Item 1. Financial Statements (Unaudited)

Arthur J. Gallagher & Co.

Consolidated State****ment of Earnings

(Unaudited - in millions, except per share data)

	Three-month period ended								Six-month period ended
	June 30,								June 30,
	2023				2022				2023				2022
Commissions	$	1,410.4			$	1,282.4			$	3,157.8			$	2,847.7
Fees		790.5				590.9				1,496.2				1,241.8
Supplemental revenues		71.2				65.7				152.8				140.0
Contingent revenues		54.2				43.1				126.0				114.7
Investment income		75.6				23.2				141.6				41.4
Net gains on divestitures		5.1				2.8				5.4				4.2
Revenues from clean coal activities		—				0.3				—				23.0
Other net revenues		(0.1	)			—				—				0.1
Revenues before reimbursements		2,406.9				2,008.4				5,079.8				4,412.9
Reimbursements		35.0				34.6				68.2				65.4
Total revenues		2,441.9				2,043.0				5,148.0				4,478.3
Compensation		1,413.0				1,161.1				2,828.5				2,443.1
Operating		433.6				323.9				816.1				641.2
Reimbursements		35.0				34.6				68.2				65.4
Cost of revenues from clean coal activities		—				—				—				22.9
Interest		77.8				64.6				145.7				128.5
Depreciation		40.8				40.0				78.5				75.2
Amortization		134.9				100.3				256.6				224.9
Change in estimated acquisition earnout payables		9.4				(33.8	)			51.2				(12.9	)
Total expenses		2,144.5				1,690.7				4,244.8				3,588.3
Earnings before income taxes		297.4				352.3				903.2				890.0
Provision for income taxes		61.6				67.2				180.8				165.8
Net earnings		235.8				285.1				722.4				724.2
Net earnings attributable to noncontrolling interests		1.3				0.9				1.4				1.3
Net earnings attributable to controlling interests	$	234.5			$	284.2			$	721.0			$	722.9
Basic net earnings per share	$	1.09			$	1.35			$	3.37			$	3.45
Diluted net earnings per share		1.07				1.33				3.31				3.38
Dividends declared per common share		0.55				0.51				1.10				1.02

See notes to consolidated financial statements.

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Arthur J. Gallagher & Co.

Consolidated Statement o****f Comprehensive Earnings

(Unaudited - in millions)

	Three-month period ended								Six-month period ended
	June 30,								June 30,
	2023				2022				2023				2022
Net earnings	$	235.8			$	285.1			$	722.4			$	724.2
Change in pension liability, net of taxes		0.7				(0.3	)			1.5				—
Foreign currency translation, net of taxes		193.5				(417.9	)			226.8				(403.0	)
Change in fair value of derivative investments, net of taxes		24.3				26.6				29.2				71.8
Comprehensive earnings (loss)		454.3				(106.5	)			979.9				393.0
Comprehensive earnings attributable to noncontrolling interests		1.6				0.8				1.6				1.3
Comprehensive earnings attributable to controlling interests (loss)	$	452.7			$	(107.3	)		$	978.3			$	391.7

See notes to consolidated financial statements.

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Arthur J. Gallagher & Co.

Consolidated B****alance Sheet

(Unaudited - in millions)

		June 30, 2023				December 31, 2022
Cash and cash equivalents		$	952.3			$	738.4
Fiduciary assets			31,759.1				18,236.7
Accounts receivable, net			3,716.3				2,911.1
Other current assets			418.0				399.0
Total current assets			36,845.7				22,285.2
Fixed assets - net			640.5				576.2
Deferred income taxes (includes tax credit carryforwards of $698.9 in 2023 and $772.7 in 2022)			1,158.6				1,299.0
Other noncurrent assets			1,109.3				989.8
Right-of-use assets			377.0				346.7
Goodwill			10,513.7				9,489.4
Amortizable intangible assets - net			3,720.4				3,372.1
Total assets		$	54,365.2			$	38,358.4
Fiduciary liabilities		$	31,759.1			$	18,236.7
Accrued compensation and other current liabilities			2,061.7				2,003.3
Deferred revenue - current			656.8				546.7
Premium financing debt			191.2				241.9
Corporate related borrowings - current			920.0				310.0
Total current liabilities			35,588.8				21,338.6
Corporate related borrowings - noncurrent			6,022.9				5,562.8
Deferred revenue - noncurrent			61.7				62.6
Lease liabilities - noncurrent			332.0				300.4
Other noncurrent liabilities			1,919.8				1,903.8
Total liabilities			43,925.2				29,168.2
Stockholders' equity:
Common stock - issued and outstanding 215.5 shares in 2023 and 211.9 shares in 2022			215.5				211.9
Capital in excess of par value			7,018.0				6,509.9
Retained earnings			4,045.1				3,562.2
Accumulated other comprehensive loss			(882.9	)			(1,140.4	)
Stockholders' equity attributable to controlling interests			10,395.7				9,143.6
Stockholders' equity attributable to noncontrolling interests			44.3				46.6
Total stockholders' equity			10,440.0				9,190.2
Total liabilities and stockholders' equity		$	54,365.2			$	38,358.4

See notes to consolidated financial statements.

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Arthur J. Gallagher & Co.

Consolidated State****ment of Cash Flows

(Unaudited - in millions)

		Six-month period ended
		June 30,
		2023				2022
Cash flows from operating activities:
Net earnings		$	722.4			$	724.2
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net gain on investments and other			(4.1	)			(2.9	)
Depreciation and amortization			335.1				300.1
Change in estimated acquisition earnout payables			51.2				(12.9	)
Amortization of deferred compensation and restricted stock			48.5				40.8
Stock-based and other noncash compensation expense			11.9				9.5
Payments on acquisition earnouts in excess of original estimates			(57.5	)			(65.2	)
Provision for deferred income taxes			(0.9	)			(10.0	)
Effect of changes in foreign exchange rates			11.0				(16.5	)
Net change in accounts receivable, net			(732.3	)			(559.2	)
Net change in deferred revenue			78.8				53.2
Net change in other current assets			(29.9	)			3.1
Net change in accrued compensation and other accrued liabilities			15.0				(221.6	)
Net change in income taxes payable			14.9				(21.9	)
Net change in other noncurrent assets and liabilities			(23.2	)			(80.3	)
Net cash provided by operating activities			440.9				140.4
Cash flows from investing activities:
Capital expenditures			(88.8	)			(91.1	)
Cash paid for acquisitions, net of cash and restricted cash acquired			(1,049.5	)			(321.3	)
Net proceeds from sales of operations/books of business			4.8				3.7
Net funding of investment transactions			4.5				(0.4	)
Net funding of premium finance loans			63.9				39.2
Net cash used by investing activities			(1,065.1	)			(369.9	)
Cash flows from financing activities:
Payments on acquisition earnouts			(72.5	)			(77.9	)
Proceeds from issuance of common stock			66.0				69.1
Payments to noncontrolling interests			(1.2	)			(1.2	)
Dividends paid			(235.9	)			(214.0	)
Net change in fiduciary assets and liabilities			1,727.0				627.9
Net borrowings on premium financing debt facility			(53.2	)			(44.7	)
Borrowings on line of credit facility			2,125.0				1,580.0
Repayments on line of credit facility			(1,690.0	)			(1,165.0	)
Net borrowings of corporate related long-term debt			643.7				(200.6	)
Debt acquisition costs			(8.6	)			1.1
Settlements on terminated interest rate swaps			60.0				52.7
Net cash provided by financing activities			2,560.3				627.4
Effect of changes in foreign exchange rates on cash and cash equivalents and restricted cash			41.9				(74.5	)
Net increase in cash, cash equivalents, restricted cash and fiduciary cash			1,978.0				323.4
Cash, cash equivalents, restricted cash and fiduciary cash at beginning of period			4,964.2				4,466.3
Cash, cash equivalents, restricted cash and fiduciary cash at end of period		$	6,942.2			$	4,789.7

See notes to consolidated financial statements.

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Arthur J. Ga****llagher & Co.

Consolidated Statement of Stockholders’ Equity

(Unaudited - in millions)

																		Accumulated
										Capital in								Other
		Common Stock								Excess of				Retained				Comprehensive				Noncontrolling
		Shares				Amount				Par Value				Earnings				Loss				Interests				Total
Balance at December 31, 2022			211.9			$	211.9			$	6,509.9			$	3,562.2			$	(1,140.4	)		$	46.6			$	9,190.2
Net earnings			—				—				—				486.5				—				0.1				486.6
Net purchase of subsidiary shares from noncontrolling interests			—				—				—				—				—				(5.4	)			(5.4	)
Dividends paid to noncontrolling interests			—				—				—				—				—				(0.7	)			(0.7	)
Net change in pension asset/ liability, net of taxes of $0.2 million			—				—				—				—				0.8				—				0.8
Foreign currency translation			—				—				—				—				33.3				(0.1	)			33.2
Change in fair value of derivative instruments, net of taxes of $1.3 million			—				—				—				—				4.9				—				4.9
Compensation expense related to stock option plan grants			—				—				7.7				—				—				—				7.7
Common stock issued in:
Four purchase transactions			1.0				1.0				185.5				—				—				—				186.5
Stock option plans			0.5				0.5				20.7				—				—				—				21.2
Employee stock purchase plan			0.1				0.1				9.0				—				—				—				9.1
Shares issued to benefit plans			0.4				0.4				84.2				—				—				—				84.6
Deferred compensation and restricted stock			0.3				0.3				(42.2	)			—				—				—				(41.9	)
Cash dividends declared on common stock			—				—				—				(118.5	)			—				—				(118.5	)
Balance at March 31, 2023			214.2			$	214.2			$	6,774.8			$	3,930.2			$	(1,101.4	)		$	40.5			$	9,858.3
Net earnings			—				—				—				234.5				—				1.3				235.8
Net purchase of subsidiary shares from noncontrolling interests			—				—				—				—				—				2.7				2.7
Dividends paid to noncontrolling interests			—				—				—				—				—				(0.5	)			(0.5	)
Net change in pension asset/ liability, net of taxes of $0.2 million			—				—				—				—				0.7				—				0.7
Foreign currency translation			—				—				—				—				193.5				0.3				193.8
Change in fair value of derivative instruments, net of taxes of $8.4 million			—				—				—				—				24.3				—				24.3
Compensation expense related to stock option plan grants			—				—				7.8				—				—				—				7.8
Common stock issued in:
Three purchase transactions			0.8				0.8				177.8				—				—				—				178.6
Stock option plans			0.4				0.4				22.4				—				—				—				22.8
Employee stock purchase plan			0.1				0.1				12.9				—				—				—				13.0
Deferred compensation and restricted stock			—				—				22.3				—				—				—				22.3
Cash dividends declared on common stock			—				—				—				(119.6	)			—				—				(119.6	)
Balance at June 30, 2023			215.5			$	215.5			$	7,018.0			$	4,045.1			$	(882.9	)		$	44.3			$	10,440.0

See notes to consolidated financial statements.

