Arthur J. Gallagher & Co. (AJG) 10-K risk factor changes: FY2021 vs FY2020

The global spread of COVID-19 (including potentially more contagious strains of COVID-19 such as [removed: those recently detected in] the [removed: U.K., South Africa] [added: Delta] and [removed: Brazil)] [added: Omicron variants)] 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 [removed: vaccines,] [added: vaccines around the world,] 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 [removed: pandemic;] [added: pandemic, including vaccine mandates, which could be controversial for some employees;] the impact of the pandemic on economic activity and actions taken in response; the [removed: effect on our clients and client demand for our services; our] ability [removed: to sell and provide our services, including limitations on travel and difficulties] of our clients [removed: 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 [removed: decrease in] [added: number of] new arising workers’ compensation and general liability claims; [added: and] the long-term impact of [removed: closing our offices and our] employees working from home, including increased technology costs; [removed: the impact of lost revenue on our employees’ variable] and [removed: 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.][added: employees’ holistic wellbeing.]

| | • | Economy-related risks. [removed: The] [added: Earlier in the pandemic, the] decline in economic activity caused by COVID-19 [removed: has already] adversely affected, and [added: if the economic recovery stalls or reverses could] in [added: the] future [removed: periods, could] materially adversely [removed: affect] [added: affect,] our business, results of operations and financial condition. [removed: Continued reductions] [added: 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, [removed: with unprecedented levels of unemployment and business closures during] [added: earlier in] the [removed: past year,] [added: pandemic,] 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 [added: brokerage] industry niches, such as hospitality, transportation, manufacturing and construction, [removed: have been] [added: were] significantly affected by the economic [removed: decline. The] decline [added: during the pandemic] in [added: 2020. If such a decline in] economic activity [removed: due to COVID-19 has caused some of our clients] [added: were] to [removed: become financially less stable, and if this trend continues] [added: return] and clients enter bankruptcy, liquidate their operations or consolidate, our revenues and the collectability of our receivables will be adversely affected. [removed: 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 [removed: 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. [added: In addition, factors related to the pandemic, including supply chain issues, have contributed to a rise in inflation in the U.S. that could negatively impact the economy and the capital markets, which could adversely affect our business, results of operations and financial condition.] |

| | • | Risks related to remote work. Many of our employees continue to work from home. [removed: 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. [removed: 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 [added: and regulatory] 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.

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

[added: | | • |] The [removed: exit of the U.K. from the European Union (Brexit)] [added: ongoing COVID-19 pandemic has and] could [added: continue to] adversely affect our [added: business,] results of operations and financial condition. [added: |]

[added: | | • | Risks relating to our post-Brexit plan to address the lack of a trade and customs agreement between the U.K. and EU with respect to insurance brokerage services. Our plan involves transferring our European Economic Area (EEA) clients to a Swedish subsidiary authorized in the EEA, and providing some services through staff working in a U.K. branch of such subsidiary.] Although this “reverse branch” model is typical of other brokers of a similar size, there can be no assurance that the approach of EU regulators will not change, potentially requiring us to adjust our plans in relation to the U.K. branch and causing further management distraction and [removed: cost.][added: cost; |]

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

Our [added: ordinary-course] acquisition program has been an important part of our historical growth, particularly in our brokerage segment, and we believe that similar acquisition activity will be important to maintaining comparable growth in the future.

[added: | | • |] We own interests in firms where we do not exercise management control (such as Casanueva Perez S.A.P. de C.V. in Mexico) and are therefore unable to direct or manage the business to realize the anticipated benefits, including mitigation of risks, that could be achieved through full [removed: integration.][added: ownership; |]

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

In most cases, these businesses complement or enhance our offerings, but in some [removed: cases] [added: cases,] they compete with us.

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 [removed: client] [added: client, our data] and [added: analytics capabilities, and] our ability to help our clients manage their overall risk exposure and insurance [added: or reinsurance] costs.

Consolidation among our existing competitors [removed: (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.

[added: | | • |] Contingent and supplemental revenues we receive from underwriting enterprises are less predictable than standard commission revenues, and any decrease in the amount of these forms of revenue could adversely affect our results of operations. [added: |]

[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. |]

Investments in technology systems [removed: (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.

We advise our clients on and provide services related to a wide range of subjects and our ability to attract and retain clients is highly dependent upon the external perceptions of our [added: expertise,] level of service, ability to protect client information, trustworthiness, business practices, financial condition and other subjective qualities such as [added: ethics,] culture and values.

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

Any resulting erosion of trust and confidence could make it difficult for us to attract and retain clients, employees or [removed: investors,] [added: investors;] result in lower ESG [removed: ratings and] [added: ratings,] exclusion of our stock from ESG-oriented [removed: indices or] [added: indices, and reduced demand for our stock from ESG-focused] investment [removed: funds,] [added: funds; increase our cost of borrowing in the future;] or harm our relationships with regulators and 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, or if one or more of them contracts COVID-19.][added: officer.]

Competition for talent [added: is intense] in [added: many areas of our business, particularly in] rapidly developing fields such as artificial intelligence and data [removed: engineering is particularly intense.][added: engineering.]

[added: | | • |] Our substantial operations outside the U.S. expose us to risks different than those we face in the U.S. [added: |]

In [removed: 2020,] [added: 2021,] we generated approximately [removed: 32%] [added: 33%] of our combined brokerage and risk management revenues outside the U.S. The global nature of our business creates operational and economic risks.

For example, we have substantial operations in India that provide important services for [removed: other parts of] our global organization.

| | • | Difficulties in staffing and managing foreign operations. For example, we are building our Latin American operations (which contributed [removed: $45.8] [added: $58.3] million in revenue from [removed: 18] [added: 19] locations in [removed: 2020)] [added: 2021)] 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; |

| | • | Political and economic instability (including risks relating to undeveloped or evolving legal systems, unstable governments, acts of terrorism and outbreaks of [removed: war);] [added: war, including a military conflict between Russia and Ukraine);] |

| | • | 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 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 [removed: 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 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;] |

[added: | | • |] The trade and military policies of the U.S. government could further develop in ways that exacerbate the risks described above, or introduce new risks for our international operations. [added: See also “The risk of non-compliance with non-U.S. laws, regulations and policies could adversely affect our results of operations, financial condition or strategic objectives,” above, for international risks arising from the Acquisition. If any of these risks materialize, our results of operations and financial condition could be adversely affected. |]

In 2020, the COVID-19 pandemic caused a reduction in the number of claims we [added: otherwise would have] 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 [removed: 2021.][added: 2022.]

| | • | If we do not control our labor and technology [removed: costs,] [added: costs (and during the pandemic] we [added: have been experiencing wage inflation and difficulty attracting and retaining talent), we] may be unable to remain competitive in the marketplace and profitably fulfill our existing contracts (other than those that provide cost-plus or other margin protection); |

[added: | | • |] We face a variety of risks in our benefit consulting operations distinct from those we face in our insurance brokerage operations. [added: |]

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 [removed: in 2020.][added: for a portion of 2021.]

New laws or regulations reducing employer-sponsored health insurance could impact [added: clients’ demand for our services.]

Such a disruption could be caused by a cybersecurity incident (for example, [removed: see details regarding a ransomware incident] [added: as disclosed in previous filings,] we experienced [removed: in 2020] [added: a ransomware attack] in [removed: the cybersecurity risk factor below),] [added: 2020),] 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.

[added: | | • |] 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. [added: |]

[removed: It also reported] [added: The U.S. Federal Reserve has warned] 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.

Risk Factor Summary

Risks Relating to the Acquisition of the Willis Towers Watson plc Treaty Reinsurance Brokerage Operations

| | • | We may encounter integration challenges and the Acquisition may not perform as expected. |

| | • | The risk of non-compliance with non-U.S. laws, regulations and policies could adversely affect our results of operations, financial condition or strategic objectives. |

| | • | We have made certain assumptions relating to the Acquisition which may prove to be materially inaccurate. |

| | • | There can be no assurance that deferred closings in certain jurisdictions will occur or that we will realize the expected benefits of the Acquisition. |

| | • | An economic downturn, as well as unstable economic conditions in the countries and regions in which we operate, could adversely affect our results of operations and financial condition. |

| | • | Economic conditions that result in financial difficulties for underwriting enterprises or lead to reduced risk-taking capital capacity could adversely affect our results of operations and financial condition. |

| | • | We have historically acquired large numbers of insurance brokers, benefit consulting firms and, to a lesser extent, third party claims administration 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 operations. |

| | • | We face significant competitive pressures in each of our businesses. |

| | • | Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability. |

| | • | Damage to our reputation could have a material adverse effect on our business. |

| | • | Our ESG-related aspirations, goals and initiatives, and our public statements and disclosures regarding them, expose us to numerous risks. |

| | • | Our future success depends success depends, in part, on our ability to attract and retain experienced and qualified talent, including our senior management team. |

| | • | We face a variety of risks in our risk management third-party claims administration operations that are distinct from those we face in our insurance brokerage and benefit consulting operations. |

| | • | Sustained increases in the cost of employee benefits could reduce our profitability. |

| | • | Business disruptions could have a material adverse effect on our operations, damage our reputation and impact client relationships. |

Regulatory, Legal and Accounting Risks

| | • | Improper disclosure of confidential, personal or proprietary information and cybersecurity attacks could result in regulatory scrutiny, legal liability or reputational harm, and could adversely affect our business, financial condition and reputation. |

| | • | Changes in data privacy and protection laws and regulations, or any failure to comply with such laws and regulations, could adversely affect our business and financial results. |

| | • | We are subject to regulation worldwide. If we fail to comply with regulatory requirements or if regulations change in a way that adversely affects our operations, we may not be able to conduct our business, or we may be less profitable. |

| | • | We are subject to a number of contingencies and legal proceedings which, if determined unfavorably to us, would adversely affect our financial results. |

| | • | Changes in our accounting estimates and assumptions could negatively affect our financial position and operating results. |

| | • | Limited protection of our intellectual property could harm our business and our ability to compete effectively, and we face the risk that our services or products may infringe upon the intellectual property rights of others. |

| | • | Our clean energy investments are subject to various risks and uncertainties. |

| | • | The IRC Section 45 operations in which we have invested and the by-products from such operations may result in environmental and product liability claims and environmental compliance costs. |

| | • | We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and limitations that could significantly impact our ability to operate our business. |

| | • | Credit rating downgrades would increase our financing costs and could subject us to operational risk. |

| | • | We are a holding company and, therefore, may not be able to receive dividends or other distributions in needed amounts from our subsidiaries. |

| | • | Future sales or other dilution of our equity could adversely affect the market price of our common stock. |

Risks Relating to the Acquisition of Willis Towers Watson plc Treaty Reinsurance Brokerage Operations

We may encounter integration challenges and the Acquisition may not perform as expected.

On December 1, 2021, we completed the acquisition of the treaty reinsurance brokerage operations of Willis Towers Watson plc (the “Acquisition”).

Upon completion of the Acquisition, we paid Willis Towers Watson plc an initial gross purchase price of $3.25 billion.

Under the terms of the purchase agreement, the purchase price is subject to potential additional deferred consideration of up to $750 million, payable in 2025 based on revenues of the acquired operations in 2024.

We can provide no assurance that we will be able to successfully integrate the operations acquired in the Acquisition, that the acquired operations will perform as expected, or that we will not incur unforeseen obligations or liabilities.

It is possible that our experience in running the operations acquired in the Acquisition will require us to adjust our expectations regarding the impact of the acquisition on our operating results.

