Arthur J. Gallagher & Co. (AJG) 10-K risk factor changes: FY2020 vs FY2019

[removed: A] [added: Apart from the impact of COVID-19, a] decline in economic activity [added: for any other reason (including climate change, or the uncertainty caused by political violence and chaos)] could adversely impact us in future years as a result of reductions in the amount of insurance coverage and consulting services that our clients purchase due to reductions in their headcount, payroll, properties, and the market values of assets, among other factors.

[removed: In addition,] [added: The transition to a low-carbon economy could harm] specific industries or sectors [removed: of the economy could experience declines] [added: such as oil and gas] in ways that [added: could] impact our business.

Any such reduction or decline (whether caused by an overall economic decline or declines in certain [removed: industries)] [added: industries or in certain countries and regions in which we operate)] could adversely impact our commission revenues, consulting revenues or revenues from managing third-party insurance claims.

[removed: Following approval by the European Union and the U.K. parliaments, the] [added: The] U.K. formally left the European Union [added: (EU)] on January 31, [added: 2020 and an agreed implementation period ended on December 31,] 2020.

Accordingly, while our [removed: EEA] [added: European Economic Area (EEA)] client base is a small part of our U.K. operations, [removed: our expectation is that EEA] [added: we have now transferred those] clients [removed: will need] to [removed: be serviced by] a [removed: subsidiary] [added: Swedish subsidiary,] authorized in the EEA.

[removed: In addition, under our business model in the U.K. some] [added: Some] services will be provided through staff working in a U.K. branch of the subsidiary.

[removed: There] [added: Although this “reverse branch” model is typical of other brokers of a similar size, there] can be no assurance that [removed: applicable] [added: the approach of] EU [removed: regulations] [added: regulators] will not change, potentially requiring us to adjust our plans [added: in relation to the U.K. branch] and causing further management distraction and cost.

We have a significant amount of [removed: trade accounts receivable] [added: receivables] from [removed: some] [added: certain] of the underwriting enterprises with which we place insurance.

The failure of an underwriting enterprise with which we place business could result in errors and omissions claims against us by our [removed: clients, and the failure of errors and omissions underwriting enterprises could make the errors and omissions insurance we rely upon cost prohibitive or unavailable, which could adversely affect our results of operations and financial condition.][added: clients.]

[removed: We] [added: We] have historically acquired large numbers of insurance brokers, benefit consulting firms and, to a lesser extent, claim 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 [removed: operations.][added: operations.]

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 (one of which has a partnership tax structure that gives it an advantage in pricing acquisitions) [added: has in some cases made and] could [added: in the future] make [removed: it] [added: appropriate acquisition targets] more difficult [removed: for us] to identify [removed: appropriate targets] and [removed: could make them] more expensive.

Our ability to finance and integrate acquisitions may also decrease if we complete a greater number of [removed: large] [added: larger] acquisitions than we have historically.

Post-acquisition risks include [removed: those] [added: poor cultural fit and risks] relating to retention of personnel, retention of clients, entry into unfamiliar [added: or complex] markets or lines of business, contingencies or liabilities, such as violations of sanctions laws or anti-corruption laws including the FCPA and U.K. Bribery Act, risks relating to ensuring compliance with licensing and regulatory requirements, tax and accounting issues, the risk that the acquisition distracts management and personnel from our existing business, and integration difficulties relating to accounting, information technology, pay equity, human resources, [removed: employee attrition] or [removed: poor organizational culture and fit,] [added: employee attrition,] some or all of which could have an adverse effect on our results of operations and growth.

Three of the firms we compete with in the global risk management and brokerage markets [added: (two of which are in the process of merging, subject to regulatory approval)] have revenues significantly larger than ours.

We believe that the primary factors determining our competitive position with other organizations in our industry are the quality of the services we render, the personalized attention we provide, the individual and corporate expertise of the brokers and consultants providing the actual service to the client and our ability to help our clients manage their overall [added: risk exposure and] insurance costs.

Consolidation among our existing competitors [added: (such as the pending merger between Aon and Willis Towers Watson)] could create additional competitive pressure on us as such firms grow their market share, take advantage of strategic and operational synergies and develop lower cost structures.

| | • | Federal and state governments establishing programs to provide health insurance [added: (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; |

[added: As underwriting enterprises continue to outsource the production of premium revenue to non-affiliated] brokers or agents such as us, those companies may seek to further minimize their expenses by reducing the commission rates payable to insurance agents or brokers.

In addition, there have been and may continue to be various trends in the insurance industry toward alternative insurance markets including, among other things, greater levels of self-insurance, captives, [added: rent-a-captives, risk retention groups and non-insurance capital markets-based solutions to traditional insurance.]

Our ability to generate premium-based commission revenue may also be challenged by the growing desire of some clients to compensate brokers based upon flat fees rather than [removed: variable commission rates.][added: a percentage of premium.]

A [removed: significant] [added: meaningful] portion of our revenues consists of contingent and supplemental revenues from underwriting enterprises.

In the case of contingent revenues, under [removed: the changed] revenue recognition accounting [removed: standard, effective January 1, 2018,] [added: standards,] this could lead to the reversal of revenues in future periods that were recognized in prior [removed: periods (See Note 2 to our 2019 consolidated financial statements for more information).][added: periods.]

[removed: If] [added: If] we are unable to apply technology 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 [removed: affected.][added: affected.]

We may be exposed to competitive risks related to the adoption and application of new technologies by established market participants (for example, through disintermediation) or new entrants such as technology companies, “Insurtech” [added: start-up companies and others.]

Our success is also dependent on maintaining a good reputation with existing and potential employees, [removed: investors] [added: investors, regulators] and [removed: regulators.][added: the communities in which we operate.]

Negative perceptions or publicity regarding the matters noted above, including our association with clients or business partners [removed: who themselves have a] [added: with] damaged [removed: reputation,] [added: reputations,] or from actual or alleged conduct by us or our employees, could damage our reputation.

Any resulting erosion of trust and confidence could make it difficult for us to attract and retain clients, employees [added: or investors, result in lower ESG ratings] and [removed: investors] [added: exclusion of our stock from ESG-oriented indices] or [added: investment funds, or] harm our relationships with [removed: regulators, any of which could have a material adverse effect on our business, financial condition] [added: regulators] and [removed: results of operations.][added: the communities in which we operate.]

We could be adversely affected if we fail to plan adequately for the succession of these leaders, including our chief executive [removed: officer.][added: officer, or if one or more of them contracts COVID-19.]

We could also be adversely affected if we fail to attract and retain talent [added: and foster a diverse and inclusive workplace] throughout our organization.

In [removed: 2019,] [added: 2020,] we generated approximately [removed: 31%] [added: 32%] of our combined brokerage and risk management revenues outside the U.S. The global nature of our business creates operational and economic risks.

To date, the dispute between India and Pakistan involving the Kashmir region, [added: rising tensions between India and China,] incidents of terrorism in India and general geopolitical uncertainties have not adversely affected our operations in India.

| | • | Maintaining awareness of and complying with a wide variety of labor practices and foreign laws, including those relating to export and import duties, environmental policies and privacy issues, as well as laws and regulations applicable to U.S. business operations abroad. These and other international regulatory risks are described below under “Regulatory, Legal and Accounting [removed: Risks;”] [added: Risks”;] |

| | • | The potential costs, difficulties and risks associated with local regulations across the globe, including the risk of personal liability for directors and officers [added: (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. For example, we are building our Latin American operations (which contributed [removed: $37.4] [added: $45.8] million in revenue from 18 locations in [removed: 2019)] [added: 2020)] through acquisitions of local family-owned insurance brokerage firms. 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 [removed: recovering] [added: recover] damages, and made it more difficult and expensive to terminate their employment; |

| | • | Unfavorable audits and exposure to additional liabilities relating to various non-income taxes (such as payroll, sales, use, value-added, net worth, property and goods and services taxes) in foreign jurisdictions. In addition, our future effective tax rates could be unfavorably affected by changes in tax rates, discriminatory or confiscatory taxation, changes in the valuation of our deferred tax assets or liabilities, changes in tax laws or their interpretation and the financial results of our international subsidiaries. The Organization for Economic Cooperation and Development [removed: issued] [added: 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. For example, in response to BEPS, the U.K., Australia and New Zealand adopted rules that affect the deductibility of interest paid on intercompany debt, and other jurisdictions where we operate may do so as well in the near [removed: future;] [added: future. Many jurisdictions adopted stimulus measures in response to COVID-19, many of which offered continued employment benefit subsidies, payroll tax deferrals or tax refunds that have various tax impacts for businesses;] |

| | • | Lost business or other financial harm due to [added: protectionism in the U.S. and in countries around the world, including adverse trade policies,] governmental actions affecting the flow of goods, services and currency, [removed: including protectionist policies that discriminate in favor of local competitors;] and [added: governmental restrictions on the transfer of funds to us from our operations outside the U.S.] |

Our third party claims administration operations [added: also] face a variety of [added: additional] risks distinct from those faced by [added: the rest of] our [removed: brokerage operations,] [added: business,] including the risks that:

| | • | 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 [removed: products.] [added: products, and we could face additional competition from potential new entrants into the global claims management services market.] |

The ongoing COVID-19 pandemic has and could continue to adversely affect our business, results of operations and financial condition.

The global spread of COVID-19 (including potentially more contagious strains of COVID-19 such as those recently detected in the U.K., South Africa and Brazil) has created significant volatility and uncertainty and economic disruption.

