8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

July 27, 2017

Date of Report: (Date of earliest event reported)

ARTHUR J. GALLAGHER & CO.

(Exact name of registrant as specified in its charter)

Delaware	1-09761	36-2151613
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

2850 W. Golf Road, Rolling Meadows, Illinois 60008-4050, (630) 773-3800

(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 2.02. Results of Operations and Financial Condition

On July 27, 2017, Arthur J. Gallagher & Co. (the Company) issued a press release setting forth the company’s financial results for the quarter ended June 30, 2017 (the Earnings Release). A copy of the company’s press release is attached hereto as Exhibit 99.1.

Item 7.01. Regulation FD Disclosure

In connection with the filing of the Earnings Release, the Company made materials entitled “Supplemental Quarterly Data” and “CFO Commentary” available through the investor relations page of its website. The CFO Commentary includes certain estimates relating to 2017 results.

Item 9.01. Financial Statements and Exhibits

99.1 Press release, dated July 27, 2017, issued by Arthur J. Gallagher & Co.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		Arthur J. Gallagher & Co.
Date: July 27, 2017	By:	/s/ Douglas K. Howell
		Douglas K. Howell
		Vice President and Chief Financial Officer

Arthur J. Gallagher & Co.

Current Report On Form 8-K

Exhibit Index

Exhibit No.	Description
99.1	Press release, dated April 27, 2017, issued by Arthur J. Gallagher & Co.

EX-99.1

Exhibit 99.1

NEWS RELEASE

ARTHUR J. GALLAGHER & CO. ANNOUNCES

SECOND QUARTER 2017 FINANCIAL RESULTS

ROLLING MEADOWS, IL, July 27, 2017 — Arthur J. Gallagher & Co. (NYSE: AJG) today reported its financial results for the quarter ended June 30, 2017. Management will host a webcast conference call to discuss these results on Friday, July 28, 2017 at 9:00 a.m. ET/8:00 a.m. CT. To listen to the call, and for printer-friendly formats of this release and the “Supplemental Quarterly Data” and “CFO Commentary,” which may also be referenced during the call, please visit ajg.com/IR. These documents contain both GAAP and non-GAAP measures. Investors and other users of this information should read carefully the section entitled “Information Regarding Non-GAAP Measures” beginning on page 9.

Summary of Financial Results – Second Quarter

Reconciliations of non-GAAP measures begin on page 2

(Dollars in millions, except per share data)	2nd Q 2017						2nd Q 2016						Change
	Reported GAAP			Adjusted Non-GAAP			Reported GAAP			Adjusted Non-GAAP			Reported GAAP			Adjusted Non-GAAP
Brokerage Segment
Revenues	$	998.1		$	997.0		$	939.1		$	916.6			6	%		9	%
Organic revenues				$	941.6					$	903.8						4.2	%
Net earnings	$	139.5					$	114.9						21	%
Net earnings margin		14.0	%					12.2	%					+174 bpts
Adjusted EBITDAC				$	309.2					$	279.6						11	%
Adjusted EBITDAC margin					31.0	%					30.5	%					+51 bpts
Diluted net earnings per share	$	0.76		$	0.81		$	0.64		$	0.74			19	%		9	%
Risk Management Segment
Revenues	$	188.7		$	188.7		$	176.5		$	175.8			7	%		7	%
Organic revenues				$	185.4					$	175.6						5.6	%
Net earnings	$	14.4					$	13.9						4	%
Net earnings margin		7.6	%					7.9	%					-25 bpts
Adjusted EBITDAC				$	32.1					$	29.7						8	%
Adjusted EBITDAC margin					17.0	%					16.9	%					+12 bpts
Diluted net earnings per share	$	0.08		$	0.08		$	0.08		$	0.08			0	%		0	%
Corporate Segment
Diluted net earnings per share	$	0.11		$	0.14		$	0.12		$	0.14			-8	%		0	%
Total Company
Diluted net earnings per share	$	0.95		$	1.03		$	0.84		$	0.96			13	%		7	%

“We delivered another excellent quarter of operating performance and are optimistic about the remainder of the year. During the second quarter, we posted outstanding organic revenue growth, completed 9 tuck-in brokerage mergers, expanded margins and grew earnings per share,” said J. Patrick Gallagher, Jr., Chairman, President and CEO. “Our first half renewals, as well as our mid-year internal insurance rate survey, suggests P&C pricing is mostly stable. Almost two thirds of our survey respondents expect no significant change in the 2017 pricing environment. This continues to be an environment in which our talented production team will outperform.”