In particular, the amount of revenue we expect the acquired operations to lose, due to the departure of key employees, the loss of key clients within the acquired operations, or for other reasons, is based upon estimates, assumptions and projections that may turn out to be incorrect.

As a result, actual lost revenue within the acquired operations may be greater than anticipated.

In addition, integration efforts are anticipated to be complex and may divert management’s attention and resources, which could adversely affect our operating results.

| | • | 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. |

The U.K. formally left the European Union (EU) on January 31, 2020 and an agreed implementation period ended on December 31, 2020.

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

Accordingly, while our European Economic Area (EEA) client base is a small part of our U.K. operations, we have now transferred those clients to a Swedish subsidiary, authorized in the EEA.

Some services will be provided through staff working in a U.K. branch of the subsidiary.

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

| | • | The transition away from LIBOR to the Secured Overnight Financing Rate as a benchmark reference for short-term interest rates; |

If any of these risks materialize, our results of operations and financial condition could be adversely affected.

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

clients’ demand for our services.

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

See our risk factors further below related to our investments in IRC Section 45 clean coal operations for information regarding the potential risk of liability for environmental damage, which could be exacerbated by a heightened focus on climate change.

See “Update on Ransomware Incident” elsewhere in this report for information regarding an incident that occurred in 2020.

However, we remain at risk of a data breach due to the intentional or

See also “The exit of the U.K. from the European Union (Brexit) could adversely affect our results of operations and financial condition” above.

Where appropriate, we have established provisions against these matters that we

Our ability to generate returns, claim tax deductions and avoid write-offs in connection with our IRC Section 45 and IRC Section 29 investments is subject to various risks and uncertainties including those set forth below.

| | • | Environmental, political and regulatory concerns. Environmental concerns about greenhouse gases, toxic wastewater discharges and coal combustion waste have led to public pressure to reduce or regulations that discourage the burning of coal, even refined coal treated by technologies such as The Chem-Mod™ Solution. In recent years there has been some negative publicity around our IRC Section 45 investments and clean coal generally, and certain members of Congress have raised questions about the methodologies clean coal refiners use to validate emission reductions under IRC Section 45. Negative publicity of this kind could exacerbate the risk referred to above or call into question the validity of existing tax credits. Additionally, several states have enacted mandates that electric power generating companies purchase a minimum amount of power from renewable energy sources such as wind, hydroelectric, solar, nuclear and geothermal. If utilities burned less coal as a result of any such regulation, including state or federal laws that otherwise limit coal-fired generation, our ability to generate additional tax credits would be reduced. |

| | • | Market demand for coal. When the price of natural gas and/or oil declines relative to that of coal, some utilities may choose to burn natural gas or oil instead of coal. Market demand for coal may also decline as a result of an increase in the use of power from renewable sources, trade protection measures, an economic slowdown (including the current economic slowdown caused by the COVID-19 pandemic) or mild weather and a corresponding decline in the use of electricity. If utilities burn less coal or eliminate coal in the production of electricity, our ability to generate additional tax credits would be reduced. |

| | • | Intellectual property and litigation risks. There is a risk that foreign laws will not protect the intellectual property associated with The Chem-Mod™ Solution to the same extent as U.S. laws, leaving us vulnerable to companies outside the U.S. who may attempt to copy such intellectual property. In addition, other companies may make claims of intellectual property infringement with respect to The Chem-Mod™ Solution. Such intellectual property claims, with or without merit, could require that Chem-Mod (or us and our investment and operational partners) obtain a license to use the intellectual property, which might not be obtainable on favorable terms, if at all. On July 17, 2019, Midwest Energy Emissions Corp. and MES Inc. (together, Midwest Energy) filed a patent infringement lawsuit in the United States District Court for the District of Delaware against us, Chem‑Mod LLC and numerous other related and unrelated parties (some of whom are seeking indemnification from Chem-Mod LLC). The complaint alleges that the named defendants infringe patents held exclusively by Midwest Energy and seeks unspecified damages and injunctive relief. We dispute the allegations contained in the complaint and intend to defend this matter vigorously. Litigation is inherently uncertain and, accordingly it is not possible for us to predict the ultimate outcome of these matters. While we believe the probability of a material loss is remote, if plaintiffs prevail on the infringement suit, or defendants cannot obtain necessary licenses on reasonable terms, that may limit the use of The Chem-Mod™ Solution by certain licensees. |

| | • | IRS audits. Several of the refined coal partnerships in which we are an investor are under audit by the IRS. One of these partnerships received a notice from the IRS disallowing our co-investors from claiming tax credits. The partnership defended its position in tax court and prevailed in August 2019. The IRS is appealing this ruling. Litigation is inherently uncertain and accordingly it is not possible for us to predict the ultimate outcome of this proceeding or other IRS audits, and their potential impact on us. |

| | • | Operational risks. Chem-Mod’s multi-pollutant reduction technologies (The Chem-ModTM Solution) require chemicals that may not be readily available in the marketplace at reasonable costs. Utilities that use the technologies could be idled for various reasons, including operational or environmental problems at the plants or in the boilers, disruptions in the supply or transportation of coal, revocation of their Chem-Mod technologies environmental permits, labor strikes, force majeure events such as hurricanes, or terrorist attacks, any of which could halt or impede the operations. Long-term operations using Chem-Mod’s multi-pollutant reduction technologies could also lead to unforeseen technical or other problems not evident in the short- or medium-term. A serious injury or death of a worker connected with the production of refined coal using Chem-Mod’s technologies could expose the operations to material liabilities, jeopardizing our investment, and could lead to reputational harm. We could also be exposed to risk due to our lack of control over the operations if future developments, for example a regulatory change affecting public and private companies differently, causes our interests and those of our co-investors to diverge. Finally, our vendors responsible for operation and management could fail to run the operations in compliance with IRC Section 45. If any of these developments occur, our investment returns may be negatively impacted. |

| | • | Incompatible coal. If utilities purchase coal of a quality or type incompatible with their boilers and operations, treating such coal through a commercial refined coal plant could magnify the negative impacts of burning such coal. As a result, refined coal plants at such utilities may be removed from production until all the incompatible coal has been burned, which could reduce their ability to generate tax credits. |

We understand

See “IRS Audits” above.

Such laws and regulations generally require the operations and/or the utilities at which the operations are located to obtain and comply with various environmental registrations, licenses, permits, inspections and other approvals.

There are costs associated with ensuring compliance with all applicable laws and regulations, and failure to fully comply with all applicable laws and regulations could lead to the imposition of penalties or other liability.

Failure of The Chem-Mod™ Solution utilized at coal-fired generation facilities, for example, could result in violations of air emissions permits, which could lead to the imposition of penalties or other liability.

As of December 31, 2020, we had total consolidated debt outstanding of approximately $4.5 billion.

would otherwise benefit our business.

In addition, please see “Information Regarding Non-GAAP Measures and Other” beginning on page [removed: 34] [added: 35] 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.

We are headquartered in Rolling Meadows, Illinois, have operations in [removed: 49] [added: 68] countries and offer client-service capabilities in more than 150 countries globally through a network of correspondent brokers and consultants.

In [removed: 2020,] [added: 2021,] we expanded, and expect to continue to expand, our international operations through both acquisitions and organic growth.

We generate approximately [removed: 68%] [added: 67%] of our revenues for the combined brokerage and risk management segments domestically, with the remaining [removed: 32%] [added: 33%] generated internationally, primarily in the U.K., Australia, Canada, New Zealand and Bermuda (based on [removed: 2020] [added: 2021] revenues).

We have three reportable segments: brokerage, risk management and corporate, which contributed approximately [removed: 74%, 14%] [added: 73%, 13%] and [removed: 12%,] [added: 14%,] respectively, to [removed: 2020] [added: 2021] revenues.

For information on fiscal [removed: 2018] [added: 2020] 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, [removed: 2019.][added: 2020.]

[removed: Summary of Financial Results - Year] [added: Summary of Financial Results \- Year] Ended [removed: December 31,][added: December 31,]

See the reconciliations of non-GAAP measures on page [removed: 30.][added: 33.]

| | | Year [removed: 2020] [added: 2021] | | | | | | | | Year [removed: 2019] [added: 2020] | | | | | | | | Change | | | | | | |

| Net earnings | | $ | [removed: 866.0] [added: 1,016.6] | | | | | | | $ | [removed: 717.3] [added: 866.0] | | | | | | | | [removed: 21] [added: 17] | % | | | | |

| Net earnings margin | | | [removed: 16.8] [added: 17.0] | % | | | | | | | [removed: 14.6] [added: 16.8] | % | | | | | | [removed: +213] [added: +28] bpts | | | | | | |

| Adjusted EBITDAC margin | | | | | | | [removed: 32.7] [added: 33.9] | % | | | | | | | [removed: 28.5] [added: 32.7] | % | | | | | | [removed: +418] [added: +123] bpts | | |

| Diluted net earnings per share | | $ | [removed: 4.42 | | | $ | 4.91] [added: 4.86] | | | $ | [removed: 3.68] [added: 4.42] | | | $ | [removed: 3.72 | | | | 20 | % | | | 32] [added: 0.44] | [removed: %] |

| Revenues before reimbursements | | [removed: $] | [removed: 821.7] [added: 967.6] | | | [removed: $] | 821.7 | | | [removed: $] | [removed: 838.5 | | | $ | 838.0 | | | | (2 | %) | | | (2] [added: 145.9] | [removed: %)] |

| Net earnings | | $ | [removed: 66.9] [added: 89.5] | | | | | | | $ | [removed: 66.2] [added: 66.9] | | | | | | | | [removed: 1] [added: 34] | % | | | | |

| Net earnings margin (before reimbursements) | | | [removed: 8.1] [added: 9.3] | % | | | | | | | [removed: 7.9] [added: 8.1] | % | | | | | | [removed: +24] [added: +111] bpts | | | | | | |

| Adjusted EBITDAC margin (before reimbursements) | | | | | | | [removed: 18.2] [added: 19.1] | % | | | | | | | [removed: 17.4] [added: 18.2] | % | | | | | | [removed: +77] [added: +88] bpts | | |

| Diluted net earnings per share | | $ | [removed: 0.34] [added: 0.43] | | | $ | [removed: 0.38] [added: 0.47] | | | $ | [removed: 0.35] [added: 0.34] | | | $ | [removed: 0.37] [added: 0.38] | | | | [removed: (3] [added: 26] | [removed: %)] [added: %] | | | [removed: 3] [added: 24] | % |

| Diluted net loss per share | | $ | [removed: (0.56] [added: (0.92] | ) | | $ | [removed: (0.57] [added: (0.46] | ) | | $ | [removed: (0.51] [added: (0.56] | ) | | $ | [removed: (0.45] [added: (0.57] | ) | | | | | | | | |

| Diluted net earnings per share | | [added: $] | [removed: 4.20] [added: 4.37] | | | $ | [removed: 4.72] [added: 5.48] | | | $ | [removed: 3.52] [added: 4.20] | | | $ | [removed: 3.64] [added: 4.81] | | | | [removed: 19] [added: 4] | % | | | [removed: 30] [added: 14] | % |

| Diluted net earnings per share | | $ | [removed: 4.76] [added: 5.29] | | | $ | [removed: 5.29] [added: 5.94] | | | $ | [removed: 4.03] [added: 4.76] | | | $ | [removed: 4.09] [added: 5.38] | | | | [removed: 18] [added: 11] | % | | | [removed: 29] [added: 10] | % |

In our corporate segment, net [removed: after tax] [added: after-tax] earnings from our clean energy investments was [removed: $69.8] [added: $97.4] million and [removed: $88.5] [added: $69.8] million in [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] respectively.

