Vice President and President of our Risk Management Operation since 2010 Corporate Vice President since 2016, Chief Service Officer since 2014 Christopher E. Mead 55 Corporate Vice President, Chief Marketing Officer since 2017 Susan E. Pietrucha 56 Corporate Vice President, Chief Human Resource Officer since 2007 William F.
Hudson 62 Corporate Vice President and President of our Risk Management Operations since 2010 Vishal Jain 62 Corporate Vice President since 2016, Chief Service Officer since 2014 Christopher E. Mead 56 Corporate Vice President, Chief Marketing Officer since 2017 Susan E. Pietrucha 57 Corporate Vice President, Chief Human Resource Officer since 2007 William F.
All executive officers are appointed annually and serve at the pleasure of our board of directors. 30 Part II
All executive officers are appointed annually and serve at the discretion of our board of directors. 31 Part II
Bay 60 Corporate Vice President, General Counsel, Secretary since 2007 Mark H. Bloom 58 Corporate Vice President and Global Chief Information Officer since 2022. Global Chief Information Officer at Aegon N.V., 2016 - 2021 Richard C. Cary 60 Controller since 1997, Chief Accounting Officer since 2001 Joel D.
Bay 61 Corporate Vice President, General Counsel, Secretary since 2007 Mark H. Bloom 59 Corporate Vice President and Global Chief Information Officer since 2022. Global Chief Information Officer at Aegon N.V., 2016 - 2021 Joel D.
Cavaness 61 Corporate Vice President since 2000, President of our Wholesale Brokerage Operation since 1997 Patrick M. Gallagher 43 Corporate Vice President and President of Property/Casualty Brokerage Operation in the Americas since 2021, Chairman, Canada and Caribbean and CEO of Latin America 2019 - 2021, President, Midwest Region of Property/Casualty Brokerage Operation 2016 - 2019 Thomas J.
Gallagher 44 Executive Vice President, Chief Operating Officer since 2024, Corporate Vice President and President of Property/Casualty Brokerage Operation in the Americas 2021 - 2024, Chairman, Canada and Caribbean and CEO of Latin America 2019 - 2021, President, Midwest Region of Property/Casualty Brokerage Operation 2016 - 2019 Walter D.
Added
Gallagher 65 President since 2024, President of our Global Property/Casualty Brokerage Operations 2017 - 2024, Chairman of our International Brokerage Operation 2010 ‑ 2016 Patrick M.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe DEPP is an unfunded, non-qualified deferred compensation plan that generally provides for distributions to certain of our key executives when they reach age 62 or upon or after their actual retirement.
Biggest changeThe DEPP is an unfunded, non-qualified deferred compensation plan that generally provides for awards to certain of our key executives that do not vest and/or distribute until participants reach age 62 (or the one-year anniversary of the date of grant for participants over the age of 61).
Under sub-plans of the DEPP for certain production staff, the plan generally provides for vesting and/or distributions no sooner than five years from the date of awards, although certain awards vest and/or distribute after the earlier of fifteen years or the participant reaching age 65. See Note 11 to our 2022 consolidated financial statements for more information regarding the DEPP.
Under sub‑plans of the DEPP for certain production staff, the plan generally provides for vesting and/or distributions no sooner than five years from the date of awards, although certain awards vest and/or distribute after the earlier of fifteen years or the participant reaching age 65. See Note 11 to our 2023 consolidated financial statements for more information regarding the DEPP.
Item 5. Market for the Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities. Our common stock is listed on the New York Stock Exchange, trading under the symbol “AJG.” As of January 31, 2023, there were approximately 1,000 holders of record of our common stock.
Item 5. Market for the Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities. Our common stock is listed on the New York Stock Exchange, trading under the symbol “AJG.” As of January 31, 2024, there were approximately 1,000 holders of record of our common stock.
(2) The average price paid per share is calculated on a settlement basis and does not include commissions. 31 (3) Effective July 28, 2021, the board of directors approved a new common stock repurchase plan of up to $1.5 billion of common stock.
(2) The average price paid per share is calculated on a settlement basis and does not include commissions. 32 (3) Effective July 28, 2021, the board of directors approved a common stock repurchase plan of up to $1.5 billion of common stock.
In the fourth quarter of 2022, we instructed the trustee for the DEPP and the DCPP to reinvest dividends on shares of our common stock held by these trusts and to purchase our common stock using cash that we contributed to the DCPP related to 2022 awards under the DCPP.
For the fourth quarter of 2023, we instructed the trustee for the DEPP and the DCPP to reinvest dividends on shares of our common stock held by these trusts and to purchase our common stock using cash that we contributed to the DCPP related to 2023 awards under the DCPP.
We want to ensure that at the time when an employee becomes entitled to a distribution under the terms of the Supplemental Plan, any amounts deemed to be invested in the fund representing our common stock are distributed in the form of shares of our common stock held by the trust.
This is to ensure that at the time when an employee becomes entitled to a distribution under the terms of the Supplemental Plan, any amounts deemed to be invested in the fund representing our common stock are distributed in the form of shares of our common stock held by the trust.
(c) Issuer Purchases of Equity Securities The following table shows the purchases of our common stock made by or on behalf of us or any “affiliated purchaser” (as such term is defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of us for each fiscal month in the three-month period ended December 31, 2022: Period Total Number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3) (4) October 1 through October 31, 2022 7,015 $ 175.59 — $ 1,500 November 1 through November 30, 2022 3,595 191.81 — 1,500 December 1 through December 31, 2022 9,722 185.86 — 1,500 Total 20,332 $ 183.37 — (1) Amounts in this column include shares of our common stock purchased by the trustees of trusts established under our Deferred Equity Participation Plan (which we refer to as the DEPP), our Deferred Cash Participation Plan (which we refer to as the DCPP) and our Supplemental Savings and Thrift Plan (which we refer to as the Supplemental Plan), respectively.
(c) Issuer Purchases of Equity Securities The following table shows the purchases of our common stock made by or on behalf of us or any “affiliated purchaser” (as such term is defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of us for each fiscal month in the three-month period ended December 31, 2023: Period Total Number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3) (4) October 1 through October 31, 2023 1,177 $ 234.06 — $ 1,500 November 1 through November 30, 2023 24,020 242.81 — 1,500 December 1 through December 31, 2023 16,461 224.95 — 1,500 Total 41,658 $ 235.50 — (1) Amounts in this column include shares of our common stock purchased by the trustees of trusts established under our Deferred Equity Participation Plan (which we refer to as the DEPP), our Deferred Cash Participation Plan (which we refer to as the DCPP) and our Supplemental Savings and Thrift Plan (which we refer to as the Supplemental Plan), respectively.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 - 65 Item 7A. Quantitative and Qualitative Disclosure about Market Risk 65 - 66 Item 8. Financial Statements and Supplementary Data 67 - 126