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Summary of Financial Results – Six Months Ended June 30, 2017

Reconciliations of non-GAAP measures begin on page 3

(Dollars in millions, except per share data)	6 Mths 2017						6 Mths 2016						Change
	Reported GAAP			Adjusted Non-GAAP			Reported GAAP			Adjusted Non-GAAP			Reported GAAP			Adjusted Non-GAAP
Brokerage Segment
Revenues	$	1,876.6		$	1,874.1		$	1,764.6		$	1,725.7			6	%		9	%
Organic revenues				$	1,757.3					$	1,697.8						3.5	%
Net earnings	$	217.6					$	180.8						20	%
Net earnings margin		11.6	%					10.3	%					+135 bpts
Adjusted EBITDAC				$	524.9					$	468.8						12	%
Adjusted EBITDAC margin					28.0	%					27.2	%					+84 bpts
Diluted net earnings per share	$	1.16		$	1.26		$	0.99		$	1.14			17	%		11	%
Risk Management Segment
Revenues	$	371.3		$	371.3		$	355.8		$	355.6			4	%		4	%
Organic revenues				$	367.9					$	355.2						3.6	%
Net earnings	$	28.7					$	28.9						-1	%
Net earnings margin		7.7	%					8.1	%					-39 bpts
Adjusted EBITDAC				$	63.3					$	61.7						3	%
Adjusted EBITDAC margin					17.1	%					17.4	%					-30 bpts
Diluted net earnings per share	$	0.16		$	0.16		$	0.16		$	0.17			0	%		-6	%
Corporate Segment
Diluted net loss per share	$	(0.06	)	$	0.01		$	(0.05	)	$	(0.01	)		-20	%		200	%
Total Company
Diluted net earnings per share	$	1.26		$	1.43		$	1.10		$	1.30			15	%		10	%

Quarter Ended June 30 Reported GAAP to Adjusted Non-GAAP Reconciliation:

																			Diluted Net
	Revenues						Net Earnings						EBITDAC						Earnings Per Share
Segment	2nd Q 17			2nd Q 16			2nd Q 17			2nd Q 16			2nd Q 17			2nd Q 16			2nd Q 17		2nd Q 16
	(in millions)						(in millions)						(in millions)
Brokerage, as reported	$	998.1		$	939.1		$	139.5		$	114.9		$	297.9		$	267.7		$	0.76	$	0.64
Gains on book sales		(1.1	)		(1.4	)		(0.8	)		(1.0	)		(1.1	)		(1.4	)		—		—
Acquisition integration		—			—			2.3			8.4			3.3			11.9			0.01		0.05
Workforce & lease termination		—			—			3.7			3.2			5.4			4.5			0.02		0.02
Acquisition related adjustments		—			—			3.7			8.0			3.7			1.8			0.02		0.04
Levelized foreign currency translation		—			(21.1	)		—			(2.2	)		—			(4.9	)		—		(0.01	)
Brokerage, as adjusted *		997.0			916.6			148.4			131.3			309.2			279.6			0.81		0.74
Risk Management, as reported		188.7			176.5			14.4			13.9			31.8			29.7			0.08		0.08
Workforce & lease termination		—			—			0.2			0.3			0.3			0.4			—		—
Levelized foreign currency translation		—			(0.7	)		—			(0.3	)		—			(0.4	)		—		—
Risk Management, as adjusted *		188.7			175.8			14.6			13.9			32.1			29.7			0.08		0.08
Corporate, as reported		376.6			311.5			26.5			26.9			(50.7	)		(30.9	)		0.11		0.12
Litigation settlement		—			—			4.4			4.4			5.6			5.5			0.02		0.02
Home office lease termination/move		—			—			1.8			—			3.0			—			0.01		—
Corporate, as adjusted *		376.6			311.5			32.7			31.3			(42.1	)		(25.4	)		0.14		0.14
Total Company, as reported	$	1,563.4		$	1,427.1		$	180.4		$	155.7		$	279.0		$	266.5		$	0.95	$	0.84
Total Company, as adjusted *	$	1,562.3		$	1,403.9		$	195.7		$	176.5		$	299.2		$	283.9		$	1.03	$	0.96
Total Brokerage & Risk
Management, as reported	$	1,186.8		$	1,115.6		$	153.9		$	128.8		$	329.7		$	297.4		$	0.84	$	0.72
Total Brokerage & Risk
Management, as adjusted *	$	1,185.7		$	1,092.4		$	163.0		$	145.2		$	341.3		$	309.3		$	0.89	$	0.82

