Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis that follows relates to our financial condition and results of operations for the three-month period ended March 31, 2025. Readers should review this information in conjunction with the March 31, 2025 unaudited consolidated financial statements and notes included in Item 1 of Part I of this quarterly report on Form 10‑Q and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our annual report on Form 10-K for the year ending December 31, 2024.

Prior Year Discussion of Results and Comparisons

For Information on fiscal first quarter 2024 results and similar comparisons, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-Q for the fiscal three-month period ended March 31, 2024.

Information Regarding Non-GAAP Measures and Other

In the discussion and analysis of our results of operations that follows, in addition to reporting financial results in accordance with GAAP, we provide information regarding EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, diluted net earnings per share, as adjusted (adjusted EPS), adjusted revenue, adjusted compensation and operating expenses, adjusted compensation expense ratio, adjusted operating expense ratio and organic revenue. These measures are not in accordance with, or an alternative to, the GAAP information provided in this quarterly report on Form 10‑Q. We believe that these presentations provide useful information to management, analysts and investors regarding financial and business trends relating to our results of operations and financial condition or because they provide investors with measures that our chief operating decision makers use when reviewing the Company’s performance. See further below for definitions and additional reasons each of these measures is useful to investors. Our industry peers may provide similar supplemental non-GAAP information with respect to one or more of these measures, although they may not use the same or comparable terminology and may not make identical adjustments. The non-GAAP information we provide should be used in addition to, but not as a substitute for, the GAAP information provided. As disclosed in our most recent Proxy Statement, we make determinations regarding certain elements of executive officer incentive compensation, performance share awards and annual cash incentive awards, partly on the basis of measures related to adjusted EBITDAC.

Adjusted Non-GAAP presentation - We believe that the adjusted non-GAAP presentation of the current and prior period information presented on the following pages provides stockholders and other interested persons with useful information regarding certain financial metrics that may assist such persons in analyzing our operating results as they develop a future earnings outlook for us. The after-tax amounts related to the adjustments were computed using the normalized effective tax rate for each respective period.

Adjusted measures - We define these measures as revenues (for the brokerage segment), revenues before reimbursements (for the risk management segment), net earnings, compensation expense and operating expense, respectively, each adjusted to exclude the following, as applicable:

Net (gains) losses on divestitures, which are primarily net proceeds received related to sales of books of business and other divestiture transactions, such as the disposal of a business through sale or closure.

Acquisition integration costs, which include costs related to certain large acquisitions (including the acquisitions of Willis Re, Buck, Cadence Insurance, Eastern Insurance and My Plan Manager), outside the scope of our usual tuck‑in strategy, not expected to occur on an ongoing basis in the future once we fully assimilate the applicable acquisition. These costs are typically associated with redundant workforce, compensation expense related to amortization of certain retention bonus arrangements, extra lease space, duplicate services and external costs incurred to assimilate the acquisition into our IT related systems.

Transaction-related costs, which are associated with completed, future and terminated acquisitions. Costs primarily relate to the acquisitions of Willis Re, Buck, Cadence Insurance, Eastern Insurance and Woodruff Sawyer, which closed on April 10, 2025, and the pending acquisition of AssuredPartners. These include costs related to regulatory filings, legal and accounting services, insurance and incentive compensation.

Workforce related charges, which primarily include severance costs (either accrued or paid) related to employee terminations and other costs associated with redundant workforce.

Lease termination related charges, which primarily include costs related to terminations of real estate leases and abandonment of leased space.

Acquisition related adjustments principally relate to changes in estimated acquisition earnout payables adjustments and acquisition related compensation charges. In addition, from time to time may include changes in balance sheet estimates arising from conforming accounting principles, purchase-related true-ups and other balance sheet adjustments made after the closing date; the net impact on the results for first quarter 2024 was approximately

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$26 million of revenues and approximately $28 million of compensation expense.

Amortization of intangible assets, which reflects the amortization of customer/expiration lists, non-compete agreements, trade names and other intangible assets acquired through our merger and acquisition strategy, the impact to amortization expense of acquisition valuation adjustments to these assets as well as non-cash impairment charges.

The impact of foreign currency translation, as applicable. The amounts excluded with respect to foreign currency translation are calculated by applying current year foreign exchange rates to the same period in the prior year.

Effective income tax rate impact, which levelizes the prior year for the change in current year tax rates.

Adjusted ratios - Adjusted compensation expense and adjusted operating expense, respectively, each divided by adjusted revenues.

Non-GAAP Earnings Measures

We believe that the presentation of EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, adjusted EPS and adjusted net earnings for the brokerage and risk management segments, each as defined below, provides a meaningful representation of our operating performance. Adjusted EPS is a performance measure and should not be used as a measure of our liquidity. We also consider EBITDAC and EBITDAC margin as ways to measure financial performance on an ongoing basis. In addition, adjusted EBITDAC, adjusted EBITDAC margin and adjusted EPS for the brokerage and risk management segments are presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.

EBITDAC and EBITDAC Margin - EBITDAC is net earnings before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables and EBITDAC margin is EBITDAC divided by total revenues (for the brokerage segment) and revenues before reimbursements (for the risk management segment). These measures for the brokerage and risk management segments provide a meaningful representation of our operating performance for the overall business and provide a meaningful way to measure its financial performance on an ongoing basis.

EBITDAC, as adjusted and EBITDAC Margin, as adjusted - Adjusted EBITDAC is EBITDAC adjusted to exclude net gains on divestitures, acquisition integration costs, workforce related charges, lease termination related charges, acquisition related adjustments, transaction related costs, and the period-over-period impact of foreign currency translation as applicable, and Adjusted EBITDAC margin is Adjusted EBITDAC divided by total adjusted revenues (defined above). These measures for the brokerage and risk management segments provide a meaningful representation of our operating performance, and are also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.

EPS, as adjusted and Net Earnings, as adjusted - Adjusted net earnings have been adjusted to exclude the after-tax impact of net gains on divestitures, acquisition integration costs, the impact of foreign currency translation, workforce related charges, lease termination related charges, acquisition related adjustments, transaction related costs, amortization of intangible assets, and effective income tax rate impact, as applicable. Adjusted EPS is Adjusted Net Earnings divided by diluted weighted average shares outstanding. This measure provides a meaningful representation of our operating performance (and as such should not be used as a measure of our liquidity), and for the overall business is also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.

Organic Revenues (a non-GAAP measure) - For the brokerage segment, organic change in base commission and fee revenues, supplemental revenues and contingent revenues exclude the first twelve months of such revenues generated from acquisitions and such revenues related to divested operations, which include disposals of a business through sale or closure, run-off of a business and the restructuring and/or repricing of programs and products in each year presented. These revenues are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of our business in both the current and prior period. In addition, organic change in base commission and fee revenues, supplemental revenues and contingent revenues excludes the period‑over‑period impact of foreign currency translation to improve the comparability of our results between periods. For the risk management segment, organic change in fee revenues excludes the first twelve months of such revenues generated from acquisitions and such revenues related to divested operations in each year presented. In addition, change in organic growth in fee revenues excludes the period-over-period impact of foreign currency translation to improve the comparability of our results between periods.

These revenue items are excluded from organic revenues in order to determine a comparable, but non-GAAP, measurement of revenue growth that is associated with the revenue sources that are expected to continue in the current year and beyond, as well as eliminating the impact of the items that have a high degree of variability. We have historically viewed organic revenue growth as an important

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indicator when assessing and evaluating the performance of our brokerage and risk management segments. We also believe that using this non‑GAAP measure allows readers of our financial statements to measure, analyze and compare the growth from our brokerage and risk management segments in a meaningful and consistent manner.

Reconciliation of Non-GAAP Information Presented to GAAP Measures - This quarterly report on Form 10‑Q includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on pages 42 and 49), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on page 38), for organic revenue measures (on pages 43 and 49), respectively, for the brokerage and risk management segments, for adjusted compensation and operating expenses and adjusted EBITDAC margin, (on page 45) for the brokerage segment and (on pages 50 and 51) for the risk management segment.

Other Informa****tion - 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 local statutory rates. We anticipate reporting an effective tax rate of approximately 24.5% to 26.5% in the brokerage segment and 25.0% to 27.0% in the risk management segment for the foreseeable future. Reported operating results by segment would change if different allocation methods were applied.

In the discussion that follows regarding our results of operations, we also provide the following ratios with respect to our operating results: pretax profit margin, compensation expense ratio and operating expense ratio. Pretax profit margin represents pretax earnings divided by total revenues. The compensation expense ratio is compensation expense divided by total revenues. The operating expense ratio is operating expense divided by total revenues.