Biggest changeItem 6. [Reserved] 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 - 66 Item 7A. Quantitative and Qualitative Disclosure about Market Risk 66 - 68 Item 8. Financial Statements and Supplementary Data 69 - 129

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

198 edited+88 added−54 removed131 unchanged
Biggest changeFor the corporate segment, the clean energy related adjustments are described on page 50. 34 Reconciliation of Non-GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share 35 (In millions except share and per share data) Earnings (Loss) Before Income Taxes Provision (Benefit) for Income Taxes Net Earnings (Loss) Net Earnings (Loss) Attributable to Noncontrolling Interests Net Earnings (Loss) Attributable to Controlling Interests Diluted Net Earnings (Loss) per Share Year Ended Dec 31, 2022 Brokerage, as reported $ 1,596.5 $ 394.7 $ 1,201.8 $ 4.4 $ 1,197.4 $ 5.58 Net gains on divestitures (12.1 ) (2.6 ) (9.5 ) — (9.5 ) (0.04 ) Acquisition integration 167.9 35.2 132.7 — 132.7 0.62 Workforce and lease termination 51.4 11.2 40.2 — 40.2 0.19 Acquisition related adjustments 77.0 21.0 56.0 — 56.0 0.26 Amortization of intangible assets 448.7 106.4 342.3 — 342.3 1.59 Brokerage, as adjusted $ 2,329.4 $ 565.9 $ 1,763.5 $ 4.4 $ 1,759.1 $ 8.19 Risk Management, as reported $ 157.2 $ 41.4 $ 115.8 $ — $ 115.8 $ 0.54 Net gains on divestitures (0.9 ) (0.3 ) (0.6 ) — (0.6 ) — Workforce and lease termination 6.5 1.7 4.8 — 4.8 0.02 Acquisition related adjustments (7.8 ) (2.0 ) (5.8 ) — (5.8 ) (0.03 ) Acquisition integration 1.8 0.4 1.4 — 1.4 0.01 Amortization of intangible assets 6.2 1.6 4.6 — 4.6 0.02 Risk Management, as adjusted $ 163.0 $ 42.8 $ 120.2 $ — $ 120.2 $ 0.56 Corporate, as reported $ (426.7 ) $ (225.1 ) $ (201.6 ) $ (2.6 ) $ (199.0 ) $ (0.93 ) Transaction-related costs 33.4 2.7 30.7 — 30.7 0.14 Legal and tax related (5.0 ) 45.2 (50.2 ) — (50.2 ) (0.23 ) Corporate, as adjusted $ (398.3 ) $ (177.2 ) $ (221.1 ) $ (2.6 ) $ (218.5 ) $ (1.02 ) Year Ended Dec 31, 2021 Brokerage, as reported $ 1,345.5 $ 328.9 $ 1,016.6 $ 8.4 $ 1,008.2 $ 4.86 Net gains on divestitures (18.8 ) (3.8 ) (15.0 ) — (15.0 ) (0.07 ) Acquisition integration 31.7 6.5 25.2 — 25.2 0.12 Workforce and lease termination 22.8 4.8 18.0 — 18.0 0.09 Acquisition related adjustments 109.0 22.6 86.4 — 86.4 0.42 Amortization of intangible assets 407.6 95.6 312.0 — 312.0 1.50 Levelized foreign currency translation (36.5 ) (8.3 ) (28.2 ) — (28.2 ) (0.14 ) Brokerage, as adjusted $ 1,861.3 $ 446.3 $ 1,415.0 $ 8.4 $ 1,406.6 $ 6.78 Risk Management, as reported $ 120.1 $ 30.6 $ 89.5 $ — $ 89.5 $ 0.43 Net gains on divestitures (0.1 ) — (0.1 ) — (0.1 ) — Workforce and lease termination 8.0 2.0 6.0 — 6.0 0.03 Acquisition related adjustments 2.7 0.7 2.0 — 2.0 0.01 Amortization of intangible assets 7.5 1.8 5.7 — 5.7 0.03 Levelized foreign currency translation (2.7 ) (0.6 ) (2.1 ) — (2.1 ) (0.01 ) 36 Risk Management, as adjusted $ 135.5 $ 34.5 $ 101.0 $ — $ 101.0 $ 0.49 Corporate, as reported $ (490.5 ) $ (339.4 ) $ (151.1 ) $ 39.8 $ (190.9 ) $ (0.92 ) Loss on extinguishment of debt 16.2 4.0 12.2 — 12.2 0.06 Transaction-related costs 47.9 9.4 38.5 — 38.5 0.19 Income tax related 9.5 (34.1 ) 43.6 — 43.6 0.21 Corporate, as adjusted $ (416.9 ) $ (360.1 ) $ (56.8 ) $ 39.8 $ (96.6 ) $ (0.46 ) Agreement to Acquire Buck On December 20, 2022, we signed a definitive agreement to acquire Buck for a gross consideration of $660.0 million or approximately $585.0 million net of agreed seller funded expenses and net working capital.
Biggest changeFor the corporate segment, the clean energy related adjustments are described on page 54 . 35 Reconciliation of Non-GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Shar e (In millions except share and per share data) Earnings (Loss) Before Income Taxes Provision (Benefit) for Income Taxes Net Earnings (Loss) Net Earnings (Loss) Attributable to Noncontrolling Interests Net Earnings (Loss) Attributable to Controlling Interests Diluted Net Earnings (Loss) per Share Year Ended Dec 31, 2023 Brokerage, as reported $ 1,571.0 $ 401.6 $ 1,169.4 $ 6.3 $ 1,163.1 $ 5.30 Net gains on divestitures (9.6 ) (2.4 ) (7.2 ) — (7.2 ) (0.03 ) Acquisition integration 243.7 59.2 184.5 — 184.5 0.84 Workforce and lease termination 63.8 15.8 48.0 — 48.0 0.22 Acquisition related adjustments 370.5 91.7 278.8 — 278.8 1.27 Amortization of intangible assets 523.6 131.3 392.3 — 392.3 1.79 Brokerage, as adjusted $ 2,763.0 $ 697.2 $ 2,065.8 $ 6.3 $ 2,059.5 $ 9.39 Risk Management, as reported $ 209.3 $ 55.3 $ 154.0 $ — $ 154.0 $ 0.70 Net gains on divestitures (0.4 ) (0.1 ) (0.3 ) — (0.3 ) — Acquisition integration 1.0 0.3 0.7 — 0.7 — Workforce and lease termination 3.4 0.9 2.5 — 2.5 0.01 Acquisition related adjustments 0.5 0.1 0.4 — 0.4 — Amortization of intangible assets 7.7 2.1 5.6 — 5.6 0.03 Risk Management, as adjusted $ 221.5 $ 58.6 $ 162.9 $ — $ 162.9 $ 0.74 Corporate, as reported $ (595.2 ) $ (237.8 ) $ (357.4 ) $ (9.8 ) $ (347.6 ) $ (1.58 ) Transaction-related costs 22.6 4.9 17.7 — 17.7 0.08 Legal and tax related 48.0 21.8 26.2 — 26.2 0.12 Clean energy related 12.0 1.1 10.9 7.6 3.3 0.01 Corporate, as adjusted $ (512.6 ) $ (210.0 ) $ (302.6 ) $ (2.2 ) $ (300.4 ) $ (1.37 ) Year Ended Dec 31, 2022 Brokerage, as reported $ 1,596.5 $ 394.7 $ 1,201.8 $ 4.4 $ 1,197.4 $ 5.58 Net gains on divestitures (12.1 ) (2.6 ) (9.5 ) — (9.5 ) (0.05 ) Acquisition integration 167.9 35.2 132.7 — 132.7 0.62 Workforce and lease termination 51.4 11.2 40.2 — 40.2 0.19 Acquisition related adjustments 77.0 21.0 56.0 — 56.0 0.26 Amortization of intangible assets 448.7 106.4 342.3 — 342.3 1.59 Effective income tax rate impact — 26.0 (26.0 ) — (26.0 ) (0.13 ) Levelized foreign currency translation (19.1 ) (5.3 ) (13.8 ) — (13.8 ) (0.06 ) Brokerage, as adjusted $ 2,310.3 $ 586.6 $ 1,723.7 $ 4.4 $ 1,719.3 $ 8.00 Risk Management, as reported $ 157.2 $ 41.4 $ 115.8 $ — $ 115.8 $ 0.54 Net gains on divestitures (0.9 ) (0.3 ) (0.6 ) — (0.6 ) — Acquisition integration 1.8 0.4 1.4 — 1.4 0.01 Workforce and lease termination 6.5 1.7 4.8 — 4.8 0.02 Acquisition related adjustments (7.8 ) (2.0 ) (5.8 ) — (5.8 ) (0.03 ) Amortization of intangible assets 6.2 1.6 4.6 — 4.6 0.02 Levelized foreign currency translation (0.6 ) 0.1 (0.7 ) — (0.7 ) — Risk Management, as adjusted $ 162.4 $ 42.9 $ 119.5 $ — $ 119.5 $ 0.56 Corporate, as reported $ (426.7 ) $ (225.1 ) $ (201.6 ) $ (2.6 ) $ (199.0 ) $ (0.93 ) Transaction-related costs 33.4 2.7 30.7 — 30.7 0.14 Income tax related (5.0 ) 45.2 (50.2 ) — (50.2 ) (0.23 ) Corporate, as adjusted $ (398.3 ) $ (177.2 ) $ (221.1 ) $ (2.6 ) $ (218.5 ) $ (1.02 ) 36 Acquisition of My Plan Manager, Cadence Insurance, Eastern Insurance and Buck On December 6, 2023, we acquired all of the issued and outstanding shares of My Plan Manager.
These include costs related to regulatory filings, legal, accounting services, insurance and incentive compensation. o Workforce related charges, which primarily include severance costs (either accrued or paid) related to employee terminations and other costs associated with redundant workforce. o Lease termination related charges, which primarily include costs related to terminations of real estate leases and abandonment of leased space. o Acquisition related adjustments, which include change in estimated acquisition earnout payables adjustments and acquisition related compensation charges. o Amortization of intangible assets reflects the amortization of customer/expiration lists, non-compete agreements, trade names and other intangible assets acquired through our merger and acquisition strategy, the impact to amortization expense of acquisition valuation adjustments to these assets as well as non-cash impairment charges. o The impact of foreign currency translation, as applicable.