The extent to which the pandemic impacts our business, operations and financial results will depend on numerous evolving factors, many of which are not within our control and which we may not be able to accurately predict, including: its duration and scope; the ultimate availability, administration and effectiveness of vaccines, and our employees’ and the general population’s willingness to receive them; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; the effect on our clients and client demand for our services; our ability to sell and provide our services, including limitations on travel and difficulties of our clients and employees working from home; the ability of our clients to pay their insurance premiums which could impact our commission and fee revenues for our services; the nature and extent of claims impacting the ability of underwriting enterprises to pay supplemental and contingent commissions; the decrease in new arising workers’ compensation and general liability claims; the long-term impact of closing our offices and our employees working from home, including increased technology costs; the impact of lost revenue on our employees’ variable and base compensation levels; the impact of uncertainty related to salary raises and future compensation levels; the impact of reduced investments and postponements related to business modernization projects; the impact of furloughed or terminated employees; and the impact of reduced advertising and sponsorship investments.

| | • | Economy-related risks. The decline in economic activity caused by COVID-19 has already adversely affected, and in future periods, could materially adversely affect our business, results of operations and financial condition. Continued reductions in our clients’ exposure units (such as headcount, payroll, properties, the market values of their assets, and plant, equipment and other asset utilization levels, among other factors) will reduce the amount of insurance coverage and consulting and claims administration services they need. In addition, with unprecedented levels of unemployment and business closures during the past year, the number of newly arising workers’ compensation and general liability claims, which directly impact our fee revenues in our risk management operation, declined materially. Certain of our industry niches, such as hospitality, transportation, manufacturing and construction, have been significantly affected by the economic decline. The decline in economic activity due to COVID-19 has caused some of our clients to become financially less stable, and if this trend continues and clients enter bankruptcy, liquidate their operations or consolidate, our revenues and the collectability of our receivables will be adversely affected. Clients with losses due to COVID-19, in addition to suing underwriting enterprises for insurance coverage under business interruption and other policies, may also sue us for improperly failing to procure coverage, and some clients have already done so. In addition, in our risk management operation, we inform claimants of insurance coverage and compensability determinations on behalf of our third-party claims administration clients (including, during the past year, with respect to numerous COVID-19 related claims) on the basis of client direction or written opinions from outside counsel. Claimants who have been denied coverage and sue our clients may also bring actions against us. While we do not believe any such actions against us generally have merit, they could result in significant costs, damage our reputation, and/or harm our relationships with clients. |

| | • | Regulatory risks. To mitigate the economic impact caused by COVID-19, certain governmental entities have proposed requiring underwriting enterprises to pay business interruption and workers compensation claims for COVID-19 losses despite applicable policy exclusions. Retroactively expanding business interruption or other coverages could materially negatively affect underwriting enterprises, reduce the availability of insurance coverage, and negatively affect our ability to generate commission revenues from such policies as well as supplemental and contingent commissions from underwriting enterprises. While some have proposed liability protections in the U.S. for companies bringing employees back into the office following the pandemic, the chances of such legislation being adopted under the current U.S. president’s administration and Democratic-led Congress may have diminished. |

| | • | Risks related to remote work. Many of our employees continue to work from home. While we have not experienced any significant operating difficulties since our work-from-home practices began, the inability to meet potential and existing clients face to face has, in some cases, negatively impacted our ability to sell and provide our services. Contingency plans related to our service center in India depend upon the normal functioning of our other offices around the world, and until that is the case, we face elevated risk in the event of a crisis rendering the India service center inoperable. The stresses of remote work for some of our employees may decrease their productivity or make them feel detached from colleagues and the organization. In some cases, this may make them more vulnerable to solicitations by competing firms. In addition, our increased reliance on work-from-home technologies and our employees’ more frequent use of personal devices and non-standard business processing may increase the risk of cybersecurity or data breaches from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error, malfeasance, social engineering, physical breaches or other actions. While we do not believe the ransomware incident referred to elsewhere in this report occurred because of remote work, it serves as an important illustration of the heightened risk. |

COVID-19 and the volatile regional and global economic conditions stemming from the pandemic, as well as reactions to future pandemics or new strains or resurgences of COVID-19, could also precipitate or aggravate the other risk factors that we identify in this report, which in turn could materially adversely affect our business, financial condition, liquidity, results of operations (including revenues and profitability) and/or stock price.

Further, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations.

Although the U.K. and the EU reached a trade and customs agreement, this agreement did not extend to insurance brokerage services.

In such an event, our results of operations and financial condition could be adversely affected.

Further, the failure of errors and omissions underwriting enterprises could make the errors and omissions insurance we rely upon cost prohibitive or unavailable.

Any of these developments could adversely affect our results of operations and financial condition.

See Note 3 to the consolidated financial statements elsewhere in this report for information regarding the size of transactions in the reporting period.

Across all of our operations, Insurtech and technology-based start-ups are entering the business.

In most cases, these businesses complement or enhance our offerings, but in some cases they compete with us.

| | • | 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; |

While underwriting enterprises generally maintain supplemental revenues in the current year at a pre-determined rate, that rate can change in future years as described above.

Investments in technology systems (for example, technology and cybersecurity investments we are making in response to the ransomware incident referred to elsewhere in this report) may not deliver the benefits or perform as expected, or may be replaced or become obsolete more quickly than expected, which could result in operational difficulties or additional costs.

Our reputation could also be harmed by negative perceptions or publicity regarding ESG matters including concerns with environmental matters, climate change, workforce diversity, pay equity, harassment, racial justice, cyber security and data privacy.

Any of these matters could have a material adverse effect on our business, financial condition and results of operations.

We enter into agreements with many of our brokers and significant client-facing employees and all of our executive officers, which prohibit them from disclosing confidential information and/or soliciting our clients, prospects and employees upon their termination of employment.

The confidentiality and non-solicitation provisions of such agreements terminate in the event of a hostile change in control, as defined in the agreements.

See also “Risks related to remote work” in our COVID-19 risk factor above.

| | • | New pandemics (in addition to COVID-19) at a regional or global level; and |

In 2020, the COVID-19 pandemic caused a reduction in the number of claims we processed, negatively impacting our third party claims administration operations to a greater degree than the rest of our business.

This disproportionate negative impact could continue into 2021.

We face a variety of risks in our benefit consulting operations distinct from those we face in our insurance brokerage operations.

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 in 2020.

If the economy is slow to recover in 2021, we could experience further deterioration in these sources of revenue.

Certain areas within our retirement consulting practice may attract a higher level of regulatory scrutiny due to regulators’ historical interest in such matters, including pension-related products and investment advisory and broker-dealer services.

New laws or regulations reducing employer-sponsored health insurance could impact

clients’ demand for our services.

Such a disruption could be caused by a cybersecurity incident (for example, see details regarding a ransomware incident we experienced in 2020 in the cybersecurity risk factor below), human error, capacity constraints, hardware failure or defect, natural disasters, fire, power loss, telecommunication failures, break-ins, sabotage, intentional acts of vandalism, acts of terrorism, political violence and unrest in the U.S. or elsewhere around the world, or war.

See our COVID-19 risk factor above.

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.

The U.S. Federal Reserve recently identified climate change as a systemic risk to the economy.

It also reported that a gradual change in investor sentiment regarding climate risk introduces the possibility of abrupt tipping points or significant swings in sentiment, which could create unpredictable follow-on effects in financial markets.

If this occurred, not only would we 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.

Our clients in such industries could go out of business or have reduced needs for insurance-related or consulting services, which could adversely impact our commission revenues, consulting revenues or revenues from managing third-party insurance claims.

For example, if climate change and environmental risks harm certain industries like oil and gas, our clients in those industries could go out of business or have reduced needs for insurance coverage or consulting services.

To cite another example, if an increase in consumer preference for

car-

and ride-sharing services results in a long-term reduction in vehicle use, the automobile insurance industry could decline.

Our operations in the U.K., which contributed approximately 19% of our brokerage segment and approximately 4% of our risk management segment revenues in 2019, expose us to risk in the event of an economic downturn in the U.K. due to Brexit.

Such a downturn could adversely affect our U.K. operations through a decline in the insurance coverage and consulting services our clients purchase as they face reductions in their headcount, payroll, properties or the market value of their assets.

The U.K. is now expected to be in an implementation period until December 31, 2020 (any further extension would require U.K. legislation to be changed).

During this period, the U.K. will still follow all the European Union’s rules and regulations, will remain in the single market and the customs union, and will permit the free movement of people.

There is no formal stated intent by the U.K. or European Economic Area (EEA) authorities to put in place, at the end of the implementation period, an arrangement under which U.K.-based insurance brokers will continue to be able to exercise “passporting rights” to provide services to clients in the EEA.

While we have a plan in place to transfer those clients to a Swedish subsidiary, such a transition could be a distraction to both clients and our management.

In addition, the uncertainty surrounding Brexit has and may continue to result in substantial volatility in foreign exchange markets, which could cause volatility in our quarterly financial results, and may lead to a sustained weakness in the British pound’s exchange rate against the U.S. dollar.

Any significant weakening of the British pound to the U.S. dollar will have an adverse impact on our brokerage and risk management segments’ net earnings as reported in U.S. dollars.

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As underwriting enterprises continue to outsource the production of premium revenue to

non-affiliated

rent-a-captives,

risk retention groups and

non-insurance

capital markets-based solutions to traditional insurance.

start-up

companies and others.

Our reputation could also be impacted by negative perceptions or publicity regarding environmental, social and governance (ESG) issues or cybersecurity and data privacy concerns.

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| | • | Adverse trade policies, and adverse changes to any of the policies of the U.S. or any of the foreign jurisdictions in which we operate; |

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[added: | | | Reported GAAP | | | | Adjusted] Non-GAAP [added: | | | | Reported GAAP | | | | Adjusted Non-GAAP | | | | Reported GAAP | | | | Adjusted Non-GAAP | | |]

[removed: non-GAAP][added: Non-GAAP Earnings Measures]

[added: In addition, please see “Information Regarding Non-GAAP Measures and Other” beginning on page 34 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 [removed: 2019,] [added: 2020,] we expanded, and expect to continue to expand, our international operations through both acquisitions and organic growth.

We generate approximately [removed: 69%] [added: 68%] of our revenues for the combined brokerage and risk management segments domestically, with the remaining [removed: 31% derived] [added: 32% generated] internationally, primarily in [added: the U.K.,] Australia, [removed: Bermuda,] Canada, [removed: the Caribbean,] New Zealand and [removed: the U.K.] [added: Bermuda] (based on [removed: 2019] [added: 2020] revenues).

We expect that our international revenue as a percentage of our total revenues in [removed: 2020] [added: 2021] will be comparable to [removed: 2019.][added: 2020.]