Overview and First Quarter 2025 Highlights

We are engaged in providing insurance brokerage, reinsurance brokerage, consulting services, and third-party property/casualty claims settlement and administration services to entities and individuals around the world. In the three-month period ended March 31, 2025, we generated approximately 66% of our revenues for the combined brokerage and risk management segments domestically and 34% internationally, primarily in Australia, Canada, New Zealand and the U.K. We have three reportable segments: brokerage, risk management and corporate. The brokerage and risk management segments contributed approximately 89% and 11%, respectively, to revenues during the three-month period ended March 31, 2025. The corporate segment did not generate any significant revenues in the three-month period ended March 31, 2025. Our major sources of operating revenues are commissions, fees and supplemental and contingent revenues from brokerage operations and fees from risk management operations. Interest income is earned on cash, cash equivalents and fiduciary cash and revenues are generated from premium financing.

We use the Council of Insurance Agents and Brokers (which we refer to as CIAB) insurance pricing quarterly survey as an indicator of the insurance rate environment. The CIAB represents the leading domestic and international insurance brokers, who write approximately 85% of the commercial property/casualty premiums in the U.S. The first quarter 2025 survey had not been published as of the filing date of this report. The fourth quarter 2024 survey indicated that commercial property/casualty rates increased by 5.4% on average and we expect a similar trend to be noted when the CIAB's first quarter 2025 survey report is issued, which would indicate overall continued price firming and hardening in most lines of business.

We believe increases in property/casualty rates will continue for the remainder of 2025 due to rising loss costs, increased frequency of natural catastrophe and weather related losses, prior year reserve volatility and social inflation. We estimate global insured natural catastrophe losses were approximately $56 billion during first quarter 2025, including approximately $40 billion of insured losses due to the California wildfires. Further global natural catastrophe loss activity from severe convective storms, hurricanes and earthquakes during the remainder of 2025 may cause insurance and/or reinsurance carriers to increase property pricing upon renewal. Additionally, if loss trends deteriorate over the coming quarters, or if profitability concerns on casualty lines increase, it could lead to a more difficult rate and conditions environment in certain lines. The combination of increasing insurable values, a tight labor market and low unemployment is likely contributing to increases in client insured exposures and we have yet to see any meaningful changes in our customers’ business activity from the prospect of tariffs. Additionally, we expect that our history of strong new business generation, solid retentions and enhanced value‑added services for our carrier partners should result in further organic growth opportunities around the world. Overall, we believe that in a positive rate environment with increasing exposures, our professionals can demonstrate their expertise and high‑quality, value-added capabilities by strengthening our clients’ insurance portfolios and delivering insurance and risk management solutions within our clients’ budgets. Based on our experience, insurance and reinsurance carriers appear to be making rational pricing decisions and are providing adequate capacity in the market for nearly all lines of coverage**.**

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Summary of Financial Results - Three-Month Periods Ended March 31, 2025 and 2024

See the reconciliations of non-GAAP measures on page 39.

(In millions, except per share data)1st Quarter 20251st Quarter 2024Change
ReportedAdjustedReportedAdjustedReportedAdjusted
GAAPNon-GAAPGAAPNon-GAAPGAAPNon-GAAP
Brokerage Segment
Revenues$3,314.6$3,308.2$2,864.9$2,820.616%17%
Organic revenues$2,984.2$2,725.39.5%
Net earnings$816.1$652.625%
Net earnings margin24.6%22.8%+ 184 bpts
Adjusted EBITDAC$1,436.6$1,123.828%
Adjusted EBITDAC margin43.4%39.8%+ 359 bpts
Diluted net earnings per share$3.13$3.97$2.92$3.597%11%
Risk Management Segment
Revenues before reimbursements$373.4$373.2$352.8$351.56%6%
Organic revenues$354.3$341.03.9%
Net earnings$41.1$39.35%
Net earnings margin (before reimbursements)11.0%11.1%- 13 bpts
Adjusted EBITDAC$76.5$72.75%
Adjusted EBITDAC margin (before reimbursements)20.4%20.7%- 18 bpts
Diluted net earnings per share$0.16$0.19$0.18$0.20(11)%(5)%
Corporate Segment
Diluted net loss per share$(0.57)$(0.49)$(0.36)$(0.34)
Total Company
Diluted net earnings per share$2.72$3.67$2.74$3.45(1)%6%
Total Brokerage and Risk Management Segment
Diluted net earnings per share$3.29$4.16$3.10$3.796%10%

The following provides information that management believes is helpful when comparing revenues before reimbursements, net earnings, EBITDAC and diluted net earnings per share for the three-month period ended March 31, 2025 with the same period in 2024. In addition, these tables provide reconciliations to the most comparable GAAP measures for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share. Reconciliations of EBITDAC for the brokerage and risk management segments are provided on pages 42 and 49, respectively, of this filing.

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For the Three-Month Periods Ended Reported GAAP to Adjuste****d Non-GAAP Reconciliation:

Revenues BeforeDiluted Net Earnings
ReimbursementsNet Earnings (Loss)EBITDAC(Loss) Per Share
Segment20252024202520242025202420252024Chg
(in millions)(in millions)(in millions)
Brokerage, as reported$3,314.6$2,864.9$816.1$652.6$1,351.0$1,048.7$3.13$2.927%
Net (gains) on divestitures(6.4)(0.5)(4.8)(0.4)(6.4)(0.5)(0.02)—
Acquisition integration——32.936.444.048.70.130.16
Workforce and lease termination——13.48.717.911.60.050.04
Acquisition related adjustments—(26.0)24.6(8.3)30.123.80.09(0.02)
Amortization of intangible assets——152.2116.7——0.590.53
Effective income tax rate impact———(2.6)———(0.01)
Levelized foreign currency translation—(17.8)—(6.3)—(8.5)—(0.03)
Brokerage, as adjusted *3,308.22,820.61,034.4796.81,436.61,123.83.973.5911%
Risk Management, as reported373.4352.841.139.371.570.50.160.18(11)%
Net (gains) losses on divestitures(0.2)0.2(0.1)0.1(0.2)0.2——
Acquisition integration——1.10.51.60.7——
Workforce and lease termination——2.30.93.21.20.01—
Acquisition related adjustments——0.30.10.40.1——
Amortization of intangible assets——4.24.5——0.020.02
Levelized foreign currency translation—(1.5)—0.1————
Risk Management, as adjusted *373.2351.548.945.576.572.70.190.20(5)%
Corporate, as reported0.40.4(148.3)(79.2)(122.2)(62.7)(0.57)(0.36)
Transaction-related costs——20.02.723.13.20.080.02
Corporate, as adjusted*0.40.4(128.3)(76.5)(99.1)(59.5)(0.49)(0.34)
Total Company, as reported$3,688.4$3,218.1$708.9$612.7$1,300.3$1,056.5$2.72$2.74(1)%
Total Company, as adjusted *$3,681.8$3,172.5$955.0$765.8$1,414.0$1,137.0$3.67$3.456%
Total Brokerage & Risk
Management, as reported$3,688.0$3,217.7$857.2$691.9$1,422.5$1,119.2$3.29$3.106%
Total Brokerage & Risk
Management, as adjusted *$3,681.4$3,172.1$1,083.3$842.3$1,513.1$1,196.5$4.16$3.7910%

*For the three-month period ended March 31, 2025, the pretax impact of the brokerage segment adjustments totals $292.0 million, mostly due to non-cash period expenses related to intangible amortization, with a corresponding adjustment to the provision for income taxes of $73.7 million relating to these items. For the three-month period ended March 31, 2025, the pretax impact of the risk management segment adjustments totals $10.7 million, with a corresponding adjustment to the provision for income taxes of $2.9 million relating to these items. For the three-month period ended March 31, 2025, the pretax impact of the corporate segment adjustments totals $23.1 million, with a corresponding adjustment to the benefit for income taxes of $3.1 million. A detailed reconciliation of the 2025 provision (benefit) for income taxes is shown on page 39.

*For the three-month period ended March 31, 2024, the pretax impact of the brokerage segment adjustments totals $196.4 million, with a corresponding adjustment to the provision for income taxes of $52.2 million relating to these items. For the three-month period ended March 31, 2024, the pretax impact of the risk management segment adjustments totals $8.6 million, with a corresponding adjustment to the provision for income taxes of $2.4 million relating to these items. For the three-month period ended March 31, 2024, the pretax impact of the corporate segment adjustments totals $3.2 million, with a corresponding adjustment to the benefit for income taxes of $0.5 million. A detailed reconciliation of the 2024 provision (benefit) for income taxes is shown on page 39.