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Arthur J. Gallagher & Co. Consolidated Statement of Stockholders’ Equity (Unaudited - in millions)

																		Accumulated
										Capital in								Other
		Common Stock								Excess of				Retained				Comprehensive				Noncontrolling
		Shares				Amount				Par Value				Earnings				Loss				Interests				Total
Balance at December 31, 2021			208.5			$	208.5			$	6,143.7			$	2,882.3			$	(726.1	)		$	51.7			$	8,560.1
Net earnings			—				—				—				438.7				—				0.4				439.1
Net purchase of subsidiary shares from noncontrolling interests			—				—				—				—				—				2.1				2.1
Dividends paid to noncontrolling interests			—				—				—				—				—				(0.6	)			(0.6	)
Net change in pension asset/ liability, net of taxes of $0.1 million			—				—				—				—				0.3				—				0.3
Foreign currency translation			—				—				—				—				14.9				0.1				15.0
Change in fair value of derivative instruments, net of taxes of $16.2 million			—				—				—				—				45.2				—				45.2
Compensation expense related to stock option plan grants			—				—				5.7				—				—				—				5.7
Common stock issued in:
Stock option plans			0.7				0.7				37.1				—				—				—				37.8
Employee stock purchase plan			0.1				0.1				8.0				—				—				—				8.1
Shares issued to benefit plans			0.5				0.5				73.9				—				—				—				74.4
Deferred compensation and restricted stock			0.3				0.3				(36.4	)			—				—				—				(36.1	)
Cash dividends declared on common stock			—				—				—				(108.0	)			—				—				(108.0	)
Balance at March 31, 2022			210.1			$	210.1			$	6,232.0			$	3,213.0			$	(665.7	)		$	53.7			$	9,043.1
Net earnings			—				—				—				284.2				—				0.9				285.1
Net purchase of subsidiary shares from noncontrolling interests			—				—				—				—				—				(1.0	)			(1.0	)
Dividends paid to noncontrolling interests			—				—				—				—				—				(0.4	)			(0.4	)
Net change in pension asset/ liability, net of taxes of $0.0 million			—				—				—				—				(0.3	)			—				(0.3	)
Foreign currency translation			—				—				—				—				(417.9	)			(0.1	)			(418.0	)
Change in fair value of derivative instruments, net of taxes of $10.3 million			—				—				—				—				26.6				—				26.6
Compensation expense related to stock option plan grants			—				—				7.2				—				—				—				7.2
Common stock issued in:
Stock option plans			0.2				0.2				10.4				—				—				—				10.6
Employee stock purchase plan			—				—				12.5				—				—				—				12.5
Deferred compensation and restricted stock			—				—				4.9				—				—				—				4.9
Cash dividends declared on common stock			—				—				—				(108.5	)			—				—				(108.5	)
Balance at June 30, 2022			210.3			$	210.3			$	6,267.0			$	3,388.7			$	(1,057.3	)		$	53.1			$	8,861.8

See notes to consolidated financial statements.

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Notes to June 30, 2023 Consolidate****d Financial Statements (Unaudited)

1. Summary of Significant Accounting Policies

Terms Used in Notes to Consolidated Financial Statements

ASC - Accounting Standards Codification.

ASU - Accounting Standards Update.

FASB - The Financial Accounting Standards Board.

GAAP - U.S. generally accepted accounting principles.

IRC - Internal Revenue Code.

IRS - Internal Revenue Service.

Underwriting enterprises - Insurance companies, reinsurance companies and various other forms of risk-taking entities, including intermediaries of underwriting enterprises.

Nature of Operations and Basis of Presentation

Arthur J. Gallagher & Co. and its subsidiaries, collectively referred to herein as we, our, us, Gallagher or the company, provide insurance and reinsurance brokerage, consulting and third party claims settlement and administration services to both domestic and international entities. We have three reportable segments: brokerage, risk management and corporate. Our brokers, agents and administrators act as intermediaries between underwriting enterprises and our clients.

Our brokerage segment operations provide brokerage and consulting services to companies and entities of all types, including commercial, not-for-profit, public entities, and, to a lesser extent, individuals, in the areas of insurance and reinsurance placement, risk of loss management, and management of employer sponsored benefit programs. Our risk management segment operations provide contract claim settlement, claim administration, loss control services and risk management consulting for commercial, not-for-profit, captive and public entities, and various other organizations that choose to self-insure property/casualty coverages or choose to use a third‑party claims management organization rather than the claim services provided by underwriting enterprises. The corporate segment reports the financial information related to our debt and other corporate costs, legacy clean energy investments, external acquisition‑related expenses and the impact of foreign currency translation. Legacy clean energy investments consist of our investments in limited liability companies that own 35 commercial clean coal production facilities that produced refined coal using Chem-Mod LLC’s proprietary technologies. We believe these operations produced refined coal that qualifies for tax credits under IRC Section 45.

We do not assume insurance underwriting risk on a net basis, other than with respect to de minimis amounts necessary to provide minimum or regulatory capital to organize captives, pools, specialized underwriters or risk-retention groups. Rather, capital necessary for covering losses is provided by underwriting enterprises.

Investment income and other revenues are primarily generated from our premium financing operations, our invested cash and restricted cash we hold on behalf of our clients, as well as clean energy investments. In addition, our share of the net earnings related to partially owned entities that are accounted for using the equity method is included in investment income.

We are a global insurance brokerage, risk management and consulting services firm, headquartered in Rolling Meadows, Illinois. We provide these services in approximately 130 countries around the world through our owned operations and a network of correspondent brokers and consultants.

- 12 -

We have prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in annual financial statements have been omitted pursuant to such rules and regulations. The unaudited consolidated financial statements included herein are, in the opinion of management, prepared on a basis consistent with our audited consolidated financial statements for the year ended December 31, 2022, and include all normal recurring adjustments necessary for a fair presentation of the information set forth. The quarterly results of operations are not necessarily indicative of the results of operations to be reported for subsequent quarters or the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. In the preparation of our unaudited consolidated financial statements as of June 30, 2023, management evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date on which the financial statements were issued, for potential recognition and/or disclosure therein.

Use of Estimates

The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses, and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements. We periodically evaluate our estimates and assumptions, including those relating to the valuation of goodwill and other intangible assets, right-of-use assets, investments (including our IRC Section 45 investments), income taxes, revenue recognition, deferred costs, stock-based compensation, claims handling obligations, retirement plans, litigation and contingencies. We base our estimates on historical experience and various assumptions that we believe to be reasonable based on specific circumstances. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed in the notes herein.

Change in Presentation of Fiduciary Assets and Liabilities

In first quarter 2023, we revised the presentation of certain amounts in our consolidated balance sheet and statement of cash flows primarily to separately identify and present fiduciary assets and liabilities. Specifically, we have reclassified prior period balances of fiduciary assets historically included in restricted cash and premiums and fees receivable into a new line on the balance sheet, fiduciary assets. Additionally, we have made certain immaterial revisions to fiduciary related balances including premiums receivable and premiums payable to underwriting enterprises related to the former Willis Re operations from gross to a net presentation to align to our accounting policy and presentation. We also added a new accounts receivable, net line in the balance sheet that includes accrued agency billed commissions, fees, supplemental commissions, direct bill commissions and contingent commission receivables due to Gallagher. Fiduciary assets represent cash held and insurance and reinsurance receivables that relate to our clients and are held on their behalf. Fiduciary liabilities represent the corresponding amounts that are owed to underwriting enterprises on behalf of our clients. We made the applicable revisions and reclassifications to the prior-period amounts to conform to the current period presentation. These changes had no impact on the consolidated statement of earnings, comprehensive earnings or stockholders’ equity for all periods presented. Additionally, these revisions did not impact our previously reported net increase in total cash (i.e., net cash, cash equivalents and restricted cash in the aggregate on our statement of cash flows).

The revisions and reclassifications to the presentation of the consolidated balance sheet include the following:

Assets

Restricted cash line was removed. Amounts were reclassified to cash and cash equivalents and fiduciary assets. See Note 13 - Supplemental Disclosures of Cash Flow Information for a reconciliation of our end of period cash, cash equivalents, restricted cash and fiduciary cash balances.

A new fiduciary assets line was added. Amounts were reclassified from restricted cash and premiums and fees receivable.

A new accounts receivable, net line was added. Amounts were reclassified from premiums and fees receivable and other current assets.

The premiums and fees receivable line was removed.

Liabilities

A new fiduciary liabilities line item was added. Amounts were reclassified from premiums payable to underwriting enterprises.

- 13 -

The premiums payable to underwriting enterprises was removed.

The revisions and reclassifications to the presentation of the consolidated statement of cash flows include the following:

Net cash provided by operating activities

The net change in premiums and fees receivable was removed.

A new net change in accounts receivable, net was added.

The net change in premiums payable to underwriting enterprises was removed.

Net cash provided (used) by financing activities

A new net change in fiduciary assets and liabilities was added.

In addition to these changes, we moved the net change in fiduciary assets and liabilities from the operating section to the financing section of the statement of cash flows.

The effect of the changes to the presentation of our consolidated balance sheet as of December 31, 2022 is summarized below:

		December 31,
(In millions)		Reported 2022				Change				Revised 2022
Cash and cash equivalents		$	342.3			$	396.1			$	738.4
Restricted cash			4,621.9				(4,621.9	)			—
Premiums and fees receivable			16,408.9				(16,408.9	)			—
Fiduciary assets			—				18,236.7				18,236.7
Accounts receivable, net			—				2,911.1				2,911.1
Other current assets			1,461.5				(1,062.5	)			399.0
Total current assets			22,834.6				(549.4	)			22,285.2
Total assets			38,907.8				(549.4	)			38,358.4
Premium payable to underwriting enterprises			18,698.2				(18,698.2	)			—
Fiduciary liabilities			—				18,236.7				18,236.7
Accrued compensation and other accrued liabilities			2,091.2				(87.9	)			2,003.3
Total current liabilities			21,888.0				(549.4	)			21,338.6
Total liabilities			29,717.6				(549.4	)			29,168.2
Total liabilities and stockholders' equity			38,907.8				(549.4	)			38,358.4

The effect of the changes to the presentation of our statement of cash flows for the six-month period ended June 30, 2022 is summarized below:

		Six-month period ended June 30,
(In millions)		Reported 2022				Change				Revised 2022
Cash flows from operating activities:
Net change in accounts receivable, net		$	—			$	(559.2	)		$	(559.2	)
Net change in premium and fees receivable			(6,892.7	)			6,892.7				—
Net change in premiums payable to underwriting enterprises			6,820.2				(6,820.2	)			—
Net change in other current assets			118.0				(114.9	)			3.1
Net change in accrued compensation and other accrued liabilities			(195.3	)			(26.3	)			(221.6	)
Net cash provided by operating activities			768.3				(627.9	)			140.4
Cash flows from financing activities:
Net change in fiduciary assets and liabilities			—				627.9				627.9
Net cash provided by (used) by financing activities			(0.5	)			627.9				627.4

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2. Effect of New Accounting Pronouncements

All new accounting pronouncements are either not applicable or deemed not material to our consolidated financial statements.

3. Business Combinations

During the six-month period ended June 30, 2023, we acquired substantially all of the ownership interest or net assets, as applicable, of the following firms in exchange for our common stock and/or cash. These acquisitions have been accounted for using the acquisition method for recording business combinations (in millions, except share data):

																										Total				Maximum
		Common				Common																Recorded				Recorded				Potential
Name and Effective		Shares				Share								Accrued				Escrow				Earnout				Purchase				Earnout
Date of Acquisition		Issued				Value				Cash Paid				Liability				Deposited				Payable				Price				Payable
		(000s)
First Ireland Risk Management Ltd. January 1, 2023 (FIR)			—			$	—			$	86.4			$	—			$	5.3			$	5.9			$	97.6			$	6.6
BCHR Holdings, L.P. dba Buck April 1, 2023 (BCHR)			—				—				600.8				24.7				19.5				—				645.0				—
Boley-Featherston-Huffman & Deal Co. April 1, 2023 (BFH)			243				45.2				8.8				—				6.0				7.9				67.9				15.0
Tay River Holdings Limited April 1, 2023 (TRH)			—				—				40.3				4.3				2.4				32.4				79.4				88.7
Insurance by Ken Brown May 1, 2023 (IKB)			273				53.9				1.8				—				2.9				13.6				72.2				17.5
RHP General Agency May 1, 2023 (RHP)			335				65.7				1.3				—				5.0				3.3				75.3				11.0
Nineteen other acquisitions completed in 2023			14				—				311.8				5.7				12.3				61.7				391.5				96.2
			865			$	164.8			$	1,051.2			$	34.7			$	53.4			$	124.8			$	1,428.9			$	235.0

On April 3, 2023, we acquired the partnership interests of BCHR holdings, L.P. and its subsidiaries dba Buck (which we refer to as Buck). We funded the transaction using free cash flow and funds received from an unsecured senior notes offering. Buck was a leading provider of retirement, human resources and employee benefits consulting and administration services operating for more than 100 years with a diverse client base by both size and industry. Immediately prior to closing, Buck had over 2,300 employees, including more than 220 credentialed actuaries, primarily serving customers throughout the U.S., Canada and the U.K.

