Arthur J. Gallagher Banks on Solid Segmental Growth Amid Cost Woes

Arthur J. Gallagher & Co. AJG continues to benefit from solid retention, improving renewal premiums and organic and inorganic growth.
AJG remains focused on generating both organic (particularly international) and inorganic growth and is, thus, tapping into growth opportunities worldwide. This, coupled with solid retention and improving renewal premiums across all major geographies and most product lines, bodes well for growth.

In the Risk Management segment, AJG expects about 7% organic growth for 2026. AJG expects the full-year adjusted EBITDAC margin to range from 21% to 22%, up slightly from December expectations. In the Brokerage segment, AJG expects organic growth of around 5.5% for 2026, with projected underlying margin expansion of 40-60 basis points.

AJG’s revenues are geographically diversified with strong domestic and international operations. International contributes about one-third of revenues. Given the number and size of its non-U.S. acquisitions, AJG expects international contributions to its total revenues to trend upward.

Its inorganic growth story is impressive. AJG completed approximately 780 acquisitions from Jan. 1, 2002, through Dec. 31, 2025. Revenue growth rates generally ranged from 5% to 18% for 2025 acquisitions. In 2025, AJG completed 33 acquisitions, representing around $3.5 billion of annualized revenues of businesses acquired in 2025. Looking at the pipeline, AJG has around 40 term sheets signed or being prepared, representing around $350 million of annualized revenues.

AJG’s Capital Deployment

A robust capital position over the years reflects its financial flexibility. Banking on its capital position, AJG distributes wealth to shareholders through dividend hikes and share repurchases. In the first quarter of 2026, the dividend was raised by 7.6%, witnessing a three-year CAGR (2020-2025) of 7.6%. Arthur J. Gallagher’s current dividend yield is 1% and has a $1.5 billion share buyback program in place.

Risk

Arthur J. Gallagher has been experiencing an increase in expenses due to higher compensation, depreciation, amortization and operating expenses that have been eroding margins.

Arthur J. Gallagher’s return on equity of 12.1% is lower than the industry average of 20.2%. Also, the trailing 12-month return on invested capital was 7.1%, lower than the industry average of 7.6%. This shows the company’s inefficiency in managing shareholders’ funds. Also, the debt level is significant, which raises interest payouts and results in low times interest earned.

Other Industry Players

Other players in the insurance industry include Willis Towers Watson Public Limited Company WTW, Brown & Brown, Inc. BRO and Aon plc AON.

WTW’s earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 2.65%.

Willis Towers is well-positioned for incremental revenue growth, cost benefits and a solid balance sheet. Its focus on realizing operational efficiencies, investment in new growth avenues and the strength of its client services bode well. Buyouts help it penetrate deeper into the markets and expand its international presence.

BRO’s earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 5.54%.

Brown & Brown’s compelling portfolio, along with an impressive growth trajectory driven by organic and inorganic initiatives across all its segments, bodes well. Buyouts and collaborations have enhanced its existing capabilities and extended its geographic foothold. Strategic efforts continue to drive commission and fees.

AON’s earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 0.99%.

Aon benefits from disciplined cost control, restructuring initiatives and focused capital deployment, which are improving efficiency and scalability. The AAU program and the 3x3 Plan are driving operational streamlining, technology adoption and integrated Risk and Human Capital solutions, supporting earnings growth, margin expansion and strong free cash flow visibility. Strategic acquisitions and partnerships have expanded its global footprint and lifted return on capital.

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