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Reconciliation of Non-GAAP Measures - Pr****etax Earnings and Diluted Net Earnings per Share

(In millions, except share and per share data)
EarningsProvisionNet Earnings (Loss)Net Earnings (Loss)
(Loss)(Benefit)Attributable toAttributable toDiluted Net
Before Incomefor IncomeNet EarningsNoncontrollingControllingEarnings (Loss)
TaxesTaxes(Loss)InterestsInterestsper Share
Quarter Ended March 31, 2025
Brokerage, as reported$1,099.1$283.0$816.1$4.5$811.6$3.13
Net (gains) on divestitures(6.4)(1.6)(4.8)—(4.8)(0.02)
Acquisition integration44.011.132.9—32.90.13
Workforce and lease termination17.94.513.4—13.40.05
Acquisition related adjustments32.98.324.6—24.60.09
Amortization of intangible assets203.651.4152.2—152.20.59
Brokerage, as adjusted$1,391.1$356.7$1,034.4$4.5$1,029.9$3.97
Risk Management, as reported$55.9$14.8$41.1$—$41.1$0.16
Net (gains) on divestitures(0.2)(0.1)(0.1)—(0.1)—
Acquisition integration1.60.51.1—1.1—
Workforce and lease termination3.20.92.3—2.30.01
Acquisition related adjustments0.40.10.3—0.3—
Amortization of intangible assets5.71.54.2—4.20.02
Risk Management, as adjusted$66.6$17.7$48.9$—$48.9$0.19
Corporate, as reported$(282.3)$(134.0)$(148.3)$—$(148.3)$(0.57)
Transaction-related costs23.13.120.0—20.00.08
Corporate, as adjusted$(259.2)$(130.9)$(128.3)$—$(128.3)$(0.49)
Quarter Ended March 31, 2024
Brokerage, as reported$876.1$223.5$652.6$4.3$648.3$2.92
Net (gains) on divestitures(0.5)(0.1)(0.4)—(0.4)—
Acquisition integration48.712.336.4—36.40.16
Workforce and lease termination11.62.98.7—8.70.04
Acquisition related adjustments(11.1)(2.8)(8.3)(3.0)(5.3)(0.02)
Amortization of intangible assets156.039.3116.7—116.70.53
Effective income tax rate impact—2.6(2.6)—(2.6)(0.01)
Levelized foreign currency translation(8.3)(2.0)(6.3)—(6.3)(0.03)
Brokerage, as adjusted$1,072.5$275.7$796.8$1.3$795.5$3.59
Risk Management, as reported$53.2$13.9$39.3$—$39.3$0.18
Net losses on divestitures0.20.10.1—0.1—
Acquisition integration0.70.20.5—0.5—
Workforce and lease termination1.20.30.9—0.9—
Acquisition related adjustments0.1—0.1—0.1—
Amortization of intangible assets6.31.84.5—4.50.02
Levelized foreign currency translation0.1—0.1—0.1—
Risk Management, as adjusted$61.8$16.3$45.5$—$45.5$0.20
Corporate, as reported$(156.6)$(77.4)$(79.2)$—$(79.2)$(0.36)
Transaction-related costs3.20.52.7—2.70.02
Corporate, as adjusted$(153.4)$(76.9)$(76.5)$—$(76.5)$(0.34)

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Acquisition of AssuredPartners and Woodruff Sawyer

As previously disclosed, on December 7, 2024, we signed a definitive agreement to acquire all of the issued and outstanding stock of Dolphin Topco, Inc., the holding company of AssuredPartners, Inc., a Delaware corporation (together with its subsidiaries, “AssuredPartners”) for gross consideration of $13.45 billion. The transaction is subject to customary regulatory approvals, On March 7, 2025, we received a request for additional information as part of the Hart-Scott-Rodino filing. We are actively responding to the request and expect that the transaction will close in the second half of 2025. AssuredPartners is a leading U.S. insurance broker with client capabilities across commercial property/casualty, specialty, employee benefits and personal lines with operations in the U.K. and Ireland. We raised $8.5 billion of cash in our December 11, 2024 follow-on common stock offering and borrowed $5.0 billion of cash in our December 19, 2024 senior notes issuance (which we refer to, together with the follow-on common stock offering, as the AssuredPartners Financing) to fund the transaction. On January 7, 2025, we received an additional $1.28 billion of cash due to the exercise by the underwriters of the overallotment provision related to the follow-on common stock offering.

On March 4, 2025, we signed a definitive agreement to acquire all of the issued and outstanding stock of Woodruff-Sawyer & Co. (which we refer to as Woodruff Sawyer) for consideration of $1.2 billion. The acquisition closed on April 10, 2025. We funded the transaction using cash on hand. Woodruff Sawyer provides a full suite of commercial property/casualty products, employee benefits solutions and risk management services with a focus on middle and large market clients. Woodruff Sawyer has over 600 employees serving through 14 U.S. offices and one U.K. office.

Results of Operations

Brokerage

The brokerage segment accounted for 89% of our revenues during the three-month period ended March 31, 2025. Our brokerage segment is primarily comprised of retail, wholesale and reinsurance brokerage operations. Our brokerage segment generates revenues by:

(i)

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

(ii)

Identifying, negotiating and placing all forms of reinsurance coverage, as well as providing capital markets services, including acting as underwriter, with respect to insurance linked securities, weather derivatives, capital raising and selected merger and acquisition advisory activities;

(iii)

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

(iv)

Providing consulting services related to health and welfare benefits, voluntary benefits, executive benefits, compensation, retirement planning, institutional investment and fiduciary, actuarial, compliance, private insurance exchange, human resources technology, communications and benefits administration; and

(v)

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

The primary source of revenues for our brokerage services is commissions from underwriting enterprises, based on a percentage of premiums paid by our clients, or fees received from clients based on an agreed level of service usually in lieu of commissions. Commissions are fixed at the contract effective date and generally are based on a percentage of premiums for insurance coverage or employee headcount for employer sponsored benefit plans. Commissions depend upon a large number of factors, including the type of risk being placed, the particular underwriting enterprise’s demand, the expected loss experience of the particular risk of coverage, and historical benchmarks surrounding the level of effort necessary for us to place and service the insurance contract. Rather than being tied to the amount of premiums, fees are most often based on an expected level of effort to provide our services. In addition, under certain circumstances, both retail brokerage and wholesale brokerage services receive supplemental and contingent revenues. Supplemental revenue is revenue paid by an underwriting enterprise that is above the base commission paid, is determined by the underwriting enterprise and is established annually in advance of the contractual period based on historical performance criteria. Contingent revenue is revenue paid by an underwriting enterprise based on the overall profit and/or volume of the business placed with that underwriting enterprise during a particular calendar year and is determined after the contractual period.

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Litigation, Regulatory and Taxation Matters

As previously disclosed, our IRC 831(b) (or “micro-captive”) advisory services business has been under a promoter investigation 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.

Financial information relating to our brokerage segment results for the three-month period ended March 31, 2025 compared to the same period in 2024, is as follows (in millions, except per share, percentages and workforce data):

Three-month period ended March 31,
Statement of Earnings20252024Change
Commissions$2,249.2$1,993.6$255.6
Fees620.2606.713.5
Supplemental revenues113.993.920.0
Contingent revenues92.986.06.9
Interest income, premium finance revenues and other income238.484.7153.7
Total revenues3,314.62,864.9449.7
Compensation1,617.21,476.8140.4
Operating346.4339.47.0
Depreciation32.932.80.1
Amortization203.6156.047.6
Change in estimated acquisition earnout payables15.4(16.2)31.6
Total expenses2,215.51,988.8226.7
Earnings before income taxes1,099.1876.1223.0
Provision for income taxes283.0223.559.5
Net earnings816.1652.6163.5
Net earnings attributable to noncontrolling interests4.54.30.2
Net earnings attributable to controlling interests$811.6$648.3$163.3
Diluted net earnings per share$3.13$2.92$0.21
Other Information
Change in diluted net earnings per share7%23%
Growth in revenues16%21%
Organic change in commissions and fees9%9%
Compensation expense ratio49%52%
Operating expense ratio10%12%
Effective income tax rate26%26%
Workforce at end of period (includes acquisitions)43,12039,989
Identifiable assets at March 31$54,427.8$56,371.6
EBITDAC
Net earnings$816.1$652.6$163.5
Provision for income taxes283.0223.559.5
Depreciation32.932.80.1
Amortization203.6156.047.6
Change in estimated acquisition earnout payables15.4(16.2)31.6
EBITDAC$1,351.0$1,048.7$302.3

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The following provides information that management believes is helpful when comparing EBITDAC and adjusted EBITDAC for the three-month period ended March 31, 2025 compared to the same period in 2024 (in millions):

Three-month period ended March 31,
20252024Change
Net earnings, as reported$816.1$652.625%
Provision for income taxes283.0223.5
Depreciation32.932.8
Amortization203.6156.0
Change in estimated acquisition earnout payables15.4(16.2)
EBITDAC1,351.01,048.729%
Net (gains) on divestitures(6.4)(0.5)
Acquisition integration44.048.7
Workforce and lease termination related charges17.911.6
Acquisition related adjustments30.123.8
Levelized foreign currency translation—(8.5)
EBITDAC, as adjusted$1,436.6$1,123.828%
Net earnings margin, as reported24.6%22.8%+ 184 bpts
EBITDAC margin, as adjusted*43.4%39.8%+ 359 bpts
Reported revenues$3,314.6$2,864.9

***** First quarter 2025 adjusted EBITDAC margin would be 40.9% excluding approximately $143.0 million of interest income revenues earned on the proceeds received in December 2024 related to the AssuredPartners Financing.