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* For 2017, the pretax impact of the Brokerage Segment adjustments totals $12.9 million, with a corresponding adjustment to the provision for income taxes of $4.0 million relating to these items. The pretax impact of the Risk Management Segment adjustments totals $0.3 million, with a corresponding adjustment to the provision for income taxes of $0.1 million relating to these items. The pretax impact of the Corporate Segment adjustments totals $8.6 million, with a corresponding adjustment to the provision for income taxes of $2.4 million relating to these items. A detailed reconciliation of the 2017 and 2016 provision for income taxes is shown on page 13.

Six Months Ended June 30 Reported GAAP to Adjusted Non-GAAP Reconciliation:

	Revenues						Net Earnings						EBITDAC						Diluted Net Earnings Per Share
Segment	6 Mths 17			6 Mths 16			6 Mths 17			6 Mths 16			6 Mths 17			6 Mths 16			6 Mths 17			6 Mths 16
	(in millions)						(in millions)						(in millions)
Brokerage, as reported	$	1,876.6		$	1,764.6		$	217.6		$	180.8		$	505.9		$	444.5		$	1.16		$	0.99
Gains on book sales		(2.5	)		(3.6	)		(1.8	)		(2.5	)		(2.5	)		(3.6	)		(0.01	)		(0.01	)
Acquisition integration		—			—			4.3			18.4			6.2			26.1			0.02			0.10
Workforce & lease termination		—			—			6.4			4.3			9.3			6.1			0.04			0.02
Acquisition related adjustments		—			—			9.9			8.3			6.0			2.6			0.05			0.05
Levelized foreign currency translation		—			(35.3	)		—			(2.8	)		—			(6.9	)		—			(0.01	)
Brokerage, as adjusted *		1,874.1			1,725.7			236.4			206.5			524.9			468.8			1.26			1.14
Risk Management, as reported		371.3			355.8			28.7			28.9			62.8			60.7			0.16			0.16
Workforce & lease termination		—			—			0.3			0.6			0.5			0.9			—			0.01
Levelized foreign currency translation		—			(0.2	)		—			—			—			0.1			—			—
Risk Management, as adjusted *		371.3			355.6			29.0			29.5			63.3			61.7			0.16			0.17
Corporate, as reported		728.2			607.1			1.9			3.9			(101.9	)		(69.3	)		(0.06	)		(0.05	)
Litigation settlement		—			—			8.8			8.1			11.1			10.2			0.05			0.04
Home office lease termination/move		—			—			4.2			—			7.0			—			0.02			—
Corporate, as adjusted *		728.2			607.1			14.9			12.0			(83.8	)		(59.1	)		0.01			(0.01	)
Total Company, as reported	$	2,976.1		$	2,727.5		$	248.2		$	213.6		$	466.8		$	435.9		$	1.26		$	1.10
Total Company, as adjusted *	$	2,973.6		$	2,688.4		$	280.3		$	248.0		$	504.4		$	471.4		$	1.43		$	1.30
Total Brokerage & Risk Management, as reported	$	2,247.9		$	2,120.4		$	246.3		$	209.7		$	568.7		$	505.2		$	1.32		$	1.15
Total Brokerage & Risk Management, as adjusted *	$	2,245.4		$	2,081.3		$	265.4		$	236.0		$	588.2		$	530.5		$	1.42		$	1.31

* For 2017, the pretax impact of the Brokerage Segment adjustments totals $27.3 million, with a corresponding adjustment to the provision for income taxes of $8.5 million relating to these items. The pretax impact of the Risk Management Segment adjustments totals $0.5 million, with a corresponding adjustment to the provision for income taxes of $0.2 million relating to these items. The pretax impact of the Corporate Segment adjustments totals $18.1 million, with a corresponding adjustment to the provision for income taxes of $5.1 million relating to these items. A detailed reconciliation of the 2017 and 2016 provision for income taxes is shown on page 14.