These include costs related to regulatory filings, legal and accounting services, insurance and incentive compensation. o Workforce related charges, which primarily include severance costs (either accrued or paid) related to employee terminations and other costs associated with redundant workforce. o Lease termination related charges, which primarily include costs related to terminations of real estate leases and abandonment of leased space. o Acquisition related adjustments, which include the change in estimated acquisition earnout payables adjustments and acquisition related compensation charges. o Amortization of intangible assets which reflects the amortization of customer/expiration lists, non-compete agreements, trade names and other intangible assets acquired through our merger and acquisition strategy, the impact to amortization expense of acquisition valuation adjustments to these assets as well as non-cash impairment charges. o The impact of foreign currency translation, as applicable.
These measures for the brokerage and risk management segments provide a meaningful representation of our operating performance, and are also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability. • Adjusted EPS and Adjusted Net Earnings - Adjusted net earnings have been adjusted to exclude the after-tax impact of net gains on divestitures, acquisition integration costs, the impact of foreign currency translation, workforce related 39 charges, lease termination related charges, acquisition related adjustments, transaction related costs, amortization of intangible assets, legal and income tax related costs and effective income tax rate impact, as applicable.
These measures for the brokerage and risk management segments provide a meaningful representation of our operating performance, and are also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability. • Adjusted EPS and Adjusted Net Earnings - Adjusted net earnings have been adjusted to exclude the after-tax impact of net gains on divestitures, acquisition integration costs, the impact of foreign currency translation, workforce related charges, lease termination related charges, acquisition related adjustments, transaction related costs, amortization of intangible assets, legal and tax related costs and effective income tax rate impact, as applicable.
In reviewing intangible assets, if the undiscounted future cash flows were less than the carrying amount of the respective (or underlying) asset, an indicator of impairment would exist and further analysis would be required to determine whether or not a loss would need to be charged against current period earnings as a component of amortization expense.
In reviewing intangible assets, if the 45 undiscounted future cash flows were less than the carrying amount of the respective (or underlying) asset, an indicator of impairment would exist and further analysis would be required to determine whether or not a loss would need to be charged against current period earnings as a component of amortization expense.
We anticipate reporting an effective tax rate on adjusted results of approximately 25.0% to 27.0% in our risk management segment based on known changes in tax rates in future periods. Corporate The corporate segment reports the financial information related to our clean energy and other investments, our debt, certain corporate and acquisition-related activities and the impact of foreign currency remeasurement.
We anticipate reporting an effective tax rate on adjusted results of approximately 25.0% to 27.0% in our risk management segment based on known changes in tax rates in future periods. 50 Corporate The corporate segment reports the financial information related to our clean energy and other investments, our debt, certain corporate and acquisition-related activities and the impact of foreign currency remeasurement.
Most of our purchase obligations are related to purchases of information technology services, marketing arrangements or other service contracts. We had no other cash requirements from known contractual obligations and commitments that have, or are reasonably likely to have, a current or future material effect on the Company’s financial condition, results of operations, or liquidity.
Most of our purchase obligations are related to purchases of information technology services, marketing arrangements or other service contracts. We had no other cash requirements from known contractual obligations and commitments that have, or are reasonably likely to have, a current or 62 future material effect on the Company’s financial condition, results of operations, or liquidity.
As such, we do not currently anticipate being subject to the CAMT and even if we were to find ourselves subject to in in a particular year, we do not believe there would be an impact on our earnings. Excise Tax On Stock Buybacks - The IRA adds a 1% surtax to corporate stock repurchases effective January 2023.
As such, we do not currently anticipate being subject to the CAMT and even if we were to find ourselves subject to it in a particular year, we do not believe there would be an impact on our earnings. Excise Tax On Stock Buybacks - The IRA adds a 1% surtax to corporate stock repurchases effective January 2023.
For supplemental revenue contracts based on a fixed amount, revenue is recognized ratably over the contract period consistent with the performance of our obligations, almost always over an annual term. 61 For contingent revenues certain underwriting enterprises may pay us additional revenues for our sales capabilities, our risk selection knowledge, or our administrative efficiencies.
For supplemental revenue contracts based on a fixed amount, revenue is recognized ratably over the contract period consistent with the performance of our obligations, almost always over an annual term. For contingent revenues certain underwriting enterprises may pay us additional revenues for our sales capabilities, our risk selection knowledge, or our administrative efficiencies.
However, if actual results are not consistent with our estimates and assumptions used to calculate estimated future cash flows, we may be exposed to impairment losses that could be material. Earnout Obligations Description Substantially all of the purchase agreements related to the acquisitions we do contain provisions for potential earnout obligations.
However, if actual results are not consistent with our estimates and assumptions used to calculate estimated future cash flows, we may be exposed to impairment losses that could be material. 65 Earnout Obligations Description Substantially all of the purchase agreements related to the acquisitions we do contain provisions for potential earnout obligations.
Beginning with the match paid in 2021, the amount matched by the company will be discretionary and annually determined by management. Employees must be employed and eligible for the plan on the last day of the plan year to receive a matching contribution, subject to certain exceptions enumerated in the plan document.
Beginning with the match paid in 2021, the amount matched by the company will be discretionary and annually determined by management. Employees must be employed and eligible for the plan on the last day of the plan year to receive a matching 61 contribution, subject to certain exceptions enumerated in the plan document.
Also, included in net 51 earnings attributable to noncontrolling interests are offsetting amounts related to non-Gallagher owned interests in several clean energy investments. Benefit for income taxes - We allocate the provision for income taxes to the brokerage and risk management segments using local statutory rates.
Also, included in net earnings attributable to noncontrolling interests are offsetting amounts related to non-Gallagher owned interests in several clean energy investments. Benefit for income taxes - We allocate the provision for income taxes to the brokerage and risk management segments using local statutory rates.
Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives. 64 Effect if Actual Results Differ From Assumptions While management believes those expectations and assumptions are reasonable, they are inherently uncertain.
Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives. Effect if Actual Results Differ From Assumptions While management believes those expectations and assumptions are reasonable, they are inherently uncertain.
However, we could be required to evaluate the recoverability of goodwill outside of the required annual assessment if, among other things, we experience disruptions to the business, unexpected significant declines in operating results, divestiture of a significant component of the business or a sustained decline in market capitalization.
However, we could 64 be required to evaluate the recoverability of goodwill outside of the required annual assessment if, among other things, we experience disruptions to the business, unexpected significant declines in operating results, divestiture of a significant component of the business or a sustained decline in market capitalization.
The $650.0 million aggregate principal amount of 2.50% Senior Notes were due 2031 (which we refer to as the 2031 May Notes) and $850.0 million aggregate principal amount of 3.50% Senior Notes are due 2051 (which we refer to as the 2051 May Notes and together with the 2031 May Notes, the May Notes).
The $650.0 million aggregate principal amount of 2.50% Senior Notes were due 2031 (which we refer to as the 2031 May Notes) and $850.0 million aggregate principal amount of 3.50% Senior Notes are due 2051 (which we refer to as the 2051 May Notes and 58 together with the 2031 May Notes, the May Notes).
Generally, we utilize operating margin assumptions based on future expectations, operating margins historically realized in the reporting units’ industries and industry marketplace valuation multiples. See Intangible Assets in Notes 1 and 7 to our 2022 consolidated financial statements. Our impairment analysis contains uncertainties due to uncontrollable events that could positively or negatively impact the anticipated future economic and operating conditions.
Generally, we utilize operating margin assumptions based on future expectations, operating margins historically realized in the reporting units’ industries and industry marketplace valuation multiples. See Intangible Assets in Notes 1 and 7 to our 2023 consolidated financial statements. Our impairment analysis contains uncertainties due to uncontrollable events that could positively or negatively impact the anticipated future economic and operating conditions.
Proceeds from the issuance of our common stock related to these plans have contributed favorably to net cash provided by financing activities in the years ended December 31, 2022 and 2021, and we believe this favorable trend will continue in the foreseeable future. We have a qualified contributory savings and thrift 401(k) plan covering the majority of our domestic employees.
Proceeds from the issuance of our common stock related to these plans have contributed favorably to net cash provided by financing activities in the years ended December 31, 2023 and 2022, and we believe this favorable trend will continue in the foreseeable future. We have a qualified contributory savings and thrift 401(k) plan covering the majority of our domestic employees.