We have three reportable segments: brokerage, risk management and corporate, which contributed approximately [removed: 68%,] [added: 74%,] 14% and [removed: 18%,] [added: 12%,] respectively, to [removed: 2019] [added: 2020] revenues.

| | | Year [removed: 2019] [added: 2020] | | | | | | | | Year [removed: 2018] [added: 2019] | | | | | | | | Change | | | | | | |

| Net earnings | | $ | [removed: 717.3] [added: 866.0] | | | | | | | $ | [removed: 573.2] [added: 717.3] | | | | | | | | [removed: 25] [added: 21] | % | | | | |

| Net earnings margin | | | [removed: 14.6] [added: 16.8] | % | | | | | | | [removed: 13.5] [added: 14.6] | % | | | | | | [removed: | +113] [added: +213] bpts | | | | | | [added: |]

| Adjusted EBITDAC margin | | | | | | | [removed: 28.6] [added: 32.7] | % | | | | | | | [removed: 27.8] [added: 28.5] | % | | | | | | [removed: | +75] [added: +418] bpts | | [added: |]

| Diluted net earnings per share | | $ | [removed: 3.68 | | | $ | 3.73] [added: 4.42] | | | $ | [removed: 3.02] [added: 3.68] | | | $ | [removed: 3.23 | | | | 22 | % | | | 15] [added: 0.74] | [removed: %] |

| Revenues before reimbursements | | $ | [removed: 838.5] [added: 821.7] | | | $ | [removed: 838.5] [added: 821.7] | | | $ | [removed: 798.3] [added: 838.5] | | | $ | [removed: 789.2] [added: 838.0] | | | | [removed: 5] [added: (2] | [removed: %] [added: %)] | | | [removed: 6] [added: (2] | [removed: %] [added: %)] |

| Net earnings | | $ | [removed: 66.2] [added: 66.9] | | | | | | | $ | [removed: 70.4] [added: 66.2] | | | | | | | | [removed: \-6] [added: 1] | % | | | | |

| Net earnings margin (before reimbursements) | | | [removed: 7.9] [added: 8.1] | % | | | | | | | [removed: 8.8] [added: 7.9] | % | | | | | | [removed: | \-92] [added: +24] bpts | | | | | | [added: |]

| Adjusted EBITDAC margin (before reimbursements) | | | | | | | [removed: 17.4] [added: 18.2] | % | | | | | | | [removed: 17.3] [added: 17.4] | % | | | | | | [removed: | +11] [added: +77] bpts | | [added: |]

| Diluted net earnings per share | | $ | [removed: 0.35] [added: 0.34] | | | $ | [removed: 0.37] [added: 0.38] | | | $ | [removed: 0.38] [added: 0.35] | | | $ | [removed: 0.36] [added: 0.37] | | | | [removed: \-8] [added: (3] | [removed: %] [added: %)] | | | 3 | % |

| Diluted net loss per share | | $ | [removed: (0.51] [added: (0.56] | ) | | $ | [removed: (0.45] [added: (0.57] | ) | | $ | [removed: —] [added: (0.51] | [added: )] | | $ | [removed: (0.16] [added: (0.45] | ) | | | | | | | | |

| Diluted net earnings per share | | [removed: $] | [removed: 3.52] [added: 4.20] | | | $ | [removed: 3.65] [added: 4.72] | | | $ | [removed: 3.40] [added: 3.52] | | | $ | [removed: 3.43] [added: 3.64] | | | | [removed: 4] [added: 19] | % | | | [removed: 6] [added: 30] | % |

| Diluted net earnings per share | | $ | [removed: 4.03] [added: 4.76] | | | $ | [removed: 4.10] [added: 5.29] | | | $ | [removed: 3.40] [added: 4.03] | | | $ | [removed: 3.59] [added: 4.09] | | | | [removed: 19] [added: 18] | % | | | [removed: 14] [added: 29] | % |

In our corporate segment, net after tax earnings from our clean energy investments was [removed: $88.5] [added: $69.8] million and [removed: $118.6] [added: $88.5] million in [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively.

Our current estimate of the [removed: 2020] [added: 2021] annual net after tax earnings, including IRC Section 45 tax credits, which will be produced from all of our clean energy investments in 2020, is [removed: $80.0] [added: $60.0] million to [removed: $100.0] [added: $75.0] million.

The following provides information that management believes is helpful when comparing revenues before reimbursements, net earnings, EBITDAC and diluted net earnings per share for [removed: 2019] [added: 2020] and [removed: 2018.][added: 2019.]

Reconciliations of EBITDAC for the brokerage and risk management segments are provided on pages [removed: 35] [added: 37] and [removed: 41] [added: 42] of this filing.

| Segment | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | Chg | | |

| Brokerage, as reported | | $ | [removed: 4,901.5] [added: 5,167.1] | | | $ | [removed: 4,246.9] [added: 4,901.5] | | | $ | [removed: 717.3] [added: 866.0] | | | $ | [removed: 573.2] [added: 717.3] | | | $ | [removed: 1,359.1] [added: 1,597.4] | | | $ | [removed: 1,126.3] [added: 1,359.1] | | | $ | [removed: 3.68] [added: 4.42] | | | $ | [removed: 3.02] [added: 3.68] | | | | [removed: 22] [added: 20] | % |

| Net [removed: gains] [added: loss (gains)] on divestitures | | | [removed: (75.3] [added: 5.8] | [removed: )] | | | [removed: (10.2] [added: (75.3] | ) | | | [removed: (47.5] [added: 4.7] | [removed: )] | | | [removed: (7.9] [added: (47.5] | ) | | | [removed: (62.3] [added: 5.8] | [removed: )] | | | [removed: (10.2] [added: (62.3] | ) | | | [removed: (0.25] [added: 0.02] | [removed: )] | | | [removed: (0.04] [added: (0.25] | ) | | | | |

| Acquisition integration | | | — | | | | — | | | | [removed: 16.1] [added: 19.3] | | | | [removed: 2.6] [added: 16.1] | | | | [removed: 20.4] [added: 25.1] | | | | [removed: 3.4] [added: 20.4] | | | | [removed: 0.08] [added: 0.10] | | | | [removed: 0.01] [added: 0.08] | | | | | |

| Workforce and lease termination | | | — | | | | — | | | | [removed: 35.1] [added: 34.0] | | | | [removed: 29.1] [added: 35.1] | | | | [removed: 44.8] [added: 43.9] | | | | [removed: 38.7] [added: 44.8] | | | | [removed: 0.19] [added: 0.17] | | | | [removed: 0.16] [added: 0.19] | | | | | |

| Acquisition related adjustments | | | — | | | | — | | | | [removed: 5.8] [added: 39.7] | | | | [removed: 16.3] [added: 5.8] | | | | [removed: 16.8] [added: 19.2] | | | | [removed: 14.2] [added: 16.8] | | | | [removed: 0.03] [added: 0.20] | | | | [removed: 0.09] [added: 0.03] | | | | | |

| Levelized foreign currency translation | | | — | | | | [removed: (50.8] [added: (5.5] | ) | | | — | | | | [removed: (2.0] [added: (2.6] | ) | | | — | | | | [removed: (7.9] [added: (3.7] | ) | | | — | | | | (0.01 | ) | | | | |

| Risk Management, as reported | | | [removed: 838.5] [added: 821.7] | | | | [removed: 798.3] [added: 838.5] | | | | [removed: 66.2] [added: 66.9] | | | | [removed: 70.4] [added: 66.2] | | | | [removed: 137.9] [added: 141.6] | | | | [removed: 134.0] [added: 137.9] | | | [added: $] | [removed: 0.35] [added: 0.34] | | | [added: $] | [removed: 0.38] [added: 0.35] | | | | [removed: \-8] [added: (3] | [removed: %] [added: %)] |

| Workforce and lease termination | | | — | | | | — | | | | [removed: 5.2] [added: 6.0] | | | | [removed: 3.5] [added: 5.2] | | | | 7.9 | | | | [removed: 4.7] [added: 7.9] | | | | [removed: 0.03] [added: 0.04] | | | | [removed: 0.01] [added: 0.03] | | | | | |

| Acquisition related adjustments | | | — | | | | — | | | | [removed: (1.0] [added: 0.4] | [removed: )] | | | [removed: (4.3] [added: (1.0] | ) | | | — | | | | — | | | | [removed: (0.01] [added: —] | [removed: )] | | | [removed: (0.02] [added: (0.01] | ) | | | | |

| Levelized foreign currency translation | | | [removed: — | | | | (9.1] [added: (3.5] | ) | | | [removed: —] [added: (0.9] | [added: )] | | | [removed: (1.4] [added: (2.6] | ) | | | — | | | | [removed: (2.3] [added: (2.6] | ) | | | [removed: — | | | |] (0.01 | ) | [removed: | | | |]

| Corporate, as reported | | | [removed: 1,316.4] [added: 863.1] | | | | [removed: 1,747.2] [added: 1,316.4] | | | | [removed: (67.7] [added: (74.8] | ) | | | [removed: 32.3] [added: (67.7] | [added: )] | | | [removed: (201.4] [added: (142.2] | ) | | | [removed: (213.9] [added: (201.4] | ) | | [added: $] | [removed: (0.51] [added: (0.56] | ) | | [added: $] | [removed: —] [added: (0.51] | [added: )] | | | | |

| [removed: Workforce] [added: Income tax related and workforce] | | | — | | | | — | | | | [removed: 2.3] [added: (1.1] | [added: )] | | | [removed: —] [added: 2.3] | | | | [removed: 3.0] [added: —] | | | | [removed: —] [added: 3.0] | | | | [removed: 0.01] [added: (0.01] | [added: )] | | | [removed: —] [added: 0.01] | | | | | |

| Clean energy related [added: adjustments] | | | [added: — | | | |] 3.0 | | | | — | | | | 11.7 | | | | — | | | | 14.9 | | | | — | | | | 0.05 | | | | [removed: —] | | [removed: | | | |]

| Corporate, as adjusted * | | | [removed: 1,319.4] [added: 863.1] | | | | [removed: 1,747.2] [added: 1,319.4] | | | | [removed: (53.7] [added: (75.9] | ) | | | [removed: 1.4] [added: (53.7] | [added: )] | | | [removed: (183.5] [added: (142.2] | ) | | | [removed: (213.9] [added: (183.5] | ) | | | [removed: (0.45] [added: (0.57] | ) | | | [removed: (0.16] [added: (0.45] | ) | | | | |

| Total Company, as reported | | $ | [removed: 7,056.4] [added: 6,851.9] | | | $ | [removed: 6,792.4] [added: 7,056.4] | | | $ | [removed: 715.8] [added: 858.1] | | | $ | [removed: 675.9] [added: 715.8] | | | $ | [removed: 1,295.6] [added: 1,596.8] | | | $ | [removed: 1,046.4] [added: 1,295.6] | | | $ | [removed: 3.52] [added: 4.20] | | | $ | [removed: 3.40] [added: 3.52] | | | | [removed: 4] [added: 19] | % |

Prior Year Discussion of Results and Comparisons

For information on fiscal 2018 results and similar comparisons, see "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the fiscal year ended December 31, 2019.

See the reconciliations of non-GAAP measures on page 30.

| Revenues | | $ | 5,167.1 | | | $ | 5,172.9 | | | $ | 4,901.5 | | | $ | 4,820.7 | | | | 5 | % | | | 7 | % |

| Organic revenues | | | | | | $ | 4,854.4 | | | | | | | $ | 4,706.1 | | | | | | | | 3.2 | % |

| Adjusted EBITDAC | | | | | | $ | 1,691.4 | | | | | | | $ | 1,375.1 | | | | | | | | 23 | % |

| Organic revenues | | | | | | $ | 813.6 | | | | | | | $ | 836.3 | | | | | | | | (2.7 | %) |

| Adjusted EBITDAC | | | | | | $ | 149.5 | | | | | | | $ | 146.0 | | | | | | | | 2 | % |

| Brokerage, as adjusted * | | | 5,172.9 | | | | 4,820.7 | | | | 963.7 | | | | 724.2 | | | | 1,691.4 | | | | 1,375.1 | | | | 4.91 | | | | 3.72 | | | | 32 | % |

| Risk Management, as adjusted * | | | 821.7 | | | | 838.0 | | | | 73.3 | | | | 70.3 | | | | 149.5 | | | | 146.0 | | | | 0.38 | | | | 0.37 | | | | 3 | % |

| Total Company, as adjusted * | | $ | 6,857.7 | | | $ | 6,978.1 | | | $ | 961.1 | | | $ | 740.8 | | | $ | 1,698.7 | | | $ | 1,337.6 | | | $ | 4.72 | | | $ | 3.64 | | | | 30 | % |

| Management, as adjusted * | | $ | 5,994.6 | | | $ | 5,658.7 | | | $ | 1,037.0 | | | $ | 794.5 | | | $ | 1,840.9 | | | $ | 1,521.1 | | | $ | 5.29 | | | $ | 4.09 | | | | 29 | % |

For the corporate segment, the clean energy related adjustments are described on page 47.