Common shares issued in connection with acquisitions are valued at closing market prices as of the effective date of the applicable acquisition or on the days when the shares are issued, if purchase consideration is deferred. We record escrow deposits that are returned to us as a result of adjustments to net assets acquired as reductions of goodwill when the escrows are settled. The maximum potential earnout payables disclosed in the foregoing table represent the maximum amount of additional consideration that could be paid pursuant to the terms of the purchase agreement for the applicable acquisition. The amounts recorded as earnout payables, which are primarily based upon the estimated future operating results of the acquired entities over a two- to three-year period subsequent to the acquisition date, are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration in the foregoing table. We will record subsequent changes in these estimated earnout obligations, including the accretion of discount, in our consolidated statement of earnings when incurred.

The fair value of these earnout obligations is based on the present value of the expected future payments to be made to the sellers of the acquired entities in accordance with the provisions outlined in the respective purchase agreements, which is a Level 3 fair value measurement. In determining fair value, we estimated the acquired entity’s future performance using financial projections developed by management for the acquired entity and market participant assumptions that were derived for revenue growth and/or profitability. Revenue growth rates generally ranged from 5.0% to 20.0% for our 2023 acquisitions. We estimated future payments using the earnout formula and performance targets specified in each purchase agreement and the financial projections just described. We then discounted these payments to present value using a risk-adjusted rate that takes into consideration market-based rates of return that reflect the ability of the acquired entity to achieve the targets. The discount rate was 9.0% for all of our 2023 acquisitions. Changes in financial projections, market participant assumptions for revenue growth and/or profitability, or the risk-adjusted discount rate, would result in a change in the fair value of recorded earnout obligations.

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During the three-month periods ended June 30, 2023 and 2022, we recognized $19.8 million and $14.0 million, respectively, of expense in our consolidated statement of earnings related to the accretion of the discount recorded for earnout obligations in connection with our acquisitions. During the six-month periods ended June 30, 2023 and 2022, we recognized $39.6 million and $23.4 million, respectively, of expense in our consolidated statement of earnings related to the accretion of the discount recorded for earnout obligations in connection with our acquisitions. In addition, during the three-month periods ended June 30, 2023 and 2022, we recognized $10.4 million and $47.8 million of income, respectively, related to net adjustments in the estimated fair value of the liability for earnout obligations in connection with revised assumptions due to changes in interest rates, volatility and other assumptions and projections of future performance for 34 and 30 acquisitions, respectively. In addition, during the six-month periods ended June 30, 2023 and 2022, we recognized $11.6 million of expense and $36.3 million of income, respectively, related to net adjustments in the estimated fair value of the liability for earnout obligations in connection with revised assumptions due to changes in interest rates, volatility and other assumptions and projections of future performance for 45 and 50 acquisitions, respectively. The net adjustments in the three-month and six-month periods ended June 30, 2023, include changes made to the estimated fair value of the Willis Re acquisition earnout and reflect updated assumptions as of June 30, 2023. The aggregate amount of maximum earnout obligations related to acquisitions was $1,899.1 million as of June 30, 2023, of which $990.8 million was recorded in the consolidated balance sheet as of June 30, 2023, based on the estimated fair value of the expected future payments to be made, of which approximately $571.4 million can be settled in cash or stock at our option and $419.4 million must be settled in cash.

The following is a summary of the estimated fair values of the net assets acquired at the date of each acquisition made in the six-month period ended June 30, 2023 (in millions):

																										Nineteen Other
		FIR				BCHR				BFH				TRH				IKB				RHP				Acquisitions				Total
Cash and cash equivalents		$	13.0			$	25.8			$	0.6			$	5.3			$	2.0			$	—			$	6.7			$	53.4
Fiduciary assets			13.8				—				3.7				—				0.5				3.0				15.5				36.5
Other current assets			1.5				60.9				1.4				8.3				2.6				1.5				5.7				81.9
Fixed assets			0.8				36.7				—				—				0.1				—				0.2				37.8
Noncurrent assets			8.6				53.2				0.2				0.3				0.5				0.3				10.1				73.2
Goodwill			58.8				419.3				38.5				50.0				46.4				49.6				196.1				858.7
Expiration lists			27.5				203.3				37.4				22.0				30.4				34.0				195.3				549.9
Non-compete agreements			4.3				—				0.4				2.2				0.2				0.2				4.1				11.4
Trade names			—				2.6				—				—				—				—				1.3				3.9
Total assets acquired			128.3				801.8				82.2				88.1				82.7				88.6				435.0				1,706.7
Fiduciary liabilities			13.8				—				3.7				—				0.5				3.0				15.5				36.5
Current liabilities			3.9				53.0				0.6				2.6				1.7				1.2				5.4				68.4
Noncurrent liabilities			13.0				103.8				10.0				6.1				8.3				9.1				22.6				172.9
Total liabilities assumed			30.7				156.8				14.3				8.7				10.5				13.3				43.5				277.8
Total net assets acquired		$	97.6			$	645.0			$	67.9			$	79.4			$	72.2			$	75.3			$	391.5			$	1,428.9

Among other things, these acquisitions allow us to expand into desirable geographic locations, further extend our presence in the retail and wholesale insurance and reinsurance brokerage markets and increase the volume of general services currently provided. The excess of the purchase price over the estimated fair value of the tangible net assets acquired at the acquisition date was allocated to goodwill, expiration lists, non-compete agreements and trade names in the amounts of $858.7 million, $549.9 million, $11.4 million and $3.9 million, respectively, within the brokerage segment.

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Provisional estimates of fair value are established at the time of each acquisition and are subsequently reviewed and finalized within the first year of operations subsequent to the acquisition date to determine the necessity for adjustments. During this period, we may use independent third-party valuation specialists to assist us in finalizing the fair value of assets acquired and liabilities assumed. Fair value adjustments, if any, are most common to the values established for amortizable intangible assets, including expiration lists, non‑compete agreements, acquired software, and for earnout liabilities, with the offset to goodwill, net of any income tax effect.

The fair value of the tangible assets and liabilities for each applicable acquisition at the acquisition date approximated their carrying values. In general, the fair value of expiration lists was established using the excess earnings method, which is an income approach based on estimated financial projections developed by management for each acquired entity using market participant assumptions. Revenue growth and attrition rates generally ranged from 3.0% to 5.0% and 5.0% to 25.5%, respectively, for our 2022 acquisitions for which valuations were performed in 2023. We estimate the fair value as the present value of the benefits anticipated from ownership of the subject expiration list in excess of returns required on the investment in contributory assets necessary to realize those benefits. The rate used to discount the net benefits was based on a risk-adjusted rate that takes into consideration market-based rates of return and reflects the risk of the asset relative to the acquired business. The discount rates ranged from 9.0% to 11.0% for our 2022 acquisitions for which valuations were performed in 2023. The fair value of non-compete agreements was established using the profit differential method, which is an income approach based on estimated financial projections developed by management for the acquired company using market participant assumptions and various non-compete scenarios.

Expiration lists, non-compete agreements and trade names related to our acquisitions are amortized using the straight-line method over their estimated useful lives (two to fifteen years for expiration lists, two to six years for non-compete agreements and two to fifteen years for trade names), while goodwill is not subject to amortization. We use the straight-line method to amortize these intangible assets because the pattern of their economic benefits cannot be reasonably determined with any certainty. We review all of our identifiable intangible assets for impairment periodically (at least annually) and whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. In reviewing identifiable intangible assets, if the undiscounted future cash flows were less than the carrying amount of the respective (or underlying) asset, an indicator of impairment would exist and further analysis would be required to determine whether or not a loss would need to be charged against current period earnings as a component of amortization expense. Based on the results of impairment reviews during the six-month periods ended June 30, 2023 and 2022, we wrote off $3.2 million and $0.4 million, respectively, of amortizable assets related to the brokerage and risk management segments.

Of the $549.9 million of expiration lists, $11.4 million of non-compete agreements and $3.9 million of trade names related to our acquisitions made during the six-month period ended June 30, 2023, $413.7 million, $10.6 million and $2.6 million, respectively, are not expected to be deductible for income tax purposes. Accordingly, we recorded a deferred tax liability of $105.4 million, and a corresponding amount of goodwill, in the six-month period ended June 30, 2023, related to the nondeductible amortizable intangible assets.

Our consolidated financial statements for the six-month period ended June 30, 2023 include the operations of the entities acquired in the six-month period ended June 30, 2023 from their respective acquisition dates. The following is a summary of the unaudited pro forma historical results, as if these entities had been acquired at January 1, 2022 (in millions, except per share data):

	Three-month period ended								Six-month period ended
	June 30,								June 30,
	2023				2022				2023				2022
Total revenues	$	2,447.6			$	2,146.3			$	5,250.6			$	4,686.8
Net earnings attributable to controlling interests		234.8				283.4				724.3				726.1
Basic net earnings per share		1.09				1.34				3.38				3.45
Diluted net earnings per share		1.07				1.32				3.31				3.38

The unaudited pro forma results above have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had these acquisitions occurred at January 1, 2022, nor are they necessarily indicative of future operating results. Annualized revenues of entities acquired during the six-month period ended June 30, 2023 totaled approximately $418.1 million. For the six-month period ended June 30, 2023, total revenues and net loss recorded in our unaudited consolidated statement of earnings related to our acquisitions made during the six-month period ended June 30, 2023 in the aggregate, were $110.3 million and $(11.3) million, respectively.

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4. Contracts with Customers

Contract Assets and Liabilities/Contract Balances

Information about unbilled receivables, contract assets and contract liabilities from contracts with customers is as follows (in millions):

		June 30, 2023				December 31, 2022
Unbilled receivables		$	1,293.7			$	910.9
Deferred contract costs			107.6				144.5
Deferred revenue			718.5				609.3

The unbilled receivables, which are included in accounts receivable in our consolidated balance sheet, primarily relate to our rights to consideration for work completed but not billed at the reporting date. These are transferred to the receivables when the client is billed. The deferred contract costs represent the costs we incur to fulfill a new or renewal contract with our clients prior to the effective date of the contract. These costs are expensed on the contract effective date. The deferred revenue in the consolidated balance sheet includes amounts that represent the remaining performance obligations under our contracts and amounts collected related to advanced billings and deposits received from customers that may or may not ultimately be recognized as revenues in the future. Deposits received from customers could be returned to the customers based on lesser actual transactional volume than originally billed volume.

Significant changes in the deferred revenue balances, which include foreign currency translation adjustments, during the period are as follows (in millions):

						Risk
		Brokerage				Management				Total
Deferred revenue at December 31, 2022		$	434.0			$	175.3			$	609.3
Incremental deferred revenue			393.6				52.6				446.2
Revenue recognized during the six-month period ended June 30, 2023 included in deferred revenue at December 31, 2022			(325.6	)			(51.3	)			(376.9	)
Net change in collected billings/deposits received from customers			7.0				(4.0	)			3.0
Impact of change in foreign exchange rates			16.9				—				16.9
Deferred revenue recognized from business acquisitions			20.0				—				20.0
Deferred revenue at June 30, 2023		$	545.9			$	172.6			$	718.5

Revenue recognized during the six-month period ended June 30, 2023 in the table above included revenue from 2022 acquisitions that would not be reflected in prior periods.