These letters of credit secure our self-insurance deductibles on our own insurance programs, allow certain of our captive operations to meet minimum statutory surplus requirements, lease security deposits and collateral related to premium and claim funds held in a fiduciary capacity. See Note 17 to our 2022 consolidated financial statements for additional discussion of these obligations and commitments.
These letters of credit secure our self-insurance deductibles on our own insurance programs, allow certain of our captive operations to meet minimum statutory surplus requirements, lease security deposits and collateral related to premium and claim funds held in a fiduciary capacity. See Note 17 to our 2023 consolidated financial statements for additional discussion of these obligations and commitments.
We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due. See Income Taxes in Notes 1 and 19 to our 2022 consolidated financial statements. Judgments and Uncertainties Changes in projected future earnings could affect the recorded valuation allowances in the future.
We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due. See Income Taxes in Notes 1 and 19 to our 2023 consolidated financial statements. Judgments and Uncertainties Changes in projected future earnings could affect the recorded valuation allowances in the future.
(3) Adjustments in fourth quarter 2022 include (a) additional U.K. income tax expense related to the non‐deductibility of acquisition-related adjustments made in the quarter, (b) gains and costs associated with legal and tax matters, (c) income tax provision adjustments as we filed our 2021 tax returns and (d) income tax benefit related to adjusting certain U.K. deferred income tax assets to the future 25% corporate income tax rate.
Adjustments in fourth quarter 2022 include (a) additional U.K. income tax expense related to the non‑deductibility of acquisition-related adjustments made in the quarter, (b) gains and costs associated with legal and tax matters, (c) income tax provision adjustments as filed in our 2021 tax returns and (d) income tax benefit related to adjusting certain U.K. deferred income tax assets to the future 25% corporate income tax rate.
While the change in the funded status of the Plan had no direct impact on our cash flows from operations in 2022 and 2021, potential changes in the pension regulatory environment and investment losses in our pension plan have an effect on our capital position and could require us to make significant contributions to our defined benefit pension plan and increase our pension expense in future periods.
While the change in the funded status of the Plan had no direct impact on our cash flows from operations in 2023 and 2022, potential changes in the pension regulatory environment and investment losses in our pension plan have an effect on our capital position and could require us to make significant contributions to our defined benefit pension plan and increase our pension expense in future periods.
Adjusted Non-GAAP presentation - We believe that the adjusted non-GAAP presentation of our 2022 and 2021 information, presented on the following pages, provides stockholders and other interested persons with useful information regarding certain financial metrics that may assist such persons in analyzing our operating results as they develop a future earnings outlook for us.
Adjusted Non-GAAP presentation - We believe that the adjusted non-GAAP presentation of our 2023 and 2022 information, presented on the following pages, provides stockholders and other interested persons with useful information regarding certain financial metrics that may assist such persons in analyzing our operating results as they develop a future earnings outlook for us.
The Employee Retirement Security Act of 1974, as amended (which we refer to as ERISA), could impose a minimum funding requirement for our plan. We were not required to make any minimum contributions to the plan for the 2022 and 2021 plan years. Funding requirements are based on the plan being frozen and the aggregate amount of our historical funding.
The Employee Retirement Security Act of 1974, as amended (which we refer to as ERISA), could impose a minimum funding requirement for our plan. We were not required to make any minimum contributions to the plan for the 2023 and 2022 plan years. Funding requirements are based on the plan being frozen and the aggregate amount of our historical funding.
Apart from commitments, guarantees, and contingencies, as disclosed herein and in Note 17 to our 2022 consolidated financial statements, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations or liquidity.
Apart from commitments, guarantees, and contingencies, as disclosed herein and in Note 17 to our 2023 consolidated financial statements, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations or liquidity.
See Note 17 to our 2022 consolidated financial statements for additional discussion of these contractual obligations. Outlook - We believe that we have sufficient capital and access to additional capital to meet our short- and long-term cash flow needs. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S.
See Note 17 to our 2023 consolidated financial statements for additional discussion of these contractual obligations. Outlook - We believe that we have sufficient capital and access to additional capital to meet our short- and long-term cash flow needs. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S.
Federal Income Tax Law Changes Items Impacting the Company Going Forward Alternative Minimum Tax Credit - The IRA enacted a book-based Corporate Alternative Minimum Tax (which we refer to as CAMT) for years beginning after 2022. The CAMT imposes a minimum 15% cash tax on adjusted book income before general business credits.
U.S. Federal Income Tax Law Changes Items Impacting the Company Going Forward Alternative Minimum Tax Credit - The IRA enacted a book-based Corporate Alternative Minimum Tax (which we refer to as CAMT) for years beginning after 2022. The CAMT imposes a minimum 15% cash tax on adjusted book income before general business credits.
Changes in financial projections, market participant assumptions for revenue growth and/or profitability, or the risk-adjusted discount rate, would result in a change in the fair value of recorded earnout obligations. See Note 3 to our 2022 consolidated financial statements for additional discussion on our 2022 business combinations.
Changes in financial projections, market participant assumptions for revenue growth and/or profitability, or the risk-adjusted discount rate, would result in a change in the fair value of recorded earnout obligations. See Note 3 to our 2023 consolidated financial statements for additional discussion on our 2023 business combinations.
In the first quarter of 2022, we increased our state effective income tax rate, which resulted in the overall U.S. effective income tax rate increasing from 25% to 26%, and caused us to incur additional income tax benefit during the quarter and recognized a one-time benefit related to the revaluation of certain deferred income tax assets.
In the first quarter of 2022, we increased our state effective income tax rate, which resulted in the overall U.S. effective income tax rate increasing from 25% to 26%, and caused us to incur additional income tax benefit during the quarter and recognize a one-time benefit related to the revaluation of certain deferred income tax assets.
Operating expense - Operating expense for 2022 includes banking and related fees of $2.5 million, external professional fees and other due diligence costs related to 2022 acquisitions of $40.8 million, which includes specific transaction-related costs as described on page 50 in note (2), other corporate and clean energy related expenses of $44.4 million, including legal fees, and costs associated with the idling of the Section 45 program and a net unrealized foreign exchange remeasurement gain of $30.6 million.
Operating expense for 2022 includes banking and related fees of $2.5 million, external professional fees and other due diligence costs related to 2022 acquisitions of $40.8 million, which includes specific transaction-related costs as described on page 54 in note (2), other corporate and clean energy related expenses of $44.4 million, including legal fees, and costs associated with the idling of the IRC Section 45 program and a net unrealized foreign exchange remeasurement gain of $30.6 million.
See the risk factors regarding our IRC Section 45 investments under Item 1A, “Risk Factors.” for a more detailed discussion of these and other factors could impact the information above. See Note 14 to our 2022 consolidated financial statements for more information regarding risks and uncertainties related to these investments.
See the risk factors regarding our IRC Section 45 investments under Item 1A, “Risk Factors.” for a more detailed discussion of these and other factors could impact the information above. See Note 14 to our 2023 consolidated financial statements for more information regarding risks and uncertainties related to these investments.
Effect if Actual Results Differ From Assumptions We have not made material changes in the accounting methodology used to evaluate impairment of goodwill during the last three years. During fiscal 2022, 2021 and 2020, all of our material reporting units passed the impairment analysis.
Effect if Actual Results Differ From Assumptions We have not made material changes in the accounting methodology used to evaluate impairment of goodwill during the last three years. During fiscal 2023, 2022 and 2021, all of our material reporting units passed the impairment analysis.
For significant acquisitions we may use independent third-party valuation specialists to assist us in determining the fair value of assets acquired and liabilities assumed. See Note 3 to our 2022 consolidated financial statements for additional discussion on our 2022 business combinations.
For significant acquisitions we may use independent third-party valuation specialists to assist us in determining the fair value of assets acquired and liabilities assumed. See Note 3 to our 2023 consolidated financial statements for additional discussion on our 2023 business combinations.
In addition, please see “Information Regarding Non-GAAP Measures and Other” beginning on page 36 for a reconciliation of the non-GAAP measures for adjusted total revenues, organic commission, fee and supplemental revenues and adjusted EBITDAC to the comparable GAAP measures, as well as other important information regarding these measures.
In addition, please see “Information Regarding Non-GAAP Measures and Other” beginning on page 38 for a reconciliation of the non-GAAP measures for adjusted total revenues, organic commission, fee and supplemental revenues and adjusted EBITDAC to the comparable GAAP measures, as well as other important information regarding these measures.