Commissions and fees - The aggregate increase in base commissions and fees for the three-month period ended March 31, 2025, compared to the same period in 2024, was due to revenues associated with acquisitions that were made in the twelve-month period ended March 31, 2025 ($90.6 million), and to the organic change in base commissions and fee revenues. The organic change in base commissions and fee revenues were 9.1% and 8.8% for the three-month periods ended March 31, 2025 and 2024, respectively.

In our property/casualty brokerage operations, during the three-month period ended March 31, 2025 we saw continued strong customer retention, higher new business generation and increasing renewal premiums (premium rates and exposures). We believe these favorable trends should continue for the remainder of 2025; however, if economic conditions worsen or premium rate increases slow, we could see our revenue growth soften.

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Items excluded from organic revenue computations yet impacting revenue comparisons for the three-month periods ended March 31, 2025 and 2024 include the following (in millions):

Three-Month Period Ended March 31,
Organic Revenues (Non-GAAP)20252024Change
Base Commissions and Fees
Commission and fees, as reported$2,869.4$2,600.310.3%
Less commission and fee revenues from acquisitions(90.6)(26.0)
Less divested operations—(11.5)
Levelized foreign currency translation—(16.7)
Organic base commission and fees$2,778.8$2,546.19.1%
Supplemental revenues
Supplemental revenues, as reported$113.9$93.921.3%
Less supplemental revenues from acquisitions(0.1)—
Levelized foreign currency translation—(0.3)
Organic supplemental revenues$113.8$93.621.6%
Contingent revenues
Contingent revenues, as reported$92.9$86.08.0%
Less contingent revenues from acquisitions(1.3)—
Levelized foreign currency translation—(0.4)
Organic contingent revenues$91.6$85.67.0%
Total reported commissions, fees, supplemental revenues and contingent revenues$3,076.2$2,780.210.6%
Less commissions, fees, supplemental revenues and contingent revenues from acquisitions(92.0)(26.0)
Less divested operations—(11.5)
Levelized foreign currency translation—(17.4)
Total organic commissions, fees, supplemental revenues and contingent revenues$2,984.2$2,725.39.5%

The following is a summary of brokerage segment acquisition activity for 2025 and 2024:

Three-month period ended March 31,
20242023
Number of acquisitions closed1012
Estimated annualized revenues acquired (in millions)$62.7$69.2

In the three-month periods ended March 31, 2025 and 2024 we issued 49,000 and 357,000 shares, respectively, of our common stock issued at the request of sellers and/or in connection with tax-free exchange acquisitions.

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Supplemental and contingent revenues - Reported supplemental and contingent revenues recognized in 2025, 2024 and 2023 by quarter are as follows (in millions):

FirstSecondThirdFourth
QuarterQuarterQuarterQuarterYTD
2025
Reported supplemental revenues$113.9$113.9
Reported contingent revenues92.992.9
Reported supplemental and contingent revenues$206.8$206.8
2024
Reported supplemental revenues$93.9$88.7$79.1$97.7$359.4
Reported contingent revenues86.059.869.352.5267.6
Reported supplemental and contingent revenues$179.9$148.5$148.4$150.2$627.0
2023
Reported supplemental revenues$81.6$71.2$70.8$90.6$314.2
Reported contingent revenues71.854.253.955.4235.3
Reported supplemental and contingent revenues$153.4$125.4$124.7$146.0$549.5

Interest income, premium finance revenues and other income - This primarily represents interest income earned on cash, cash equivalents and fiduciary cash and revenues from premium financing, income from equity investments and net gains related to divestitures and sales of books of business.

Interest income, premium finance revenues and other income in the three-month period ended March 31, 2025 increased compared to the same period in 2024, primarily due to increases in interest income earned on our own and fiduciary funds, including the $142.6 million interest income earned in the three-month period ended March 31, 2025 related to the proceeds from the AssuredPartners Financing.

The following table provides a reconciliation of brokerage segment interest income, premium finance revenues and other income, as reported in our consolidated financial statements to interest income earned on cash, cash equivalents and fiduciary cash (in millions):

Three-month period ended March 31,
20252024
Interest income, premium finance revenues and other income$238.4$84.7
Less:
Net (gains) on divestitures(6.4)(0.5)
Premium financing revenues and net earnings from equity interests(23.3)(21.5)
Interest income from cash, cash equivalents, and fiduciary cash$208.7$62.7

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Compensation expense - The following provides non-GAAP information that management believes is helpful when comparing compensation expense for the three-month period ended March 31, 2025 with the same period in 2024 (in millions):

Three-month period ended March 31,
20252024
Compensation expense, as reported$1,617.2$1,476.8
Acquisition integration(27.6)(24.5)
Workforce and lease termination related charges(16.5)(10.4)
Acquisition related adjustments(30.1)(49.8)
Levelized foreign currency translation—(8.8)
Compensation expense, as adjusted$1,543.0$1,383.3
Reported compensation expense ratios48.8%51.6%
Adjusted compensation expense ratios46.6%49.0%
Reported revenues$3,314.6$2,864.9
Adjusted revenues - see page 38$3,308.2$2,820.6

The $140.4 million increase in compensation expense for the three-month period ended March 31, 2025 compared to the same period in 2024, was primarily due to increases in base and incentive compensation related to the hiring of producers and other roles to service and support organic growth and higher benefit costs - $103.7 million in the aggregate, compensation associated with the acquisitions completed in the twelve-month period ended March 31, 2025 ‑ $47.2 million, increases in workforce related charges - $6.1 million, increased acquisition integration costs - $3.1 million, partially offset by reduced acquisition earnout related adjustments - $19.7 million.

Operating expense - The following provides non-GAAP information that management believes is helpful when comparing operating expense for the three-month period ended March 31, 2025 with the same period in 2024 (in millions):

Three-month period ended March 31
20252024
Operating expense, as reported$346.4$339.4
Acquisition integration(16.4)(24.2)
Workforce and lease termination related charges(1.4)(1.2)
Levelized foreign currency translation—(0.5)
Operating expense, as adjusted$328.6$313.5
Reported operating expense ratios10.5%11.9%
Adjusted operating expense ratios9.9%11.1%
Reported revenues$3,314.6$2,864.9
Adjusted revenues - see page 38$3,308.2$2,820.6

The $7.0 million increase in operating expense for the three-month period ended March 31, 2025 compared to the same period in 2024, was primarily due to expenses associated with the acquisitions completed in the twelve-month period ended March 31, 2025 ‑ $12.4 million, additional investments in technology, partially offset by savings in real estate expenses related to office consolidations, and lower travel and entertainment related costs - $2.2 million in the aggregate, increased workforce related charges $0.2 million, partially offset by a decrease in acquisition integration costs - $7.8 million.

Depreciation - Depreciation expense increased in the three-month period ended March 31, 2025 compared to the same period in 2024 by $0.1 million. The increase in depreciation expense in 2025 compared to 2024 was due primarily to the purchases of furniture, equipment and leasehold improvements related to office consolidations and moves, and expenditures related to upgrading computer systems. Also contributing to the increase in depreciation expense was the depreciation expense associated with acquisitions completed in the twelve-month period ended March 31, 2025.

Amortization - The increase in amortization expense in the three-month period ended March 31, 2025 compared to the same period in 2024 was primarily due to the impact of amortization expense of intangible assets associated with acquisitions completed in the twelve-month period ended March 31, 2025. Based on the results of impairment reviews and decisions made to exit some non-core

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operations during the three-month period ended March 31, 2025, we wrote off $40.6 million of amortizable assets. Based on the results of impairment reviews during the three-month period ended March 31, 2024, no impairments were noted. We review all of our intangible assets for impairment periodically (at least annually for goodwill) and whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. We perform such impairment reviews at the division (i.e., reporting unit) level with respect to goodwill and at the business unit level for amortizable intangible assets. In reviewing 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. Expiration lists, non‑compete agreements and trade names 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).