Remaining Performance Obligations

Remaining performance obligations represent the portion of the contract price for which work has not been performed. As of June 30, 2023, the aggregate amount of the contract price allocated to remaining performance obligations was $718.5 million. The estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period is as follows (in millions):

		Brokerage				Risk Management				Total
2023 (remaining six months)		$	425.6			$	86.4			$	512.0
2024			105.4				40.3				145.7
2025			12.4				19.9				32.3
2026			1.2				10.8				12.0
2027			0.7				6.4				7.1
Thereafter			0.6				8.8				9.4
Total		$	545.9			$	172.6			$	718.5

Deferred Contract Costs

We capitalize costs incurred to fulfill contracts as deferred contract costs which are included in other current assets in our consolidated balance sheet. Deferred contract costs were $107.6 million and $144.5 million as of June 30, 2023 and December 31, 2022,

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respectively. Capitalized fulfillment costs are amortized to expense on the contract effective date. The amount of amortization of the deferred contract costs was $306.7 million and $274.5 million for the six-month periods ended June 30, 2023 and 2022, respectively.

We have applied the practical expedient to recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less for our brokerage segment. These costs are included in compensation and operating expenses in our consolidated statement of earnings.

5. Intangible Assets

The carrying amount of goodwill at June 30, 2023 and December 31, 2022 allocated by domestic and foreign operations is as follows (in millions):

		Brokerage				Risk Management				Corporate				Total
At June 30, 2023
United States		$	5,705.7			$	74.8			$	—			$	5,780.5
United Kingdom			2,387.9				18.5				—				2,406.4
Canada			592.8				—				—				592.8
Australia			499.2				10.3				—				509.5
New Zealand			199.5				9.4				—				208.9
Other foreign			996.3				—				19.3				1,015.6
Total goodwill		$	10,381.4			$	113.0			$	19.3			$	10,513.7
At December 31, 2022
United States		$	5,065.7			$	74.8			$	—			$	5,140.5
United Kingdom			2,180.2				17.7				—				2,197.9
Canada			569.7				—				—				569.7
Australia			467.6				10.2				—				477.8
New Zealand			203.8				9.5				—				213.3
Other foreign			871.1				—				19.1				890.2
Total goodwill		$	9,358.1			$	112.2			$	19.1			$	9,489.4

The changes in the carrying amount of goodwill for the six-month period ended June 30, 2023 are as follows (in millions):

		Brokerage				Risk Management				Corporate				Total
Balance as of December 31, 2022		$	9,358.1			$	112.2			$	19.1			$	9,489.4
Goodwill acquired during the period			858.7				—				—				858.7
Goodwill true-ups due to appraisals and other acquisition adjustments (see Note 3)			10.1				(0.1	)			—				10.0
Foreign currency translation adjustments during the period			154.5				0.9				0.2				155.6
Balance as of June 30, 2023		$	10,381.4			$	113.0			$	19.3			$	10,513.7

Major classes of amortizable intangible assets at June 30, 2023 and December 31, 2022 consist of the following (in millions):

		June 30,				December 31,
		2023				2022
Expiration lists		$	7,097.8			$	6,472.3
Accumulated amortization - expiration lists			(3,458.7	)			(3,178.5	)
			3,639.1				3,293.8
Non-compete agreements			100.2				91.3
Accumulated amortization - non-compete agreements			(72.1	)			(67.5	)
			28.1				23.8
Trade names			113.1				108.5
Accumulated amortization - trade names			(59.9	)			(54.0	)
			53.2				54.5
Net amortizable assets		$	3,720.4			$	3,372.1

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Estimated aggregate amortization expense for each of the next five years and thereafter is as follows (in millions):

2023 (remaining six months)		$	265.2
2024			499.8
2025			457.2
2026			415.9
2027			385.1
Thereafter			1,697.2
Total		$	3,720.4

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6. Credit and Other Debt Agreements

The following is a summary of our corporate and other debt (in millions):		June 30,				December 31,
		2023				2022
Senior Notes:
Semi-annual payments of interest, fixed rate of 2.40%, balloon due November 9, 2031		$	400.0			$	400.0
Semi-annual payments of interest, fixed rate of 5.50%, balloon due March 2, 2033			350.0				—
Semi-annual payments of interest, fixed rate of 3.50%, balloon due May 20, 2051			850.0				850.0
Semi-annual payments of interest, fixed rate of 3.05%, balloon due March 9, 2052			350.0				350.0
Semi-annual payments of interest, fixed rate of 5.75%, balloon due March 2, 2053			600.0				—
Total Senior Notes			2,550.0				1,600.0
Note Purchase Agreements:
Semi-annual payments of interest, fixed rate of 5.49%, balloon due February 10, 2023			—				50.0
Semi-annual payments of interest, fixed rate of 4.13%, balloon due June 24, 2023			—				200.0
Semi-annual payments of interest, fixed rate of 4.72%, balloon due February 13, 2024			100.0				100.0
Semi-annual payments of interest, fixed rate of 4.58%, balloon due February 27, 2024			325.0				325.0
Quarterly payments of interest, floating rate of 90 day LIBOR plus 1.40%, balloon due June 13, 2024			—				50.0
Semi-annual payments of interest, fixed rate of 4.31%, balloon due June 24, 2025			200.0				200.0
Semi-annual payments of interest, fixed rate of 4.85%, balloon due February 13, 2026			140.0				140.0
Semi-annual payments of interest, fixed rate of 4.73%, balloon due February 27, 2026			175.0				175.0
Semi-annual payments of interest, fixed rate of 4.40%, balloon due June 2, 2026			175.0				175.0
Semi-annual payments of interest, fixed rate of 4.36%, balloon due June 24, 2026			150.0				150.0
Semi-annual payments of interest, fixed rate of 3.75%, balloon due January 30, 2027			30.0				30.0
Semi-annual payments of interest, fixed rate of 4.09%, balloon due June 27, 2027			125.0				125.0
Semi-annual payments of interest, fixed rate of 4.09%, balloon due August 2, 2027			125.0				125.0
Semi-annual payments of interest, fixed rate of 4.14%, balloon due August 4, 2027			98.0				98.0
Semi-annual payments of interest, fixed rate of 3.46%, balloon due December 1, 2027			100.0				100.0
Semi-annual payments of interest, fixed rate of 4.55%, balloon due June 2, 2028			75.0				75.0
Semi-annual payments of interest, fixed rate of 4.34%, balloon due June 13, 2028			125.0				125.0
Semi-annual payments of interest, fixed rate of 5.04%, balloon due February 13, 2029			100.0				100.0
Semi-annual payments of interest, fixed rate of 4.98%, balloon due February 27, 2029			100.0				100.0
Semi-annual payments of interest, fixed rate of 4.19%, balloon due June 27, 2029			50.0				50.0
Semi-annual payments of interest, fixed rate of 4.19%, balloon due August 2, 2029			50.0				50.0
Semi-annual payments of interest, fixed rate of 3.48%, balloon due December 2, 2029			50.0				50.0
Semi-annual payments of interest, fixed rate of 3.99%, balloon due January 30, 2030			341.0				341.0
Semi-annual payments of interest, fixed rate of 4.44%, balloon due June 13, 2030			125.0				125.0
Semi-annual payments of interest, fixed rate of 5.14%, balloon due March 13, 2031			180.0				180.0
Semi-annual payments of interest, fixed rate of 4.70%, balloon due June 2, 2031			25.0				25.0
Semi-annual payments of interest, fixed rate of 4.09%, balloon due January 30, 2032			69.0				69.0
Semi-annual payments of interest, fixed rate of 4.34%, balloon due June 27, 2032			75.0				75.0
Semi-annual payments of interest, fixed rate of 4.34%, balloon due August 2, 2032			75.0				75.0
Semi-annual payments of interest, fixed rate of 4.59%, balloon due June 13, 2033			125.0				125.0
Semi-annual payments of interest, fixed rate of 5.29%, balloon due March 13, 2034			40.0				40.0
Semi-annual payments of interest, fixed rate of 4.48%, balloon due June 12, 2034			175.0				175.0
Semi-annual payments of interest, fixed rate of 4.24%, balloon due January 30, 2035			79.0				79.0
Semi-annual payments of interest, fixed rate of 2.44%, balloon due February 10, 2036			100.0				100.0
Semi-annual payments of interest, fixed rate of 2.46%, balloon due May 5, 2036			75.0				75.0
Semi-annual payments of interest, fixed rate of 4.69%, balloon due June 13, 2038			75.0				75.0
Semi-annual payments of interest, fixed rate of 5.45%, balloon due March 13, 2039			40.0				40.0
Semi-annual payments of interest, fixed rate of 4.49%, balloon due January 30, 2040			56.0				56.0
Total Note Purchase Agreements			3,948.0				4,248.0
Credit Agreement:
Periodic payments of interest and principal, prime or SOFR plus up to 1.075%, expires June 22, 2028			495.0				60.0
Premium Financing Debt Facility - expires September 15, 2024:
Facility B
AUD denominated tranche, interbank rates plus 1.500%			172.9				217.6
NZD denominated tranche, interbank rates plus 1.850%			—				—
Facility C and D
AUD denominated tranche, interbank rates plus 0.830%			9.2				15.2
NZD denominated tranche, interbank rates plus 0.990%			9.1				9.1
Total Premium Financing Debt Facility			191.2				241.9
Total corporate and other debt			7,184.2				6,149.9
Less unamortized debt acquisition costs on Senior Notes and Note Purchase Agreements			(29.2	)			(20.6	)
Less unamortized discount on Bonds Payable			(20.9	)			(14.6	)
Net corporate and other debt		$	7,134.1			$	6,114.7

On June 22, 2023, we entered into a new Credit Agreement (the “Credit Agreement”) with an administrative agent and a group of other lenders. The Credit Agreement provides for a five-year unsecured revolving credit facility in the amount of $1,200,000,000 (including a $75,000,000 letter of credit sub-facility), which is also available in Pounds Sterling, Canadian Dollars, Australian Dollars, New Zealand Dollars, Euros, Japanese Yen and any other currencies agreed by the lenders. We may also, upon the agreement of either one or more of the then-existing lenders or of additional banks not currently party to the Credit Agreement, increase the

- 21 -

commitments under the Credit Agreement up to $1,700,000,000. The Credit Agreement permits us to designate wholly-owned subsidiaries located in certain jurisdictions as additional borrowers, the obligations of which under the Credit Agreement will be guaranteed by the Company, subject to the terms and conditions set forth in the Credit Agreement. Any subsidiary that guarantees any notes under the Company’s existing note purchase agreements is required to guarantee the obligations under the Credit Agreement. There are currently no subsidiary borrowers or guarantors under the Credit Agreement.

Loans borrowed under the Credit Agreement bear interest at a variable annual rate based on a customary benchmark rate for each available currency Secured Overnight Financing Rate (which we refer to as SOFR) (for loans in U.S. Dollars), or at our election solely for loans in U.S. Dollars, the base rate, plus in each case an applicable margin. The applicable margin is determined by reference to the rating of our long-term senior unsecured debt. Subject to certain conditions stated in the Credit Agreement, we may borrow, prepay and reborrow amounts under the Credit Agreement at any time during the term of the Credit Agreement. Funds borrowed under the Credit Agreement may be used for general corporate and working capital purposes of the Company and its subsidiaries.

The Credit Agreement also contains customary representations and warranties and affirmative and negative covenants, including financial covenants, as well as customary events of default, with corresponding grace periods, including, without limitation, payment defaults, cross-defaults to other agreements evidencing indebtedness and bankruptcy-related defaults.

Concurrently, on June 22, 2023, we paid off and terminated all of our obligations under the Second Amended and Restated Multicurrency Credit Agreement, dated as of June 7, 2019.