During the years ended December 31, 2022 and 2021, we did not repurchase shares of our common stock. The plan authorizes the repurchase of our common stock at such times and prices, as we may deem advantageous, in transactions on the open market or in privately negotiated transactions.
During the years ended December 31, 2023 and 2022, we did not repurchase shares of our common stock. The plan authorizes the repurchase of our common stock at such times and prices, as we may deem advantageous, in transactions on the open market or in privately negotiated transactions.
Depreciation - The increase in depreciation expense in 2022 compared to 2021 was due primarily to the impact of purchases of furniture, equipment and leasehold improvements related to office consolidations and moves, and expenditures related to upgrading computer systems. Also contributing to the increases in depreciation expense in 2022 was the depreciation expense associated with acquisitions completed in 2022.
Depreciation - The increase in depreciation expense in 2023 compared to 2022 was due primarily to the impact of purchases of furniture, equipment and leasehold improvements related to office consolidations and moves, and expenditures related to upgrading computer systems. Also contributing to the increases in depreciation expense in 2023 was the depreciation expense associated with acquisitions completed in 2023.
Change in estimated acquisition earnout payables - The change in the expense from the change in estimated acquisition earnout payables in 2022 compared to 2021 was due primarily to adjustments made to the estimated fair value of earnout obligations related to revised assumptions due to rising interest rates and increased market volatility and projections of future performance.
Change in estimated acquisition earnout payables - The change in the expense from the change in estimated acquisition earnout payables in 2023 compared to 2022 was due primarily to adjustments made to the estimated fair value of earnout obligations related to revised assumptions due to rising interest rates and increased market volatility and projections of future performance.
During 2022, our board of directors authorized the 5.0% employer matching contributions on eligible compensation to the 401(k) plan for the 2022 plan year to be funded with our common stock, which is expected to be funded in February 2023.
During 2023, our board of directors authorized the 5.0% employer matching contributions on eligible compensation to the 401(k) plan for the 2023 plan year to be funded with our common stock, which is expected to be funded in February 2024.
See Note 1 to our 2022 consolidated financial statements for other significant accounting policies. See Note 2 to our 2022 consolidated financial statements for a discussion of recently issued accounting pronouncements and their impact or potential future impact on the our financial results, if determinable.
See Note 1 to our 2023 consolidated financial statements for other significant accounting policies. See Note 2 to our 2023 consolidated financial statements for a discussion of recently issued accounting pronouncements and their impact or potential future impact on the our financial results, if determinable.
In our property/casualty brokerage operations, during the twelve-month period ended December 31, 2022, we saw continued strong customer retention and new business generation and increasing renewal premiums (premium rates and exposures).
In our property/casualty brokerage operations, during the twelve-month period ended December 31, 2023, we saw continued strong customer retention and new business generation and increasing renewal premiums (premium rates and exposures).
Change in estimated acquisition earnout payables - The change in expense from the change in estimated acquisition earnout payables in 2022 compared to 2021, were due primarily to adjustments made in 2022 and 2021 to the estimated fair value of an earnout obligation related to revised projections of future performance.
Change in estimated acquisition earnout payables - The change in expense from the change in estimated acquisition earnout payables in 2023 compared to 2022, were due primarily to adjustments made in 2023 and 2022 to the estimated fair value of an earnout obligation related to revised projections of future performance.
The increase in cash provided by operating activities during 2022 compared to the same period in 2021 was primarily due to growth in our core broking and risk management operations, timing differences between periods with cash receipts and disbursements related to other current assets and current liabilities compared to 2021, to the collection of refined coal production related receivables due to the wind up of clean coal operations and the cash benefit related to the utilization of IRC Section 45 tax credits.
The increase in cash provided by operating activities during 2023 compared to the same period in 2022 was primarily due to growth in our core broking and risk management operations, timing differences between periods with cash receipts and disbursements related to other current assets and current liabilities compared to 2022, and the collection of refined coal production related receivables due to the wind up of clean coal operations and the cash benefit related to the utilization of IRC Section 45 tax credits that occurred in 2022.
At this time, we anticipate our clean energy investments will produce after-tax losses in 2023. The following provides information that management believes is helpful when comparing revenues before reimbursements, net earnings, EBITDAC and diluted net earnings per share for 2022 and 2021.
At this time, we anticipate our clean energy investments will produce after-tax losses in 2024. 34 The following provides information that management believes is helpful when comparing revenues before reimbursements, net earnings, EBITDAC and diluted net earnings per share for 2023 and 2022.
We performed a qualitative impairment review on carrying value of our goodwill for all of our reporting units as of December 31, 2022 and no indicators of impairment were noted.
We performed a qualitative impairment review on carrying value of our goodwill for all of our reporting units as of December 31, 2023 and no indicators of impairment were noted.
Our brokerage segment generates revenues by: (i) Identifying, negotiating and placing all forms of insurance or reinsurance coverage, as well as providing risk-shifting, risk-sharing and risk-mitigation consulting services, principally related to property/casualty, life, health, welfare and disability insurance.
Our brokerage segment generates revenues by: (i) Identifying, negotiating and placing all forms of insurance or coverage, as well as providing data analytics, risk-shifting, risk-sharing and risk-mitigation consulting services, principally related to property/casualty, life, health, welfare and disability insurance.
See Note 14 to our 2022 consolidated financial statements for a summary discussion of the nature of our investments at December 31, 2022 and 2021. See Note 8 to our 2022 consolidated financial statements for a summary of our debt at December 31, 2022 and 2021.
See Note 14 to our 2023 consolidated financial statements for a summary discussion of the nature of our investments at December 31, 2023 and 2022. See Note 8 to our 2023 consolidated financial statements for a summary of our debt at December 31, 2023 and 2022.
The after-tax amounts related to the adjustments were computed using the normalized effective tax rate for each respective period. • Adjusted measures - We define these measures as revenues (for the brokerage segment), revenues before reimbursements (for the risk management segment), net earnings, compensation expense and operating expense, respectively, each adjusted to exclude the following, as applicable: o Net gains on divestitures, which are primarily net proceeds received related to sales of books of business and other divestiture transactions, such as the disposal of a business through sale or closure. o Acquisition integration costs, which include costs related to certain large acquisitions (including Willis Re), outside the scope of our usual tuck-in strategy, not expected to occur on an ongoing basis in the future once we fully assimilate the applicable acquisition.
The after-tax amounts related to the adjustments were computed using the normalized effective tax rate for each respective period. • Adjusted measures - We define these measures as revenues (for the brokerage segment), revenues before reimbursements (for the risk management segment), net earnings, compensation expense and operating expense, respectively, each adjusted to exclude the following, as applicable: o Net gains on divestitures, which are primarily net proceeds received related to sales of books of business and other divestiture transactions, such as the disposal of a business through sale or closure. 38 o Acquisition integration costs, which include costs related to certain large acquisitions (including Willis Re, the acquisition of Buck and the acquisitions of Cadence Insurance, Eastern Insurance and My Plan Manager), outside the scope of our usual tuck-in strategy, not expected to occur on an ongoing basis in the future once we fully assimilate the applicable acquisition.
Our risk management segment operations provide contract claim settlement, claim administration, loss control services and risk management consulting for commercial, not for profit, captive and public entities, and various other organizations that choose to self-insure property/casualty coverages or choose to use a third‑party claims management organization rather than the claim services provided by underwriting enterprises.
Our risk management segment operations provide contract claim settlement, claim administration, loss control services and risk management consulting for commercial, nonprofit, captive and public sector entities, and various other organizations that choose to self-insure property/casualty coverages or choose to use a third‑party claims management organization rather than the claim services provided by underwriting enterprises.
Litigation, Regulatory and Taxation Matters - We routinely are involved in legal proceedings, claims, disputes, regulatory matters and governmental inspections or investigations arising in the ordinary course of or incidental to our business, including those noted below in this section.
Litigation, Regulatory and Taxation Matters - We routinely are involved in legal proceedings, claims, disputes, regulatory matters and governmental inspections or investigations arising in the ordinary course of or incidental to our business, including relating to E&O claims and those noted below in this section.
(4) Corporate pretax loss includes a net unrealized foreign exchange remeasurement gain of $30.6 million in the year ended December 31, 2022 and a net unrealized foreign exchange remeasurement loss $0.9 million in the year ended December 31, 2021. Interest and banking costs and debt - Interest and banking costs includes expenses related to our debt.
(4) Corporate pretax loss includes a net unrealized foreign exchange remeasurement loss of $(9.8) million and a net unrealized foreign exchange remeasurement gain of $30.6 million in the year ended December 31, 2022. Interest and banking costs and debt - Interest and banking costs includes expenses related to our debt.