Reconciliation of Non-GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share

| Brokerage, as reported | | $ | 1,142.3 | | | $ | 276.3 | | | $ | 866.0 | | | $ | 4.9 | | | $ | 861.1 | | | $ | 4.42 | |

| Net losses on divestitures | | | 5.8 | | | | 1.1 | | | | 4.7 | | | | — | | | | 4.7 | | | | 0.02 | |

| Acquisition integration | | | 25.1 | | | | 5.8 | | | | 19.3 | | | | — | | | | 19.3 | | | | 0.10 | |

| Workforce and lease termination | | | 43.9 | | | | 9.9 | | | | 34.0 | | | | — | | | | 34.0 | | | | 0.17 | |

| Acquisition related adjustments | | | 51.0 | | | | 11.3 | | | | 39.7 | | | | — | | | | 39.7 | | | | 0.20 | |

| Brokerage, as adjusted | | $ | 1,268.1 | | | $ | 304.4 | | | $ | 963.7 | | | $ | 4.9 | | | $ | 958.8 | | | $ | 4.91 | |

| Risk Management, as reported | | $ | 89.4 | | | $ | 22.5 | | | $ | 66.9 | | | $ | — | | | $ | 66.9 | | | $ | 0.34 | |

| Workforce and lease termination | | | 7.9 | | | | 1.9 | | | | 6.0 | | | | — | | | | 6.0 | | | | 0.04 | |

| Acquisition related adjustments | | | 0.6 | | | | 0.2 | | | | 0.4 | | | | — | | | | 0.4 | | | | — | |

| Risk Management, as adjusted | | $ | 97.9 | | | $ | 24.6 | | | $ | 73.3 | | | $ | \- | | | $ | 73.3 | | | $ | 0.38 | |

| Corporate, as reported | | $ | (360.8 | ) | | $ | (286.0 | ) | | $ | (74.8 | ) | | $ | 34.4 | | | $ | (109.2 | ) | | $ | (0.56 | ) |

| Income tax related impact | | | — | | | | 1.1 | | | | (1.1 | ) | | | — | | | | (1.1 | ) | | | (0.01 | ) |

| Corporate, as adjusted | | $ | (360.8 | ) | | $ | (284.9 | ) | | $ | (75.9 | ) | | $ | 34.4 | | | $ | (110.3 | ) | | $ | (0.57 | ) |

| Brokerage, as adjusted | | $ | 953.4 | | | $ | 229.2 | | | $ | 724.2 | | | $ | 17.2 | | | $ | 707.0 | | | $ | 3.72 | |

COVID-19 Impact

In our property/casualty brokerage operations, during fourth quarter 2020, (a) our customer retention remained at pre‑pandemic levels, (b) new business generation was above pre-pandemic levels, offset somewhat by non-recurring business that was below pre‑pandemic levels, (c) renewal exposure units (i.e., insured values, payrolls, employees, miles driven, etc.) declined; however, premium rates across most geographies and lines of coverage have continued to increase, effectively mitigating exposure unit declines, and (d) net positive mid-term policy modifications were slightly higher than fourth quarter 2019.

Thus far in the first quarter of 2021, property/casualty customer exposure unit renewals showed improvement compared to lows seen in April and May 2020, as our customers’ businesses continue to recover and economic activity increases.

Full policy cancellations have remained similar to pre-pandemic levels, and we continue to see property/casualty premium rates move higher overall which may partially, or fully, offset future declines in exposure units, if any.

In our employee benefits brokerage operations, during the fourth quarter of 2020 we saw a decrease in new consulting and special project work, while covered lives on renewal business were similar to the third quarter of 2020.

Our January 1, 2021 health and welfare renewals have shown covered lives being consistent with levels seen in the fourth quarter of 2020, although still not at pre-pandemic levels.

Consulting engagements and special project work improved slightly from fourth quarter levels, but are still below pre‑pandemic levels.

We believe revenue softness related to reduced covered lives and lower frequency of special project work could persist over the next few quarters, and even deteriorate further, if the economy is slow to recover.

In our risk management operations, we began seeing a meaningful decline in new claims arising during the last two weeks of March 2020, which persisted into April.

From May to December 2020, we saw an improving trend in new claims arising and higher COVID‑related workers compensation claims; yet the current level of weekly new claims so far in 2021 is still below pre-pandemic levels.

A slower recovery or reversal in the number of workers employed could cause fewer claims to arise in future quarters.

In addition, please see “Information Regarding

Measures and Other” beginning on page 32 for a reconciliation of the

See the reconciliations of

non-GAAP

measures on pages 27 and 28.

| | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Reported | | | | Adjusted | | | | Reported | | | | Adjusted | | | | Reported | | | | Adjusted | | |

| | | GAAP | | | | Non-GAAP | | | | GAAP | | | | Non-GAAP | | | | GAAP | | | | Non-GAAP | | |

| Revenues | | $ | 4,901.5 | | | $ | 4,826.2 | | | $ | 4,246.9 | | | $ | 4,185.9 | | | | 15 | % | | | 15 | % |

| Organic revenues | | | | | | $ | 4,326.2 | | | | | | | $ | 4,088.3 | | | | | | | | 5.8 | % |

| Adjusted EBITDAC | | | | | | $ | 1,378.8 | | | | | | | $ | 1,164.5 | | | | | | | | 18 | % |

| Organic revenues | | | | | | $ | 823.3 | | | | | | | $ | 788.7 | | | | | | | | 4.4 | % |

| Adjusted EBITDAC | | | | | | $ | 145.8 | | | | | | | $ | 136.4 | | | | | | | | 7 | % |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Brokerage, as adjusted * | | | 4,826.2 | | | | 4,185.9 | | | | 726.8 | | | | 611.3 | | | | 1,378.8 | | | | 1,164.5 | | | | 3.73 | | | | 3.23 | | | | 15 | % |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Risk Management, as adjusted * | | | 838.5 | | | | 789.2 | | | | 70.4 | | | | 68.2 | | | | 145.8 | | | | 136.4 | | | | 0.37 | | | | 0.36 | | | | 3 | % |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Corporate legal entity restructuring | | | — | | | | — | | | | — | | | | (22.0 | ) | | | — | | | | — | | | | — | | | | (0.12 | ) | | | | |

| Impact of U.S. tax reform | | | — | | | | — | | | | — | | | | (8.9 | ) | | | — | | | | — | | | | — | | | | (0.04 | ) | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Total Company, as adjusted * | | $ | 6,984.1 | | | $ | 6,722.3 | | | $ | 743.4 | | | $ | 680.9 | | | $ | 1,341.1 | | | $ | 1,087.0 | | | $ | 3.65 | | | $ | 3.43 | | | | 6 | % |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Management, as adjusted * | | $ | 5,664.7 | | | $ | 4,975.1 | | | $ | 797.1 | | | $ | 679.5 | | | $ | 1,524.6 | | | $ | 1,300.9 | | | $ | 4.10 | | | $ | 3.59 | | | | 14 | % |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

Reconciliation of

Non-GAAP

Measures -

Pre-tax

| | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | |

| Brokerage, as adjusted | | $ | 956.9 | | | $ | 230.1 | | | $ | 726.8 | | | $ | 17.2 | | | $ | 709.6 | | | $ | 3.73 | |

The following analyses present the hypothetical loss in fair value of the financial instruments held by us at December 31, [removed: 2019] [added: 2020] 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 [added: one-year period.]

The fair value of our portfolio of cash and cash equivalents as of December 31, [removed: 2019] [added: 2020] approximated its carrying value due to its short-term duration.

[removed: We estimated market] [added: Market] risk [added: is estimated] as the potential [removed: decrease] [added: increase] in fair value resulting from a hypothetical [added: one-percentage point decrease in our weighted average short-term borrowing rate at December 31, 2020.]

[added: 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 resulting fair values were not materially different from their carrying values at December 31, [removed: 2019.][added: 2020.]

As of December 31, [removed: 2019,] [added: 2020,] we had [removed: $3,923.0] [added: $4,348.0] million of borrowings outstanding under our various note purchase agreements.

The aggregate estimated fair value of these borrowings at December 31, [removed: 2019] [added: 2020] was [removed: $4,254.2] [added: $5,018.9] 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 [added: long‑term debt.]

For the [removed: purposes] [added: purpose] of our analysis, the average BBB rate was assumed to be the appropriate borrowing rate for us.

We estimated market risk as the potential impact on the value of the debt recorded in our consolidated balance sheet based on a hypothetical [added: one-percentage point change in our weighted average borrowing rate as of December 31, 2020.]

[added: A one-percentage] point decrease would result in an estimated fair value of [removed: $4,532.3] [added: $5,345.9] million, or [removed: $609.3] [added: $997.9] million more than their current carrying value.

[added: A one-percentage] point increase would result in an estimated fair value of [removed: $3,999.6] [added: $4,720.0] million, or [removed: $76.6] [added: $372.0] million more than their current carrying value.

As of December 31, [removed: 2019,] [added: 2020,] we had [removed: $520.0 million of] [added: no] borrowings outstanding under our Credit Agreement and [removed: $170.6] [added: $203.6] million of borrowings outstanding under our Premium Financing Debt Facility.

Assuming a hypothetical adverse change of 10% in the average foreign currency exchange rate for [removed: 2019] [added: 2020] (a weakening of the U.S. dollar), earnings before income taxes would have increased by approximately [removed: $14.7] [added: $25.1] million.

Assuming a hypothetical favorable change of 10% in the average foreign currency exchange rate for [removed: 2019] [added: 2020] (a strengthening of the U.S. dollar), earnings before income taxes would have decreased by approximately [removed: $14.8] [added: $19.8] million.

However, our consolidated financial position is exposed to foreign currency exchange risk related to intra-entity loans between our U.S. based subsidiaries and our [added: non-U.S. based subsidiaries that are denominated in the respective local foreign currency.]