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: 2020] [added: 2021] and [removed: 2019.][added: 2020.]

[removed: In addition, these tables provide reconciliations to the most] comparable GAAP measures for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share.

Reconciliations of EBITDAC for the brokerage and risk management segments are provided on pages [removed: 37] [added: 39] and [removed: 42] [added: 45] of this filing.

| Segment | | [removed: 2020] [added: 2021] | | | | [removed: 2019] [added: 2020] | | | | [removed: 2020] [added: 2021] | | | | [removed: 2019] [added: 2020] | | | | [removed: 2020] [added: 2021] | | | | [removed: 2019] [added: 2020] | | | | [removed: 2020] [added: 2021] | | | | [removed: 2019] [added: 2020] | | | | Chg | | |

| Brokerage, as reported | | $ | [removed: 5,167.1] [added: 5,967.5] | | | $ | [removed: 4,901.5] [added: 5,167.1] | | | $ | [removed: 866.0] [added: 1,016.6] | | | $ | [removed: 717.3] [added: 866.0] | | | $ | [removed: 1,597.4] [added: 1,957.2] | | | $ | [removed: 1,359.1] [added: 1,597.4] | | | $ | [removed: 4.42] [added: 4.86] | | | $ | [removed: 3.68] [added: 4.42] | | | | [removed: 20] [added: 10] | % |

| Net [removed: loss] (gains) [added: loss] on divestitures | | | [added: (18.8 | ) | | |] 5.8 | | | | [removed: (75.3] [added: (15.0] | ) | | | 4.7 | | | | [removed: (47.5] [added: (18.8] | ) | | | 5.8 | | | | [removed: (62.3] [added: (0.07] | ) | | | 0.02 | | | | [removed: (0.25] | [removed: )] | [removed: | | | |]

| Acquisition integration | | | — | | | | — | | | | [removed: 19.3] [added: 25.2] | | | | [removed: 16.1] [added: 19.3] | | | | [removed: 25.1] [added: 31.7] | | | | [removed: 20.4] [added: 25.1] | | | | [removed: 0.10] [added: 0.12] | | | | [removed: 0.08] [added: 0.10] | | | | | |

| Workforce and lease termination | | | — | | | | — | | | | [removed: 34.0] [added: 18.0] | | | | [removed: 35.1] [added: 34.0] | | | | [removed: 43.9] [added: 20.6] | | | | [removed: 44.8] [added: 43.9] | | | | [removed: 0.17] [added: 0.09] | | | | [removed: 0.19] [added: 0.17] | | | | | |

| Acquisition related adjustments | | | — | | | | — | | | | [removed: 39.7] [added: 98.3] | | | | [removed: 5.8] [added: 39.7] | | | | [removed: 19.2] [added: 27.4] | | | | [removed: 16.8] [added: 19.2] | | | | [removed: 0.20] [added: 0.47] | | | | [removed: 0.03] [added: 0.20] | | | | | |

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

| Risk Management, as reported | | | [removed: 821.7] [added: 967.6] | | | | [removed: 838.5] [added: 821.7] | | | | [removed: 66.9] [added: 89.5] | | | | [removed: 66.2] [added: 66.9] | | | | [removed: 141.6] [added: 177.1] | | | | [removed: 137.9] [added: 141.6] | | | $ | [removed: 0.34] [added: 0.43] | | | $ | [removed: 0.35] [added: 0.34] | | | | [removed: (3] [added: 26] | [removed: %)] [added: %] |

| Workforce and lease termination | | | — | | | | — | | | | 6.0 | | | | [removed: 5.2] [added: 6.0] | | | | [removed: 7.9] [added: 7.1] | | | | 7.9 | | | | [removed: 0.04] [added: 0.03] | | | | [removed: 0.03] [added: 0.04] | | | | | |

| Acquisition related adjustments | | | — | | | | — | | | | [removed: 0.4] [added: 2.1] | | | | [removed: (1.0] [added: 0.4] | [removed: )] | | | [removed: —] [added: 0.4] | | | | — | | | | [removed: —] [added: 0.01] | | | | [removed: (0.01] [added: —] | [removed: )] | | | | |

| Levelized foreign currency translation | | | — | | | | [removed: (0.5 | ) | | | — | | | | (0.1 | ) | | | — | | | | 0.2 | | | | — | | | | —] [added: 36.2] | | | | | |

| Corporate, as reported | | | [removed: 863.1] [added: 1,141.3] | | | | [removed: 1,316.4] [added: 863.1] | | | | [removed: (74.8] [added: (151.1] | ) | | | [removed: (67.7] [added: (74.8] | ) | | | [removed: (142.2] [added: (231.0] | ) | | | [removed: (201.4] [added: (142.2] | ) | | $ | [removed: (0.56] [added: (0.92] | ) | | $ | [removed: (0.51] [added: (0.56] | ) | | | | |

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

| Corporate, as adjusted * | | | [removed: 863.1] [added: 1,141.3] | | | | [removed: 1,319.4] [added: 863.1] | | | | [removed: (75.9] [added: (56.8] | ) | | | [removed: (53.7] [added: (75.9] | ) | | | [removed: (142.2] [added: (173.6] | ) | | | [removed: (183.5] [added: (142.2] | ) | | | [removed: (0.57] [added: (0.46] | ) | | | [removed: (0.45] [added: (0.57] | ) | | | | |

We expect that our international revenue as a percentage of our total revenues in 2022 will increase compared to 2021, in part due to our acquisition of the Willis Towers Watson plc treaty reinsurance brokerage operations (see further below).

Our ability to generate additional tax credits from our Section 45 clean energy investments ended in December 2021.

Unless Congress reinstates the law allowing for such tax credits, we do not expect to generate any revenue or earnings from such investments in 2022.

| Revenues | | $ | 5,967.5 | | | $ | 5,948.7 | | | $ | 5,167.1 | | | $ | 5,283.0 | | | | 16 | % | | | 13 | % |

| Organic revenues | | | | | | $ | 5,603.6 | | | | | | | $ | 5,188.4 | | | | | | | | 8.0 | % |

| Adjusted EBITDAC | | | | | | $ | 2,018.1 | | | | | | | $ | 1,727.6 | | | | | | | | 17 | % |

| Organic revenues | | | | | | $ | 933.9 | | | | | | | $ | 832.4 | | | | | | | | 12.2 | % |

| Adjusted EBITDAC | | | | | | $ | 184.5 | | | | | | | $ | 151.5 | | | | | | | | 22 | % |

At this time, we do not anticipate our clean energy investments will produce after-tax earnings in 2022.

In addition, these tables provide reconciliations to the most

| Brokerage, as adjusted * | | | 5,948.7 | | | | 5,283.0 | | | | 1,143.1 | | | | 981.1 | | | | 2,018.1 | | | | 1,727.6 | | | | 5.47 | | | | 5.00 | | | | 9 | % |

| Net gains on divestures | | | (0.1 | ) | | | — | | | | (0.1 | ) | | | — | | | | (0.1 | ) | | | — | | | | — | | | | — | | | | | |

| Risk Management, as adjusted * | | | 967.5 | | | | 833.1 | | | | 97.5 | | | | 74.0 | | | | 184.5 | | | | 151.5 | | | | 0.47 | | | | 0.38 | | | | 24 | % |

| Loss on extinguishment of debt | | | — | | | | — | | | | 12.2 | | | | — | | | | — | | | | — | | | | 0.06 | | | | — | | | | | |

| Transaction-related costs | | | — | | | | — | | | | 38.5 | | | | — | | | | 47.9 | | | | — | | | | 0.19 | | | | — | | | | | |

| Total Company, as adjusted * | | $ | 8,057.5 | | | $ | 6,979.2 | | | $ | 1,183.8 | | | $ | 979.2 | | | $ | 2,029.0 | | | $ | 1,736.9 | | | $ | 5.48 | | | $ | 4.81 | | | | 14 | % |

| Management, as adjusted * | | $ | 6,916.2 | | | $ | 6,116.1 | | | $ | 1,240.6 | | | $ | 1,055.1 | | | $ | 2,202.6 | | | $ | 1,879.1 | | | $ | 5.94 | | | $ | 5.38 | | | | 10 | % |

| Brokerage, as reported | | $ | 1,345.5 | | | $ | 328.9 | | | $ | 1,016.6 | | | $ | 8.4 | | | $ | 1,008.2 | | | $ | 4.86 | |

| Net gains on divestitures | | | (18.8 | ) | | | (3.8 | ) | | | (15.0 | ) | | | — | | | | (15.0 | ) | | | (0.07 | ) |

| Acquisition integration | | | 31.7 | | | | 6.5 | | | | 25.2 | | | | — | | | | 25.2 | | | | 0.12 | |

| Workforce and lease termination | | | 22.8 | | | | 4.8 | | | | 18.0 | | | | — | | | | 18.0 | | | | 0.09 | |

| Acquisition related adjustments | | | 123.5 | | | | 25.2 | | | | 98.3 | | | | — | | | | 98.3 | | | | 0.47 | |

| Brokerage, as adjusted | | $ | 1,504.7 | | | $ | 361.6 | | | $ | 1,143.1 | | | $ | 8.4 | | | $ | 1,134.7 | | | $ | 5.47 | |

| Risk Management, as reported | | $ | 120.1 | | | $ | 30.6 | | | $ | 89.5 | | | $ | — | | | $ | 89.5 | | | $ | 0.43 | |

| Net gains on divestitures | | | (0.1 | ) | | | — | | | | (0.1 | ) | | | — | | | | (0.1 | ) | | | — | |

| Risk Management, as adjusted | | $ | 130.7 | | | $ | 33.2 | | | $ | 97.5 | | | $ | — | | | $ | 97.5 | | | $ | 0.47 | |

| Corporate, as reported | | $ | (490.5 | ) | | $ | (339.4 | ) | | $ | (151.1 | ) | | $ | 39.8 | | | $ | (190.9 | ) | | $ | (0.92 | ) |

| Loss on extinguishment of debt | | | 16.2 | | | | 4.0 | | | | 12.2 | | | | — | | | | 12.2 | | | | 0.06 | |

| Transaction-related costs | | | 47.9 | | | | 9.4 | | | | 38.5 | | | | — | | | | 38.5 | | | | 0.19 | |

| Legal and income tax related | | | 9.5 | | | | (34.1 | ) | | | 43.6 | | | | — | | | | 43.6 | | | | 0.21 | |

| Corporate, as adjusted | | $ | (416.9 | ) | | $ | (360.1 | ) | | $ | (56.8 | ) | | $ | 39.8 | | | $ | (96.6 | ) | | $ | (0.47 | ) |

| Brokerage, as adjusted | | $ | 1,290.8 | | | $ | 309.7 | | | $ | 981.1 | | | $ | 4.9 | | | $ | 976.2 | | | $ | 5.00 | |

Acquisition of the Willis Towers Watson plc Treaty Reinsurance Brokerage Operations

On December 1, 2021, we acquired substantially all of the Willis Towers Watson’s plc treaty reinsurance brokerage operations for an initial gross consideration of $3.25 billion, and potential additional consideration of $750 million subject to certain third-year revenue targets.