In 2022, 54 Section 45 credits were no longer generated due to the IRC Section 45 program expiring as of December 31, 2021, and therefore the Section 45 credit utilization against our cash tax obligation resulted in favorable cash flow in 2022.
In 2023, IRC Section 45 credits were no longer generated due to the IRC Section 45 program expiring as of December 31, 2021, and therefore the IRC Section 45 credit utilization against our cash tax obligation resulted in favorable cash flow in 2023.
During the quarter ended December 31, 2022, we did not sell shares of our common stock under the program. 59 Common Stock Issuances - Another source of liquidity to us is the issuance of our common stock pursuant to our stock option and employee stock purchase plans.
During the quarter ended December 31, 2023, we did not sell shares of our common stock under the program. Common Stock Issuances - Another source of liquidity to us is the issuance of our common stock pursuant to our stock option and employee stock purchase plans.
These measures for the brokerage and risk management segments provide a meaningful representation of our operating performance for the overall business and provide a meaningful way to measure its financial performance on an ongoing basis. • Adjusted EBITDAC and Adjusted EBITDAC Margin - Adjusted EBITDAC is EBITDAC adjusted to exclude net gains on divestitures, acquisition integration costs, workforce related charges, lease termination related charges, acquisition related adjustments, transaction related costs, legal and income tax related costs, loss on extinguishment of debt and the period-over-period impact of foreign currency translation, as applicable and Adjusted EBITDAC margin is Adjusted EBITDAC divided by total adjusted revenues (defined above).
These measures for the brokerage and risk management segments provide a meaningful representation of our operating performance for the overall business and provide a meaningful way to measure our financial performance on an ongoing basis. 39 • Adjusted EBITDAC and Adjusted EBITDAC Margin - Adjusted EBITDAC is EBITDAC adjusted to exclude net gains on divestitures, acquisition integration costs, workforce related charges, lease termination related charges, acquisition related adjustments, transaction related costs, legal and tax related costs, and the period-over-period impact of foreign currency translation, as applicable and Adjusted EBITDAC margin is Adjusted EBITDAC divided by total adjusted revenues (defined above).
Significant Future Income Tax Law Changes - In 2022, the U.S. enacted the IRA and the Creating Helpful Incentives to Produce Semiconductors (which we refer to as CHIPS) and Science Act of 2022. We do not anticipate any significant impacts from either law change, see more discussions of those provisions below.
In 2022, the U.S. enacted the IRA and the Creating Helpful Incentives to Produce Semiconductors (which we refer to as CHIPS) and Science Act of 2022. We do not anticipate any significant impacts from either law change. See more discussions of those provisions below.
The amounts initially recorded as earnout payables for our 2019 to 2022 acquisitions were measured at fair value as of the acquisition date and are primarily based upon the estimated future operating results of the acquired entities over a two- to three‑year period subsequent to the acquisition date.
The amounts initially recorded as earnout payables for our 2020 to 2023 acquisitions were measured at fair value as of the acquisition date and are primarily based upon the estimated future operating results of the acquired entities over a two- to three‑year period subsequent to the acquisition date.
For all of our acquisitions made in the period from 2019 to 2022 that contain potential earnout obligations, such obligations are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration for the respective acquisition.
For all of our acquisitions made in the period from 2020 to 2023 that contain potential earnout obligations, such obligations are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration for the respective acquisition.
We anticipate reporting an effective tax rate of approximately 24.5% to 26.5% in our brokerage segment based on known changes in tax rates in future periods. Net earnings attributable to noncontrolling interests - The amounts reported in this line for 2022 and 2021 include noncontrolling interest earnings of $4.4 million and $8.4 million, respectively.
We anticipate reporting an effective tax rate of approximately 24.5% to 26.5% in our brokerage segment based on known changes in tax rates in future periods. Net earnings attributable to noncontrolling interests - The amounts reported in this line for 2023 and 2022 include noncontrolling interest earnings of $6.3 million and $4.4 million, respectively.
Other Liquidity Matters Letters of Credit and Other Guarantees We have entered into a number of arrangements whereby our performance on certain obligations is guaranteed by a third party through the issuance of a letter of credit. We had total letters of credit outstanding of $13.0 million at December 31, 2022 and $17.0 million at December 31, 2021.
Other Liquidity Matters Letters of Credit and Other Guarantees We have entered into a number of arrangements whereby our performance on certain obligations is guaranteed by a third party through the issuance of a letter of credit. We had total letters of credit outstanding of $21.2 million at December 31, 2023 and $13.0 million at December 31, 2022.
In determining fair value, we estimate the acquired entity’s future performance using financial projections developed by management for the acquired entity and market participant assumptions that were derived for revenue growth and/or profitability. Revenue growth rates generally ranged from 3.0% to 18.5% for our 2022 acquisitions.
In determining fair value, we estimate the acquired entity’s future performance using financial projections developed by management for the acquired entity and market participant assumptions that were derived for revenue growth and/or profitability. Revenue growth rates generally ranged from 5.0% to 20.0% for our 2023 acquisitions.
Amortization - The increase in amortization in 2022 compared to 2021 was primarily due to the impact of acquisition valuation true-ups recorded in 2022 relating to acquisitions made in fourth quarter 2021, partially offset by the impact of amortization expense of intangible assets associated with acquisitions completed in 2022 and 2021.
Amortization - The increase in amortization in 2023 compared to 2022 was primarily due to the impact of amortization expense of intangible assets associated with acquisitions completed in 2023 and 2022, partially offset by the impact of acquisition valuation true-ups recorded in 2023 relating to acquisitions made in 2022.
During 2021, our board of directors authorized the 5.0% employer matching contribution on eligible compensation to the 401(k) plan for the 2021 plan year to be funded with our common stock, which was funded in February 2022.
During 2022, our board of directors authorized the 5.0% employer matching contributions on eligible compensation to the 401(k) plan for the 2022 plan year to be funded with our common stock, which was funded in February 2023.
In addition, these tables provide reconciliations to the most 33 comparable GAAP measures for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share. Reconciliations of EBITDAC for the brokerage and risk management segments are provided on pages 39 and 45 of this filing.
In addition, these tables provide reconciliations to the most comparable GAAP measures for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share. Reconciliations of EBITDAC for the brokerage and risk management segments are provided on pages 42 and 48 of this filing.
Reconciliation of Non-GAAP Information Presented to GAAP Measures - This report includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on pages 39 and 45), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on pages 33 and 34), for organic revenue measures (on pages 40 and 45), respectively, for the brokerage and risk management segments, for adjusted compensation and operating expenses and adjusted EBITDAC margin (on page 42), respectively, for the brokerage segment and on page 48 for the risk management segment.
Reconciliation of Non-GAAP Information Presented to GAAP Measures - This report includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on pages 42 and 48 ), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on page 35 ), for organic revenue measures (on pages 43 and 48 ), respectively, for the brokerage and risk management segments, for adjusted compensation and operating expenses and adjusted EBITDAC margin (on page 45 ), respectively, for the brokerage segment and (on page 49 ) for the risk management segment.
At December 31, 2022, 7.0 million shares remained available for issuance under this registration statement. Common Stock Repurchases - We have in place a common stock repurchase plan approved by our board of directors in July 2021, that authorizes the repurchase of up to $1.5 billion of common stock.
At December 31, 2023, 6.2 million shares remained available for issuance under this registration statement. Common Stock Repurchases - We have in place a common stock repurchase plan approved by our board of directors in July 2021 that authorizes the repurchase of up to $1.5 billion of common stock.
Proceeds from the issuance of common stock under these plans were $123.1 million in 2022 and $108.7 million in 2021. On May 10, 2022, our stockholders approved the 2022 Long-Term Incentive Plan (which we refer to as the LTIP), which replaced our previous stockholder-approved 2017 Long-Term Incentive Plan.
Proceeds from the issuance of common stock under these plans were $120.2 million in 2023 and $123.1 million in 2022. On May 10, 2022, our stockholders approved the 2022 Long-Term Incentive Plan (which we refer to as the LTIP), which replaced our previous stockholder-approved 2017 Long-Term Incentive Plan.
Relating to the development of our corporate headquarters, we received property tax related credits under a tax-increment financing note from Rolling Meadows, Illinois and an Illinois state EDGE tax credit. Recent assessed valuations of the corporate headquarters by the county indicates that incentives from these two programs could total between $50.0 million and $80.0 million over a fifteen-year period.