On March 2, 2023, we closed and funded an offering of $950.0 million of unsecured senior notes in two tranches. The $350.0 million aggregate principal amount of 5.50% Senior Notes are due 2033 (which we refer to as the 2033 Notes) and $600.0 million aggregate principal amount of 5.75% Senior Notes are due 2053 (which we refer to as the 2053 Notes). The weighted average interest rate is 5.05% per annum after giving effect to underwriting costs and a net hedge gain. During 2019 through 2022, we entered into a pre‑issuance interest rate hedging transaction related to these notes. We realized a net cash gain of approximately $112.7 million on the hedging transactions that will be recognized on a pro rata basis as a decrease to our reported interest expense over ten years. We used the proceeds of these offerings to fund acquisitions, earnout payments related to acquisitions and general corporate purposes.

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7. Earnings Per Share

The following table sets forth the computation of basic and diluted net earnings per share (in millions, except per share data):

	Three-month period ended								Six-month period ended
	June 30,								June 30,
	2023				2022				2023				2022
Net earnings attributable to controlling interests	$	234.5			$	284.2			$	721.0			$	722.9
Weighted average number of common shares outstanding		214.9				210.2				213.8				209.6
Dilutive effect of stock options using the treasury stock method		4.1				4.1				4.2				4.3
Weighted average number of common and common equivalent shares outstanding		219.0				214.3				218.0				213.9
Basic net earnings per share	$	1.09			$	1.35			$	3.37			$	3.45
Diluted net earnings per share	$	1.07			$	1.33			$	3.31			$	3.38

Anti-dilutive stock-based awards of 1.1 million and 2.3 million shares were outstanding at the three-month periods ended June 30, 2023 and 2022, respectively, that were excluded in the computation of the dilutive effect of stock-based awards for the three-month periods then ended. Anti-dilutive stock-based awards of 0.7 million and 1.7 million shares were outstanding at the six-month periods ended June 30, 2023 and 2022, respectively, that were excluded in the computation of the dilutive effect of stock-based awards for the six-month periods then ended. These stock‑based awards were excluded from the computation because the exercise prices on these stock‑based awards were greater than the average market price of our common shares during the respective period, and therefore, would be anti‑dilutive to earnings per share under the treasury stock method.

8. Stock Option Plans

On May 10, 2022, our stockholders approved the Arthur J. Gallagher & Co. 2022 Long-Term Incentive Plan (which we refer to as the LTIP), which replaced our previous stockholder-approved Arthur J. Gallagher & Co. 2017 Long-Term Incentive Plan (which we refer to as the 2017 LTIP). The LTIP term began May 10, 2022 and terminates on the date of the annual meeting of stockholders in 2032, unless terminated earlier by our board of directors. All of our officers, employees and non-employee directors are eligible to receive awards under the LTIP. The compensation committee of our board of directors determines the annual number of shares delivered under the LTIP. The LTIP provides for non-qualified and incentive stock options, stock appreciation rights, restricted stock and restricted stock units, any or all of which may be made contingent upon the achievement of performance criteria.

Shares of our common stock available for issuance under the LTIP include authorized and unissued shares of common stock or authorized and issued shares of common stock reacquired and held as treasury shares or otherwise, or a combination thereof. The number of available shares will be reduced by the aggregate number of shares that become subject to outstanding awards granted under the LTIP. A maximum of 3.5 million shares issued for full value awards (i.e., awards other than stock options or stock appreciation rights) will be counted one-for-one against the 13.5 million share pool, and every share subject to a full value award in excess of such limit will count as 3.8 shares against the pool. To the extent that shares subject to an outstanding award granted under either the LTIP or prior equity plans are not issued or delivered by reason of the expiration, termination, cancellation or forfeiture of such award or by reason of the settlement of such award in cash, then such shares will again be available for grant under the LTIP.

The maximum number of shares available under the LTIP for restricted stock, restricted stock unit awards and performance unit awards settled with stock (i.e., all awards other than stock options and stock appreciation rights) was 2.8 million at June 30, 2023.

The LTIP provides for the grant of stock options, which may be either tax-qualified incentive stock options or non-qualified stock options and stock appreciation rights. The compensation committee determines the period for the exercise of a non-qualified stock option, tax-qualified incentive stock option or stock appreciation right, provided that no option can be exercised later than seven years after its date of grant. The exercise price of a non-qualified stock option or tax-qualified incentive stock option and the base price of a stock appreciation right cannot be less than 100% of the fair market value of a share of our common stock on the date of grant, provided that the base price of a stock appreciation right granted in tandem with an option will be the exercise price of the related option.

Upon exercise, the option exercise price may be paid in cash, by the delivery of previously owned shares of our common stock, through a net-exercise arrangement, or through a broker-assisted cashless exercise arrangement. The compensation committee determines all of the terms relating to the exercise, cancellation or other disposition of an option or stock appreciation right upon a

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termination of employment, whether by reason of disability, retirement, death or any other reason. Stock option and stock appreciation right awards under the LTIP are non-transferable.

On March 15, 2023, the compensation committee granted 1,131,000 options under the LTIP to our officers and key employees that become exercisable at the rate of 34%, 33% and 33% on the anniversary date of the grant in 2026, 2027 and 2028. On February 1, 2022 and March 15, 2022, the compensation committee granted 1,197,000 and 1,141,000 options, respectively, under the 2017 LTIP to our officers and key employees that become exercisable at the rate of 34%, 33% and 33% on the anniversary date of the grant in 2025, 2026 and 2027, respectively. The 2023 and 2022 options expire seven years from the date of grant, or earlier in the event of certain terminations of employment. For our executive officers age 55 or older, stock options are not subject to forfeiture upon such officers’ departure from the company after two years from the date of grant.

During the three-month periods ended June 30, 2023 and 2022, we recognized $7.8 million and $7.2 million, respectively, of compensation expense related to our stock option grants. During the six-month periods ended June 30, 2023 and 2022, we recognized $15.5 million and $12.9 million, respectively, of compensation expense related to our stock option grants.

For purposes of expense recognition, the estimated fair values of the stock option grants are amortized to expense over the options’ vesting period. We estimated the fair value of stock options at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

		2023				2022
Expected dividend yield			1.2	%			1.3	%
Expected risk-free interest rate			3.6	%			1.9	%
Volatility			25.0	%			23.1	%
Expected life (in years)			5.4				5.4

Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. The weighted average fair value per option for all options granted during the six-month periods ended June 30, 2023 and 2022, as determined on the grant date using the Black-Scholes option pricing model, was $46.48 and $33.25, respectively.

The following is a summary of our stock option activity and related information for 2023 (in millions, except exercise price and year data):

		Six-month period ended June 30, 2023
										Weighted
										Average
						Weighted				Remaining
		Shares				Average				Contractual				Aggregate
		Under				Exercise				Term				Intrinsic
		Option				Price				(in years)				Value
Beginning balance			8.3			$	107.47
Granted			1.1				177.78
Exercised			(0.9	)			60.17
Forfeited or canceled			(0.1	)			127.99
Ending balance			8.4			$	122.14				4.38			$	817.6
Exercisable at end of period			2.1			$	72.16				2.06			$	310.2
Ending unvested and expected to vest			5.6			$	137.06				5.10			$	462.8

Options with respect to 12.0 million shares (less any shares of restricted stock issued under the LTIP - see Note 10 to these unaudited consolidated financial statements) were available for grant under the LTIP at June 30, 2023.

The total intrinsic value of options exercised during the six-month periods ended June 30, 2023 and 2022 was $123.8 million and $97.2 million, respectively. As of June 30, 2023, we had approximately $130.4 million of total unrecognized compensation expense related to nonvested options. We expect to recognize that cost over a weighted average period of approximately four years.

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Other information regarding stock options outstanding and exercisable at June 30, 2023 is summarized as follows (in millions, except exercise price and year data):

										Options Outstanding												Options Exercisable
														Weighted
														Average
														Remaining				Weighted								Weighted
														Contractual				Average								Average
										Number				Term				Exercise				Number				Exercise
Range of Exercise Prices										Outstanding				(in years)				Price				Exercisable				Price
$	55.94			—		$	56.86				0.5				0.71			$	56.84				0.5			$	56.84
	70.74			—			70.74				0.7				1.71				70.74				0.7				70.74
	79.59			—			79.59				0.9				2.71				79.59				0.5				79.59
	86.17			—			86.17				1.3				3.70				86.17				0.4				86.17
	127.90			—			127.90				1.5				4.72				127.90				—				127.90
	156.85			—			156.85				1.2				5.60				156.85				—				—
	158.56			—			161.14				1.1				5.72				158.65				—				—
	177.09			—			202.13				1.2				6.72				177.78				—				—
$	55.94			—		$	202.13				8.4				4.38			$	122.14				2.1			$	72.16

9. Deferred Compensation

We have a Deferred Equity Participation Plan (which we refer to as the DEPP), which is a non-qualified plan that generally provides for distributions to certain of our key executives when they reach age 62 (or the one-year anniversary of the date of the grant for participants over the age of 61 as of the grant date) or upon or after their actual retirement if later. Under the provisions of the DEPP, we typically contribute cash in an amount approved by the compensation committee to a rabbi trust on behalf of the executives participating in the DEPP, and instruct the trustee to acquire a specified number of shares of our common stock on the open market or in privately negotiated transactions based on participant elections. Distributions under the DEPP may not normally be made until the participant reaches age 62 (or the one-year anniversary of the date of the grant for participants over the age of 61 as of the grant date) and are subject to forfeiture in the event of voluntary termination of employment prior to then. DEPP awards are generally made annually in the first quarter. In addition, we annually make awards under sub-plans of the DEPP for certain production staff, which generally provide 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. All contributions to the plan (including sub-plans) deemed to be invested in shares of our common stock are distributed in the form of our common stock and all other distributions are paid in cash.

Our common stock that is issued to or purchased by the rabbi trust as a contribution under the DEPP is valued at historical cost, which equals its fair market value at the date of grant or date of purchase. When common stock is issued, we record an unearned deferred compensation obligation as a reduction of capital in excess of par value in the accompanying consolidated balance sheet, which is amortized to compensation expense ratably over the vesting period of the participants. Future changes in the fair market value of our common stock owed to the participants do not have any impact on the amounts recorded in our consolidated financial statements.

In the first quarters of 2023 and 2022, the compensation committee approved $25.1 million and $26.3 million, respectively, of awards in the aggregate to certain key executives under the DEPP that were contributed to the rabbi trust in the first quarters of 2023 and 2022, respectively. We contributed cash to the rabbi trust and instructed the trustee to acquire a specified number of shares of our common stock on the open market to fund these 2023 and 2022 awards. During the three-month periods ended June 30, 2023 and 2022, we charged $5.9 million and $5.0 million, respectively, to compensation expense related to these awards. During the six-month periods ended June 30, 2023 and 2022, we charged $9.9 million and $8.5 million, respectively, to compensation expense related to these awards.

In the first quarters of 2023 and 2022, the compensation committee approved $3.0 million and $1.9 million, respectively, of awards under the sub-plans referred to above, which were contributed to the rabbi trust in the first quarters of 2023 and 2022, respectively. During the three-month periods ended June 30, 2023 and 2022, we charged $0.8 million and $0.6 million, respectively, to compensation expense related to these awards. During the six-month periods ended June 30, 2023 and 2022, we charged $1.4 million and $1.1 million, respectively, to compensation expense related to these awards. There were $6.4 million of distributions from the sub-plans during the six-month period ended June 30, 2023. There were no distributions from the sub-plans during the six-month period ended June 30, 2022.

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At June 30, 2023 and December 31, 2022, we recorded $97.8 million (related to 2.6 million shares) and $77.7 million (related to 2.5 million shares), respectively, of unearned deferred compensation as a reduction of capital in excess of par value in the accompanying consolidated balance sheet. The total intrinsic value of our unvested equity-based awards under the plan at June 30, 2023 and December 31, 2022 was $566.9 million and $478.7 million, respectively. During the six-month period ended June 30, 2023, cash and equity awards with an aggregate fair value of $9.4 million were vested and distributed to executives under the DEPP. During the six-month period ended June 30, 2022, cash and equity awards with an aggregate fair value of $2.3 million were vested and distributed to executives under the DEPP.