Change in estimated acquisition earnout payables - The change in the expense from the change in estimated acquisition earnout payables in the three-month period ended March 31, 2025 compared to the same period in 2024, was primarily due to adjustments made to the estimated fair value of earnout obligations related to revised assumptions due to rising interest rates and increased market volatility and projections of future performance. During the three-month periods ended March 31, 2025 and 2024, we recognized $12.6 million and $18.7 million, respectively, of expense related to the accretion of the discount recorded for earnout obligations in connection with our acquisitions made in the period from 2021 to 2025. In addition, during the three-month periods ended March 31, 2025 and 2024, we recognized $2.8 million of expense and $34.9 million of income, respectively, related to net adjustments in the estimated fair value of earnout obligations in connection with revised assumptions due to changes in interest rates, volatility and other assumptions and projections of future performance for 28 and 37 acquisitions, respectively.

The amounts initially recorded as earnout payables for our 2021 to 2025 acquisitions were measured at fair value as of the acquisition date and 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. 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. In determining fair value, we estimate 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. We estimate future earnout payments using the earnout formula and performance targets specified in each purchase agreement and these financial projections. Subsequent changes in the underlying financial projections or assumptions will cause the estimated earnout obligations to change and such adjustments are recorded in our consolidated statement of earnings when incurred. Increases in the earnout payable obligations will result in the recognition of expense and decreases in the earnout payable obligations will result in the recognition of income.

Provision for income taxes - The brokerage segment’s effective income tax rates for the three-month periods ended March 31, 2025 and 2024, were 25.7% and 25.5%, respectively. We anticipate reporting an effective tax rate of approximately 24.5% to 26.5% in our brokerage segment based on known changes in tax rates in future periods.

Net earnings attributable to noncontrolling interests - The amounts reported in this line for the three-month periods ended March 31, 2025 and 2024, include noncontrolling interest earnings of $4.5 million and $4.3 million, respectively.

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Risk Management

The risk management segment accounted for 11% of our revenue during the three-month period ended March 31, 2025. Our risk management segment operations provide contract claim settlement, claim administration, loss control services and risk management consulting for commercial, nonprofit, captive and public sector 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. Revenues for our risk management segment are comprised of fees generally negotiated (i) on a per-claim or per-service basis, (ii) on a cost-plus basis, or (iii) as performance-based fees. We also provide risk management consulting services that are recognized as the services are delivered.

Financial information relating to our risk management segment results for the three-month period ended March 31, 2025 compared to the same period in 2024, is as follows (in millions, except per share, percentages and workforce data):

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Statement of EarningsThree-month period ended March 31,
20252024Change
Fees$364.6$344.5$20.1
Interest income and other income8.88.30.5
Revenues before reimbursements373.4352.820.6
Reimbursements39.038.60.4
Total revenues412.4391.421.0
Compensation231.1213.917.2
Operating70.868.42.4
Reimbursements39.038.60.4
Depreciation9.510.9(1.4)
Amortization5.76.3(0.6)
Change in estimated acquisition earnout payables0.40.10.3
Total expenses356.5338.218.3
Earnings before income taxes55.953.22.7
Provision for income taxes14.813.90.9
Net earnings41.139.31.8
Net earnings attributable to noncontrolling interests———
Net earnings attributable to controlling interests$41.1$39.3$1.8
Diluted net earnings per share$0.16$0.18$(0.02)
Other information
Change in diluted net earnings per share-11%20%
Growth in revenues (before reimbursements)6%19%
Organic change in fees (before reimbursements)4%13%
Compensation expense ratio (before reimbursements)62%61%
Operating expense ratio (before reimbursements)19%19%
Effective income tax rate26%26%
Workforce at end of period (includes acquisitions)10,5949,832
Identifiable assets at March 31$1,982.4$1,673.5
EBITDAC
Net earnings$41.1$39.3$1.8
Provision for income taxes14.813.90.9
Depreciation9.510.9(1.4)
Amortization5.76.3(0.6)
Change in estimated acquisition earnout payables0.40.10.3
EBITDAC$71.5$70.5$1.0

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The following provides non-GAAP information that management believes is helpful when comparing EBITDAC and adjusted EBITDAC for the three-month period ended March 31, 2025 to the same period in 2024 (in millions):

Three-month period ended March 31,
20252024Change
Net earnings, as reported$41.1$39.35%
Provision for income taxes14.813.9
Depreciation9.510.9
Amortization5.76.3
Change in estimated acquisition earnout payables0.40.1
Total EBITDAC71.570.51%
Net (gains) losses on divestitures(0.2)0.2
Acquisition integration1.60.7
Workforce and lease termination related charges3.21.2
Acquisition related adjustments0.40.1
Levelized foreign currency translation——
EBITDAC, as adjusted$76.5$72.75%
Net earnings margin (before reimbursements), as reported11.0%11.1%- 13 bpts
EBITDAC margin (before reimbursements), as adjusted20.4%20.7%- 18 bpts
Reported revenues (before reimbursements)$373.4$352.8
Adjusted revenues (before reimbursements) - see page 38$373.2$351.5

Fees - In our risk management operations, for the three-month period ended March 31, 2025, client retention was strong and new business was positive. We believe these favorable trends should continue for the remainder of 2025. However, worsening economic conditions or a reversal in the number of workers employed could cause fewer new liability and core workers' compensation claims to arise in future quarters. Organic change in fee revenues for the three-month period ended March 31, 2025 was 3.9% compared to 13.3% for the same period in 2024.

Items excluded from organic fee computations yet impacting revenue comparisons for the three-month periods ended March 31, 2025 and 2024 include the following (in millions):

Three-Month Period Ended March 31
Organic Revenues (Non-GAAP)20252024Change
Fees$362.9$341.96.1%
International performance bonus fees1.72.6
Fees as reported364.6344.55.8%
Less fees from acquisitions(10.3)—
Less divested operations—(2.0)
Levelized foreign currency translation—(1.5)
Organic fees$354.3$341.03.9%

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The following is a summary of risk management segment acquisition activity for 2025 and 2024:

Three-month period ended March 31,
20252024
Number of acquisitions closed1—
Estimated annualized revenues acquired (in millions)$38.2$—

Reimbursements - Reimbursements represent amounts received from clients reimbursing us for certain third-party costs associated with providing our claims management services. In certain service partner relationships, we are considered a principal because we direct the third party, control the specified service and combine the services provided into an integrated solution. Given this principal relationship, we are required to recognize revenue on a gross basis and service partner vendor fees in the operating expense line in our consolidated statement of earnings.

Interest income and other income - Interest income and other income primarily represents interest income earned on cash, cash equivalents and fiduciary cash. Interest income and other income in the three-month period ended March 31, 2025 increased compared to the same period in 2024, primarily due to increases in interest income from increased levels of fiduciary cash.

Compensation expense - The following provides non-GAAP information that management believes is helpful when comparing compensation expense for the three-month period ended March 31, 2025 with the same period in 2024 (in millions):

Three-month period ended March 31,
20252024
Compensation expense, as reported$231.1$213.9
Acquisition integration(0.5)(0.6)
Workforce and lease termination related charges(2.8)(0.8)
Acquisition related adjustments(0.4)(0.1)
Levelized foreign currency translation—(1.2)
Compensation expense, as adjusted$227.4$211.2
Reported compensation expense ratios (before reimbursements)61.9%60.6%
Adjusted compensation expense ratios (before reimbursements)60.9%60.1%
Reported revenues (before reimbursements)$373.4$352.8
Adjusted revenues (before reimbursements) - see page 38$373.2$351.5

The $17.2 million increase in compensation expense for the three-month period ended March 31, 2025 compared to the same period in 2024, was primarily due to compensation associated with the acquisitions completed in the twelve-month period ended March 31, 2025 ‑ $7.7 million, increases in base compensation to service and support organic growth and higher benefit costs, partially offset by savings in incentive compensation - $7.3 million in the aggregate, increases in workforce related charges - $2.0 million and acquisition earnout related adjustments - $0.3 million, partially offset by reduced acquisition integration costs - $0.1 million.