During [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017,] [added: 2018,] 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.

In addition, during [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017,] [added: 2018,] 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 the scenario where such hedge does not pass the effectiveness test, the hedge will be [added: re-measured at the stated point and the appropriate loss, if applicable, would be recognized.]

For the year ended December 31, [removed: 2019] [added: 2020] 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 [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017.][added: 2018.]

See Note 21 to our [removed: 2019] [added: 2020] consolidated financial statements for the changes in fair value of these derivative instruments reflected in comprehensive earnings in [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017.][added: 2018.]

one-year

period.

one-percentage

long-term

debt.

one-percentage

point change in our weighted average borrowing rate as of December 31, 2019.

one-percentage

one-percentage

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, 2019.

non-U.S.

based subsidiaries that are denominated in the respective local foreign currency.

re-measured

at the stated point and the appropriate loss, if applicable, would be recognized.

Our brokerage segment operations provide brokerage and consulting services to businesses and organizations of all types, including commercial, [added: not-for-profit, and public entities, and, to a lesser extent, individuals, in the areas of insurance placement, risk of loss management, and management of employer sponsored benefit programs.]

[added: 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.

[removed: magazine’s July 2019 edition, and] [added: Based on revenues, our risk management operation ranked as] one of the world’s largest property/casualty third party claims [removed: administrators,] [added: administrators] according to [added: *Business Insurance* magazine’s May 2020 edition.]

We have three reportable segments: brokerage, risk management and corporate, which contributed approximately [removed: 68%,] [added: 74%,] 14% and [removed: 18%,] [added: 12%,] respectively, to [removed: 2019] [added: 2020] revenues.

We generate approximately [removed: 69%] [added: 68%] of our revenues from the combined brokerage and risk management segments in the United States (U.S.), with the remaining [removed: 31% derived] [added: 32% generated] internationally, primarily in [added: the United Kingdom (U.K.),] Australia, [removed: Bermuda,] Canada, [removed: the Caribbean,] New Zealand and [removed: the United Kingdom (U.K.).][added: Bermuda.]

Shares of our common stock are traded on the New York Stock Exchange under the symbol “AJG”, and we had a market capitalization at December 31, [removed: 2019] [added: 2020] of approximately [removed: $17.9] [added: $24.0] billion.

Information in this report is as of December 31, [removed: 2019] [added: 2020] unless otherwise noted.

Our executive offices are located at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050, and our telephone number is (630) [added: 773‑3800.]

The major sources of our operating revenues are commissions, fees and supplemental and contingent revenues from our brokerage operations, and fees, including [added: performance‑based fees, from our risk management operations.]

The brokerage segment accounted for [removed: 68%] [added: 74%] of our revenues in [removed: 2019.][added: 2020.]

[removed: We operate our] [added: Our] brokerage segment [removed: operations] [added: operates] through a network of more than [removed: 580] [added: 480] sales and service offices located throughout the U.S. and more than [removed: 300] [added: 170] sales and service offices in 49 countries, most of which are in [added: the U.K.,] Australia, Canada, [removed: the Caribbean,] New Zealand and [removed: the U.K. Most of these offices are fully staffed with sales and service personnel.][added: Bermuda.]

[removed: Retail] [added: Retail] Insurance Brokerage [removed: Operations][added: Operations]

Our retail insurance brokerage operations accounted for 82% of our brokerage segment revenues in [removed: 2019.][added: 2020.]

Our retail brokerage operations are organized and operate within certain key niche/practice groups, which account for approximately [removed: 67%] [added: 64%] of our retail brokerage revenues.

| | • | Developing and managing alternative market mechanisms such as captives, rent-a-captives and deductible [removed: plans/ self-insurance.] [added: plans/self‑insurance.] |

Our wholesale insurance brokerage operations accounted for 18% of our brokerage segment revenues in [removed: 2019.][added: 2020.]

Our wholesale brokers assist our retail brokers and other [added: non-affiliated brokers in the placement of specialized and hard-to-place insurance.]

These brokers operate through approximately [removed: 300] [added: 170] offices primarily located across the U.S., Bermuda and through our approved Lloyd’s of London brokerage operation.

More than 79% of our wholesale brokerage revenues comes from [added: non-affiliated brokerage clients.]

Based on revenues, our domestic wholesale brokerage operation ranked [added: as] the largest managing general agents/underwriting [removed: managers/ Lloyds] [added: managers/Lloyds] coverholders according to [added: *Business Insurance* magazine’s September 2020 edition.]

Our risk management segment accounted for 14% of our revenues in [removed: 2019.][added: 2020.]

Approximately 63% of our risk management segment’s revenues are from workers’ compensation-related claims, [removed: 28%] [added: 29%] are from general and commercial auto liability-related claims and [removed: 9%] [added: 8%] are from property-related claims in [removed: 2019.][added: 2020.]

We manage our third party claims adjusting operations through a network of more than [removed: 70] [added: 65] offices located throughout the U.S., Australia, [added: the U.K.,] New Zealand and [removed: the U.K. Most of these offices are fully staffed with claims adjusters and other service personnel.][added: Canada.]

[removed: Based on revenues, our] [added: Our] risk management operation [removed: ranked] [added: currently ranks] as one of the world’s largest property/casualty third party claims administrators [added: based on revenues,] according to [added: *Business Insurance* magazine’s May 2020 edition.]

The corporate segment accounted for [removed: 18%] [added: 12%] of our revenues in [removed: 2019.][added: 2020.]

We own [removed: 34] [added: 35] commercial clean coal production facilities that are qualified to produce refined coal using [added: Chem-Mod LLC’s proprietary technologies.]

The law that provides for IRC Section 45 tax credits expired as of December 31, 2019 for 14 of our plants and will expire on or before December 31, 2021 for the other [removed: 20] [added: 21] plants.

[added: Chem-Mod] LLC (described below) is a privately-held enterprise that has commercialized multi-pollutant reduction technologies to reduce mercury, sulfur dioxide and other emissions at coal-fired power plants.

[added: We own 46.5% of Chem-Mod] LLC and are its controlling managing member.

[added: At this time, it is unclear if C‑Quest] will ever become commercially viable.

We operate as a retail commercial property and casualty broker throughout [removed: 45] [added: 46] locations in Australia, [removed: 42] [added: 46] locations in Canada and [removed: 37] [added: 34] locations in New Zealand.

In the U.K., we operate as a retail broker from approximately [removed: 135] [added: 116] locations.

[removed: \-] [added: Captive underwriting enterprises -] We have ownership interests in several underwriting enterprises based in the U.S., Bermuda, Gibraltar, Guernsey, Isle of Man and Malta, that primarily operate segregated account [added: “rent-a-captive” facilities.]

[added: These “rent-a-captive”] facilities enable our clients to receive the benefits of participating in a captive underwriting enterprise without incurring certain disadvantages of ownership.

See Note 18 to our [removed: 2019] [added: 2020] consolidated financial statements for additional financial information related to the insurance activity of our wholly owned underwriting enterprise subsidiary for [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017.][added: 2018.]

We completed and integrated [removed: 556] [added: 583] acquisitions from January 1, 2002 through December 31, [removed: 2019,] [added: 2020,] most of which were within our brokerage segment.

The total purchase price for individual acquisitions has typically ranged from $1.0 million to [removed: $50.0] [added: $100.0] million.

See Note 3 to our [removed: 2019] [added: 2020] consolidated financial statements for a summary of our [removed: 2019] [added: 2020] acquisitions, the amount and form of the consideration paid and the dates of acquisitions.

Our client base is highly diversified and includes commercial, industrial, public entity, religious and [added: not-for-profit entities.]

In [removed: 2019,] [added: 2020,] our largest single client represented approximately 1.0% and our ten largest clients together represented approximately [removed: 2.0%] [added: 3.0%] of our combined brokerage and risk management segment revenues.

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 2020 edition, and one of the world’s largest property/casualty third party claims administrators, according to *Business Insurance* magazine’s May 2020 edition.

Most of these offices are fully staffed with sales and service personnel.

Most of these offices are fully staffed with claims adjusters and other service personnel.

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 as together, C-Quest), which own technologies that reduce carbon dioxide emissions created by burning fossil fuels.

We provide sophisticated data analysis 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 believe these capabilities provide a growing competitive advantage with respect to many of the smaller organizations with which we compete.

Human Capital

In 2020, the COVID-19 pandemic had a significant impact on our human capital management.

Of our nearly 1,000 office locations, nearly 400 are open, but most of those at reduced capacity.

Accordingly, the vast majority of our employees continue to work remotely for some or all of their work week.

We have instituted safety protocols and procedures for employees when they are in an office and have not had any office-wide outbreaks of COVID-19.

As of December 31, 2020, we had 32,401 employees, with approximately 50% in the U.S. and 50% outside of the U.S. Approximately 76% of our employees work in our brokerage segment and 20% in our risk management segment.

Our remaining employees work in our corporate segment, primarily in our home office and financial services division, as well as in our service centers in India and elsewhere around the world.

In 2020, our total compensation expense was $2,882.5 million for the brokerage segment and $517.5 million for the risk management segment, representing 55.8% and 63.0%, respectively, of brokerage and risk management segment revenues.

Additional information regarding compensation expense, both on a reported and an adjusted basis, can be found elsewhere in this report under Item 7.

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.

Since then, our program has grown globally and we employed more than 400 interns each summer in 2018 and 2019 (we had fewer interns in 2020 due to the COVID-19 pandemic).

We provide our interns with professional development and on-the-job sales training that gives them the opportunity to cultivate expertise and accelerate their full-time sales career growth.

As of December 31, 2020, approximately 59.8% of our employees were women, including 47.3% of managers and 40.2% of producers.

In the U.S., approximately 23.6% of our employees were racially/ethnically diverse, including 14.4% of managers and 18.9% of producers.

Regulation

Many of our activities throughout the world are subject to regulatory supervision and regulations promulgated by bodies such as the SEC, the Department of Justice (DOJ), the IRS, the Office of Foreign Assets Control and the Federal Trade Commission 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 retirement-related consulting and investment services are subject to pension law and financial regulation in many countries.

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, reserves and the amount of local investment with respect to our operations in certain countries.

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.

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.

In addition, major political and legal developments in jurisdictions in which we do business may lead to new regulatory costs and challenges.

Regulations promulgated by the U.S. Treasury Department pursuant to FATCA require us to take various measures relating to non-U.S. funds, transactions and accounts.

Our executive offices are located at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050, and our telephone number is (630) 773‑3800.

not-for-profit,

and public entities, and, to a lesser extent, individuals, in the areas of insurance placement, risk of loss management, and management of employer sponsored benefit programs.

Our risk management segment operations provide contract claim settlement, claim administration, loss control services and risk management consulting for commercial,

not-for-profit,

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

Business Insurance

magazine’s May 2019 edition.