We have a Deferred Cash Participation Plan (which we refer to as the DCPP), which is a 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 provisions of the DCPP, we typically contribute cash in an amount approved by the compensation committee to the rabbi trust on behalf of the executives participating in the DCPP, and instruct the trustee to acquire a specified number of shares of our common stock on the open market or in privately negotiated transactions based on participant elections. In the first quarters of 2023 and 2022, the compensation committee approved $9.8 million and $8.3 million, respectively, of awards in the aggregate to certain key executives under the DCPP that were contributed to the rabbi trust in the first quarters of 2023 and 2022, respectively. During the three-month periods ended June 30, 2023 and 2022, we charged $4.2 million and $3.3 million, respectively, to compensation expense related to these awards. During the six-month periods ended June 30, 2023 and 2022, we charged $8.0 million and $6.0 million, respectively, to compensation expense related to these awards. There were $19.5 million and $16.9 million of distributions from the DCPP during the six-month periods ended June 30, 2023 and 2022, respectively.

10. Restricted Stock, Performance Share and Cash Awards

Restricted Stock Awards

As discussed in Note 8 to these unaudited consolidated financial statements, on May 10, 2022, our stockholders approved the LTIP, which replaced our previous stockholder-approved 2017 LTIP. The LTIP provides for the grant of a stock award either as restricted stock or as restricted stock units to officers, employees and non-employee directors. In either case, the compensation committee may determine that the award will be subject to the attainment of performance measures over an established performance period. Stock awards and the related dividend equivalents are non-transferable and subject to forfeiture if the holder does not remain continuously employed with us during the applicable restriction period or, in the case of a performance-based award, if applicable performance measures are not attained. The compensation committee will determine all of the terms relating to the satisfaction of performance measures and the termination of a restriction period, or the forfeiture and cancellation of a restricted stock award upon a termination of employment, whether by reason of disability, retirement, death or any other reason.

The agreements awarding restricted stock units under the LTIP will specify whether such awards may be settled in shares of our common stock, cash or a combination of shares and cash and whether the holder will be entitled to receive dividend equivalents, on a current or deferred basis, with respect to such award. Prior to the settlement of a restricted stock unit, the holder of a restricted stock unit will have no rights as a stockholder of the company. The maximum number of shares available under the LTIP for restricted stock, restricted stock units and performance unit awards settled with stock (i.e., all awards other than stock options and stock appreciation rights) is 4.0 million. At June 30, 2023, 2.8 million shares were available for grant under the LTIP for such awards.

In the first quarters of 2023 and 2022, we granted 378,000 and 295,000 restricted stock units, respectively, to employees under the LTIP and 2017 LTIP, respectively, with an aggregate fair value of $67.0 million and $46.8 million, respectively, at the date of grant. These 2023 and 2022 awards of restricted stock units vest in full based on continued employment through March 15, 2028 and March 15, 2027, respectively. Additionally, in first quarter 2022, we granted 335,000 restricted stock units to employees under the 2017 LTIP, with an aggregate fair value of $52.6 million at the date of grant. These 2022 awards of restricted stock units vest in full based on continued employment through February 1, 2027. For our executive officers age 55 or older, restricted stock units are not subject to forfeiture upon such officers’ departure from the company after two years from the date of grant.

We account for restricted stock awards at historical cost, which equals its fair market value at the date of grant, which is amortized to compensation expense ratably over the vesting period of the participants. Future changes in the fair market value of our common stock that is owed to the participants do not have any impact on the amounts recorded in our consolidated financial statements. During the three-month periods ended June 30, 2023 and 2022, we recognized $11.0 million and $10.1 million, respectively, to compensation expense related to restricted stock unit awards granted in 2016 through 2022. During the six-month periods ended June 30, 2023 and 2022, we recognized $20.7 million and $17.7 million, respectively, to compensation expense related to restricted stock unit awards granted in 2016 through 2022. The total intrinsic value of unvested restricted stock units at June 30, 2023 and 2022 was $460.5 million and $353.1 million, respectively. During each of the six-month periods ended June 30, 2023 and 2022, equity awards (including accrued dividends) with an aggregate value of $62.0 million were vested and distributed to employees under this plan.

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Performance Share Awards

On March 15, 2023 and March 15, 2022, pursuant to the LTIP and 2017 LTIP, respectively, the compensation committee approved 58,000 and 54,000, respectively, of provisional performance share awards, with an aggregate fair value of $10.3 million and $8.6 million, respectively, for future grants to our officers. Each performance share award was equivalent to the value of one share of our common stock on the date such provisional award was approved. At the end of the performance period, eligible participants will receive a number of earned shares based on the growth in adjusted EBITDAC per share (as defined in our 2023 Proxy Statement). Earned shares for the 2023 and 2022 provisional awards will fully vest based on continuous employment through March 15, 2026 and March 15, 2025, respectively, and will be settled in unrestricted shares of our common stock on a one-for-one basis as soon as practicable thereafter. The 2023 and 2022 awards are subject to a three-year performance period that began on January 1, 2023 and 2022, respectively, and vest on the three-year anniversary of the date of grant (March 15, 2026 and March 15, 2025). For certain of our executive officers age 55 or older, awards are no longer subject to forfeiture upon such officers’ departure from the company after two years from the date of grant. During the three-month periods ended June 30, 2023 and 2022, we recognized $3.8 million and $3.7 million, respectively, to compensation expense related to performance share awards granted in 2019 through 2023. During the six-month periods ended June 30, 2023 and 2022, we recognized $8.5 million and $7.5 million, respectively, to compensation expense related to performance share awards granted in 2019 through 2023. The total intrinsic value of unvested performance share awards at June 30, 2023 and 2022 was $64.3 million and $54.2 million, respectively. During the six-month periods ended June 30, 2023 and 2022, equity awards (including accrued dividends) with an aggregate fair value of $28.9 million and $21.8 million, respectively, were vested and distributed to employees under this plan.

Cash Awards

Pursuant to our Performance Unit Program (which we refer to as the Program), there were no units granted in the six-month period ended June 30, 2023. The Program consists of a one-year performance period based on our financial performance and a three-year vesting period measured from January 1 of the year of grant. At the discretion of the compensation committee and determined based on our performance, the eligible officer or key employee will be granted a percentage of the provisional cash award units that equates to the EBITAC growth achieved (as defined in the Program). At the end of the performance period, eligible participants will be granted a number of units based on achievement of the performance goal and subject to approval by the compensation committee. Granted units will fully vest based on continuous employment through the three-year vesting period. The ultimate award value will be equal to the trailing twelve-month price of our common stock, multiplied by the number of units subject to the award, but limited to between 0.5 and 1.5 times the original value of the units determined as of the grant date. The fair value of the awarded units will be paid out in cash as soon as practicable. If an eligible employee leaves us prior to the vesting date, the entire award will be forfeited.

On March 15, 2022, pursuant to the Program, the compensation committee approved provisional cash awards of $19.9 million in the aggregate for future grants to our officers and key employees that are denominated in units (125,000 units in the aggregate), each of which was equivalent to the value of one share of our common stock on the date the provisional award was approved. Terms of the 2022 provisional awards were similar to the terms of the 2023 provisional awards. During the three and six-month periods ended June 30, 2023, we recognized $3.1 million and $5.7 million, respectively, to compensation expense related to these awards.

On March 16, 2021, pursuant to the Program, the compensation committee approved provisional cash awards of $18.8 million in the aggregate for future grants to our officers and key employees that are denominated in units (147,000 units in the aggregate), each of which was equivalent to the value of one share of our common stock on the date the provisional award was approved. Terms of the 2021 provisional awards were similar to the terms of the 2022 provisional awards. Based on our performance for 2021, we granted 143,000 units under the Program in the first quarter of 2022 that will fully vest on January 1, 2024. During the three and six-month periods ended June 30, 2023, we recognized $3.2 million and $6.5 million, respectively, to compensation expense related to these awards.

On March 12, 2020, pursuant to the Program, the compensation committee approved provisional cash awards of $18.4 million in the aggregate for future grants to our officers and key employees that are denominated in units (213,000 units in the aggregate), each of which was equivalent to the value of one share of our common stock on the date the provisional award was approved. Terms of the 2020 provisional awards were similar to the terms of the 2022 provisional awards. Based on our performance for 2020, we granted 208,000 units under the Program in the first quarter of 2021 that will fully vest on January 1, 2023. During the three and six-month periods ended June 30, 2023, we recognized $0.1 million to compensation expense related to these awards. During the three and six-month periods ended June 30, 2022, we recognized $2.9 million and $6.0 million, respectively, to compensation expense related to these awards.

During the six-month period ended June 30, 2023, cash awards related to the 2020 provisional award with an aggregate fair value of $24.7 million (191,000 units in the aggregate) were vested and distributed to employees under the program. During the six-month period ended June 30, 2022, cash awards related to the 2019 provisional award with an aggregate fair value of $21.1 million (177,000 units in the aggregate) were vested and distributed to employees under the Program.

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11. Derivatives and Hedging Activity

We are exposed to market risks, including changes in foreign currency exchange rates and interest rates. To manage the risk related to these exposures, we enter into various derivative instruments that reduce these risks by creating offsetting exposures. We generally do not enter into derivative transactions for trading or speculative purposes.

Foreign Exchange Risk Management

We are exposed to foreign exchange risk when we earn revenues, pay expenses, or enter into monetary intercompany transfers denominated in a currency that differs from our functional currency, or other transactions that are denominated in a currency other than our functional currency. We use foreign exchange derivatives, typically forward contracts and options, to reduce our overall exposure to the effects of currency fluctuations on cash flows. These exposures are hedged, on average, for less than three years.

Interest Rate Risk Management

We enter into various long-term debt agreements. We use interest rate derivatives, typically swaps, to reduce our exposure to the effects of interest rate fluctuations on the forecasted interest rates for up to three years into the future.

We have not received or pledged any collateral related to derivative arrangements at June 30, 2023.

The notional and fair values of derivatives designated as hedging instruments are as follows at June 30, 2023 and December 31, 2022 (in millions):

						Derivative Assets						Derivative Liabilities
		Notional				Balance Sheet		Fair				Balance Sheet		Fair
Instrument		Amount				Classification		Value				Classification		Value
At June 30, 2023
Interest rate contracts		$	900.0			Other current assets		$	57.7			Accrued compensation and other current liabilities		$	—
						Other noncurrent assets			3.5			Other noncurrent liabilities			—
Foreign exchange contracts (1)			90.7			Other current assets			2.3			Accrued compensation and other current liabilities			6.9
						Other noncurrent assets			13.1			Other noncurrent liabilities			8.8
Total		$	990.7					$	76.6					$	15.7
At December 31, 2022
Interest rate contracts		$	950.0			Other current assets		$	56.5			Accrued compensation and other current liabilities		$	—
						Other noncurrent assets			56.6			Other noncurrent liabilities			—
Foreign exchange contracts (1)			113.0			Other current assets			0.8			Accrued compensation and other current liabilities			18.5
						Other noncurrent assets			14.5			Other noncurrent liabilities			27.0
Total		$	1,063.0					$	128.4					$	45.5

(1)

Included within foreign exchange contracts at June 30, 2023 were $729.6 million of call options, offset with $729.6 million of put options, and $8.6 million of buy forwards, offset with $99.3 million of sell forwards. Included within foreign exchange contracts at December 31, 2022 were $948.8 million of call options, offset with $948.8 million of put options, and $12.4 million of buy forwards, offset with $125.4 million of sell forwards.