There are twelve remaining international operations with deferred closings that comprise approximately $180 million of the initial purchase consideration that are subject to local regulatory approval and are expected to close in the first and second quarters of 2022.

We funded the transaction using cash on hand, including the $1.4 billion of net cash raised in our May 17, 2021 follow-on common stock offering, $850 million of net cash borrowed in our May 20, 2021 30-year senior note issuance, $750 million of net cash borrowed in our November 9, 2021 10-year ($400 million) and 30-year ($350 million) senior note issuances and short‑term borrowings.

Significant Developments and Trends

Relative to fourth quarter 2020, during fourth quarter 2021;

| | • | Nearly all of our brokerage segment operations’ revenue benefited from our clients’ improving business conditions which increases insured exposure units (i.e., insured values, payrolls, employees, miles driven, gross receipts, etc.) and covered lives; |

| | • | Our risk management segment operations’ revenue benefited from our clients’ improving business conditions, which increases new arising workers’ compensation and general liability claims; and |

We expect that our international revenue as a percentage of our total revenues in 2021 will be comparable to 2020.

| 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 | % |

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

We expect to use the additional cash flow generated by these earnings to continue our mergers and acquisition strategy in our core brokerage and risk management operations.

| 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 | % |

| Clean energy related adjustments | | | — | | | | 3.0 | | | | — | | | | 11.7 | | | | — | | | | 14.9 | | | | — | | | | 0.05 | | | | | |

| 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 | % |

| --- | --- |

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

| Brokerage, as reported | | $ | 946.5 | | | $ | 229.2 | | | $ | 717.3 | | | $ | 17.2 | | | $ | 700.1 | | | $ | 3.68 | |

| Net gains on divestitures | | | (62.3 | ) | | | (14.8 | ) | | | (47.5 | ) | | | — | | | | (47.5 | ) | | | (0.25 | ) |

| Acquisition integration | | | 20.4 | | | | 4.3 | | | | 16.1 | | | | — | | | | 16.1 | | | | 0.08 | |

| Workforce and lease termination | | | 44.8 | | | | 9.7 | | | | 35.1 | | | | — | | | | 35.1 | | | | 0.19 | |

| Acquisition related adjustments | | | 7.5 | | | | 1.7 | | | | 5.8 | | | | — | | | | 5.8 | | | | 0.03 | |

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

| Risk Management, as reported | | $ | 88.4 | | | $ | 22.2 | | | $ | 66.2 | | | $ | — | | | $ | 66.2 | | | $ | 0.35 | |

| Risk Management, as adjusted | | $ | 94.0 | | | $ | 23.7 | | | $ | 70.3 | | | $ | \- | | | $ | 70.3 | | | $ | 0.37 | |

| Corporate, as reported | | $ | (408.8 | ) | | $ | (341.1 | ) | | $ | (67.7 | ) | | $ | 29.8 | | | $ | (97.5 | ) | | $ | (0.51 | ) |

| Clean energy related adjustments | | | 14.9 | | | | 3.2 | | | | 11.7 | | | | 2.5 | | | | 9.2 | | | | 0.05 | |

| Workforce | | | 3.0 | | | | 0.7 | | | | 2.3 | | | | — | | | | 2.3 | | | | 0.01 | |

| Corporate, as adjusted | | $ | (390.9 | ) | | $ | (337.2 | ) | | $ | (53.7 | ) | | $ | 32.3 | | | $ | (86.0 | ) | | $ | (0.45 | ) |

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.

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.

Throughout 2020 and in the fourth quarter of 2020, our clean energy investments experienced the impact of lower electricity consumption in the U.S., when compared to the same periods in 2019, due to reduced economic activity (as well as, unrelated to COVID-19, milder temperatures, other than some brief periods of unusually warm weather, falling natural gas prices, and increased use of renewable energy sources).

We expect reduced U.S. electricity consumption could persist at least through the first half of 2021, and could even continue throughout all of 2021.

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

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

We believe our service levels are unchanged from pre-pandemic levels.

The following analyses present the hypothetical loss in fair value of the financial instruments held by us at December 31, [removed: 2020] [added: 2021] 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 [removed: one-year period.][added: one-]

The fair value of our portfolio of cash and cash equivalents as of December 31, [removed: 2020] [added: 2021] approximated its carrying value due to its short-term duration.

The resulting fair values were not materially different from their carrying values at December 31, [removed: 2020.][added: 2021.]

As of December 31, [removed: 2020,] [added: 2021,] we had [removed: $4,348.0] [added: $4,448.0] million of borrowings outstanding under our various [added: senior notes and] note purchase agreements.

The aggregate estimated fair value of these borrowings at December 31, [removed: 2020] [added: 2021] was [removed: $5,018.9] [added: $6,390.1] million due to the long-term duration and fixed interest rates associated with these debt obligations.

We estimated market risk as the potential impact on the value of the debt recorded in our consolidated balance sheet based on a hypothetical one-percentage point change in our weighted average borrowing rate as of December 31, [removed: 2020.][added: 2021.]

A one-percentage point decrease would result in an estimated fair value of [removed: $5,345.9] [added: $6,954.0] million, or [removed: $997.9] [added: $906.0] million more than their current carrying value.

A one-percentage point increase would result in an estimated fair value of [removed: $4,720.0] [added: $5,905.2] million, or [removed: $372.0] [added: $142.8] million [removed: more] [added: less] than their current carrying value.

As of December 31, [removed: 2020,] [added: 2021,] we had [removed: no] [added: $45.0 million of] borrowings outstanding under our Credit Agreement and [removed: $203.6] [added: $228.4] million of borrowings outstanding under our Premium Financing Debt Facility.

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, [removed: 2020.][added: 2021 and the resulting fair values are not materially different from their carrying value.]

[removed: Because these are short-term borrowings with variable interest rates, the estimated] [added: The] fair [removed: values] [added: value] of these borrowings approximate their carrying [removed: value.][added: value due to their short-term duration and variable interest rates associated with these debt obligations.]

Assuming a hypothetical adverse change of 10% in the average foreign currency exchange rate for [removed: 2020] [added: 2021] (a weakening of the U.S. dollar), earnings before income taxes would have increased by approximately [removed: $25.1] [added: $24.8] million.

Assuming a hypothetical favorable change of 10% in the average foreign currency exchange rate for [removed: 2020] [added: 2021] (a strengthening of the U.S. dollar), earnings before income taxes would have decreased by approximately [removed: $19.8] [added: $23.2] million.

The remeasurement process required by U.S. GAAP for such foreign currency loan transactions will give rise to a consolidated unrealized foreign exchange gain or loss, which could be material, that is recorded in accumulated other comprehensive [removed: earnings (loss).][added: loss.]

During [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018,] [added: 2019,] 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: 2020, 2019] [added: 2021, 2020] and [removed: 2018,] [added: 2019,] 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 [removed: re-measured] [added: re\-measured] at the stated point and the appropriate loss, if applicable, would be recognized.

For the year ended December 31, [removed: 2020] [added: 2021] 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: 2020, 2019] [added: 2021, 2020] and [removed: 2018.][added: 2019.]

See Note 21 to our [removed: 2020] [added: 2021] consolidated financial statements for the changes in fair value of these derivative instruments reflected in comprehensive earnings in [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018.][added: 2019.]

year period.

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

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 [removed: 2020] [added: 2021] edition, [added: to the world’s third largest insurance broker/risk manager based on market capitalization as of December 31, 2021,] and one of the world’s largest property/casualty third party claims administrators, according to *Business Insurance* magazine’s May [removed: 2020] [added: 2021] edition.

We have three reportable segments: brokerage, risk management and corporate, which contributed approximately [removed: 74%, 14%] [added: 73%, 13%] and [removed: 12%,] [added: 14%,] respectively, to [removed: 2020] [added: 2021] revenues.

We generate approximately [removed: 68%] [added: 67%] of our revenues from the combined brokerage and risk management segments in the United States (U.S.), with the remaining [removed: 32%] [added: 33%] generated internationally, primarily in the United Kingdom (U.K.), Australia, Canada, New Zealand and 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: 2020] [added: 2021] of approximately [removed: $24.0] [added: $35.4] billion.

Information in this report is as of December 31, [removed: 2020] [added: 2021] unless otherwise noted.

The brokerage segment accounted for [removed: 74%] [added: 73%] of our revenues in [removed: 2020.][added: 2021.]

Our brokerage segment operates through a network of more than [removed: 480] [added: 475] sales and service offices located throughout the U.S. and more than [removed: 170] [added: 300] sales and service offices in [removed: 49] [added: 67] countries, most of which are in the U.K., Australia, Canada, New Zealand and Bermuda.

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

Our retail insurance brokerage operations accounted for 82% of our brokerage segment revenues in [removed: 2020.][added: 2021.]

Our retail brokerage operations are organized and operate within certain key niche/practice groups, which account for approximately [removed: 64%] [added: 79%] of our retail brokerage revenues.

Our wholesale insurance brokerage operations accounted for 18% of our brokerage segment revenues in [removed: 2020.][added: 2021.]

These brokers operate through approximately [removed: 170] [added: 300] 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 [removed: revenues] [added: reve3nues] comes from non-affiliated brokerage clients.

Based on revenues, our domestic wholesale brokerage operation ranked as the largest managing general agents/underwriting managers/Lloyds coverholders according to *Business Insurance* magazine’s September [removed: 2020] [added: 2021] edition.

Our risk management segment accounted for [removed: 14%] [added: 13%] of our revenues in [removed: 2020.][added: 2021.]

Approximately 63% of our risk management segment’s revenues are from workers’ compensation-related claims, [removed: 29%] [added: 30%] are from general and commercial auto liability-related claims and [removed: 8%] [added: 7%] are from property-related claims in [removed: 2020.][added: 2021.]

We manage our third party claims adjusting operations through a network of more than [removed: 65] [added: 57] offices located throughout the U.S., Australia, the U.K., New Zealand and Canada.

Based on revenues, our risk management operation ranked as one of the world’s largest property/casualty third party claims administrators according to *Business Insurance* magazine’s May [removed: 2020] [added: 2021] edition.

The corporate segment accounted for [removed: 12%] [added: 14%] of our revenues in [removed: 2020.][added: 2021.]

These operations [removed: produce] [added: produced] refined coal that we believe qualifies for tax credits under Internal Revenue Code [added: Section 45] (which we refer to as [removed: IRC)] [added: IRC] Section [removed: 45.][added: 45).]

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

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

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

We operate as a retail commercial property and casualty broker throughout [removed: 46] [added: 51] locations in Australia, [removed: 46] [added: 52] locations in Canada and [removed: 34] [added: 36] locations in New Zealand.

In the U.K., we operate as a retail broker from approximately [removed: 116] [added: 110] locations.

[removed: Captive underwriting enterprises] [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 “rent-a-captive” facilities.

See Note 18 to our [removed: 2020] [added: 2021] consolidated financial statements for additional financial information related to the insurance activity of our wholly owned underwriting enterprise subsidiary for [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018.][added: 2019.]

Our risk management operation currently ranks as one of the world’s largest property/casualty third party claims administrators based on revenues, according to *Business Insurance* magazine’s May [removed: 2020] [added: 2021] edition.

We believe that the primary factors determining our competitive position are our ability to deliver better [removed: claim] outcomes, reputation for outstanding service, cost-efficient service and financial strength.

We completed and integrated [removed: 583] [added: 621] acquisitions from January 1, 2002 through December 31, [removed: 2020,] [added: 2021,] most of which were within our brokerage segment.