773-3800.

performance-based

fees, from our risk management operations.

See Note 22 to our 2019 consolidated financial statements for unaudited quarterly operating results for 2019 and 2018.

Our brokerage segment generates revenues by:

| | (i) | Identifying, negotiating and placing all forms of insurance or reinsurance coverages, as well as providing risk-shifting, risk-sharing and risk-mitigation consulting services, principally related to property/casualty, life, health, welfare and disability insurance. We also provide these services through, or in conjunction with, other unrelated agents and brokers, consultants and management advisors. |

| --- | --- | --- |

| | (ii) | Acting as an agent or broker for multiple underwriting enterprises by providing services such as sales, marketing, selecting, negotiating, underwriting, servicing and placing insurance coverage on their behalf. |

| --- | --- | --- |

| | (iii) | Providing consulting services related to health and welfare benefits, voluntary benefits, executive benefits, compensation, retirement planning, institutional investment and fiduciary, actuarial, compliance, private insurance exchange, human resource technology, communications and benefit administration. |

| --- | --- | --- |

| | (iv) | Providing management and administrative services to captives, pools, risk-retention groups, healthcare exchanges, small underwriting enterprises, such as accounting, claims and loss processing assistance, feasibility studies, actuarial studies, data analytics and other administrative services. |

| --- | --- | --- |

The vast majority of our brokerage contracts and service understandings are for a period of one year or less.

Commissions and fees

The primary source of brokerage segment revenues is commissions from underwriting enterprises, which are based on a percentage of premiums paid by our clients, or fees received from clients based on an agreed level of service usually in lieu of commissions.

Commissions are fixed at the contract effective date and generally are based on a percentage of premium for insurance coverage or employee headcount for employer sponsored benefit plans.

Commissions depend upon a large number of factors, including the type of risk being placed, the particular underwriting enterprise’s demand, the expected loss experience of the particular risk of coverage, and historical benchmarks surrounding the level of effort necessary for us to place and service the insurance contract.

Rather than being tied to the amount of premiums, fees are typically based on an expected level of effort to provide our services.

Whether we are paid a commission or a fee, the vast majority of our services are associated with the placement of an insurance (or insurance-like) contract.

See Revenue Recognition in Note 1 to our 2019 consolidated financial statements.

See Note 2 to our 2019 consolidated financial statements for information with respect to the impacts that a new accounting standard, relating to revenue recognition, had on our financial position and operating results.

Supplemental revenues

Certain underwriting enterprises may pay us additional revenues based on the volume of premium we place with them and for insights into our sales pipeline, our sales capabilities or our risk selection knowledge.

These amounts are in excess of the commission and fee revenues discussed above, and not all business we place with underwriting enterprises is eligible for supplemental revenues.

See Revenue Recognition in Note 1 to our 2019 consolidated financial statements.

See Note 2 to our 2019 consolidated financial statements for information with respect to the impacts that a new accounting standard, relating to revenue recognition, had on our financial position and operating results.

Contingent revenues

Certain underwriting enterprises may pay us additional revenues for our sales capabilities, our risk selection knowledge, or our administrative efficiencies.

These amounts are in excess of the commission revenues discussed above, and not all business we place with participating underwriting enterprises is eligible for contingent revenues.

FORM [added: 10-K]

| ☒ | [added: |] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |

For the fiscal year ended December 31, [removed: 2019][added: 2020]

| ☐ | [added: |] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |

For the transition period from [added: to]

Commission file number [added: 1-09761]

Registrant’s telephone number, including area code (630) [added: 773-3800]

[added: |] Securities registered pursuant to Section 12(g) of the Act: [added: None | | | | |]

Yes [added: ☒ No ☐.]

Yes [added: ☐ No ☒.]

Yes [added: ☒ No ☐.]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation [added: S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).]

Yes [added: ☒ No ☐.]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a [added: non-accelerated filer, a smaller reporting company, or emerging growth company.]

[removed: filer, a smaller] [added: | Non-accelerated filer | ☐ | | Smaller] reporting [removed: company, or emerging growth company.][added: company | ☐ |]

See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule [added: 12b‑2 of the Exchange Act.]

| Large accelerated filer | [removed: |] ☒ | | Accelerated filer | [removed: |] ☐ |

| | | | [removed: |] Emerging growth company | [removed: |] ☐ |

Yes [added: ☐ No ☒.]

[added: The aggregate market value] of the [added: voting common equity held by non-affiliates of the] registrant, computed by reference to the last reported price at which the registrant’s common equity was sold on June 30, [removed: 201][added: 2020 (the last day of the registrant’s most recently completed second quarter) was $16,249,616,000.]

The number of outstanding shares of the registrant’s Common Stock, $1.00 par value, as of January 31, [added: 2021 was 193,740,000.]

Documents incorporated by reference: [added: Portions of Arthur J.]

[added: Gallagher & Co.’s definitive 2021] Proxy Statement are incorporated by reference into this Form [added: 10‑K in response to Part III to the extent described herein.]

For example, we may use forward-looking statements when addressing topics such as: market and industry conditions, including competitive and pricing trends; acquisition [removed: strategy;] [added: strategy including] the expected [added: size of our acquisition program; the expected] impact of acquisitions and dispositions; the development and performance of our services and products; changes in the composition or level of our revenues or earnings; our cost structure and the [added: size and] outcome of cost-saving or restructuring initiatives; future capital expenditures; future debt levels and anticipated actions to be taken in connection with maturing debt; future debt to earnings ratios; the outcome of contingencies; dividend policy; pension obligations; cash flow and liquidity; capital structure and financial losses; future actions by regulators; the outcome of existing regulatory actions, investigations, reviews or litigation; the impact of changes in accounting [removed: rules, including the changed revenue recognition and lease accounting standards;] [added: rules;] financial markets; interest rates; foreign exchange rates; matters relating to our operations; income taxes, [removed: including the impact of tax reform; and] expectations regarding our investments, including our clean energy investments; [added: human capital management, including diversity] and [added: inclusion initiatives; environmental, social and governance matters, including climate-resilience products and services and carbon emissions; and] integrating recent acquisitions.

| | • | [removed: An] [added: The current or a future] economic downturn or unstable economic [removed: conditions] [added: conditions,] whatever the cause, including [removed: pandemics like] the [removed: coronavirus,] [added: effects of the COVID-19 pandemic, or other factors like] Brexit, [added: worsening international relations,] tariffs, trade [removed: wars] [added: wars, political violence and unrest in the U.S.] or [added: around the world, or] climate change and other long-term [removed: environmental] [added: environmental, social and governance matters and global health] risks; |

| | • | Risks that could negatively affect the success of our acquisition strategy, including [added: the impact of current economic uncertainty on our ability to source, review and price acquisitions,] continuing consolidation in our industry and growing interest in acquiring insurance brokers on the part of private equity firms and newly public insurance brokers, which could make it more difficult to identify targets and could make them more expensive, the risk that we may not receive timely regulatory approval of desired transactions, execution risks, integration risks, [added: poor cultural fit,] the risk of post-acquisition deterioration leading to intangible asset impairment charges, and the risk we could incur or assume unanticipated liabilities such as cybersecurity issues or those relating to violations of anti-corruption and sanctions laws; |

| | • | Cyber attacks or other cybersecurity [removed: incidents;] [added: incidents including the ransomware incident referred to elsewhere in this report under “Update on Ransomware Incident”;] improper disclosure of confidential, personal or proprietary data; and changes to laws and regulations governing cybersecurity and data privacy; |

| | • | Risks arising from changes in U.S. or foreign tax laws, including [removed: our ability to effectively account for] the [added: current] U.S. [added: president’s administration’s potential reversal of all or part of the U.S.] Tax Cuts and Jobs Act [added: 2017] (which we refer to as the [removed: Tax Act)] [added: TCJA)] and related regulations; |

| | • | Uncertainty from the expected discontinuance of [removed: LIBOR and transition to any other interest rate benchmark;] [added: LIBOR;] |

| | • | Our failure to attract and retain experienced and qualified talent, including our senior management [removed: team;] [added: team, and the risk of our CEO or another senior executive contracting COVID-19;] |

| | • | Risks arising from our [removed: substantial] international operations, including the risks posed by political and economic uncertainty in certain countries (such as the risks posed by Brexit), risks related to maintaining regulatory and legal compliance across multiple jurisdictions (such as those relating to violations of anti-corruption, sanctions and privacy laws), [added: rising global tensions] and [added: protectionism, and] risks arising from the complexity of managing businesses across different time zones, languages, geographies, cultures and legal regimes that conflict with one another at times; |

| | • | Risks particular to our risk management segment, including [added: reduced economic activity due to COVID-19 further reducing claim activity,] any slowing of the trend toward outsourcing claims administration, and [removed: of] the concentration of large amounts of revenue with certain clients; |

| | • | Our failure to comply with regulatory requirements, including those related to governance and control requirements in particular jurisdictions, international sanctions, or a change in regulations or enforcement policies that adversely affects our operations (for example, relating to insurance broker compensation [removed: methods or the failure of state and local governments to follow through on agreed-upon income tax credits or other tax related incentives, relating to our corporate headquarters);] [added: methods);] |

| | • | Changes to our financial presentation from new accounting estimates and [removed: assumptions (including as a result of the changed lease and revenue recognition standards or the Tax Act);] [added: assumptions;] |

| | • | Risks related to our clean energy investments, including intellectual property claims, utilities switching from coal to natural gas or renewable energy sources, environmental and product liability claims, environmental compliance costs and the risk of disallowance by the Internal Revenue Service [removed: (IRS)] [added: (which we refer to as the IRS)] of previously claimed tax credits; |

They involve risks, uncertainties and assumptions, including the risk factors referred to [removed: above.][added: above, and are currently, or in the future could be, amplified by the COVID-19 pandemic.]

