Arthur J. Gallagher & Co. (Gallagher) is assertively reshaping the global insurance landscape through aggressive acquisitions, international expansion, and financial discipline, which has led to it being crowned as the world’s third largest insurance brokerage.
In pursuit of that status, Gallagher has upended market share and the conventional pace of acquisitions. Likewise, incisive decision-making is confronting well-documented disruptions to the global insurance industry. While its ambitions are plain, seasoned analysts claim Gallagher walks fine lines regarding share valuation and talent retention strategies.
These dynamics, and more insights on the US’s third largest and the fastest acquiring insurance brokerage, are laid bare in Insurance Business’ inaugural Insurance Brokerage Competitive Analysis. The analysis is a comprehensive leading-brokerage report on segments including acquisition history, financial architecture, sector priorities, market capitalization strategy, and leadership decision-making, with a new edition released each month.
“Right now, there are three big, large account, commercial (underwriters). Gallagher is actually moving up in account size, pushing into Marsh, Aon, and WTW’s businesses, strategically... Gallagher is going larger, and the other big three are going smaller,” said Paul Newsome – managing director of Piper Sandler and vice president of The Association of Insurance and Financial Analysts, who has been professionally following Gallagher for 25 years – for Insurance Business’s Gallagher Analysis.
Gallagher’s unprecedented total number of acquisitions is a cornerstone of its growth ambitions. More than half, over 150, have occurred since 2020.
The blockbuster and largest to date: AssuredPartners, announced last December for $13.45 billion. To achieve this seismic play, CEO J. Patrick Gallagher and CFO Douglas Howell presented the firm’s largest public offering in its nearly 100-year history, over 30 million shares. The offer boosted Gallagher’s cash assets by more than 1,900% compared to 2022, and ended with no discernable impact on 2024’s average earnings per share.
“There’s an enormous amount of scale economy that can be achieved in an insurance brokerage. It’s a very rapidly consolidating business... (Gallagher) is a little bit more extreme, in the sense that they put more of their cash flow in than others do,” said Newsome.
Gallagher’s AssuredPartners acquisition has yet to be finalized, given the U.S. Department of Justice’s second ongoing request for information. It nonetheless follows a string of billion-and-multi-million-dollar acquisitions including Buck HR administration, WTW’s reinsurance brokerage Willis Re, India’s Edelweis insurance, and during Q4 2024 alone, 20 tuck-in mergers.
Business models acquired by Gallagher are primarily diversified or involve insurance distribution. Many were previously owned by banks, which are conventionally slow-moving. “Certainly, when we look at the results after Gallagher’s taken ownership of (previously bank-owned firms), there is no impediment to the strong organic (revenue) they are producing,” said Meyer Shields – managing director of Keefe, Bruyette & Woods who has followed Gallagher since 2000 – for the Review.
These acquisitions, particularly in the fast-evolving industry of insurance distribution, are supported by Gallagher's proprietary AI technologies: Gallagher Automated Insurance Analytics (GAIA) and Gallagher Drive. The firm also has partnerships with insurtech providers SEND, Federato, ProNavigator, Shift Technologies, and Sprout.ai.
All this supports the second cornerstone of Gallagher’s broader strategy: world domination. “In some bursts of activity, opposed to a little bit every year, (Gallagher's) established an international infrastructure starting with English-speaking countries,” said Shields.
One hundred offices in the UK, 45 in Australia, 37 in New Zealand, and 16 in India prove a likely staging ground for expansion into Latin America, Western Europe, and Asia, before rapidly emerging insurance markets in Eastern Europe and Africa, Shields continued. A hub-and-spoke model enables Gallagher to serve multinational clients with more nuance, such as middle-market firms with increasingly international operations and who value brokers that can navigate multiple risk regimes under one roof. It also supports the firm’s peerless strategy for growth through expansion.
Each Gallagher strategic cornerstone comes with external and internal risks, outlined in Insurance Business’s Review.
“We do seem to be past the peak of rate increases in the property and casualty insurance industry. Broadly speaking, I’m worried,” Shields began in the Review. Gallagher's credit rating saw no change following its mammoth AssuredPartners acquisition.
Likewise, Gallagher has exercised aggressive litigation against former employees who have moved to other firms. It's been framed as securing one of the firm's most important assets, talent, but may not go without consequence for its next most important asset, reputation.
This reputation has attracted and arguably drives the decision-making of Gallagher's storied executives and board directors. Their lengthy careers span the world’s largest renewable energy company NextEra Energy, Lloyd’s of London, global industry promoter the International Insurance Foundation, and northeastern commercial insurance enterprise The Plymouth Rock Group.
Gallagher’s acquisition history, financial architecture, sector priorities, market capitalization, and leadership, closely examined together in Insurance Business’ first Competitive Analysis, reveals the firm’s linchpin ambition to be the globally dominant market insurance brokerage.
“Mainly acquisition-driven... (Gallagher) are setting themselves up, intelligently, to build a very legitimate global brokerage,” said Shields.
Read the full report here.