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Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):

Organic Revenues (Non-GAAP)	2nd Q 17			2nd Q 16			Change			6 Mths 17			6 Mths 16			Change
Base Commissions and Fees
Commissions and fees, as reported	$	912.6		$	861.7			5.9	%	$	1,691.1		$	1,586.8			6.6	%
Less commissions and fees from acquisitions		(40.3	)		—						(87.3	)		—
Less disposed of operations		—			—						—			(1.4	)
Levelized foreign currency translation		—			(19.5	)					—			(32.4	)
Organic base commissions and fees	$	872.3		$	842.2			3.6	%	$	1,603.8		$	1,553.0			3.3	%
Supplemental Commissions
Supplemental commissions, as reported	$	41.5		$	38.6			7.5	%	$	76.0		$	71.5			6.3	%
Less supplemental commissions from acquisitions		—			—						(1.2	)		—
Less disposed of operations		—			(0.3	)					—			(0.4	)
Levelized foreign currency translation		—			(1.5	)					—			(2.9	)
Organic supplemental commissions	$	41.5		$	36.8			12.8	%	$	74.8		$	68.2			9.7	%
Contingent Commissions
Contingent commissions, as reported	$	29.5		$	25.1			17.5	%	$	82.9		$	80.3			3.2	%
Less contingent commissions from acquisitions		(1.7	)		—						(4.2	)		—
Less disposed of operations		—			(0.1	)					—			(2.9	)
Levelized foreign currency translation		—			(0.2	)					—			(0.8	)
Organic contingent commissions	$	27.8		$	24.8			12.1	%	$	78.7		$	76.6			2.7	%
Total reported commissions, fees, supplemental commissions and contingent commissions	$	983.6		$	925.4			6.3	%	$	1,850.0		$	1,738.6			6.4	%
Less commissions and fees from acquisitions		(42.0	)		—						(92.7	)		—
Less disposed of operations		—			(0.4	)					—			(4.7	)
Levelized foreign currency translation		—			(21.2	)					—			(36.1	)
Total organic commissions, fees, supplemental
commissions and contingent commissions	$	941.6		$	903.8			4.2	%	$	1,757.3		$	1,697.8			3.5	%

Of the 4.2% growth in total organic revenues for second quarter 2017, our domestic operations posted approximately 3.5% growth and international operations posted approximately 5.5% growth.

Acquisition Activity	2nd Q 17		2nd Q 16		6 Mths 17		6 Mths 16
Number of acquisitions closed		9		13		21		21
Estimated annualized revenues acquired (in millions)	$	30.3	$	40.4	$	92.8	$	70.4

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Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued) (dollars in millions):

Compensation Expense and Ratios		2nd Q 17			2nd Q 16			6 Mths 17			6 Mths 16
Compensation expense, as reported		$	547.8		$	518.2		$	1,073.3		$	1,011.1
Acquisition integration (1)			(2.6	)		(4.5	)		(3.7	)		(9.1	)
Workforce and lease termination related charges			(4.3	)		(2.5	)		(7.8	)		(3.8	)
Acquisition related adjustments			(3.7	)		(1.8	)		(6.0	)		(2.6	)
Levelized foreign currency translation			—			(11.5	)		—			(21.5	)
Compensation expense, as adjusted		$	537.2		$	497.9		$	1,055.8		$	974.1
Reported compensation expense ratios using reported
revenues on page 2 and 3	*		54.9	%		55.2	%		57.2	%		57.3	%
Adjusted compensation expense ratios using adjusted
revenues on page 2 and 3	*		53.9	%		54.3	%		56.3	%		56.5	%

* Reported second quarter compensation ratio was 0.3 pts lower than the same period in 2016. Adjusted second quarter compensation ratio was 0.4 pts lower than the same period in 2016. Both ratios were primarily impacted by savings in compensation related to headcount controls.

Operating Expense and Ratios		2nd Q 17			2nd Q 16			6 Mths 17			6 Mths 16
Operating expense, as reported		$	152.4		$	153.2		$	297.4		$	309.0
Acquisition integration (1)			(0.7	)		(7.4	)		(2.5	)		(17.0	)
Workforce and lease termination related charges			(1.1	)		(2.0	)		(1.5	)		(2.3	)
Levelized foreign currency translation			—			(4.7	)		—			(6.9	)
Operating expense, as adjusted		$	150.6		$	139.1		$	293.4		$	282.8
Reported operating expense ratios using reported
revenues on page 2 and 3	*		15.3	%		16.3	%		15.9	%		17.5	%
Adjusted operating expense ratios using adjusted
revenues on page 2 and 3	**		15.1%			15.2	%		15.7	%		16.4	%

* Reported second quarter operating expense ratio was 1.0 pts lower than the same period in 2016. This ratio was primarily impacted by lower integration costs such as technology and lease termination charges.