Annual Report on Form [added: 10-K]

For the Fiscal Year Ended December 31, [removed: 2019][added: 2020]

| | | | [removed: |] Page No. | [removed: | |]

| [removed: Part I . | | |] [added: [Part I.](#PART_I)] | | | |

| --- | --- | --- | --- | --- |

| | | | | |

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 726(b)) by the registered public accounting firm that prepared or issued its audit report Yes ☒ No ☐.

| | • | The ongoing COVID-19 pandemic, including its effect on the economy, our employees, our clients, the regulatory environment and our operations; |

| | • | Risks particular to our benefit consulting operations, including reduced economic activity due to COVID-19 further reducing fee revenue from special projects and risks to the business posed by potential changes to health legislation under the current U.S. president’s administration; |

| | • | A disaster or other significant disruption to business continuity; including natural disasters and political violence and unrest in the U.S. or elsewhere around the world; |

| | • | Damage to our reputation including as a result of environmental, social and governance (ESG) matters; |

| | • | Climate risks, including the risk of a systemic economic crisis and disruptions to our business caused by the transition to a low-carbon economy; |

| --- | --- | --- |

| --- | --- | --- |

| --- | --- | --- |

A detailed discussion of the factors that could cause actual results to differ materially from our published expectations is contained under the heading “Risk Factors” in this report and any other reports we file with the Securities and Exchange Commission (SEC) in the future.

| --- | --- | --- | --- |

| | | | |

| | | | |

| | | | |

| | | | |

| | Item 1B. | [Unresolved Staff Comments](#ITEM_1B_UNRESOLVED_STAFF_COMMENTS) | 24 |

| | | | |

| | Item 2. | [Properties](#ITEM_2_PROPERTIES) | 24 |

| | | | |

| | Item 3. | [Legal Proceedings](#ITEM_3_LEGAL_PROCEEDINGS) | 24 |

| | | | |

| | Item 4. | [Mine Safety Disclosures.](#ITEM_4_MINE_SAFETY_DISCLOSURES) | 24 |

| | | | |

| | [Information About Our Executive Officers](#INFORMATION_ABOUT_OUR_EXECUTIVE_FICERS) | | 24 |

| | | | |

| [Part II.](#PART_II) | | | |

| | | | |

| | Item 5. | [Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#ITEM_5_MARKET_FOR_REGISTRANTS_COMMON_EQU) | 25-26 |

| | | | |

| | Item 6. | [Selected Financial Data](#ITEM_6_SELECTED_FINANCIAL_DATA) | 26 |

| | | | |

| | Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#ITEM_7_MANAGEMENTS_DISCUSSION_ANALYSIS_F) | 27-56 |

| | | | |

| | Item 7A. | [Quantitative and Qualitative Disclosure about Market Risk](#ITEM_7A_QUANTITATIVE_QUALITATIVE_DISCLOS) | 56-57 |

| | | | |

| | Item 8. | [Financial Statements and Supplementary Data](#ITEM_8_FINANCIAL_STATEMENTS_SUPPLEMENTAR) | 58-114 |

| | | | |

| | Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#ITEM_9_CHANGES_IN_DISAGREEMENTS_WITH_ACC) | 115 |

| --- | --- |

| --- | --- |

to

1-09761

| | | |

| | | |

773-3800

None

No

No

No

S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

No

non-accelerated

12b-2

of the Exchange Act.

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | | | | | |

| Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |

| | | | | | | |

No

The aggregate market value of the voting common equity held by

non-affiliates

(the last day of the registrant’s most recently completed second quarter) was $14,245,000.

2020

was

188,247,000

​​​​​​​

Portions of Arthur J.

Gallagher & Co.’s definitive 20

in response to Part III to the extent described herein.

| | • | A disaster or other significant disruption to business continuity; |

| | • | Damage to our reputation; |

| | • | Changes in healthcare-related laws and regulations with the potential to negatively impact our employee benefits consulting business, including “Medicare-for-all” and other proposed laws expanding the role of public programs in healthcare; |

Further information about factors that could materially affect us, including our results of operations and financial condition, is contained in the “Risk Factors” section of Part I, Item 1A of this report.

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | | | | | |

Not applicable.

| | | | | | | |

Item 2.

Properties 23

| | | | | | | |

Item 3.

Legal Proceedings 23

| | | | | | | |

Item 4.

Mine Safety Disclosures 23

| | | | | | | |

| Information About Our Executive Officers | | | | | 23 | |

| | | | | | | |

| Part II. | | | | | | |

| | | | | | | |

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 23-24

| | | | | | | |

Item 6.

Selected Financial Data 25

| | | | | | | |

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations 26-56

| | | | | | | |

Item 7A.

Quantitative and Qualitative Disclosure about Market Risk 56-57

| | | | | | | |

Item 8.

Financial Statements and Supplementary Data 58-112

| | | | | | | |

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 113

| | | | | | | |

Item 9A.

Controls and Procedures 113

| | | | | | | |

See Notes 15 and 17 to our [removed: 2019] [added: 2020] consolidated financial statements for information with respect to our lease commitments as of December 31, [removed: 2019.][added: 2020.]

| Name | | Age | | [removed: | |] Position and Year First Elected |

| J. Patrick Gallagher, Jr. | | [removed: | 67 |] [added: 68] | | Chairman since 2006, President since 1990, Chief Executive Officer since 1995 |

| Walter D. Bay | | [removed: | 57 |] [added: 58] | | Corporate Vice President, General Counsel, Secretary since 2007 |

| Richard C. Cary | | [removed: | 57 |] [added: 58] | | Controller since 1997, Chief Accounting Officer since 2001 |

| Joel D. Cavaness | | [removed: | 58 |] [added: 59] | | Corporate Vice President since 2000, President of our Wholesale Brokerage Operation since 1997 |

| Thomas J. Gallagher | | [removed: | 61 |] [added: 62] | | 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 | | [removed: | 58 |] [added: 59] | | Corporate Vice President, Chief Financial Officer since 2003 |

| Scott R. Hudson [removed: | |] [added: Vishal Jain] | [removed: 58] | [added: 59 59] | | Corporate Vice President and President of our Risk Management Operation since 2010 [added: Corporate Vice President since 2016, Chief Service Officer since 2014] |

| Christopher E. Mead | | [removed: | 52 |] [added: 53] | | Corporate Vice President, Chief Marketing Officer since 2017; Managing Director [removed: –] [added: -] Marketing Division, CME Group, 2005 - 2017 |

| Susan E. Pietrucha | | [removed: | 53 |] [added: 54] | | Corporate Vice President, Chief Human Resource Officer since 2007 |

| William F. Ziebell | | [removed: | 57 |] [added: 58] | | Corporate Vice President since 2011, regional leader in our Employee Benefit and Consulting Brokerage Operations 2004 - 2016, President beginning in 2017 |

| --- | --- | --- | --- | --- |

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| --- | --- | --- | --- | --- | --- | --- |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

As of January 31, [removed: 2020,] [added: 2021,] there were approximately 1,000 holders of record of our common stock.

[removed: (c)] [added: | (c) |] Issuer Purchases of Equity Securities [added: |]

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 [added: 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, 2020:]

| October 1 through October 31, [removed: 2019] [added: 2020] | | | [removed: 6,928] [added: 1,811] | | | $ | [removed: 88.12] [added: 106.28] | | | | — | | | | 7,287,019 | |

| November 1 through November 30, [removed: 2019] [added: 2020] | | | [removed: 1,172] [added: 2,583] | | | | [removed: 91.57] [added: 111.80] | | | | — | | | | 7,287,019 | |

| December 1 through December 31, [removed: 2019] [added: 2020] | | | [removed: 16,329] [added: 13,742] | | | | [removed: 95.73] [added: 125.73] | | | | — | | | | 7,287,019 | |

[removed: | (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. These plans are considered to be unfunded for purposes of federal tax law since the assets of these trusts are available to our creditors in the event of our financial insolvency. The 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. 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 2019 consolidated financial statements in this report for more information regarding the DEPP. The DCPP is an unfunded, non-qualified deferred compensation plan for certain key employees, other than executive officers, that generally provides for vesting and/or distributions no sooner than five years from the date of awards. Under the terms of the DEPP and the DCPP, we may contribute cash to the trust and instruct the trustee to acquire a specified number of shares of our common stock on the open market or in privately negotiated transactions. In the fourth quarter of 2019, 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 2019 awards under the DCPP. The Supplemental Plan is an unfunded, non-qualified deferred compensation plan that allows certain highly compensated employees to defer compensation, including company match amounts, on a before-tax basis or after-tax basis. Under the terms of the Supplemental Plan, all amounts credited to an employee’s account may be deemed invested, at the employee’s election, in a number of investment options that include various mutual funds, an annuity product and a fund representing our common stock. When an employee elects to have some or all of the amounts credited to the employee’s account under the Supplemental Plan deemed to be invested in the fund representing our common stock, the trustee of the trust for the Supplemental Plan purchases shares of our common stock in a number sufficient to ensure that the trust holds a number of shares of our common stock with a value equal to all equivalent to the amounts deemed invested in the fund representing our common stock. 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. We established the trusts for the DEPP, the DCPP and the Supplemental Plan to assist us in discharging our deferred compensation obligations under these plans. All assets of these trusts, including any shares of our common stock purchased by the trustees, remain, at all times, assets of the Company, subject to the claims of our creditors in the event of our financial insolvency. The terms of the DEPP, the DCPP and the Supplemental Plan do not provide for a specified limit on the number of shares of common stock that may be purchased by the respective trustees of the trusts. |][added: | (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. These plans are considered to be unfunded for purposes of federal tax law since the assets of these trusts are available to our creditors in the event of our financial insolvency. The 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. 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 2020 consolidated financial statements in this report for more information regarding the DEPP. The DCPP is an unfunded, non-qualified deferred compensation plan for certain key employees, other than executive officers, that generally provides for vesting and/or distributions no sooner than five years from the date of awards. Under the terms of the DEPP and the DCPP, we may contribute cash to the trust and instruct the trustee to acquire a specified number of shares of our common stock on the open market or in privately negotiated transactions. In the fourth quarter of 2020, 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 2020 awards under the DCPP. The Supplemental Plan is an unfunded, non-qualified deferred compensation plan that allows certain highly compensated employees to defer compensation, including company match amounts, on a before-tax basis or after-tax basis. Under the terms of the Supplemental Plan, all amounts credited to an employee’s account may be deemed invested, at the employee’s election, in a number of investment options that include various mutual funds, an annuity product and a fund representing our common stock. When an employee elects to have some or all of the amounts credited to the employee’s account under the Supplemental Plan deemed to be invested in the fund representing our common stock, the trustee of the trust for the Supplemental Plan purchases shares of our common stock in a number sufficient to ensure that the trust holds a number of shares of our common stock with a value equal to all equivalent to the amounts deemed invested in the fund representing our common stock. 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. We established the trusts for the DEPP, the DCPP and the Supplemental Plan to assist us in discharging our deferred compensation obligations under these plans. All assets of these trusts, including any shares of our common stock purchased by the trustees, remain, at all times, assets of the Company, subject to the claims of our creditors in the event of our financial insolvency. The terms of the DEPP, the DCPP and the Supplemental Plan do not provide for a specified limit on the number of shares of common stock that may be purchased by the respective trustees of the trusts. |]

| Total | | | 18,136 | | | $ | 121.80 | | | | — | | | | | |

| --- | --- |

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, 2019:

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| Total | | | 24,429 | | | $ | 93.37 | | | | — | | | | | |

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The following selected consolidated financial data for each of the five years in the period ended December 31, [removed: 2019] [added: 2020] have been derived from our consolidated financial statements.

| | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015*] [added: 2016] | | |

| Commissions | | $ | [removed: 3,320.6] [added: 3,591.9] | | | $ | [removed: 2,920.7] [added: 3,320.6] | | | $ | [removed: 2,641.0] [added: 2,920.7] | | | $ | [removed: 2,409.9] [added: 2,641.0] | | | $ | [removed: 2,338.7] [added: 2,409.9] | |

| Fees | | | [removed: 1,911.1] [added: 1,957.9] | | | | [removed: 1,756.3] [added: 1,911.1] | | | | [removed: 1,591.9] [added: 1,756.3] | | | | [removed: 1,491.7] [added: 1,591.9] | | | | [removed: 1,432.3] [added: 1,491.7] | |

| Supplemental revenues | | | [removed: 210.5] [added: 221.9] | | | | [removed: 189.9] [added: 210.5] | | | | [removed: 158.0] [added: 189.9] | | | | [removed: 139.9] [added: 158.0] | | | | [removed: 125.5] [added: 139.9] | |

| Contingent revenues | | | [removed: 135.6] [added: 147.0] | | | | [removed: 98.0] [added: 135.6] | | | | [removed: 99.5] [added: 98.0] | | | | [removed: 97.9] [added: 99.5] | | | | [removed: 93.7] [added: 97.9] | |

| Investment income and other | | | [removed: 1,478.6] [added: 933.2] | | | | [removed: 1,827.5] [added: 1,478.6] | | | | [removed: 1,622.6] [added: 1,827.5] | | | | [removed: 1,409.0] [added: 1,622.6] | | | | [removed: 1,402.2] [added: 1,409.0] | |

| Revenue before reimbursements | | | [removed: 7,056.4] [added: 6,851.9] | | | | [removed: 6,792.4] [added: 7,056.4] | | | | [removed: 6,113.0] [added: 6,792.4] | | | | [removed: 5,548.4] [added: 6,113.0] | | | | [removed: 5,392.4] [added: 5,548.4] | |

| Reimbursements | | | [removed: 138.6] [added: 151.7] | | | | [removed: 141.6] [added: 138.6] | | | | [removed: 136.0] [added: 141.6] | | | | [removed: 132.1] [added: 136.0] | | | | [removed: —] [added: 132.1] | |

| Total revenues | | | [removed: 7,195.0] [added: 7,003.6] | | | | [removed: 6,934.0] [added: 7,195.0] | | | | [removed: 6,249.0] [added: 6,934.0] | | | | [removed: 5,680.5] [added: 6,249.0] | | | | [removed: 5,392.4] [added: 5,680.5] | |

| Total expenses | | | [removed: 6,568.9] [added: 6,132.7] | | | | [removed: 6,454.6] [added: 6,568.9] | | | | [removed: 5,889.2] [added: 6,454.6] | | | | [removed: 5,346.9] [added: 5,889.2] | | | | [removed: 5,098.9] [added: 5,346.9] | |

| Earnings before income taxes | | | [removed: 626.1] [added: 870.9] | | | | [removed: 479.4] [added: 626.1] | | | | [removed: 359.8] [added: 479.4] | | | | [removed: 333.6] [added: 359.8] | | | | [removed: 293.5] [added: 333.6] | |

| Benefit [added: (provision)] for income taxes | | | [removed: (89.7] [added: 12.8] | [removed: )] | | | [removed: (196.5] [added: (89.7] | ) | | | [removed: (157.1] [added: (196.5] | ) | | | [removed: (96.7] [added: (157.1] | ) | | | [removed: (95.6] [added: (96.7] | ) |

| Net earnings | | | [removed: 715.8] [added: 858.1] | | | | [removed: 675.9] [added: 715.8] | | | | [removed: 516.9] [added: 675.9] | | | | [removed: 430.3] [added: 516.9] | | | | [removed: 389.1] [added: 430.3] | |

| Net earnings attributable to noncontrolling interests | | | [removed: 47.0] [added: 39.3] | | | | [removed: 42.4] [added: 47.0] | | | | [removed: 35.6] [added: 42.4] | | | | [removed: 33.5] [added: 35.6] | | | | [removed: 32.3] [added: 33.5] | |

| Net earnings attributable to controlling interests | | $ | [removed: 668.8] [added: 818.8] | | | $ | [removed: 633.5] [added: 668.8] | | | $ | [removed: 481.3] [added: 633.5] | | | $ | [removed: 396.8] [added: 481.3] | | | $ | [removed: 356.8] [added: 396.8] | |

| Diluted net earnings per share (1) | | | [removed: 3.52] [added: 4.20] | | | | [removed: 3.40] [added: 3.52] | | | | [removed: 2.64] [added: 3.40] | | | | [removed: 2.22] [added: 2.64] | | | | [removed: 2.06] [added: 2.22] | |

| Dividends declared per common share (2) | | | [removed: 1.72] [added: 1.80] | | | | [removed: 1.64] [added: 1.72] | | | | [removed: 1.56] [added: 1.64] | | | | [removed: 1.52] [added: 1.56] | | | | [removed: 1.48] [added: 1.52] | |

| Shares outstanding at year end | | | [removed: 188.1] [added: 193.7] | | | | [removed: 184.0] [added: 188.1] | | | | [removed: 181.0] [added: 184.0] | | | | [removed: 178.3] [added: 181.0] | | | | [removed: 176.9] [added: 178.3] | |

| Weighted average number of common shares outstanding | | | [removed: 186.0] [added: 191.0] | | | | [removed: 182.7] [added: 186.0] | | | | [removed: 180.1] [added: 182.7] | | | | [removed: 177.6] [added: 180.1] | | | | [removed: 172.2] [added: 177.6] | |

| Weighted average number of common and common equivalent shares outstanding | | | [removed: 190.1] [added: 195.0] | | | | [removed: 186.2] [added: 190.1] | | | | [removed: 182.1] [added: 186.2] | | | | [removed: 178.4] [added: 182.1] | | | | [removed: 173.2] [added: 178.4] | |

| Total assets | | $ | [removed: 19,634.8] [added: 22,331.4] | | | $ | [removed: 16,334.0] [added: 19,634.8] | | | $ | [removed: 14,909.7] [added: 16,334.0] | | | $ | [removed: 13,528.2] [added: 14,909.7] | | | $ | [removed: 10,910.5] [added: 13,528.2] | |

| Long-term debt less current portion | | | [removed: 3,823.0] [added: 4,273.0] | | | | [removed: 3,098.0] [added: 3,823.0] | | | | [removed: 2,698.0] [added: 3,098.0] | | | | [removed: 2,150.0] [added: 2,698.0] | | | | [removed: 2,075.0] [added: 2,150.0] | |

| Total [removed: stockholders’] [added: stockholders'] equity | | | [removed: 5,215.5] [added: 6,232.7] | | | | [removed: 4,569.7] [added: 5,215.5] | | | | [removed: 4,299.7] [added: 4,569.7] | | | | [removed: 3,775.5] [added: 4,299.7] | | | | [removed: 3,688.2] [added: 3,775.5] | |

| Return on beginning [removed: stockholders’] [added: stockholders'] equity (3) | | | [removed: 15] [added: 16] | % | | | 15 | % | | | [removed: 13] [added: 15] | % | | | [removed: 11] [added: 13] | % | | | 11 | % |

| Number of employees - at year end | | | [removed: 33,247] [added: 32,401] | | | | [removed: 30,362] [added: 33,247] | | | | [removed: 26,783] [added: 30,362] | | | | [removed: 24,790] [added: 26,783] | | | | [removed: 23,857] [added: 24,790] | |

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| * | As of January 1, 2018, we adopted ASC 606, Revenues from Contracts with Customers related to Topic 606 using the full retrospective method to restate 2017 and 2016. The cumulative effect of the adoption was recognized as an increase to retained earnings of $125.3 million on January 1, 2016. As permitted under the guidelines issued by the SEC related to the adoption of Topic 606, we did not restate the 2015 information in the table above. |

[removed: Arthur] [added: Arthur] J.

Gallagher & [removed: Co.][added: Co.]

| | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | |

| Commissions | | $ | [removed: 3,320.6] [added: 3,591.9] | | | $ | [removed: 2,920.7] [added: 3,320.6] | | | $ | [removed: 2,641.0] [added: 2,920.7] | |

| Fees | | | [removed: 1,911.1] [added: 1,957.9] | | | | [removed: 1,756.3] [added: 1,911.1] | | | | [removed: 1,591.9] [added: 1,756.3] | |

| Supplemental revenues | | | [removed: 210.5] [added: 221.9] | | | | [removed: 189.9] [added: 210.5] | | | | [removed: 158.0] [added: 189.9] | |

| Contingent revenues | | | [removed: 135.6] [added: 147.0] | | | | [removed: 98.0] [added: 135.6] | | | | [removed: 99.5] [added: 98.0] | |

| Investment income | | | [removed: 86.9] [added: 75.9] | | | | [removed: 70.1] [added: 86.9] | | | | [removed: 58.7] [added: 70.1] | |

| Net [added: (losses)] gains on divestitures | | | [removed: 75.3] [added: (5.8] | [added: )] | | | [removed: 10.2] [added: 75.3] | | | | [removed: 3.4] [added: 10.2] | |

| Revenues from clean coal activities | | | [removed: 1,319.3] [added: 863.5] | | | | [removed: 1,746.3] [added: 1,319.3] | | | | [removed: 1,560.5] [added: 1,746.3] | |

| Other net (losses) revenue | | | [removed: (2.9] [added: (0.4] | ) | | | [removed: 0.9] [added: (2.9] | [added: )] | | | [removed: —] [added: 0.9] | |

| Revenues before reimbursements | | | [removed: 7,056.4] [added: 6,851.9] | | | | [removed: 6,792.4] [added: 7,056.4] | | | | [removed: 6,113.0] [added: 6,792.4] | |

| Reimbursements | | | [removed: 138.6] [added: 151.7] | | | | [removed: 141.6] [added: 138.6] | | | | [removed: 136.0] [added: 141.6] | |

| Total revenues | | | [removed: 7,195.0] [added: 7,003.6] | | | | [removed: 6,934.0] [added: 7,195.0] | | | | [removed: 6,249.0] [added: 6,934.0] | |

| Compensation | | | [removed: 3,339.5] [added: 3,466.5] | | | | [removed: 3,026.3] [added: 3,339.5] | | | | [removed: 2,747.4] [added: 3,026.3] | |

| Operating | | | [removed: 1,068.5] [added: 906.5] | | | | [removed: 903.7] [added: 1,068.5] | | | | [removed: 829.1] [added: 903.7] | |

| Reimbursements | | | [removed: 138.6] [added: 151.7] | | | | [removed: 141.6] [added: 138.6] | | | | [removed: 136.0] [added: 141.6] | |