See Note 3 to our [removed: 2020] [added: 2021] consolidated financial statements for a summary of our [removed: 2020] [added: 2021] acquisitions, the amount and form of the consideration paid and the dates of acquisitions.

In [removed: 2020,] [added: 2021,] our largest single client represented approximately [removed: 1.0%] [added: 1%] and our ten largest clients together represented approximately [removed: 3.0%] [added: 3%] of our combined brokerage and risk management segment revenues.

In [removed: 2020,] [added: 2021,] the COVID-19 pandemic [removed: had] [added: continued to have] a significant impact on our human capital management.

[removed: Accordingly, the vast majority] [added: Many] of our employees continue to work remotely for some or all of their work [removed: week.][added: week and we continue to make investments in support of a hybrid work environment.]

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

As of December 31, [removed: 2020,] [added: 2021,] we had [removed: 32,401] [added: approximately 39,000] employees, with approximately [removed: 50%] [added: 47%] in the U.S. and [removed: 50%] [added: 53%] outside of the U.S. Approximately 76% of our employees work in our brokerage segment and [removed: 20%] [added: 19%] in our risk management segment.

In [removed: 2020,] [added: 2021,] our total compensation expense was [removed: $2,882.5] [added: $3,252.4] million for the brokerage segment and [removed: $517.5] [added: $580.7] million for the risk management segment, representing [removed: 55.8%] [added: 55%] and [removed: 63.0%,] [added: 60%,] respectively, of brokerage and risk management segment revenues.

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

Since then, our program has grown globally and we [removed: employed] [added: employ] more than 400 interns each [removed: summer in 2018 and 2019] [added: summer, pre-pandemic] (we had fewer interns in 2020 [added: and 2021] due to the COVID-19 pandemic).

Our ability to generate additional tax credits from our Section 45 clean energy investments ended in December 2021.

On December 1, 2021, we acquired substantially all of the Willis Towers Watson’s plc treaty reinsurance brokerage operations for an initial gross consideration of $3.25 billion, and potential additional consideration of $750 million subject to certain third-year revenue targets.

There are twelve remaining international operations with deferred closings that comprise approximately $180 million of the initial purchase consideration that are subject to local regulatory approval and are expected to close in first and second quarters of 2022.

Together with our existing reinsurance operations, the combined businesses will trade as Gallagher Re from more than 70 offices across 31 countries and incorporate approximately 2,200 employees.

This acquisition brings specialist expertise, underpinned by a portfolio of analytics capabilities including catastrophe modeling, dynamic financial analysis, rating agency analysis and capital modeling that will immediately provide value to insurance carriers and insurance capital providers around the world.

See the previous discussion regarding our acquisition of the Willis Towers Watson’s plc treaty reinsurance brokerage operations as it relates to the impact on our international operations.

Related to our acquisition of the Willis Towers Watson’s plc treaty reinsurance brokerage operations there are twelve remaining international deferred closings that comprise approximately $180 million of the initial purchase consideration that are subject to local regulatory approval and various licensing requirements that are expected to close in first and second quarters of 2022.

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

For the fiscal year ended December 31, [removed: 2020][added: 2021]

The aggregate market value of the 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: 2020] [added: 2021] (the last day of the registrant’s most recently completed second quarter) was [removed: $16,249,616,000.][added: $25,186,468,000.]

The number of outstanding shares of the registrant’s Common Stock, $1.00 par value, as of January 31, [removed: 2021] [added: 2022] was [removed: 193,740,000.][added: 208,542,000.]

Gallagher & Co.’s definitive [removed: 2021] [added: 2022] Proxy Statement are incorporated by reference into this Form 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: [added: comments regarding the expected benefits of our acquisition of the Willis Towers Watson plc treaty reinsurance brokerage operations; the remaining twelve international deferred closings that require local regulatory approvals for such acquisition; the expected duration and costs of integration of such acquisition;] market and industry conditions, including competitive and pricing trends; acquisition strategy including the expected 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 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, [removed: investigations,] [added: audits,] reviews or litigation; the impact of changes in accounting rules; financial markets; interest rates; foreign exchange rates; matters relating to our operations; income taxes, expectations regarding our investments, [removed: including our clean energy investments;] human capital management, including diversity and inclusion initiatives; environmental, social and governance matters, including climate-resilience products and services and carbon emissions; and integrating recent acquisitions.

[removed: Potential] [added: Additional potential] factors that could impact results include:

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

| | • | Risks that could negatively affect the success of our acquisition strategy, including 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 [removed: regulatory approval of desired transactions, execution risks, integration risks, 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 incidents including the ransomware incident [removed: referred to elsewhere] [added: we publicly disclosed] in [removed: this report under “Update on Ransomware Incident”;] [added: September 2020;] 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 the current U.S. president’s administration’s potential reversal of all or part of the U.S. Tax Cuts and Jobs Act 2017 (which we refer to as the TCJA) and related [removed: regulations;] [added: regulations and the recent increase in U.K. corporate tax rates;] |

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

| | • | Risks arising from our international operations, including the risks posed by political and economic uncertainty in certain [removed: countries (such as] [added: countries, (including] the [removed: risks posed by Brexit),] [added: repercussions of a military conflict between Russia and Ukraine),] risks related to maintaining regulatory and legal compliance across multiple jurisdictions (such as those relating to violations of anti-corruption, sanctions and privacy laws), rising global tensions and 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 [removed: reduced economic activity due to COVID-19 further reducing claim activity,] [added: wage inflation, staffing shortages,] any slowing of the trend toward outsourcing claims administration, and the concentration of large amounts of revenue with certain clients; |

| | • | Risks particular to our benefit consulting operations, including [removed: 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; |

| | • | Risks related to our [added: legacy] clean energy investments, including intellectual property claims, [removed: 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 (which we refer to as the IRS) of previously claimed tax credits; |

Our future performance and actual results [added: or outcomes] may differ materially from those expressed in forward-looking statements.

For the Fiscal Year Ended December 31, [removed: 2020][added: 2021]

| | Item 1. | [Business](#ITEM_1_BUSINESS) | [removed: 4-8] [added: 5-9] |

| | Item 1A. | [Risk Factors](#ITEM_1A_RISK_FACTORS) | [removed: 9-23] [added: 10-27] |

| | Item 1B. | [Unresolved Staff Comments](#ITEM_1B_UNRESOLVED_STAFF_COMMENTS) | [removed: 24] [added: 27] |

| | Item 2. | [Properties](#ITEM_2_PROPERTIES) | [removed: 24] [added: 27] |

| | Item 3. | [Legal Proceedings](#ITEM_3_LEGAL_PROCEEDINGS) | [removed: 24] [added: 27] |

| | Item 4. | [Mine Safety Disclosures.](#ITEM_4_MINE_SAFETY_DISCLOSURES) | [removed: 24] [added: 27] |

| | [Information About Our Executive Officers](#INFORMATION_ABOUT_OUR_EXECUTIVE_FICERS) | | [removed: 24] [added: 28] |

| | 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) | [removed: 25-26] [added: 29-30] |

| | Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#ITEM_7_MANAGEMENTS_DISCUSSION_ANALYSIS_F) | [removed: 27-56] [added: 30-61] |

| | Item 7A. | [Quantitative and Qualitative Disclosure about Market Risk](#ITEM_7A_QUANTITATIVE_QUALITATIVE_DISCLOS) | [removed: 56-57] [added: 61-63] |

| | Item 8. | [Financial Statements and Supplementary Data](#ITEM_8_FINANCIAL_STATEMENTS_SUPPLEMENTAR) | [removed: 58-114] [added: 64-116] |

| | Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#ITEM_9_CHANGES_IN_DISAGREEMENTS_WITH_ACC) | [removed: 115] [added: 121] |

| | Item 9A. | [Controls and Procedures](#ITEM_9A_CONTROLS_PROCEDURES) | [removed: 115] [added: 121] |

| | Item [removed: 9B.] [added: 9B] | [Other Information](#ITEM_9B_OR_INFORMATION) | [removed: 115] [added: 121] |

| | Item 10. | [Directors, Executive Officers and Corporate Governance](#ITEM_10_DIRECTORS_EXECUTIVE_FICERS_CORPO) | [removed: 115] [added: 122] |

| | Item 11. | [Executive Compensation](#ITEM_11_EXECUTIVE_COMPENSATION) | [removed: 115] [added: 122] |

| | Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#ITEM_12_SECURITY_OWNERSHIP_CERTAIN_BENEF) | [removed: 115] [added: 122] |

| | Item 13. | [Certain Relationships and Related Transactions, and Director Independence](#ITEM_13_CERTAIN_RELATIONSHIPS_RELATED_TR) | [removed: 116] [added: 122] |

| | Item 14. | [Principal Accountant Fees and Services](#ITEM_14_PRINCIPAL_ACCOUNTANT_FEES_SERVIC) | [removed: 116] [added: 122] |

| | Item 15. | [Exhibits and Financial Statement Schedules](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH) | [removed: 116-118] [added: 122-125] |

| | Item 16. | [Form 10-K Summary](#ITEM_16_FORM_10K_SUMMARY) | [removed: 118] [added: 125] |

| [Schedule II - Valuation and Qualifying Accounts](#SCHEDULE_II) | | | [removed: 120] [added: 127] |

Potential factors from the acquisition of the Willis Towers Watson plc treaty reinsurance brokerage operations that could impact results include:

| | • | Risks related to the integration of the operations, businesses and assets acquired in the acquisition into the Company; |

| | • | Risks related to retention of clients following completion of the acquisition; |

| | • | The possibility that the twelve remaining international deferred closings that are subject to local regulatory approval, and which are expected to close in the first and second quarters of 2022, are not closed on a timely basis or at all; |

| | • | Potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the acquisition; |

| | • | The possibility that our estimates of lost revenue in the operations acquired, are inaccurate and actual lost revenue is greater; |

| | • | The increased legal and regulatory complexity of entering additional geographic markets, including the risks associated with the labor and employment law frameworks in certain countries where the Company did not previously operate; |

| | • | Diversion of management’s attention from ongoing business operations and opportunities; |

| | • | The inability to retain certain key employees of the operations acquired in the acquisition or the Company; and |

| | • | That financial information subsequently presented for the business acquired in the acquisition in our subsequent public filing may be different from that presented herein. |

| | | regulatory approval of desired transactions, execution risks, integration risks, 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; |

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

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

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

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

| | • | Intellectual property risks; |

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

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

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

| | • | The risk of credit rating downgrades; |

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

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

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

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

In addition, historical, current and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.

| | Item 6. | [\[Reserved\]](#Item_6_Reserved) | 30 |

| | Item 9C. | [Disclosures Regarding Foreign Jurisdictions that Prevent Inspections](#Item_9C_Disclosures_Regarding_Foreign) | 121 |

| [Signatures](#SIGNATURES) | | | 126 |

| | | | |

| | • | Uncertainty from the expected discontinuance of LIBOR; |

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

| [Signatures](#SIGNATURES) | | | 119 |

See Notes 15 and 17 to our [removed: 2020] [added: 2021] consolidated financial statements for information with respect to our lease commitments as of December 31, [removed: 2020.][added: 2021.]