** Adjusted second quarter operating expense ratio was 0.1 pts lower than the same period in 2016. All items were essentially consistent with the prior period.

Net Earnings to Adjusted EBITDAC (Non-GAAP)	2nd Q 17			2nd Q 16			Change			6 Mths 17			6 Mths 16			Change
Net earnings, as reported	$	139.5		$	114.9			21.4	%	$	217.6		$	180.8			20.4	%
Provision for income taxes		73.0			63.3						112.6			97.4
Depreciation		16.1			14.4						31.0			28.4
Amortization		64.4			61.9						128.0			120.8
Change in estimated acquisition earnout payables		4.9			13.2						16.7			17.1
EBITDAC		297.9			267.7			11.3	%		505.9			444.5			13.8	%
Gains from books of business sales		(1.1	)		(1.4	)					(2.5	)		(3.6	)
Acquisition integration (1)		3.3			11.9						6.2			26.1
Acquisition related adjustments		3.7			1.8						6.0			2.6
Workforce and lease termination related charges		5.4			4.5						9.3			6.1
Levelized foreign currency translation		—			(4.9	)					—			(6.9	)
EBITDAC, as adjusted	$	309.2		$	279.6			10.6	%	$	524.9		$	468.8			12.0	%
Net earnings margin, as reported using reported
revenues on page 2 and 3		14.0	%		12.2	%		+174 bpts			11.6	%		10.3	%		+135 bpts
EBITDAC margin, as adjusted using adjusted
revenues on page 2 and 3		31.0	%		30.5	%		+51 bpts			28.0	%		27.2	%		+84 bpts

(1) Acquisition integration costs consist mostly of IT system conversion costs, professional fees and compensation related to certain of our large acquisitions outside the scope of our usual tuck-in strategy.

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Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):

Organic Revenues (Non-GAAP)		2nd Q 17			2nd Q 16			Change			6 Mths 17			6 Mths 16			Change
Fees	*		$186.7		$	176.3			5.9	%	$	367.5		$	353.6			3.9	%
International performance bonus fees			1.8			—						3.5			1.8
Fees as reported			188.5			176.3			6.9	%		371.0			355.4			4.4	%
Less fees from acquisitions			(3.1	)		—						(3.1	)		—
Levelized foreign currency translation			—			(0.7	)					—			(0.2	)
Organic fees	*		$185.4		$	175.6			5.6	%	$	367.9		$	355.2			3.6	%

* Organic fee growth was hampered by a law change in South Australia, which capped the time an injured worker can receive benefits. A shorter claim life also effectively reduced our revenues in the second quarter by $1.8 million which had an adverse impact on our organic growth of 1.0%. We expect a similar impact for the remaining two quarters of 2017.

Compensation Expense and Ratios		2nd Q 17			2nd Q 16			6 Mths 17			6 Mths 16
Compensation expense, as reported		$	110.4		$	104.0		$	218.2		$	209.5
Workforce and lease termination related charges			(0.3	)		(0.4	)		(0.5	)		(0.9	)
Levelized foreign currency translation			—			(0.2	)		—			(0.2	)
Compensation expense, as adjusted		$	110.1		$	103.4		$	217.7		$	208.4
Reported compensation expense ratios using reported
revenues on page 2 and 3	*		58.5	%		58.9	%		58.8	%		58.9	%
Adjusted compensation expense ratios using adjusted
revenues on page 2 and 3	*		58.4	%		58.8	%		58.6	%		58.6	%

* Reported and adjusted second quarter compensation ratios were 0.4 pts lower than the same period in 2016. Both ratios were primarily impacted by savings in compensation related to headcount controls.

Operating Expense and Ratios		2nd Q 17			2nd Q 16			6 Mths 17			6 Mths 16
Operating expense, as reported		$	46.5		$	42.8		$	90.3		$	85.6
Levelized foreign currency translation			—			(0.1	)		—			(0.1	)
Operating expense, as adjusted		$	46.5		$	42.7		$	90.3		$	85.5
Reported operating expense ratios using reported
revenues on page 2 and 3	*		24.6	%		24.3	%		24.3	%		24.1	%
Adjusted operating expense ratios using adjusted
revenues on page 2 and 3	*		24.6	%		24.3	%		24.3	%		24.0	%

* Reported and adjusted second quarter operating expense ratios were 0.3 pts higher than the same period in 2016. The increase is partially from ramp-up costs associated with new business wins in Australia. All other items were essentially consistent with the prior period.