Relating to the development of our corporate headquarters, we received property tax related credits under a tax-increment financing note from Rolling Meadows, Illinois and an Illinois state EDGE tax credit. Incentives from these two programs could total between $50.0 million and $80.0 million over a fifteen-year period.
We also own a 46.5% controlling interest in Chem-Mod, which prior to 2022 marketed The Chem‑Mod™ Solution proprietary technologies principally to refined fuel plants that sell refined fuel to coal-fired power plants owned by utility companies, including those plants in which we hold interests. Currently, Chem-Mod is not anticipated to generate after-tax earnings after 2021.
We also own a 46.5% controlling interest in Chem-Mod, which prior to 2022 marketed The Chem‑Mod™ Solution proprietary technologies principally to refined fuel plants that sell refined fuel to coal-fired power plants owned by utility companies, including those plants in which we hold interests. Chem-Mod has not generated after-tax earnings since 2021.
When assessing our overall liquidity, we believe that the focus should be on net earnings as reported in our consolidated statement of earnings, adjusted for non-cash items (i.e., EBITDAC), and cash provided by operating activities in our consolidated statement of cash flows. Consolidated EBITDAC was $2,266.5 million and $1,903.3 million for 2022 and 2021, respectively.
When assessing our overall liquidity, we believe that the focus should be on net earnings as reported in our consolidated statement of earnings, adjusted for non-cash items (i.e., EBITDAC), and cash provided by operating activities in our consolidated statement of cash flows. Consolidated EBITDAC was $2,555.6 million and $2,266.5 million for 2023 and 2022, respectively.
Prime Minister was not going to reverse the corporate rate increase, we recognized a one-time benefit associated with the deferral of U.K. tax losses to a future year. The income tax benefit of stock based awards that vested or were settled in the years ended December 31, 2022 and 2021 was $59.3 million and $40.0 million, respectively.
Prime Minister was not going to reverse a previously‑enacted corporate tax rate increase, we recognized a one-time benefit associated with the deferral of U.K. tax losses to a future year. The income tax benefit of stock based awards that vested or were settled in the years ended December 31, 2023 and 2022 was $76.1 million and $59.3 million, respectively.
In 2022, we expanded, and expect to continue to expand, our international operations through both acquisitions and organic growth. We generate approximately 65% of our revenues for the combined brokerage and risk management segments domestically, with the remaining 35% generated internationally, primarily in the U.K., Australia, Canada, New Zealand and Bermuda (based on 2022 revenues).
In 2023, we expanded, and expect to continue to expand, our international operations through both acquisitions and organic growth. We generate approximately 64% of our revenues for the combined brokerage and risk management segments domestically, with the remaining 36% generated internationally, primarily in the Australia, Canada, New Zealand and the U.K. (based on 2023 revenues).
We believe these favorable trends should continue for 2023, however, deteriorating economic conditions or a reversal in the number of workers employed, could cause fewer new core workers’ compensation claims to arise in future quarters. Organic change in fee revenues was 13% in 2022 and 12% in 2021.
We believe these favorable trends should continue for 2024, however, worsening economic conditions or a reversal in the number of workers employed, could cause fewer new liability and core workers’ compensation claims to arise in future quarters. Organic change in fee revenues was 16% in 2023 and 13% in 2022.
We recorded impairment charges related to amortizable intangible assets of $2.0 million, $17.6 million and $51.7 million 2022, 2021 and 2020, respectively. See Intangible Assets in Notes 1 and 7 to our 2022 consolidated financial statements.
We recorded impairment charges related to amortizable intangible assets of $3.5 million, $2.0 million, and $17.6 million in 2023, 2022 and 2021, respectively. See Intangible Assets in Notes 1 and 7 to our 2023 consolidated financial statements.
Net (losses) earnings attributable to noncontrolling interests - The amounts reported in this line for 2022 and 2021 primarily include noncontrolling interest (losses) earnings of $(2.6) million and $39.8 million, respectively, related to our investment in ChemMod LLC. As of December 31, 2022 and 2020, we held a 46.5% controlling interest in Chem-Mod LLC.
Net losses attributable to noncontrolling interests - The amounts reported in this line for 2023 and 2022 primarily include noncontrolling interest losses of $(9.8) million and $(2.6) million, respectively, related to our investment in Chem-Mod LLC. As of December 31, 2023 and 2022, we held a 46.5% controlling interest in Chem-Mod LLC.
Due to the outstanding borrowing and letters of credit, $1,150.6 million remained available for potential borrowings under the Credit Agreement at December 31, 2022. We use the Credit Agreement to post letters of credit and to borrow funds to supplement our operating cash flows from time to time.
Due to the outstanding borrowing and letters of credit, $1,443.4 million remained available for potential borrowings under the Credit Agreement at December 31, 2023. We use the Credit Agreement to post letters of credit and to borrow funds to supplement our operating cash flows from time to time.
Matching contributions are subject to a five-year graduated vesting schedule and can be funded in cash or company stock. We expensed (net of plan forfeitures) $73.8 million and $65.7 million related to the plan in 2022 and 2021, respectively.
Matching contributions are subject to a five-year graduated vesting schedule and can be funded in cash or company stock. We expensed (net of plan forfeitures) $86.0 million and $73.8 million related to the plan in 2023 and 2022, respectively.
The Premium Financing Debt Facility is comprised of: (i) Facility B is separated into AU$350.0 million and NZ$25.0 million tranches (the NZ$ tranche will decrease as of May 1, 2023 to NZ$10.0 million), (ii) Facility C, an AU$60.0 million equivalent multi‑currency overdraft tranche and (iii) Facility D, a NZ$15.0 million equivalent multi-currency overdraft tranche.
The Premium Financing Debt Facility is comprised of: (i) Facility B is separated into AU$390.0 million and NZ$25.0 million tranches (the NZ$ tranche will be decreased as of May 1, 2024 to NZ$10.0 million), (ii) Facility C, an AU$60.0 million equivalent multi‑currency overdraft tranche and (iii) Facility D, a NZ$15.0 million equivalent multi-currency overdraft tranche.
On September 20, 2022, we entered into an amendment to our revolving loan facility (which we refer to as the Premium Financing Debt Facility) that provides funding for the three Australian (AU) and New Zealand (NZ) premium finance subsidiaries.
Premium Financing Debt Facility - On October 31, 2023, we entered into an amendment to our revolving loan facility (which we refer to as the Premium Financing Debt Facility) that provides funding for the three Australian (AU) and New Zealand (NZ) premium finance subsidiaries.
We are engaged in providing insurance brokerage and consulting services, and third-party property/casualty claims settlement and administration services to entities in the U.S. and abroad. We believe that one of our major strengths is our ability to deliver comprehensively structured insurance and risk management services to our clients.
We are engaged in providing insurance brokerage, reinsurance brokerage, consulting services, and third-party property/casualty claims settlement and administration services to entities and individuals around the world. We believe that one of our major strengths is our ability to deliver comprehensively structured insurance and risk management services to our clients.
Annualized revenues of businesses acquired in 2022 and 2021 totaled approximately $246.5 million and $1,002.0 million, respectively. In 2023, we expect to use new debt, our Credit Agreement, cash from operations and our common stock, or a combination thereof to fund all of the acquisitions we complete.
Annualized revenues of businesses acquired in 2023 and 2022 totaled approximately $885.1 million and $246.5 million, respectively. In 2024, we expect to use new debt, our Credit Agreement (as defined below), cash from operations and our common stock, or a combination thereof to fund all of the acquisitions we complete.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the fiscal year ended December 31, 2021. 32 Summary of Financial Results - Year Ended December 31, See the reconciliations of non-GAAP measures on page 34.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the fiscal year ended December 31, 2022. 33 Summary of Financial Results - Year Ended December 31, See the reconciliations of non-GAAP measures on page 36 .
The production of refined coal generates pretax operating losses. Cost of revenues - Cost of revenues from consolidated clean coal production plants in 2022 and 2021 consists of the cost of coal, labor, equipment maintenance, chemicals, supplies, management fees and depreciation incurred by the clean coal production plants to generate the consolidated revenues discussed above.
Cost of revenues - Cost of revenues from consolidated clean coal production plants in 2022 consists of the cost of coal, labor, equipment maintenance, chemicals, supplies, management fees and depreciation incurred by the clean coal production plants to generate the consolidated revenues discussed above.
See Note 8 to our 2022 consolidated financial statements for a discussion of the terms of the Senior Notes, Note purchase agreements, the Credit Agreement and the Premium Financing Debt Facility. Consistent with past practice, as of December 31, 2022 we had pre-issuance hedges open for $350.0 million for 2023, $500.0 million for 2024 and $100.0 million in 2025.