[removed: Information About Our Executive Officers][added: Information About Our Executive Officers]

| J. Patrick Gallagher, Jr. | | [removed: 68] [added: 69] | | Chairman since 2006, President since 1990, Chief Executive Officer since 1995 |

| Walter D. Bay | | [removed: 58] [added: 59] | | Corporate Vice President, General Counsel, Secretary since 2007 |

| Richard C. Cary | | [removed: 58] [added: 59] | | Controller since 1997, Chief Accounting Officer since 2001 |

| Joel D. Cavaness | | [removed: 59] [added: 60] | | Corporate Vice President since 2000, President of our Wholesale Brokerage Operation since 1997 |

| Thomas J. Gallagher | | [removed: 62] [added: 63] | | 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: 59] [added: 60] | | Corporate Vice President, Chief Financial Officer since 2003 |

| Scott R. Hudson Vishal Jain | | [removed: 59 59] [added: 60 60] | | Corporate Vice President and President of our Risk Management Operation since 2010 Corporate Vice President since 2016, Chief Service Officer since 2014 |

| Christopher E. Mead | | [removed: 53] [added: 54] | | Corporate Vice President, Chief Marketing Officer since 2017; Managing Director - Marketing Division, CME Group, 2005 - 2017 |

| Susan E. Pietrucha | | [removed: 54] [added: 55] | | Corporate Vice President, Chief Human Resource Officer since 2007 |

| William F. Ziebell | | [removed: 58] [added: 59] | | Corporate Vice President since 2011, regional leader in our Employee Benefit and Consulting Brokerage Operations 2004 - 2016, President beginning in 2017 |

As of January 31, [removed: 2021,] [added: 2022,] there were approximately 1,000 holders of record of our common stock.

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 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, [removed: 2020:][added: 2021:]

| October 1 through October 31, [removed: 2020] [added: 2021] | | | [removed: 1,811] [added: 1,190] | | | $ | [removed: 106.28] [added: 153.91] | | | | — | | | | 7,287,019 | |

| November 1 through November 30, [removed: 2020] [added: 2021] | | | [removed: 2,583] [added: 978] | | | | [removed: 111.80] [added: 162.37] | | | | — | | | | 7,287,019 | |

| December 1 through December 31, [removed: 2020] [added: 2021] | | | [removed: 13,742] [added: 22,523] | | | | [removed: 125.73] [added: 166.60] | | | | — | | | | 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 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. |][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 2021 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 2021, 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 2021 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. |]

| (3) | We have a common stock repurchase plan that the board of directors adopted on May 10, 1988 and has periodically amended since that date to authorize additional shares for repurchase (the last amendment was on [removed: January 24, 2008] [added: July 28, 2021] and approved the repurchase of [removed: 10,000,000] [added: 1.5 billion] shares). The repurchase plan has no expiration date and we are under no commitment or obligation to repurchase any particular amount of our common stock under the plan. At our discretion, we may suspend the repurchase plan at any time. |

| Total | | | 24,691 | | | $ | 165.82 | | | | — | | | | | |

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

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

Such data should be read in conjunction with our consolidated financial statements and notes thereto in Item 8 of this annual report.

| | | Year Ended December 31, | | | | | | | | | | | | | | | | | | |

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

| | | 2020 | | | | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | |

| | | (In millions, except per share and employee data) | | | | | | | | | | | | | | | | | | |

| Consolidated Statement of Earnings Data: | | | | | | | | | | | | | | | | | | | | |

| Commissions | | $ | 3,591.9 | | | $ | 3,320.6 | | | $ | 2,920.7 | | | $ | 2,641.0 | | | $ | 2,409.9 | |

| Fees | | | 1,957.9 | | | | 1,911.1 | | | | 1,756.3 | | | | 1,591.9 | | | | 1,491.7 | |

| Supplemental revenues | | | 221.9 | | | | 210.5 | | | | 189.9 | | | | 158.0 | | | | 139.9 | |

| Contingent revenues | | | 147.0 | | | | 135.6 | | | | 98.0 | | | | 99.5 | | | | 97.9 | |

| Investment income and other | | | 933.2 | | | | 1,478.6 | | | | 1,827.5 | | | | 1,622.6 | | | | 1,409.0 | |

| Revenue before reimbursements | | | 6,851.9 | | | | 7,056.4 | | | | 6,792.4 | | | | 6,113.0 | | | | 5,548.4 | |

| Reimbursements | | | 151.7 | | | | 138.6 | | | | 141.6 | | | | 136.0 | | | | 132.1 | |

| Total revenues | | | 7,003.6 | | | | 7,195.0 | | | | 6,934.0 | | | | 6,249.0 | | | | 5,680.5 | |

| Total expenses | | | 6,132.7 | | | | 6,568.9 | | | | 6,454.6 | | | | 5,889.2 | | | | 5,346.9 | |

| Earnings before income taxes | | | 870.9 | | | | 626.1 | | | | 479.4 | | | | 359.8 | | | | 333.6 | |

| Benefit (provision) for income taxes | | | 12.8 | | | | (89.7 | ) | | | (196.5 | ) | | | (157.1 | ) | | | (96.7 | ) |

| Net earnings | | | 858.1 | | | | 715.8 | | | | 675.9 | | | | 516.9 | | | | 430.3 | |

| Net earnings attributable to noncontrolling interests | | | 39.3 | | | | 47.0 | | | | 42.4 | | | | 35.6 | | | | 33.5 | |

| Net earnings attributable to controlling interests | | $ | 818.8 | | | $ | 668.8 | | | $ | 633.5 | | | $ | 481.3 | | | $ | 396.8 | |

| Per Share Data: | | | | | | | | | | | | | | | | | | | | |

| Diluted net earnings per share (1) | | | 4.20 | | | | 3.52 | | | | 3.40 | | | | 2.64 | | | | 2.22 | |

| Dividends declared per common share (2) | | | 1.80 | | | | 1.72 | | | | 1.64 | | | | 1.56 | | | | 1.52 | |

| Share Data: | | | | | | | | | | | | | | | | | | | | |

| Shares outstanding at year end | | | 193.7 | | | | 188.1 | | | | 184.0 | | | | 181.0 | | | | 178.3 | |

| Weighted average number of common shares outstanding | | | 191.0 | | | | 186.0 | | | | 182.7 | | | | 180.1 | | | | 177.6 | |

| Weighted average number of common and common equivalent shares outstanding | | | 195.0 | | | | 190.1 | | | | 186.2 | | | | 182.1 | | | | 178.4 | |

| Consolidated Balance Sheet Data: | | | | | | | | | | | | | | | | | | | | |

| Total assets | | $ | 22,331.4 | | | $ | 19,634.8 | | | $ | 16,334.0 | | | $ | 14,909.7 | | | $ | 13,528.2 | |

| Long-term debt less current portion | | | 4,273.0 | | | | 3,823.0 | | | | 3,098.0 | | | | 2,698.0 | | | | 2,150.0 | |

| Total stockholders' equity | | | 6,232.7 | | | | 5,215.5 | | | | 4,569.7 | | | | 4,299.7 | | | | 3,775.5 | |

| Return on beginning stockholders' equity (3) | | | 16 | % | | | 15 | % | | | 15 | % | | | 13 | % | | | 11 | % |

| Employee Data: | | | | | | | | | | | | | | | | | | | | |

| Number of employees - at year end | | | 32,401 | | | | 33,247 | | | | 30,362 | | | | 26,783 | | | | 24,790 | |

| (1) | Based on the weighted average number of common and common equivalent shares outstanding during the year. |

| --- | --- |

| (2) | Based on the total dividends declared on a share of common stock outstanding during the entire year. |

| --- | --- |

| (3) | Represents net earnings divided by total stockholders' equity, as of the beginning of the year. |

| | | [removed: 2020] [added: 2021] | | | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | |

| Commissions | | $ | [removed: 3,591.9] [added: 4,132.3] | | | $ | [removed: 3,320.6] [added: 3,591.9] | | | $ | [removed: 2,920.7] [added: 3,320.6] | |

| Fees | | | [removed: 1,957.9] [added: 2,264.1] | | | | [removed: 1,911.1] [added: 1,957.9] | | | | [removed: 1,756.3] [added: 1,911.1] | |

| Supplemental revenues | | | [removed: 221.9] [added: 248.7] | | | | [removed: 210.5] [added: 221.9] | | | | [removed: 189.9] [added: 210.5] | |

| Contingent revenues | | | [removed: 147.0] [added: 188.0] | | | | [removed: 135.6] [added: 147.0] | | | | [removed: 98.0] [added: 135.6] | |

| Investment income | | | [removed: 75.9] [added: 83.1] | | | | [removed: 86.9] [added: 75.9] | | | | [removed: 70.1] [added: 86.9] | |

| Net [removed: (losses)] gains [added: (losses)] on divestitures | | | [removed: (5.8] [added: 18.9] | [removed: )] | | | [removed: 75.3] [added: (5.8] | [added: )] | | | [removed: 10.2] [added: 75.3] | |

| Revenues from clean coal activities | | | [removed: 863.5] [added: 1,140.8] | | | | [removed: 1,319.3] [added: 863.5] | | | | [removed: 1,746.3] [added: 1,319.3] | |

| Other net [removed: (losses)] revenue [added: (losses)] | | | [removed: (0.4] [added: 0.5] | [removed: )] | | | [removed: (2.9] [added: (0.4] | ) | | | [removed: 0.9] [added: (2.9] | [added: )] |

| Revenues before reimbursements | | | [removed: 6,851.9] [added: 8,076.4] | | | | [removed: 7,056.4] [added: 6,851.9] | | | | [removed: 6,792.4] [added: 7,056.4] | |

| Reimbursements | | | [removed: 151.7] [added: 133.0] | | | | [removed: 138.6] [added: 151.7] | | | | [removed: 141.6] [added: 138.6] | |

| Total revenues | | | [removed: 7,003.6] [added: 8,209.4] | | | | [removed: 7,195.0] [added: 7,003.6] | | | | [removed: 6,934.0] [added: 7,195.0] | |

| Compensation | | | [removed: 3,466.5] [added: 3,927.5] | | | | [removed: 3,339.5] [added: 3,466.5] | | | | [removed: 3,026.3] [added: 3,339.5] | |

| Operating | | | [removed: 906.5] [added: 1,072.4] | | | | [removed: 1,068.5] [added: 906.5] | | | | [removed: 903.7] [added: 1,068.5] | |

| Reimbursements | | | [removed: 151.7] [added: 133.0] | | | | [removed: 138.6] [added: 151.7] | | | | [removed: 141.6] [added: 138.6] | |

| Cost of revenues from clean coal activities | | | [removed: 882.1] [added: 1,173.2] | | | | [removed: 1,352.8] [added: 882.1] | | | | [removed: 1,816.0] [added: 1,352.8] | |

| Interest | | | [removed: 196.4] [added: 226.1] | | | | [removed: 179.8] [added: 196.4] | | | | [removed: 138.4] [added: 179.8] | |

| Depreciation | | | [removed: 145.1] [added: 151.2] | | | | [removed: 140.4] [added: 145.1] | | | | [removed: 127.8] [added: 140.4] | |

| Amortization | | | [removed: 417.3] [added: 415.1] | | | | [removed: 334.0] [added: 417.3] | | | | [removed: 291.2] [added: 334.0] | |

| Change in estimated acquisition earnout payables | | | [removed: (32.9] [added: 119.6] | [removed: )] | | | [removed: 15.3] [added: (32.9] | [added: )] | | | [removed: 9.6] [added: 15.3] | |

| Total expenses | | | [removed: 6,132.7] [added: 7,234.3] | | | | [removed: 6,568.9] [added: 6,132.7] | | | | [removed: 6,454.6] [added: 6,568.9] | |