The effect of cash flow hedge accounting on accumulated other comprehensive loss for the six-month periods ended June 30, 2023 and 2022 were as follows (in millions):

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										Amount of
						Amount of				Gain
						Gain (Loss)				Recognized
		Amount of				Reclassified				in Earnings
		Gain (Loss)				from				Related to
		Recognized in				Accumulated				Amount
		Accumulated				Other				Excluded
		Other				Comprehensive				from
		Comprehensive				Loss into				Effectiveness				Statement of Earnings
Instrument		Loss (1)				Earnings				Testing				Classification
Three-month period ended June 30, 2023
Interest rate contracts		$	18.9			$	(0.3	)		$	—			Interest expense
Foreign exchange contracts			12.8				0.2				—			Commission revenue
							(0.5	)			0.4			Compensation expense
							(0.4	)			0.3			Operating expense
Total		$	31.7			$	(1.0	)		$	0.7
Three-month period ended June 30, 2022
Interest rate contracts		$	68.5			$	(0.3	)		$	—			Interest expense
Foreign exchange contracts			(31.7	)			0.1				—			Commission revenue
							—				0.5			Compensation expense
							(0.1	)			0.4			Operating expense
Total		$	36.8			$	(0.3	)		$	0.9
Six-month period ended June 30, 2023
Interest rate contracts		$	8.8			$	(0.6	)		$	—			Interest expense
Foreign exchange contracts			28.7				0.8				—			Commission revenue
							(1.0	)			1.0			Compensation expense
							(0.7	)			0.7			Operating expense
Total		$	37.5			$	(1.5	)		$	1.7
Six-month period ended June 30, 2022
Interest rate contracts		$	135.5			$	(0.6	)		$	—			Interest expense
Foreign exchange contracts			(38.2	)			(0.2	)			—			Commission revenue
							(0.2	)			0.8			Compensation expense
							(0.2	)			0.6			Operating expense
Total		$	97.3			$	(1.2	)		$	1.4

(1)

For the three and six-month periods ended June 30, 2023, the amount excluded from the assessment of hedge effectiveness for our foreign exchange contracts recognized in accumulated other comprehensive loss was a gain of $0.3 million and $0.8 million, respectively. For the three and six-month periods ended June 30, 2022, the amount excluded from the assessment of hedge effectiveness for our foreign exchange contracts recognized in accumulated other comprehensive loss was a gain of $1.2 million and $0.5, respectively.

We estimate that approximately $5.1 million of pretax loss currently included within accumulated other comprehensive loss will be reclassified into earnings in the next twelve months.

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12. Commitments, Contingencies and Off-Balance Sheet Arrangements

In connection with our investing and operating activities, we have entered into certain contractual obligations and commitments. Our future minimum cash payments, including interest, associated with our contractual obligations pursuant to the Senior Notes, Note Purchase Agreements, Credit Agreement, Premium Financing Debt Facility, operating leases and purchase obligations at June 30, 2023 were as follows (in millions):

		Payments Due by Period
Contractual Obligations		2023				2024				2025				2026				2027				Thereafter				Total
Senior Notes		$	—			$	—			$	—			$	—			$	—			$	2,550.0			$	2,550.0
Note Purchase Agreements			—				425.0				200.0				640.0				478.0				2,205.0				3,948.0
Credit Agreement			495.0				—				—				—				—				—				495.0
Premium Financing Debt Facility			191.2				—				—				—				—				—				191.2
Interest on debt			137.0				265.2				251.4				232.6				214.1				2,393.8				3,494.1
Total debt obligations			823.2				690.2				451.4				872.6				692.1				7,148.8				10,678.3
Operating lease obligations			50.0				101.7				84.2				68.6				54.4				100.2				459.1
Less sublease arrangements			(0.8	)			(1.2	)			(0.7	)			(0.6	)			(0.5	)			—				(3.8	)
Outstanding purchase obligations			83.6				94.2				51.1				19.3				15.7				49.5				313.4
Total contractual obligations		$	956.0			$	884.9			$	586.0			$	959.9			$	761.7			$	7,298.5			$	11,447.0

The amounts presented in the table above may not necessarily reflect our actual future cash funding requirements, because the actual timing of the future payments made may vary from the stated contractual obligation.

Senior Notes, Note Purchase Agreements, Credit Agreement and Premium Financing Debt Facility - See Note 6 to these unaudited consolidated financial statements for a summary of the amounts outstanding under the Senior Notes, Note Purchase Agreements, the Credit Agreement and Premium Financing Debt Facility.

Operating Lease Obligations - Our corporate segment’s executive offices and certain subsidiary and branch facilities of our brokerage and risk management segments are located in a building we own at 2850 Golf Road, Rolling Meadows, Illinois, where we have approximately 360,000 square feet of space.

We generally operate in leased premises at our other locations. Certain of these leases have options permitting renewals for additional periods. In addition to minimum fixed rentals, a number of leases contain annual escalation clauses which are generally related to increases in an inflation index.

We have leased certain office space to several non-affiliated tenants under operating sublease arrangements. In the normal course of business, we expect that certain of these leases will not be renewed or replaced. We adjust charges for real estate taxes and common area maintenance annually based on actual expenses, and we recognize the related revenues in the year in which the expenses are incurred. These amounts are not included in the minimum future rentals to be received in the contractual obligations table above.

Outstanding Purchase Obligations - The amount disclosed in the contractual obligations table above represents the aggregate amount of unrecorded purchase obligations that we had outstanding at June 30, 2023. These obligations represent agreements to purchase goods or services that were executed in the normal course of business.

Off-Balance Sheet Commitments - Our total unrecorded commitments associated with outstanding letters of credit, and financial guarantees as of June 30, 2023 were as follows (in millions):

																										Total
		Amount of Commitment Expiration by Period																								Amounts
Off-Balance Sheet Commitments		2023				2024				2025				2026				2027				Thereafter				Committed
Letters of credit		$	—			$	—			$	—			$	—			$	—			$	18.8			$	18.8
Financial guarantees			0.8				2.2				0.2				0.1				0.1				—				3.4
Total commitments		$	0.8			$	2.2			$	0.2			$	0.1			$	0.1			$	18.8			$	22.2

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Since commitments may expire unused, the amounts presented in the table above do not necessarily reflect our actual future cash funding requirements. See the Off‑Balance Sheet Debt section below for a discussion of our letters of credit. All of the letters of credit represent multiple year commitments that have annual, automatic renewing provisions and are classified by the latest commitment date.

Since January 1, 2002, we have acquired 675 companies, all of which were accounted for using the acquisition method for recording business combinations. Substantially all of the purchase agreements related to these acquisitions contain provisions for potential earnout obligations. For all of our acquisitions made in the period from 2019 to 2023 that contain potential earnout obligations, such obligations are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration for the respective acquisition. The amounts recorded as earnout payables are primarily based upon estimated future potential operating results of the acquired entities over a two- to three-year period subsequent to the acquisition date. The aggregate amount of the maximum earnout obligations related to these acquisitions was $1,899.1 million, of which $990.8 million was recorded in our consolidated balance sheet as of June 30, 2023 based on the estimated fair value of the expected future payments to be made, of which approximately $571.4 million can be settled in cash or stock at our option and $419.4 million must be settled in cash.

Off-Balance Sheet Debt - Our unconsolidated investment portfolio includes investments in enterprises where our ownership interest is between 1% and 50%, in which management has determined that our level of influence and economic interest is not sufficient to require consolidation. As a result, these investments are accounted for under the equity method. None of these unconsolidated investments had any outstanding debt at June 30, 2023 or December 31, 2022, that was recourse to us.

At June 30, 2023, we had posted two letters of credit totaling $9.2 million, in the aggregate, related to our self‑insurance deductibles, for which we had a recorded liability of $14.4 million. We have an equity investment in a rent-a-captive facility, which we use as a placement facility for certain of our insurance brokerage operations. At June 30, 2023, we had posted nine letters of credit totaling $8.3 million to allow certain of our captive operations to meet minimum statutory surplus requirements plus additional collateral related to premium and claim funds held in a fiduciary capacity, one letter of credit totaling $0.8 million for collateral related to claim funds held in a fiduciary capacity by a recent acquisition, and two letters of credit totaling $0.5 million as a security deposit for a 2015 acquisition’s lease. These letters of credit have never been drawn upon.

Litigation, Regulatory and Taxation Matters - We routinely are involved in legal proceedings, claims, disputes, regulatory matters and governmental inspections or investigations arising in the ordinary course of or incidental to our business, including those noted below in this section. We record accruals in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. For the matters we disclose that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is immaterial, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies, unless disclosed below. We currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations or cash flows. However, legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other adverse events could occur, including the payment of substantial monetary damages or an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices or requiring other remedies, which may result in a material adverse impact on our business, results of operations or financial position.

During third quarter 2022, we received a subpoena from the FCPA Unit of the U.S. Department of Justice seeking information related to our insurance business with public entities in Ecuador. We continue to fully cooperate with the investigation.

In July 2019, Midwest Energy Emissions Corp. and MES Inc. (which we refer to together as 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. The complaint alleges that the named defendants’ infringe patents held exclusively by Midwest Energy and seeks unspecified damages and injunctive relief. Discovery is complete and the case is scheduled for trial in November 2023. We continue to defend this matter vigorously.

As previously disclosed, our IRC 831(b) (or “micro-captive”) advisory services business has been under audit by the IRS since 2013. Among other matters, the IRS is investigating whether we have been acting as a tax shelter promoter in connection with these operations. Additionally, the IRS is conducting a criminal investigation related to IRC 831(b) micro-captive underwriting enterprises. We have been advised that we are not a target of the criminal investigation. We are fully cooperating with both matters.

Contingent Liabilities - We purchase insurance to provide protection from errors and omissions (which we refer to as E&O) claims that may arise during the ordinary course of business. Currently we retain the first $15.0 million of each and every E&O claim. In addition, we retain, in aggregate, up to another $2.0 million between $15.0 million and $100.0 million, plus up to another $10.0 million between $100.0 million and $225.0 million, and up to another $20.0 million between $225.0 million and $400.0 million. We

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have historically maintained self-insurance reserves for the portion of our E&O exposure that is not insured. We periodically determine a range of possible reserve levels using actuarial techniques that rely heavily on projecting historical claim data into the future. Our E&O reserve in the June 30, 2023 consolidated balance sheet is above the lower end of the most recently determined actuarial range by $3.4 million and below the upper end of the actuarial range by $10.5 million. We can make no assurances that the historical claim data used to project the current reserve levels will be indicative of future claim activity. Thus, the E&O reserve level and corresponding actuarial range could change in the future as more information becomes known, which could materially impact the amounts reported and disclosed herein.

Tax-advantaged Investments No Longer Held - Between 1996 and 2007, we developed and then sold portions of our ownership in various energy related investments, many of which qualified for tax credits under IRC Section 29. We recorded tax benefits in connection with our ownership in these investments. At June 30, 2023, we had exposure on $108.0 million of previously earned tax credits. Under the TCJA, a portion of these previously earned tax credits were refunded in 2019 for tax year 2018, according to a specific formula. Under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was passed on March 27, 2020, we accelerated the refund of all remaining credits on April 17, 2020, and the remaining credits were refunded to us in the second quarter of 2020. In 2004, 2007 and 2009, the IRS examined several of these investments and all examinations were closed without any changes being proposed by the IRS. However, any future adverse tax audits, administrative rulings or judicial decisions could disallow previously claimed tax credits.

Due to the contingent nature of this exposure and our related assessment of its likelihood, no reserve has been recorded in our June 30, 2023 consolidated balance sheet related to this exposure.

13. Supplemental Disclosures of Cash Flow Information

		Six-month period ended June 30,
Supplemental disclosures of cash flow information (in millions):		2023				2022
Interest paid		$	127.3			$	119.7
Income taxes paid, net			116.7				141.0

The following is a reconciliation of our end of period cash, cash equivalents, restricted cash and fiduciary cash balances as presented in the consolidated statement of cash flows for the six-month periods ended June 30, 2023 and 2022 (in millions):

		June 30,
		2023				2022
Cash and cash equivalents - non-restricted cash		$	777.9			$	552.9
Cash and cash equivalents - restricted cash			174.4				128.6
Total cash and cash equivalents			952.3				681.5
Fiduciary cash			5,989.9				4,108.2
Total cash, cash equivalents, restricted cash and fiduciary cash		$	6,942.2			$	4,789.7

Fiduciary cash is included in fiduciary assets in our consolidated balance sheet.