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Operating expense - The following provides non-GAAP information that management believes is helpful when comparing operating expense for the three-month period ended March 31, 2025 with the same period in 2024 (in millions):

Three-month period ended March 31,
20252024
Operating expense, as reported$70.8$68.4
Acquisition integration(1.1)(0.1)
Workforce and lease termination related charges(0.4)(0.4)
Levelized foreign currency translation—(0.3)
Operating expense, as adjusted$69.3$67.6
Reported operating expense ratios (before reimbursements)19.0%19.4%
Adjusted operating expense ratios (before reimbursements)18.6%19.2%
Reported revenues (before reimbursements)$373.4$352.8
Adjusted revenues (before reimbursements) - see page 38$373.2$351.5

The $2.4 million increase in operating expense for the three-month period ended March 31, 2025 compared to the same period in 2024, was primarily due to expenses associated with the acquisitions completed in the twelve-month period ended March 31, 2025 - $1.6 million, an increase in acquisition integration costs - $1.0 million, and additional investments in technology, partially offset by savings in client-related expenses - $0.2 million in the aggregate.

Depreciation - Depreciation decreased in the three-month period ended March 31, 2025 compared to the same period in 2024 by $1.4 million which reflects the impact of office consolidations that occurred as leases expired in 2024 (less depreciation associated with furniture, equipment and leasehold improvements), partially offset by the impact of expenditures related to upgrading computer systems.

Amortization - Amortization expense in the three-month period ended March 31, 2025 decreased by $0.6 million due to the normal recurring quarterly amortization expense. Based on the results of impairment reviews during the three-month periods ended March 31, 2025 and 2024, no impairments were noted.

Change in estimated acquisition earnout payables - The change in expense from the change in estimated acquisition earnout payables in the three-month period ended March 31, 2025 to the same period in 2024, was due to accretion of the discount. During the three-month periods ended March 31, 2025 and 2024, we recognized $0.4 million and $0.1 million, respectively, of expense, related to the accretion of the discount recorded for earnout obligations in connection with our acquisitions.

Provision for income taxes - The risk management segment’s effective income tax rates for the three-month periods ended March 31, 2025 and 2024, were 26.5% and 26.1%, respectively. We anticipate reporting an effective tax rate on adjusted results of approximately 25.0% to 27.0% in our risk management segment based on known changes in tax rates in future periods.

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Corporate

The corporate segment reports the financial information related to our debt, external acquisition-related expenses, other corporate costs and the impact of foreign currency remeasurement. For a detailed discussion of the nature of our debt, see Note 6 to our unaudited consolidated financial statements included herein as of March 31, 2025 and in Note 7 to our most recent Annual Report on Form 10‑K as of December 31, 2024.

Financial information relating to our corporate segment results for the three-month period ended March 31, 2025 compared to the same period in 2024 is as follows (in millions, except per share):

Three-month period ended March 31,
Statement of Earnings20252024Change
Other income$0.4$0.4$—
Total revenues0.40.4—
Compensation49.435.214.2
Operating73.227.945.3
Interest158.492.266.2
Depreciation1.71.7—
Total expenses282.7157.0125.7
Loss before income taxes(282.3)(156.6)(125.7)
Benefit for income taxes(134.0)(77.4)(56.6)
Net loss(148.3)(79.2)(69.1)
Net loss attributable to noncontrolling interests———
Net loss attributable to controlling interests$(148.3)$(79.2)$(69.1)
Diluted net loss per share$(0.57)$(0.36)$(0.21)
Identifiable assets at March 31
EBITDAC
Net loss$(148.3)$(79.2)$(69.1)
Benefit for income taxes(134.0)(77.4)(56.6)
Interest158.492.266.2
Depreciation1.71.7—
EBITDAC$(122.2)$(62.7)$(59.5)

Revenues - Revenues in the corporate segment consist of other income related to the run-off of clean energy and legacy investments.

Compensation expense - Compensation expense in the three-month periods ended March 31, 2025 and 2024, includes salary, incentive compensation, and associated benefit expenses of $49.4 million and $35.2 million, respectively. The change in compensation expense for the three-month period ended March 31, 2025 compared to the same period in 2024 was primarily due to increased incentive compensation, which includes transaction-related costs as described on page 53 in note (1), and increased costs associated with stock-based benefits.

Operating expense - Operating expense in the three-month period ended March 31, 2025, includes banking and related fees of $1.1 million, external professional fees and other due diligence costs related to acquisitions of $20.5 million, which includes $18.1 million of transaction-related costs as described on page 53 in note (1), other corporate and clean energy related expenses, including litigation matters, technology and other professional fees of $28.6 million in aggregate, and a net unrealized foreign exchange remeasurement loss of $23.0 million.

Operating expense in the three-month period ended March 31, 2024 includes banking and related fees of $0.9 million, external professional fees and other due diligence costs related to acquisitions of $3.8 million, which includes transaction‑related costs as described on page 53 in note (1), other corporate and clean energy related expenses, including litigation matters, technology and other professional fees of $23.8 million, partially offset by a net unrealized foreign exchange remeasurement gain of $0.6 million.

Interest expense - The increase in interest expense for the three-month period ended March 31, 2025 compared to the same period in 2024, was due to the following:

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Change in interest expense related to:Three-month period ended March 31, 2025
Interest on borrowings from our Credit Agreement$(3.6)
Interest on the maturity of the Series H notes(2.5)
Interest on the maturity of the Series HH notes(0.6)
Interest on the $1,000.0 million senior notes funded on February 15, 20247.2
Interest on the $5,000.0 million senior notes funded on December 19, 202465.8
Amortization of hedge gains/losses(0.1)
Net change in interest expense$66.2

Depreciation - Depreciation expense in the three-month period ended March 31, 2025 was flat compared to 2024 and includes capital improvements made at our corporate headquarters and Gallagher Centers of Excellence and to the acquisition of other corporate related fixed assets.

Benefit for income taxes - We allocate the provision for income taxes to the brokerage and risk management segments using local country statutory rates. Our consolidated effective tax rate for the three-month period ended March 31, 2025 was 18.8% compared to 20.7% for the same period in 2024.

The following provides non-GAAP information that we believe is helpful when comparing our operating results for the three-month periods ended March 31, 2025 and 2024 for the corporate segment (in millions):

20252024
Net Earnings
Income(Loss)Income(Loss)
TaxAttributable toTaxAttributable to
Pretax(Provision)ControllingPretax(Provision)Controlling
Three-Month Periods Ended March 31,LossBenefitInterestsLossBenefitInterests
Interest and banking costs$(159.5)$41.5$(118.0)$(93.1)$24.2$(68.9)
Clean energy related(1.8)0.5(1.3)(1.9)0.5(1.4)
Acquisition costs (1)(26.4)3.4(23.0)(4.7)0.8(3.9)
Corporate (2)(94.6)88.6(6.0)(56.9)51.9(5.0)
Corporate, as reported(282.3)134.0(148.3)(156.6)77.4(79.2)
Adjustments
Transaction-related costs (1)23.1(3.1)20.03.2(0.5)2.7
Components of Corporate Segment, as adjusted
Interest and banking costs(159.5)41.5(118.0)(93.1)24.2(68.9)
Clean energy related(1.8)0.5(1.3)(1.9)0.5(1.4)
Acquisition costs(3.3)0.3(3.0)(1.5)0.3(1.2)
Corporate (2)(94.6)88.6(6.0)(56.9)51.9(5.0)
Adjusted three months$(259.2)$130.9$(128.3)$(153.4)$76.9$(76.5)

(1)

We incurred transaction-related costs, which include legal, consulting, employee compensation and other professional fees associated with completed, future and terminated acquisitions. Adjustments primarily relate to our acquisition of Willis Re, the acquisitions of Buck, Cadence Insurance and Eastern Insurance, all of which closed in 2023, Woodruff Sawyer, which closed on April 10, 2025, and the pending acquisition of AssuredPartners.

(2)

Corporate pretax loss includes a net unrealized foreign exchange remeasurement loss of $23.0 million in first quarter 2025 and a net unrealized foreign exchange remeasurement gain of $0.6 million in first quarter 2024.

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Interest and banking costs and debt - Interest and banking costs includes expenses related to our debt.

Clean energy - For 2025, this consists of the operating results related to our investments in new clean energy projects.

Acquisition costs - Consists mostly of external professional fees and other due diligence costs related to acquisitions. On occasion, we enter into forward currency hedges for the purchase price of committed, but not yet funded, acquisitions with funding requirements in currencies other than the U.S. dollar. The gains or losses, if any, associated with these hedge transactions are also included in acquisition costs.

Corporate - Consists of overhead allocations mostly related to corporate staff compensation, other corporate level activities, and net unrealized foreign exchange remeasurement. In addition, it includes the tax expense related to partial taxation of foreign earnings, nondeductible executive compensation and entertainment expenses, the tax benefit from vesting of employee equity awards, as well as other permanent or discrete tax items not reflected in the provision for income taxes in the brokerage and risk management segments. The income tax benefit of stock-based awards that vested or were settled in the three-month periods ended March 31, 2025 and 2024, was $65.8 million and $46.4 million, respectively, and is included in the table above in the Corporate line.