| Earnings before income taxes | | | [removed: 870.9] [added: 975.1] | | | | [removed: 626.1] [added: 870.9] | | | | [removed: 479.4] [added: 626.1] | |

| Provision (benefit) for income taxes | | | [removed: 12.8] [added: 20.1] | | | | [removed: (89.7] [added: 12.8] | [removed: )] | | | [removed: (196.5] [added: (89.7] | ) |

| Net earnings | | | [removed: 858.1] [added: 955.0] | | | | [removed: 715.8] [added: 858.1] | | | | [removed: 675.9] [added: 715.8] | |

| Net earnings attributable to noncontrolling interests | | | [removed: 39.3] [added: 48.2] | | | | [removed: 47.0] [added: 39.3] | | | | [removed: 42.4] [added: 47.0] | |

| Net earnings attributable to controlling interests | | $ | [removed: 818.8] [added: 906.8] | | | $ | [removed: 668.8] [added: 818.8] | | | $ | [removed: 633.5] [added: 668.8] | |

| Basic net earnings per share | | $ | [removed: 4.29] [added: 4.47] | | | $ | [removed: 3.60] [added: 4.29] | | | $ | [removed: 3.47] [added: 3.60] | |

| Diluted net earnings per share | | | [removed: 4.20] [added: 4.37] | | | | [removed: 3.52] [added: 4.20] | | | | [removed: 3.40] [added: 3.52] | |

| Dividends declared per common share | | | [removed: 1.80] [added: 1.92] | | | | [removed: 1.72] [added: 1.80] | | | | [removed: 1.64] [added: 1.72] | |

| | | [removed: 2020] [added: 2021] | | | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | |

| Net earnings | | $ | [removed: 858.1] [added: 955.0] | | | $ | [removed: 715.8] [added: 858.1] | | | $ | [removed: 675.9] [added: 715.8] | |

| Change in pension liability, net of taxes | | | [removed: 0.4] [added: 19.0] | | | | [removed: 4.7] [added: 0.4] | | | | [removed: (10.3] [added: 4.7] | [removed: )] |

| Foreign currency translation, net of taxes in [removed: 2020] [added: 2021] and [removed: 2019] [added: 2020] | | | [removed: 183.7] [added: (122.3] | [added: )] | | | [removed: 44.0] [added: 183.7] | | | | [removed: (197.7] [added: 44.2] | [removed: )] |

| Change in fair value of derivative instruments, net of taxes | | | [removed: (68.1] [added: 20.8] | [removed: )] | | | [removed: (22.7] [added: (68.1] | ) | | | [removed: (15.6] [added: (22.7] | ) |

| Comprehensive earnings | | | [removed: 974.1] [added: 872.5] | | | | [removed: 741.8] [added: 974.1] | | | | [removed: 452.3] [added: 742.0] | |

| Comprehensive earnings attributable to noncontrolling interests | | | [removed: 39.7] [added: 49.5] | | | | [removed: 47.3] [added: 39.7] | | | | [removed: 40.4] [added: 47.3] | |

| Comprehensive earnings attributable to controlling interests | | $ | [removed: 934.4] [added: 823.0] | | | $ | [removed: 694.5] [added: 934.4] | | | $ | [removed: 411.9] [added: 694.7] | |

| | | [added: 2021 | | | |] 2020 | | | | 2019 | | |

| Cash and cash equivalents | | $ | [added: 402.6 | | | $ |] 664.6 | | | $ | 604.8 | |

| Restricted cash | | | [added: 4,063.7 | | | |] 2,909.7 | | | | 2,019.1 | |

| Loss on extinguishment of debt | | | 16.2 | | | | — | | | | — | |

| Loss on extinguishment of debt | | | 9.7 | | | | — | | | | — | |

| Provision for deferred income taxes | | | (184.0 | ) | | | (162.0 | ) | | | (171.2 | ) |

| Net funding of premium finance loans | | | (66.8 | ) | | | (54.6 | ) | | | (71.9 | ) |

| Balance at December 31, 2020 | | | 193.7 | | | | 193.7 | | | $ | 4,264.4 | | | $ | 2,371.7 | | | $ | (643.6 | ) | | $ | 46.5 | | | $ | 6,232.7 | |

| Net earnings | | | — | | | | — | | | | — | | | | 906.8 | | | | — | | | | 48.2 | | | | 955.0 | |

| Foreign currency translation | | | — | | | | — | | | | — | | | | — | | | | (122.3 | ) | | | 1.3 | | | | (121.0 | ) |

| Thirty-seven purchase transactions | | | 1.7 | | | | 1.7 | | | | 249.6 | | | | — | | | | — | | | | — | | | | 251.3 | |

| Stock option plans | | | 1.4 | | | | 1.4 | | | | 66.2 | | | | — | | | | — | | | | — | | | | 67.6 | |

| Shares issued to benefit plans | | | 0.6 | | | | 0.6 | | | | 70.8 | | | | — | | | | — | | | | — | | | | 71.4 | |

| Stock issuance from public offering | | | 10.3 | | | | 10.3 | | | | 1,427.6 | | | | — | | | | — | | | | — | | | | 1,437.9 | |

| Other compensation expense | | | — | | | | — | | | | 0.3 | | | | — | | | | — | | | | — | | | | 0.3 | |

| Balance at December 31, 2021 | | | 208.5 | | | | 208.5 | | | $ | 6,143.7 | | | $ | 2,882.3 | | | $ | (726.1 | ) | | $ | 51.7 | | | $ | 8,560.1 | |

December 31, 2021

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein.

We adopted this new guidance effective January 1, 2021.

The adoption did not have any impact on our consolidated financial statements.

| Atlas General Holdings, LLC January 1, 2021 (AGH) | | | — | | | $ | — | | | $ | 95.2 | | | $ | — | | | $ | 5.4 | | | $ | 8.7 | | | $ | 109.3 | | | $ | 35.0 | |

| Bollington Wilson Group February 5, 2021 (BWG) | | | — | | | | — | | | | 328.0 | | | | — | | | | 1.4 | | | | — | | | | 329.4 | | | | — | |

| LDJ American Online Benefits Group, LLC May 1, 2021 (LDJ) | | | — | | | | — | | | | 38.2 | | | | — | | | | 7.1 | | | | 14.8 | | | | 60.1 | | | | 20.0 | |

| Edelweiss Gallagher Insurance Brokers Limited (EDW) October 1, 2021 | | | — | | | | — | | | | 35.7 | | | | 5.3 | | | | — | | | | 8.5 | | | | 49.5 | | | | 9.9 | |

| Manchester Underwriting Agencies Limited (MUA) October 1, 2021 | | | — | | | | — | | | | 33.0 | | | | 3.9 | | | | 1.4 | | | | 16.5 | | | | 54.8 | | | | 20.6 | |

| Willis Reinsurance operations (WRE) December 1, 2021 | | | — | | | | — | | | | 3,278.9 | | | | — | | | | — | | | | 300.0 | | | | 3,578.9 | | | | 750.0 | |

| Thirty-two other acquisitions completed in 2021 | | | 1,008 | | | | 149.9 | | | | 224.2 | | | | 19.0 | | | | 30.1 | | | | 66.3 | | | | 489.5 | | | | 133.9 | |

| | | | 1,008 | | | $ | 149.9 | | | $ | 4,033.2 | | | $ | 28.2 | | | $ | 45.4 | | | $ | 414.8 | | | $ | 4,671.5 | | | $ | 969.4 | |

On December 1, 2021, we acquired substantially all of the Willis Towers Watson plc treaty reinsurance brokerage operations for an initial gross consideration of $3.25 billion, and potential additional consideration of $750 million subject to certain third-year revenue targets.

There are twelve remaining international operations with deferred closings that comprise approximately $180 million of the initial purchase consideration that are subject to local regulatory approval and are expected to close in first and second quarters of 2022.

As of the initial closing date, we are the beneficial owners of the operating activity for the twelve deferred closing locations.

Together with our existing reinsurance operations, the combined businesses will trade as Gallagher Re from more than 70 offices across 31 countries and incorporate approximately 2,200 employees.

We funded the transaction using cash on hand, including the $1,437.9 million of net cash raised in our May 17, 2021 follow-on public offering of our common stock, $850 million of net cash borrowed in our May 20, 2021 30-year senior note issuance, $750 million of net cash borrowed in our November 9, 2021 10-year ($400 million) and 30-year ($350 million) senior note issuances and short‑term borrowings.

We estimated future payments using the

| | | AGH | | | | BWG | | | | LDG | | | | EDW | | | | MUA | | | | WRE | | | | Thirty-two Other Acquisitions | | | | Total | | |

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

| Cash and restricted cash | | $ | 32.8 | | | $ | 24.9 | | | $ | 0.7 | | | $ | 2.7 | | | $ | 5.8 | | | $ | 748.7 | | | $ | 24.5 | | | $ | 840.1 | |

| Premiums and fees receivable | | | 111.4 | | | | 8.7 | | | | 7.8 | | | | 8.2 | | | | 4.0 | | | | 5,410.8 | | | | 68.4 | | | | 5,619.3 | |

| Other current assets | | | 0.6 | | | | 6.6 | | | | 8.0 | | | | 3.7 | | | | 2.4 | | | | 41.4 | | | | 4.4 | | | | 67.1 | |

| Fixed assets | | | 7.4 | | | | 3.8 | | | | — | | | | 0.3 | | | | 0.3 | | | | 51.5 | | | | 0.3 | | | | 63.6 | |

| Net change in deferred income taxes | | | (175.6 | ) | | | (150.7 | ) | | | (216.0 | ) |

| Repurchases of common stock | | | \- | | | | \- | | | | (11.3 | ) |

| Balance at December 31, 2017 | | | 181.0 | | | | 181.0 | | | $ | 3,388.2 | | | $ | 1,221.8 | | | $ | (555.4 | ) | | $ | 64.1 | | | $ | 4,299.7 | |

| Reclassification of the income tax effects within accumulated other comprehensive loss related to the TCJA | | | \- | | | | \- | | | | \- | | | | 6.6 | | | | (6.6 | ) | | | \- | | | | \- | |

| Net earnings | | | \- | | | | \- | | | | \- | | | | 633.5 | | | | \- | | | | 42.4 | | | | 675.9 | |

| Foreign currency translation | | | \- | | | | \- | | | | \- | | | | \- | | | | (197.7 | ) | | | (2.0 | ) | | | (199.7 | ) |

| Ten purchase transactions | | | 0.8 | | | | 0.8 | | | | 60.8 | | | | \- | | | | \- | | | | \- | | | | 61.6 | |

| Stock option plans | | | 1.6 | | | | 1.6 | | | | 57.0 | | | | \- | | | | \- | | | | \- | | | | 58.6 | |

| Common stock repurchases | | | (0.1 | ) | | | (0.1 | ) | | | (11.2 | ) | | | \- | | | | \- | | | | \- | | | | (11.3 | ) |

| Balance at December 31, 2019 | | | 188.1 | | | | 188.1 | | | $ | 3,825.7 | | | $ | 1,901.3 | | | $ | (759.6 | ) | | $ | 60.0 | | | $ | 5,215.5 | |

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Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).

Under this new accounting guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.

Topic 842 was subsequently amended by various standards, including ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements.

This new guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions.

Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

This new guidance is effective for first quarter 2019, and requires a modified retrospective adoption, applying the new standard to all leases existing at the date of initial application, with early adoption permitted.

An entity may choose to use the standard’s effective date, rather than the beginning of the earliest comparative period presented, as the date of initial application.

