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Corporate pretax loss includes a net unrealized foreign exchange remeasurement loss of $(9.6) million in second
quarter 2023 and a net unrealized foreign exchange remeasurement gain of $13.6 million in second quarter 2022. Corporate pretax loss includes a net unrealized foreign exchange remeasurement loss of $(9.7) million in the six-month period ended June 30, 2023 and a net unrealized foreign exchange remeasurement gain of $16.7 million in the six-month period ended June 30, 2022.
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Interest and banking costs and debt - At June 30, 2023, Gallagher had $2,550.0 million of borrowings from
public debt, $3,948.0 million of borrowings from private placements and $495.0 million of short-term borrowings under its line of credit facility. In addition, Gallagher had $191.2 million outstanding under a revolving loan facility
that provides funding for premium finance receivables, which are fully collateralized by the underlying premiums held by insurance carriers, and as such are excluded from its debt covenant computations. As previously announced, on June 22,
2023, Gallagher entered into a new Credit Agreement that provides for a five-year unsecured revolving credit facility in the amount of $1.2 billion (including a $75.0 million letter of credit
sub-facility). Gallagher may also, upon the agreement of the lenders, increase the commitments under the Credit Agreement up to $1.7 billion.
Clean energy - For 2023, this consists of operating results related to Gallagher’s investments in new clean energy projects and the wind-up of its investments in clean coal production plants. The production of IRC Section 45 clean energy tax credits ceased in December 2021, which reduced the royalty income received by Chem-Mod LLC and net earnings generated by its investments in clean coal production plants in 2022. Even though the law governing IRC Section 45 tax credits expired as of December 31, 2021, Gallagher had
some production at its clean coal production plants in the three-month period ended March 31, 2022 to run-off existing chemical supplies. Additional information regarding these results is available in the
“CFO Commentary” at ajg.com/IR.
Acquisition costs - Consists mostly of external professional fees and other due diligence costs
related to acquisitions. On occasion, Gallagher enters into forward currency hedges for the purchase price of committed, but not yet funded, acquisitions with funding requirements in currencies other than the U.S. dollar. The gains or losses, if
any, associated with these hedge transactions are also included in acquisition costs.
Corporate - Consists of overhead allocations mostly related
to corporate staff compensation, other corporate level activities, and net unrealized foreign exchange remeasurement. In addition, it includes the tax expense related to the partial taxation of foreign earnings, nondeductible executive compensation
and entertainment expenses, the tax benefit from the vesting of employee equity awards, as well as other permanent or discrete tax items not reflected in the provision for income taxes in the Brokerage and Risk Management segments.
Income Taxes - Gallagher allocates the provision for income taxes to its Brokerage and Risk Management segments using the local country statutory
rates. Gallagher’s consolidated effective tax rate for the quarters ended June 30, 2023 and 2022 were 20.7% and 19.1%, respectively. In first quarter 2022, Gallagher increased its state effective income tax rate, which resulted in the
overall U.S. effective income tax rate increasing from 25% to 26% and caused Gallagher to incur additional income tax expense during the quarter and recognized a one-time benefit related to the revaluation of
certain deferred income tax assets to the higher income tax rate. In addition, in 2021, the U.K. government enacted tax legislation that increased the corporate income tax rate from 19% to 25% effective in April 2023.
Webcast Conference Call - Gallagher will host a webcast conference call on Thursday, July 27, 2023 at 5:15 p.m. ET/4:15 p.m. CT. To listen to this
call, please go to ajg.com/IR. The call will be available for replay at such website for at least 90 days.
About Arthur J. Gallagher &
Co.
Arthur J. Gallagher & Co., a global insurance brokerage, risk management and consulting services firm, is headquartered in Rolling
Meadows, Illinois. Gallagher provides these services in approximately 130 countries around the world through its owned operations and a network of correspondent brokers and consultants.
Change in Presentation of Fiduciary Assets and Liabilities in First Quarter 2023
In first quarter 2023, Gallagher changed the presentation of certain amounts and classifications in its consolidated balance sheet and statement of cash flows
to identify and present fiduciary assets and liabilities and respective changes of these accounts in the balance sheet and statement of cash flows. These revisions also better reflect the cash flows associated with its operations. Lines for accounts
receivable, fiduciary assets and fiduciary liabilities were added and lines for restricted cash, premiums and fees receivable and premiums payable to underwriting enterprises were removed. Gallagher made the applicable revisions and
reclassifications to the December 31, 2022 balance sheet amounts included herein to conform to the current period presentation. These changes had no impact on the 2022 consolidated statement of earnings or December 31, 2022
stockholders’ equity.
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