See Note 8 to our 2023 consolidated financial statements for a discussion of the terms of the Senior Notes, Note purchase agreements, the Credit Agreement (as defined below) and the Premium Financing Debt Facility. Consistent with past practice, as of December 31, 2023 we had pre-issuance hedges open for $150.0 million for 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

18 edited+1 added−0 removed14 unchanged
Biggest changeIf the transaction is already denominated in the foreign entity’s functional currency, only the translation to U.S. dollar reporting is necessary. The remeasurement process required by U.S. GAAP for such foreign currency loan transactions will give rise to a consolidated unrealized foreign exchange gain or loss, which could be material, that is recorded in accumulated other comprehensive loss.
Biggest changeIf the transaction is already denominated in the foreign entity’s functional currency, only the translation to U.S. dollar reporting is necessary. The remeasurement process required by U.S.
The fair value of our portfolio of cash and cash equivalents as of December 31, 2022 approximated its carrying value due to its short-term duration. We estimated market risk as the potential decrease in fair value resulting from a hypothetical one-percentage point increase in interest rates for the instruments contained in the cash and cash equivalents investment portfolio.
The fair value of our portfolio of cash and cash equivalents as of December 31, 2023 approximated its carrying value due to its short-term duration. We estimated market risk as the potential decrease in fair value resulting from a hypothetical one-percentage point increase in interest rates for the instruments contained in the cash and cash equivalents investment portfolio.
Market risk is estimated as the potential increase in fair value resulting from a hypothetical one-percentage point decrease in our weighted average short-term borrowing rate at December 31, 2022 and the resulting fair values are not materially different from their carrying value.
Market risk is estimated as the potential increase in fair value resulting from a hypothetical one-percentage point decrease in our weighted average short-term borrowing rate at December 31, 2023 and the resulting fair values are not materially different from their carrying value.
In addition, during 2022, 2021 and 2020, we had several monthly put/call options in place with an external financial institution that were designed to hedge a significant portion of our Indian currency disbursements through various future payment dates.
In addition, during 2023, 2022 and 2021, we had several monthly put/call options in place with an external financial institution that were designed to hedge a significant portion of our Indian currency disbursements through various future payment dates.
We estimated market risk as the potential impact on the value of the debt recorded in our consolidated balance sheet based on a hypothetical one-percentage point change in our weighted average borrowing rate as of December 31, 2022.
We estimated market risk as the potential impact on the value of the debt recorded in our consolidated balance sheet based on a hypothetical one-percentage point change in our weighted average borrowing rate as of December 31, 2023.
For the year ended December 31, 2022 there has been no such effect on our consolidated financial presentation. The impact of these hedging strategies was not material to our consolidated financial statements for 2022, 2021 and 2020.
For the year ended December 31, 2023 there has been no such effect on our consolidated financial presentation. The impact of these hedging strategies was not material to our consolidated financial statements for 2023, 2022 and 2021.
The following analyses present the hypothetical loss in fair value of the financial instruments held by us at December 31, 2022 that are sensitive to changes in interest rates. The range of changes in interest rates used in the analyses reflects our view of changes that are reasonably possible over a one‑year period.
The following analyses present the hypothetical loss in fair value of the financial instruments held by us at December 31, 2023 that are sensitive to changes in interest rates. The range of changes in interest rates used in the analyses reflects our view of changes that are 66 reasonably possible over a one‑year period.
Although these hedging strategies were designed to protect us against significant U.K. and Indian currency exchange rate movements, we are still exposed to some foreign currency exchange rate risk for the portion of the payments and currency exchange rate that are unhedged.
Although these hedging strategies were designed to protect us against significant India, Norway and the U.K. currency exchange rate movements, we are still exposed to some foreign currency exchange rate risk for the portion of the payments and currency exchange rate that are unhedged.
During 2022, 2021 and 2020, we had several monthly put/call options in place with an external financial institution that were designed to hedge a significant portion of our future U.K. currency revenues through various future payment dates.
During 2023, 2022 and 2021, we had several monthly put/call options in place with an external financial institution that were designed to hedge a significant portion of our future Norway and the U.K. currency revenues through various future payment dates.
Assuming a hypothetical favorable change of 10% in the average foreign currency exchange rate for 2022 (a strengthening of the U.S. dollar), earnings before income taxes would have decreased by approximately $31.2 million. We are also subject to foreign currency exchange rate risk associated 65 with the translation of local currencies of our foreign subsidiaries into U.S. dollars.
Assuming a hypothetical favorable change of 10% in the average foreign currency exchange rate for 2023 (a strengthening of the U.S. dollar), earnings before income taxes would have decreased by approximately $45.4 million. We are also subject to foreign currency exchange rate risk associated with the translation of local currencies of our foreign subsidiaries into U.S. dollars.
See Note 21 to our 2022 consolidated financial statements for the changes in fair value of these derivative instruments reflected in comprehensive earnings in 2022, 2021 and 2020 . 66
See Note 21 to our 2023 consolidated financial statements for the changes in fair value of these derivative instruments reflected in comprehensive earnings in 2023, 2022 and 2021 . 68
As of December 31, 2022, we had $60.0 million of borrowings outstanding under our Credit Agreement and $241.9 million of borrowings outstanding under our Premium Financing Debt Facility. The fair value of these borrowings approximate their carrying value due to their short-term duration and variable interest rates associated with these debt obligations.
As of December 31, 2023, we had $245.0 million of borrowings outstanding under our Credit Agreement and $289.0 million of borrowings outstanding under our Premium Financing Debt Facility. The fair value of these borrowings approximate their carrying value due to their short-term duration and variable interest rates associated with these debt obligations.
The resulting fair values were not materially different from their carrying values at December 31, 2022. As of December 31, 2022, we had $5,848.0 million of borrowings outstanding under our various senior notes and note purchase agreements.
The resulting fair values were not materially different from their carrying values at December 31, 2023. As of December 31, 2023, we had $7,498.0 million of borrowings outstanding under our various senior notes and note purchase agreements.
Assuming a hypothetical adverse change of 10% in the average foreign currency exchange rate for 2022 (a weakening of the U.S. dollar), earnings before income taxes would have increased by approximately $18.3 million.
Assuming a hypothetical adverse change of 10% in the average foreign currency exchange rate for 2023 (a weakening of the U.S. dollar), earnings before income taxes would have increased by approximately $22.6 million.
The aggregate estimated fair value of these borrowings at December 31, 2022 was $4,942.5 million due to the long-term duration and fixed interest rates associated with these debt obligations. No active or observable market exists for our private placement long‑term debt.
The aggregate estimated fair value of these borrowings at December 31, 2023 was $6,840.2 million due to the long-term duration and fixed interest rates associated with these debt obligations. No active or observable market exists for our private placement long‑term debt.
A one-percentage point decrease would result in an estimated fair value of $5,284.4 million, or $563.6 million less than their current carrying value. A one‑percentage point increase would result in an estimated fair value of $4,640.7 million, or $1,207.3 million less than their current carrying value.
A one-percentage point decrease would result in an estimated fair value of $7,420.6 million, or $77.4 million less than their current carrying value. A one‑percentage point increase would result in an estimated fair value of $6,340.6 million, or $1,157.4 million less than their current carrying value.
We are subject to foreign currency exchange rate risk primarily from one of our larger U.K. based brokerage subsidiaries that incurs expenses denominated primarily in British pounds while receiving a substantial portion of its revenues in U.S. dollars. Please see Item 1A, “Risk Factors,” for additional information regarding potential foreign exchange rate risks arising from Brexit.
We are subject to foreign currency exchange rate risk primarily from one of our larger U.K. based brokerage subsidiaries that incurs expenses denominated primarily in British pounds while receiving a substantial portion of its revenues in U.S. dollars.
Historically, we have not entered into derivatives or other similar financial instruments for trading or speculative purposes. However, with respect to managing foreign currency exchange rate risk in India, Norway and the U.K., we have periodically purchased financial instruments to minimize our exposure to this risk.
However, with respect to managing foreign currency exchange rate risk in India, Norway and the U.K., we have periodically purchased financial instruments to minimize our exposure to this risk.
Added
GAAP for such foreign currency loan transactions will give rise to a consolidated unrealized foreign exchange gain or loss, which could be material, that is recorded in accumulated other comprehensive loss. 67 Historically, we have not entered into derivatives or other similar financial instruments for trading or speculative purposes.

Other AJG 10-K year-over-year comparisons