An entity would record the effects of initially applying the new guidance as a cumulative-effect adjustment to retained earnings.

Consequently, an entity’s reporting for the comparative periods presented in the year of adoption would continue to be in accordance with the current guidance, including the current disclosure requirements.

We adopted ASC Topic 842 for all leases effective January 1, 2019, using the modified retrospective approach allowing us to initially apply the new lease standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the first quarter of 2019.

Consequently, the reporting for the comparative prior year periods presented in 2019 will continue to be in accordance with the previous lease guidance under ASC Topic 840, including comparative disclosure requirements.

We elected the package of practical expedients to carry forward historical identification and classification of leases that commenced before January 1, 2019 and to not re-assess initial direct costs for leases commencing before January 1, 2019.

We also elected the lessee practical expedient, by class of underlying asset (e.g., office space), to not separate non-lease components such as lessor-provided maintenance and property management services from the associated lease component.

The new lease accounting standard requires us to recognize lease right-of-use assets and lease liabilities on our balance sheet, which are established at the inception of a lease by computing a net present value of the future lease payments.

Right-of-use assets are amortized to expense, and the discount amount related to lease liabilities is accreted to expense, over the lease term.

The amortization of the right-of-use asset is calculated as the difference between the straight-line lease expense and the interest calculated on the lease liability.

Rent payments are applied against the lease liabilities.

Adoption of the new standard resulted in the recording of net right-of-use assets and lease liabilities of approximately $379.6 million and $420.3 million, respectively, and the reclassification of net rent related assets and liabilities of $38.3 million as of January 1, 2019.

The difference between the additional lease assets and lease liabilities, net of the deferred tax impact, was recorded as a decrease to beginning retained earnings of $2.4 million.

The adoption of the new standard had a de minimis impact on our consolidated statement of earnings and had no impact on our consolidated statement of cash flows.

See Notes 15 and 17 to these 2020 consolidated financial statements for details on our current lease arrangements, the amounts of which represent the future undiscounted commitments.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we included a report of management’s assessment of the design and effectiveness of our internal controls as part of this annual report for the fiscal year ended December 31, [removed: 2020.][added: 2021.]

Part III

None.

Part III

Our [removed: 2021] [added: 2022] Proxy Statement will include the information required by this item under the headings “Election of Directors,” “Other Board Matters,” “Board Committees” and, if necessary, “Delinquent Section 16(a) Reports,” which we incorporate herein by reference.

Our [removed: 2021] [added: 2022] Proxy Statement will include the information required by this item under the headings “Compensation Committee Report” and “Compensation Discussion and Analysis,” which we incorporate herein by reference.

Our [removed: 2021] [added: 2022] Proxy Statement will include the information required by this item under the headings “Security Ownership by Certain Beneficial Owners and Management” and “Equity Compensation Plan Information,” which we incorporate herein by reference.

Our [removed: 2021] [added: 2022] Proxy Statement will include the information required by this item under the headings “Certain Relationships and Related Transactions” and “Other Board Matters,” which we incorporate herein by reference.

Our [removed: 2021] [added: 2022] Proxy Statement will include the information required by this item under the heading “Ratification of Appointment of Independent Auditor - Principal Accountant Fees and Services,” which we incorporate herein by reference.

Our independent registered public accounting firm is Ernst & Young LLP, Chicago, Illinois, Auditor Firm ID: 42

| | (a) | Consolidated Statement of Earnings for each of the three years in the period ended December 31, [removed: 2020.] [added: 2021.] |

| | (b) | Consolidated Balance Sheet as of December 31, [removed: 2020] [added: 2021] and [removed: 2019.] [added: 2020.] |

| | (c) | Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, [removed: 2020.] [added: 2021.] |

| | (d) | Consolidated Statement of Stockholders’ Equity for each of the three years in the period ended December 31, [removed: 2020.] [added: 2021.] |

| 4.1 | | [Description of Securities (incorporated by reference to the same exhibit number to our Form 10-K Annual Report for 2019, File No. [removed: 1-09761.](http://www.sec.gov/Archives/edgar/data/0000354190/000119312520028191/d879025dex41.htm)] [added: 1-09761)](http://www.sec.gov/Archives/edgar/data/0000354190/000119312520028191/d879025dex41.htm).] |

| *10.15 | | [The Arthur J. Gallagher & Co. Supplemental Savings and Thrift Plan, as amended and restated effective October 20, [removed: 2020.](https://www.sec.gov/Archives/edgar/data/354190/000156459021004555/ajg-ex1015_15.htm)] [added: 2020 (incorporated by reference to the same exhibit number to our Form 10-K Annual Report for 2020, File No. 1-09761).](http://www.sec.gov/Archives/edgar/data/0000354190/000156459021004555/ajg-ex1015_15.htm)] |

| *10.16 | | [Arthur J. Gallagher & [removed: Co.] [added: Co.,] Deferred Equity Participation Plan [added: (as] amended and restated as of [removed: March 12, 2020] [added: February 20, 2021)] (incorporated by reference to the same exhibit number to our Form 10-Q for the quarterly period ended March 31, [removed: 2020] [added: 2021] File No. 1 [removed: 09761).](http://www.sec.gov/Archives/edgar/data/354190/000156459020021299/ajg-ex1016_123.htm)] [added: 09761)\].](http://www.sec.gov/Archives/edgar/data/0000354190/000156459021022079/ajg-ex1016_14.htm)] |

| 21.1 | | [Subsidiaries of Arthur J. Gallagher & Co., including state or other jurisdiction of incorporation or organization and the names under which each does [removed: business.](https://www.sec.gov/Archives/edgar/data/354190/000156459021004555/ajg-ex211_173.htm)] [added: business.](https://www.sec.gov/Archives/edgar/data/354190/000156459022005714/ajg-ex211_10.htm)] |

| 23.1 | | [Consent of Ernst & Young LLP, Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/354190/000156459021004555/ajg-ex231_6.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/354190/000156459022005714/ajg-ex231_6.htm)] |

| 24.1 | | [Power of [removed: Attorney.](https://www.sec.gov/Archives/edgar/data/354190/000156459021004555/ajg-ex241_12.htm)] [added: Attorney.](https://www.sec.gov/Archives/edgar/data/354190/000156459022005714/ajg-ex241_8.htm)] |

| 31.1 | | [Rule 13a-14(a) Certification of Chief Executive [removed: Officer.](https://www.sec.gov/Archives/edgar/data/354190/000156459021004555/ajg-ex311_11.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/354190/000156459022005714/ajg-ex311_12.htm)] |

| 31.2 | | [Rule 13a-14(a) Certification of Chief Financial [removed: Officer.](https://www.sec.gov/Archives/edgar/data/354190/000156459021004555/ajg-ex312_9.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/354190/000156459022005714/ajg-ex312_11.htm)] |

| 32.1 | | [Section 1350 Certification of Chief Executive [removed: Officer.](https://www.sec.gov/Archives/edgar/data/354190/000156459021004555/ajg-ex321_8.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/354190/000156459022005714/ajg-ex321_9.htm)] |

| 32.2 | | [Section 1350 Certification of Chief Financial [removed: Officer.](https://www.sec.gov/Archives/edgar/data/354190/000156459021004555/ajg-ex322_10.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/354190/000156459022005714/ajg-ex322_7.htm)] |

| 2.1 | | [Security and Asset Purchase Agreement, dated as of August 12, 2021, by and between Arthur J. Gallagher & Co. and Willis Watson plc (incorporated by reference to Exhibit 2.1 to our Form 8-K Current Report dated August 16, 2021).](http://www.sec.gov/Archives/edgar/data/0000354190/000119312521247953/d179219dex21.htm) |

| 2.2 | | [Letter Agreement, dated December 1, 2021, by and between Willis Towers Watson plc and Arthur J. Gallagher & Co. (incorporated by reference to Exhibit 10.1 to our Form 8-K Current Report dated December 6, 2021, File No. 1-09761).](http://www.sec.gov/Archives/edgar/data/0000354190/000119312521349102/d158737dex101.htm) |

| 4.4 | | [Indenture, dated as of May 20, 2021, between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to our Form 8-K Current Report dated May 20, 2021, File No. 1-09761).](http://www.sec.gov/Archives/edgar/data/0000354190/000119312521167806/d185690dex41.htm) |

| *10.50 | | [Arthur J. Gallagher & Co. U.K. Employee Share Incentive Plan (incorporated by reference to Exhibit 4.3 to our Form S-8 Registration Statement, File No. 333-258331).](http://www.sec.gov/Archives/edgar/data/0000354190/000119312521231637/d186367dex43.htm) |

| *10.51 | | [Form of Partnership Share Agreement under the Arthur J. Gallagher & Co. U.K. Employee Share Incentive Plan (incorporated by reference to Exhibit 4.4 to our Form S-8 Registration Statement, File No. 333-258331).](http://www.sec.gov/Archives/edgar/data/0000354190/000119312521231637/d186367dex44.htm) |

| | | |

| | | |

| | | |

| 10.38 | | [Operating Agreement of Chem-Mod LLC dated as of June 23, 2004, by and among NOx II, Ltd., an Ohio limited liability company, AJG Coal, Inc., a Delaware corporation, and IQ Clean Coal LLC, a Delaware limited liability company (incorporated by reference to the same exhibit number to our Form 10-K Annual Report for 2005, File No. 1-09761).](http://www.sec.gov/Archives/edgar/data/0000354190/000119312506023110/dex1038.htm) |

| 10.40 | | [Operating Agreement of Chem-Mod International LLC dated as of July 8, 2005, between NOx II International, Ltd., an Ohio limited liability company and AJG Coal, Inc., a Delaware corporation, together with Amendment No. 1 dated August 2, 2005 (incorporated by reference to the same exhibit number to our Form 10-K Annual Report for 2005, File No. 1-09761).](http://www.sec.gov/Archives/edgar/data/0000354190/000119312506023110/dex1040.htm) |

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the [removed: 5th] [added: 18th] day of February, [removed: 2021.][added: 2022.]

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on the [removed: 5th] [added: 18th] day of February, [removed: 2021] [added: 2022] by the following persons on behalf of the Registrant in the capacities indicated.

| Year ended December 31, [removed: 2018] [added: 2021] | | | | | | | | | | | | | | | | |

| Valuation allowance for deferred tax assets | | | [removed: 79.1] [added: 94.9] | | | | [removed: (11.7] [added: 60.0] | [removed: )] | | | — | | | | [removed: 67.4] [added: 154.9] | |

| lists, non-compete agreements and trade names | | | [removed: 1,490.7] [added: 2,537.0] | | | | [removed: 291.2] [added: 415.1] | | | | [removed: (31.5] [added: (28.1] | ) | (3) | | [removed: 1,750.4] [added: 2,924.0] | |

| *TERESA H. CLARKE | | Director |

| Teresa H. Clarke | | |

| | | |

| Allowance for doubtful accounts | | $ | 10.1 | | | $ | 7.0 | | | $ | (8.8 | ) | (1) | $ | 8.3 | |

| Allowance for estimated policy cancellations | | | 9.9 | | | | (1.3 | ) | | | 1.4 | | (2) | | 10.0 | |

| Allowance for doubtful accounts | | $ | 13.5 | | | $ | 5.8 | | | $ | (9.3 | ) | (1) | $ | 10.0 | |

| Allowance for estimated policy cancellations | | | 7.4 | | | | (1.2 | ) | | | 1.6 | | (2) | | 7.8 | |