We have a qualified contributory savings and thrift 401(k) plan covering the majority of our domestic employees. For eligible employees who have met the plan’s age and service requirements to receive matching contributions, we historically have matched 100% of pre-tax and Roth elective deferrals up to a maximum of 5.0% of eligible compensation, subject to federal limits on plan contributions and not in excess of the maximum amount deductible for federal income tax purposes. Beginning in 2021, the amount matched by the company will be discretionary and annually determined by management. Employees must be employed and eligible for the plan on the last day of the plan year to receive a matching contribution, subject to certain exceptions enumerated in the plan document. Matching contributions are subject to a five-year graduated vesting schedule and can be funded in cash or company stock. We expensed (net of plan forfeitures) $42.3 million and $40.0 million related to the plan in the six-month periods ended June 30, 2023 and 2022, respectively. During 2022, our board of directors authorized the 5.0% employer matching contribution on eligible compensation to the 401(k) plan for the 2022 plan year to be funded with our common stock, which was funded in February 2023. During 2021, our board of directors authorized the 5.0% employer matching contribution on eligible compensation to the 401(k) plan for the 2021 plan year to be funded with our common stock, which was funded in February 2022.

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14. Accumulated Other Comprehensive Loss

The after-tax components of our accumulated other comprehensive loss attributable to controlling interests consist of the following (in millions):

						Foreign				Fair Value of				Accumulated
		Pension				Currency				Derivative				Comprehensive
		Liability				Translation				Investments				Loss
Balance as of December 31, 2022		$	(49.4	)		$	(1,125.2	)		$	34.2			$	(1,140.4	)
Net change in period			1.5				226.8				29.2				257.5
Balance as of June 30, 2023		$	(47.9	)		$	(898.4	)		$	63.4			$	(882.9	)

The foreign currency translation during the six-month period ended June 30, 2023 primarily relates to the net impact of changes in the value of the local currencies relative to the U.S. dollar for our operations in the U.K., Australia, Canada, New Zealand, the Caribbean, India and other non-U.S. locations. The reporting currency for our financial statements is the U.S. dollar. Certain of our assets, liabilities, expenses and revenues are denominated in currencies other than the U.S. dollar, primarily in British pound, Australian dollar, Canadian dollar and New Zealand dollar. To prepare our consolidated financial statements, we must translate those assets, liabilities, expenses and revenues into U.S. dollars at the applicable exchange rates. Assets and liabilities of non-U.S. dollar functional currency operations are translated into U.S. dollars at end-of-period exchange rates while revenues, expenses and cash flows are translated at average monthly exchange rates over the period. Equity is translated at historical exchange rates and the resulting cumulative translation adjustments are included as a component of accumulated other comprehensive loss in the consolidated balance sheet. The net change in the foreign currency translation during the six-month period ended June 30, 2023 primarily relates to goodwill (see Note 5 for the impact on goodwill) and amortizable intangible assets held by operations with a non-USD functional currency.

During the six-month periods ended June 30, 2023 and 2022, $2.6 million and $1.2 million, of expense, respectively, related to the pension liability was reclassified from accumulated other comprehensive loss to compensation expense in the statement of earnings. During the six-month periods ended June 30, 2023 and 2022, $1.5 million and $1.2 million of expense, respectively, related to the fair value of derivative investments, was reclassified from accumulated other comprehensive loss to the statement of earnings. During the six-month periods ended June 30, 2023 and 2022, no amounts related to foreign currency translation were reclassified from accumulated other comprehensive loss to the statement of earnings.

15. Segment Information

We have three reportable segments: brokerage, risk management and corporate.

The brokerage segment is primarily comprised of our retail and wholesale insurance brokerage operations. The brokerage segment generates revenues through commissions paid by underwriting enterprises and through fees charged to our clients. Our brokers, agents and administrators act as intermediaries between underwriting enterprises and our clients and we do not assume net underwriting risks.

The risk management segment provides contract claim settlement and administration services for enterprises and public entities that choose to self-insure some or all of their property/casualty coverages and for underwriting enterprises that choose to outsource some or all of their property/casualty claims departments. These operations also provide claims management, loss control consulting and insurance property appraisal services. Revenues are principally generated on a negotiated per-claim or per-service fee basis. Our risk management segment also provides risk management consulting services that are recognized as the services are delivered.

The corporate segment manages our clean energy and other investments. In addition, the corporate segment reports the financial information related to our debt and other corporate costs, external acquisition-related expenses and the impact of foreign currency remeasurements.

Allocations of investment income and certain expenses are based on reasonable assumptions and estimates primarily using revenue, headcount and other information. We allocate the provision for income taxes to the brokerage and risk management segments using the local country statutory rates. Reported operating results by segment would change if different methods were applied.

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Financial information relating to our segments for the three and six-month periods ended June 30, 2023 and 2022 as follows

(in millions):

	Three-month period ended June 30,								Six-month period ended June 30,
	2023				2022				2023				2022
Brokerage
Total revenues	$	2,088.4			$	1,740.7			$	4,463.6			$	3,863.3
Earnings before income taxes	$	390.5			$	410.9			$	1,081.4			$	1,029.3
Identifiable assets at June 30, 2023 and 2022 *									$	50,623.8			$	36,574.3
Risk Management
Total revenues	$	353.6			$	302.0			$	684.4			$	591.9
Earnings before income taxes	$	49.9			$	38.8			$	95.4			$	71.1
Identifiable assets at June 30, 2023 and 2022 *									$	1,212.8			$	1,120.3
Corporate
Total revenues	$	(0.1	)		$	0.3			$	—			$	23.1
Loss before income taxes	$	(143.0	)		$	(97.4	)		$	(273.6	)		$	(210.4	)
Identifiable assets at June 30, 2023 and 2022 *									$	2,528.6			$	2,156.2
Total
Total revenues	$	2,441.9			$	2,043.0			$	5,148.0			$	4,478.3
Earnings before income taxes	$	297.4			$	352.3			$	903.2			$	890.0
Identifiable assets at June 30, 2023 and 2022 *									$	54,365.2			$	39,850.8

***** See Note 1 for a discussion on the 2022 impact of the change in presentation of fiduciary assets and liabilities.Disaggregation of Revenue

We disaggregate our revenue from contracts with clients by type and geographic location for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Revenues by type and segment for the three-month period ended June 30, 2023 are as follows (in millions):

						Risk
		Brokerage				Management				Corporate				Total
Revenues:
Commissions		$	1,410.4			$	—			$	—			$	1,410.4
Fees			478.5				312.0				—				790.5
Supplemental revenues			71.2				—				—				71.2
Contingent revenues			54.2				—				—				54.2
Investment income			69.1				6.5				—				75.6
Net gains on divestitures			5.0				0.1				—				5.1
Other net revenues			—				—				(0.1	)			(0.1	)
Revenues before reimbursements			2,088.4				318.6				(0.1	)			2,406.9
Reimbursements			—				35.0				—				35.0
Total revenues		$	2,088.4			$	353.6			$	(0.1	)		$	2,441.9

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Revenues by type and segment for the six-month period ended June 30, 2023 are as follows (in millions):

						Risk
		Brokerage				Management				Corporate				Total
Revenues:
Commissions		$	3,157.8			$	—			$	—			$	3,157.8
Fees			891.2				605.0				—				1,496.2
Supplemental revenues			152.8				—				—				152.8
Contingent revenues			126.0				—				—				126.0
Investment income			130.6				11.0				—				141.6
Net gains on divestitures			5.2				0.2				—				5.4
Revenues before reimbursements			4,463.6				616.2				—				5,079.8
Reimbursements			—				68.2				—				68.2
Total revenues		$	4,463.6			$	684.4			$	—			$	5,148.0

Revenues by geographical location and segment for the three-month period ended June 30, 2023 are as follows (in millions):

						Risk
		Brokerage				Management				Corporate				Total
Revenues:
United States		$	1,199.7			$	298.7			$	(0.1	)		$	1,498.3
United Kingdom			527.6				11.6				—				539.2
Australia			83.8				37.5				—				121.3
Canada			104.6				1.5				—				106.1
New Zealand			53.0				4.3				—				57.3
Other foreign			119.7				—				—				119.7
Total revenues		$	2,088.4			$	353.6			$	(0.1	)		$	2,441.9

Revenues by geographical location and segment for the six-month period ended June 30, 2023 are as follows (in millions):

						Risk
		Brokerage				Management				Corporate				Total
Revenues:
United States		$	2,675.0			$	578.8			$	—			$	3,253.8
United Kingdom			1,041.1				22.9				—				1,064.0
Australia			148.0				71.5				—				219.5
Canada			198.3				3.0				—				201.3
New Zealand			91.0				8.2				—				99.2
Other foreign			310.2				—				—				310.2
Total revenues		$	4,463.6			$	684.4			$	—			$	5,148.0

Revenues by type and segment for the three-month period ended June 30, 2022 are as follows (in millions):

						Risk
		Brokerage				Management				Corporate				Total
Revenues:
Commissions		$	1,282.4			$	—			$	—			$	1,282.4
Fees			323.6				267.3				—				590.9
Supplemental revenues			65.7				—				—				65.7
Contingent revenues			43.1				—				—				43.1
Investment income			23.1				0.1				—				23.2
Net gains on divestitures			2.8				—				—				2.8
Revenues from clean coal activities			—				—				0.3				0.3
Revenues before reimbursements			1,740.7				267.4				0.3				2,008.4
Reimbursements			—				34.6				—				34.6
Total revenues		$	1,740.7			$	302.0			$	0.3			$	2,043.0

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Revenues by type and segment for the six-month period ended June 30, 2022 are as follows (in millions):

						Risk
		Brokerage				Management				Corporate				Total
Revenues:
Commissions		$	2,847.7			$	—			$	—			$	2,847.7
Fees			715.5				526.3				—				1,241.8
Supplemental revenues			140.0				—				—				140.0
Contingent revenues			114.7				—				—				114.7
Investment income			41.2				0.2				—				41.4
Net gains on divestitures			4.2				—				—				4.2
Revenues from clean coal activities			—				—				23.0				23.0
Other net revenues			—				—				0.1				0.1
Revenues before reimbursements			3,863.3				526.5				23.1				4,412.9
Reimbursements			—				65.4				—				65.4
Total revenues		$	3,863.3			$	591.9			$	23.1			$	4,478.3

Revenues by geographical location and segment for the three-month period ended June 30, 2022 are as follows (in millions):

						Risk
		Brokerage				Management				Corporate				Total
Revenues:
United States		$	1,015.0			$	250.2			$	0.3			$	1,265.5
United Kingdom			426.2				12.5				—				438.7
Australia			76.6				34.3				—				110.9
Canada			93.8				1.4				—				95.2
New Zealand			47.2				3.6				—				50.8
Other foreign			81.9				—				—				81.9
Total revenues		$	1,740.7			$	302.0			$	0.3			$	2,043.0

Revenues by geographical location and segment for the six-month period ended June 30, 2022 are as follows (in millions):

						Risk
		Brokerage				Management				Corporate				Total
Revenues:
United States		$	2,351.7			$	492.5			$	23.1			$	2,867.3
United Kingdom			866.4				23.5				—				889.9
Australia			135.6				66.0				—				201.6
Canada			181.3				2.8				—				184.1
New Zealand			81.6				7.1				—				88.7
Other foreign			246.7				—				—				246.7
Total revenues		$	3,863.3			$	591.9			$	23.1			$	4,478.3

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