Clean energy investm****ents - Please refer to our filings with the SEC, including Item 1A, “Risk Factors,” on pages 11 through 31 of our Annual Report on Form 10‑K for the fiscal year ended December 31, 2024, for a more detailed discussion of these and other factors that could impact the information above.

Liquidity and Capital Resources

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations. The insurance brokerage and risk management industries are not capital intensive. Historically, our capital requirements have primarily included dividend payments on our common stock, repurchases of our common stock, funding of our investments, acquisitions of brokerage and risk management operations and capital expenditures, including investments being made in IT and software development projects.

On March 4, 2025, we signed a definitive agreement to acquire all of the issued and outstanding stock of Woodruff Sawyer for a gross consideration of $1.2 billion. The acquisition closed on April 10, 2025. We funded the transaction using cash on hand. Total expected expense to integrate Woodruff Sawyer into our operations is approximately $150.0 million.

Operating Cash Flow

Historically, we have depended on our ability to generate positive cash flow from operations to meet a substantial portion of our cash requirements. We believe that our cash flows from operations and borrowings under our Credit Agreement (as defined below) will provide us with adequate resources to meet our liquidity needs in the foreseeable future. To fund acquisitions made during 2024 and for the three-month period ended March 31, 2025, we relied on a combination of net cash flows from operations, proceeds from borrowings under our Credit Agreement, proceeds from issuances of senior unsecured notes and issuance of our common stock.

Cash provided by operating activities was $871.8 million and $789.3 million for the three-month periods ended March 31, 2025 and 2024, respectively. The increase in cash provided by operating activities during the three-month period ended March 31, 2025 compared to the same period in 2024, was primarily due to growth in our core brokerage and risk management operations and timing differences between periods with cash receipts and disbursements related to accounts receivables and accrued compensation and other current liabilities compared to the same period in 2024.

During the three-month period ended March 31, 2025 employee matching contributions to the 401(k) plan of $105.4 million relating to 2024 were funded using common stock. During the three-month period ended March 31, 2024, employee matching contributions to the 401(k) plan of $86.0 million relating to 2023 were funded using common stock.

When assessing our overall liquidity, we believe that the focus should be on net earnings as reported in our consolidated statement of earnings, adjusted for non‑cash items (i.e., EBITDAC), and cash provided by operating activities in our consolidated statement of cash flows. Consolidated EBITDAC was $1,300.3 million and $1,056.5 million for the three-month periods ended March 31, 2025 and 2024, respectively. Net earnings attributable to controlling interests were $704.4 million and $608.4 million for the three-month periods ended March 31, 2025 and 2024, respectively. We believe that EBITDAC items are indicators of trends in liquidity.

Defined Benefit Pension Plan

Our policy for funding our defined benefit pension plan is to contribute amounts at least sufficient to meet the minimum funding

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requirements under the IRC. The Employee Retirement Income Security Act of 1974, as amended (which we refer to as ERISA), could impose a minimum funding requirement for our plan. We are not required to make any minimum contributions to the plan for the 2025 plan year, nor were we required to make any minimum contributions to the plan for the 2024 plan year. Funding requirements are based on the plan being frozen and the aggregate amount of our historical funding. The plan’s actuaries determine contribution rates based on our funding practices and requirements. Funding amounts may be influenced by future asset performance, the level of discount rates and other variables impacting the assets and/or liabilities of the plan. In addition, amounts funded in the future, to the extent not due under regulatory requirements, may be affected by alternative uses of our cash flows, including dividends, acquisitions and common stock repurchases. We did not make any discretionary contributions to the plan during the three-month periods ended March 31, 2025 and 2024. We are not considering making any discretionary contributions to the plan in 2025, but may be required to make minimum contributions to the plan in future periods.

Investing Cash Flows

Capital Expenditures - Capital expenditures were $28.2 million and $29.7 million for the three-month periods ended March 31, 2025 and 2024, respectively. In 2025, we expect total expenditures for capital improvements to be approximately $150.0 million (includes the impact of acquisitions closed through March 31, 2025), part of which is related to expenditures on office moves and investments being made in IT and software development projects. Capital expenditures decreased in 2025 compared to 2024 primarily due to less acquisition integration related expenditures, differences in the period over period timing of expenditures related to investments in information technology, and by the movement of information technology to cloud computing based technology from in‑house hosted environments. Expenditures made related to cloud computing based technology are accounted for as deferred costs versus fixed assets, which would reduce capital expenditures.

Acquisitions - Cash paid for acquisitions, net of cash and restricted cash acquired, was $331.8 million and $251.2 million in the three-month periods ended March 31, 2025 and 2024, respectively. In addition, during the three-month period ended March 31, 2025, we issued 0.1 million shares ($16.6 million) of our common stock as payment for a portion of the total consideration paid for 2025 acquisitions and earnout payments made in 2025. During the three-month period ended March 31, 2024, we issued 0.4 million shares ($88.3 million) of our common stock as payment for consideration paid for 2024 acquisitions and earnout payments made in 2024. We completed eleven and twelve acquisitions in the three-month periods ended March 31, 2025 and 2024, respectively. Annualized revenues of businesses acquired in the three-month periods ended March 31, 2025 and 2024 totaled approximately $100.9 million and $69.2 million, respectively. For the remainder of 2025, we expect to use cash on hand, new debt, our Credit Agreement, cash from operations and our common stock, or a combination thereof to fund all of the acquisitions we complete.

If liquidity concerns arise, we may be more likely to issue common stock to fund acquisitions.

Dispositions - During each of the three-month periods ended March 31, 2025 and 2024, we sold several books of business and recognized net gains of $6.6 million and $0.3 million, respectively. We received net cash proceeds of $1.8 million and $0.1 million, respectively, in these 2025 and 2024 transactions.

Financing Cash Flows

At March 31, 2025, we had $9,550.0 million of Senior Notes, $3,523.0 million of corporate related borrowings outstanding, no borrowings outstanding under our Credit Agreement, $152.8 million of borrowings outstanding under our Premium Financing Debt Facility and a cash and cash equivalent balance of $16,691.8 million.

Consistent with past practice, as of March 31, 2025 we had pre-issuance hedges open for $1,000.0 million for 2026.

The Senior Notes, Note Purchase Agreements, the Credit Agreement and the Premium Financing Debt Facility contain various financial covenants that require us to maintain specified financial ratios. We were in compliance with these covenants at March 31, 2025.

Senior Notes - On December 19, 2024, we closed and funded an offering of $5,000.0 million of unsecured senior notes in five tranches. The $750.0 million aggregate principal amount of 4.60% Senior Notes is due in 2027, $750.0 million aggregate principal amount of 4.85% Senior Notes is due in 2029, $500.0 million aggregate principal amount of 5.00% Senior Notes is due in 2032, $1,500.0 million aggregate principal amount of 5.15% Senior Notes is due in 2035, $1,500.0 million aggregate principal amount of 5.55% Senior Notes is due in 2055. The weighted average interest rate is 5.25% per annum after giving effect to underwriting costs and a net hedge gain. During 2024, we entered into a pre-issuance interest rate hedging transaction related to these notes. We realized a net cash gain of approximately $4.1 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 expect to use the net proceeds of this offering to fund a portion of the cash consideration payable in connection with the AssuredPartners acquisition and for general corporate purposes including other acquisitions.

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On February 12, 2024, we closed and funded an offering of $1,000.0 million of unsecured senior notes in two tranches. The $500.0 million aggregate principal amount of 5.45% Senior Notes is due in 2034 (which we refer to as the 2034 July Notes) and $500.0 million aggregate principal amount of 5.75% Senior Notes is due in 2054 (which we refer to as the 2054 July Notes). The weighted average interest rate is 5.71% per annum after giving effect to underwriting costs and a net hedge loss. During 2023, we entered into a pre-issuance interest rate hedging transaction related to these notes. We realized a net cash loss of approximately $1.4 million on the hedging transactions that will be recognized on a pro rata basis as an increase 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.

Note Purchase Agreement - During February 2024, we used operating cash to fund the $100.0 million Series HH note maturity that had a fixed rate of 4.72% that was due February 13, 2024 and the $325.0 million Series H note maturity that had a fixed rate of 4.58% that was due February 27, 2024.

Credit Agreement - On June 22, 2023, we entered into a new Credit Agreement (which we refer to as the Credit Agreement) with an administrative agent and a group of other lenders. The Credit Agreement provided for a five-year unsecured revolving credit facility in the amount of $1,200.0 million (including a $75.0 million letter of credit sub-facility), which was also available in Pounds Sterling, Canadian Dollars, Australian Dollars, New Zealand Dollars, Euros, Japanese Yen and any other currencies agreed by the lenders. On November 7, 2023, we entered into the First Amendment to the Credit Agreement, pursuant to which we increased the commitments under the Credit Agreement to $1,700.0 million.

