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Top insurance brokers, No. 3: Arthur J. Gallagher & Co.

J. Patrick Gallagher Jr.

2023 brokerage revenue: $9.7B
Percent increase: 15.8%

Arthur J. Gallagher & Co.’s continued appetite for acquisitions helped push the brokerage further up the ranks of the world’s largest brokers in 2023, with three sizeable deals completed last year expected to significantly expand the company’s capabilities.

“We had a terrific year last year,” said J. Patrick Gallagher Jr., chairman and CEO of the brokerage. In addition to 51 acquisitions in 2023, Gallagher picked up several books of business and recruited producers that he said would help further boost revenue.

Gallagher’s 2023 brokerage revenue of $9.70 billion marked a 15.8% increase over the prior year. Gallagher overtook rival Willis Towers Watson PLC to take the No. 3 position in Business Insurance’s ranking of the world’s largest brokers.

The brokerage’s gross revenue reached $10.07 billion last year, up 17.8% from 2022.

Gallagher’s $660 million acquisition of BCHR Holdings L.P., which does business as Buck, in April 2023 “was a transformational deal for us,” Mr. Gallagher said. “It really expanded our retirement, benefits and HR consulting services. This gave us tremendous scale in those practices and at the same time expanded us globally.”

In October, the brokerage paid $510 million for bank-owned Eastern Insurance Group LLC in a deal that Mr. Gallagher said was a “classic example of finding something that was a tremendous fit.” The deal will allow Gallagher to expand in several areas, including life sciences and hospitality, he said.

In another deal with a bank, in November Gallagher acquired the insurance brokerage unit of Cadence Bank for $904 million. The move will broaden Gallagher’s presence in the southern U.S. where “we’re already very strong,” Mr. Gallagher said. 

In the first quarter of this year, Gallagher recorded 12 acquisitions, representing a total of $69.2 million in annualized revenue.

Mr. Gallagher said there remains a rich pool of acquisition targets, but there aren’t many with the attractiveness of the major buys the brokerage made in 2023. “If there are bank opportunities, we clearly will be on the list of people they want to talk to,” he added. “We like that aspect of the business, and we probably would be very competitive if the opportunity arose.”

Outside the U.S., Gallagher is looking to India, Europe, the Middle East, Africa and Asia for future deals, Mr. Gallagher said. In continental Europe, “we’ve had our toes in the water there for 20 years,” he said, and expansion in that part of the world is expected.

Gallagher doesn’t rely on debt to fund its acquisitions in the way private-equity firms that compete for deals often do, Mr. Gallagher said. 

“We don’t carry that kind of leverage,” he said. “We have a lot of dry powder, and we’re focused on using that cash to do acquisitions and to invest in making the company better. … That separates us into a very, very small group of people with the size, scale, depth of capabilities and the money to invest.” 

Last year’s acquisitions followed the 2022 purchase of the treaty reinsurance operations of Willis Towers Watson PLC, a move that significantly boosted Gallagher’s reinsurance brokerage business.

“Generally speaking, there are three primary reinsurance brokers in the world and one of them was the one they acquired,” said J. Paul Newsome, managing director with Piper Sandler & Co. in Minneapolis. “That’s worked out quite well,” he added, with the acquisition coming at a time when firm reinsurance prices meant higher commissions. 

Gallagher’s reinsurance revenue climbed to $1.16 billion in 2023, compared with $1.01 billion the previous year. 

Strong organic growth that neared 10% in 2023 was better than most of Gallagher’s large competitors saw, according to C. Gregory Peters, managing director-equity research at Raymond James & Associates Inc. in St. Petersburg, Florida. That’s “a very positive reflection of good, strong momentum inside an organization,” he said.

Organic growth is expected to moderate as brokerages see insurance rate increases decelerate, Mr. Peters said. “It’s not a principal driver of organic growth, but it’s also not an insignificant component,” he said.

Gallagher is in a good position to continue its middle-market growth, Mr. Newsome said. “It’s a bigger market with less concentration of competitors, and that has allowed them over a long period of time to grow faster than companies that are dominant in the large-account business,” he said.



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