On April 3, 2025, we entered into an amendment and restatement to the Credit Agreement. The Credit Agreement provides for a five-year unsecured revolving credit facility in the amount of $2,500.0 million, 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. The Credit Agreement also includes a $75.0 million letter of credit sub-facility and a $250.0 million Euro swingline sub-facility. We may also, upon the agreement of either one or more then-existing lenders or of additional banks not currently party to the Credit Agreement, increase the commitments under the Credit Agreement up to $3,000.0 million. The amendment and restatement, among other things, also extended the maturity date from June 22, 2028 to April 3, 2030 and updated the facility fee and applicable margin as determined by reference to the rating of our long-term senior unsecured debt.

We use the Credit Agreement to post letters of credit and to borrow funds to supplement our operating cash flows from time to time. In the three-month period ended March 31, 2025, we had no borrowings or repayments. At March 31, 2025, there were no borrowings outstanding under the Credit Agreement. Due to outstanding letters of credit, $1,697.9 million remained available for potential borrowings under the Credit Agreement at March 31, 2025. Principal uses of the 2024 borrowings under the Credit Agreement were to fund acquisitions, earnout payments related to acquisitions and general corporate purposes.

Premium Financing Debt Facility - On October 30, 2024, we entered into an amendment to our revolving loan facility (which we refer to as the Premium Financing Debt Facility), that provides funding for the three Australian (AU) and New Zealand (NZ) premium finance subsidiaries. The Premium Financing Debt Facility is comprised of: (i) Facility B, which is separated into AU$390.0 million and NZ$25.0 million tranches (the NZ$ tranche has been decreased as of May 1, 2025 to NZ$10.0 million), (ii) Facility C, which is an AU$60.0 million equivalent multi-currency overdraft tranche and (iii) Facility D, which is a NZ$15.0 million equivalent multi-currency overdraft tranche.

At March 31, 2025, AU$230.0 million of borrowings were outstanding under Facility B, with no borrowings outstanding under the NZ$ tranche of Facility B. There were no borrowings outstanding under Facility C and NZ$13.9 million of borrowings were outstanding under Facility D, which in aggregate amount to US$152.8 million of borrowings outstanding under the Premium Financing Debt Facility.

Dividends - Our board of directors determines our dividend policy. Our board of directors determines dividends on our common stock on a quarterly basis after considering our available cash from earnings, our anticipated cash needs and current conditions in the economy and financial markets.

In the three-month period ended March 31, 2025, we declared $167.2 million in cash dividends on our common stock, or $0.65 per common share, an 8% increase over the three-month period ended March 31, 2024. On April 30, 2025, we announced a quarterly dividend for second quarter 2025 of $0.65 per common share. This dividend level in 2025 will result in annualized net cash used by financing activities in 2025 of approximately $664.1 million (based on the number of outstanding shares as of March 31, 2025) or an anticipated increase in cash used of approximately $138.7 million compared to 2024. We make no assurances regarding the amount of any future dividend payments**.**

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Shelf Registration Statement - On February 12, 2024, we filed a shelf registration statement on Form S-3 with the SEC, registering the offer and sale from time to time, of an indeterminate amount of debt securities, guarantees, common stock, preferred stock, warrants, depositary shares, purchase contracts, or units. The availability of the potential liquidity under this shelf registration statement depends on investor demand, market conditions and other factors. We make no assurances regarding when, or if, we will issue any securities under this registration statement. On November 15, 2022, we filed a shelf registration statement on Form S-4 with the with the SEC, registering 7.0 million shares of our common stock that we may offer and issue from time to time in connection with future acquisitions of other businesses, assets or securities. At March 31, 2025, 5.5 million shares remained available for issuance under this registration statement. Please see the information set forth in “Investing Cash Flows - Acquisitions.”

Common Stock Repurchases - We have in place a common stock repurchase plan approved by our board of directors in July 2021, that authorizes the repurchase of up to $1.5 billion of common stock. During the three-month periods ended March 31, 2025 and 2024, we did not repurchase shares of our common stock. The plan authorizes the repurchase of our common stock at such times and prices, as we may deem advantageous, in transactions on the open market or in privately negotiated transactions. We are under no commitment or obligation to repurchase any particular number of shares, and the plan may be suspended at any time at our discretion. Management may consider repurchasing common stock during the remainder of 2025 to the extent that our available cash exceeds acquisition opportunities. Funding for share repurchases may come from a variety of sources, including cash from operations, short-term or long‑term borrowings under our Credit Agreement or other sources. See “Issuer Purchases of Equity Securities” below for more information regarding shares repurchased during the quarter.

Public Offering of Common Stock - On December 9, 2024, we entered into an Underwriting Agreement with Morgan Stanley & Co. LLC and BofA Securities, Inc., as representatives of the several underwriters listed thereto, pursuant to which we agreed to sell 30.4 million shares of our common stock for a public per share offering price of $280.00, for aggregate offering price of $8.5 billion. The offering closed on December 11, 2024 and 30.4 million shares of our common stock were issued for net proceeds, after underwriting discounts, of $8,347.0 million. We also granted the underwriters a 30-day option to purchase up to an additional 4.6 million shares of our common stock at the same price, which was exercised in full by the underwriters on January 6, 2025. The option closed on January 7, 2025 and 4.6 million shares of our common stock were issued for net proceeds, after underwriting discounts, of $1.252.0 million of cash. We expect to use the proceeds of this offering to fund a portion of the cash consideration payable in connection with the AssuredPartners acquisition and for other general corporate purposes including other acquisitions.

At-the-Market Equity Program - On March 14, 2024, we entered into an updated Equity Distribution Agreement with Morgan Stanley & Co. LLC, pursuant to which we may offer and sell, from time to time, up to 3,000,000 shares of our common stock through Morgan Stanley as sales agent. We intend to use the net proceeds of sales under this program to fund future acquisitions from time to time or for general corporate purposes. Pursuant to the agreement, shares may be sold by means of ordinary brokers’ transactions, including on the New York Stock Exchange, at market prices prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices, in block transactions, or as otherwise agreed upon by us and Morgan Stanley. During the quarter ended March 31, 2025, we did not sell shares of our common stock under the program.

Common Stock Issuances - Another source of liquidity to us is the issuance of our common stock pursuant to our stock option and employee stock purchase plans. Proceeds from the issuance of common stock under these plans for the three-month periods ended March 31, 2025 and 2024, were $82.7 million and $52.0 million, respectively. On May 10, 2022, our stockholders approved the 2022 Long-Term Incentive Plan (which we refer to as the LTIP), which replaced our previous stockholder-approved 2017 Long-Term Incentive Plan. All of our officers, employees and non-employee directors are eligible to receive awards under the LTIP. Awards that may be granted under the LTIP include non-qualified and incentive stock options, stock appreciation rights, restricted stock units and performance units, any or all of which may be made contingent upon the achievement of performance criteria. Stock options with respect to 9.9 million shares (less any shares of restricted stock issued under the LTIP - 2.1 million shares of our common stock were available for this purpose as of March 31, 2025) were available for grant under the LTIP at March 31, 2025. Our employee stock purchase plan allows our employees to purchase our common stock at 95% of its fair market value. Proceeds from the issuance of our common stock related to these plans have contributed favorably to net cash provided by financing activities in the three-month periods ended March 31, 2025 and 2024, and we believe this favorable trend will continue in the foreseeable future.

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 pretax 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 with the match paid 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 common stock of the Company. We expensed (net of plan forfeitures) $29.9 million and $26.1 million related to the plan in the three-month periods ended March 31, 2025 and 2024, respectively. During 2024, management determined the 5.0% employer

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matching contribution on eligible compensation to the 401(k) plan for the 2024 plan year to be funded with our common stock, which we funded in February 2025. During 2023, management determined the 5.0% employer matching contribution on eligible compensation to the 401(k) plan for the 2023 plan year to be funded with our common stock, which we funded in February 2024.

Outlook - We believe that we have sufficient capital and access to additional capital to meet our short- and long-term cash flow needs.

Critical Accounting Estimates

There have been no changes in our critical accounting estimates, which include revenue recognition, income taxes and intangible assets/earnout obligations, as discussed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Business Combinations and Dispositions

See Note 3 to the unaudited consolidated financial statements for a discussion of our business combinations during the three-month period ended March 31, 2025. We did not have any material dispositions during the three-month period ended March 31, 2025.

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