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Risk Management Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued) (dollars in millions):

Net Earnings to Adjusted EBITDAC (Non-GAAP)	2nd Q 17			2nd Q 16			Change			6 Mths 17			6 Mths 16			Change
Net earnings, as reported	$	14.4		$	13.9			3.6	%	$	28.7		$	28.9			-0.7	%
Provision for income taxes		8.5			8.5						17.1			17.5
Depreciation		8.0			6.6						15.4			13.2
Amortization		0.7			0.7						1.4			1.1
Change in estimated acquisition earnout payables		0.2			—						0.2			—
EBITDAC		31.8			29.7			7.1	%		62.8			60.7			3.5	%
Workforce and lease termination related charges		0.3			0.4						0.5			0.9
Levelized foreign currency translation		—			(0.4	)					—			0.1
EBITDAC, as adjusted	$	32.1		$	29.7			8.1	%	$	63.3		$	61.7			2.6	%
Net earnings margin, as reported using reported
revenues on page 2 and 3		7.6	%		7.9	%		-25 bpts			7.7	%		8.1	%		-39 bpts
EBITDAC margin, as adjusted using adjusted
revenues on page 2 and 3		17.0	%		16.9	%		+12 bpts			17.1	%		17.4	%		-30 bpts

Corporate Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):

	2017									2016
	Pretax Loss			Income Tax Benefit			Net Earnings (Loss) Attributable to Controlling Interests			Pretax Loss			Income Tax Benefit			Net Earnings (Loss) Attributable to Controlling Interests
2nd Quarter
Interest and banking costs	$	(32.4	)	$	13.0		$	(19.4	)	$	(28.0	)	$	11.2		$	(16.8	)
Clean energy related (1)		(35.3	)		86.1			50.8			(24.4	)		73.6			49.2
Acquisition costs		(2.4	)		0.6			(1.8	)		(1.1	)		0.2			(0.9	)
Corporate		(16.1	)		12.8			(3.3	)		(10.0	)		3.9			(6.1	)
Litigation settlement		(5.6	)		1.2			(4.4	)		(5.5	)		1.1			(4.4	)
Home office lease termination/move		(3.0	)		1.2			(1.8	)		—			—			—
Reported 2nd quarter		(94.8	)		114.9			20.1			(69.0	)		90.0			21.0
Litigation settlement		5.6			(1.2	)		4.4			5.5			(1.1	)		4.4
Home office lease termination/move		3.0			(1.2	)		1.8			—			—			—
Adjusted 2nd quarter	$	(86.2	)	$	112.5		$	26.3		$	(63.5	)	$	88.9		$	25.4
Six Months
Interest and banking costs	$	(63.1	)	$	25.3		$	(37.8	)	$	(54.3	)	$	21.7		$	(32.6	)
Clean energy related (1)		(75.7	)		125.6			49.9			(58.3	)		104.8			46.5
Acquisition costs		(5.1	)		1.3			(3.8	)		(2.8	)		0.5			(2.3	)
Corporate		(27.9	)		21.3			(6.6	)		(18.6	)		6.2			(12.4	)
Litigation settlement		(11.1	)		2.3			(8.8	)		(10.2	)		2.1			(8.1	)
Home office lease termination/move		(7.0	)		2.8			(4.2	)		—			—			—
Reported six months		(189.9	)		178.6			(11.3	)		(144.2	)		135.3			(8.9	)
Litigation settlement		11.1			(2.3	)		8.8			10.2			(2.1	)		8.1
Home office lease termination/move		7.0			(2.8	)		4.2			—			—			—
Adjusted six months	$	(171.8	)	$	173.5		$	1.7		$	(134.0	)	$	133.2		$	(0.8	)

(1) Pretax earnings for the second quarter are presented net of amounts attributable to noncontrolling interests of $6.4 million in 2017 and $5.9 million in 2016. Pretax earnings for the six-month period are presented net of amounts attributable to noncontrolling interests of $13.2 million in 2017 and $12.8 million in 2016.

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Corporate Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (continued):

Interest and banking costs and debt - At June 30, 2017, Gallagher had $2,700.0 million of borrowings from private placements, $318.0 million of short-term borrowings under its line of credit facility and $100.0 million outstanding under a revolving loan facility that provides funding for premium finance receivables, which are fully collateralized by the underlying premiums held by insurance carriers, and as such are excluded from our debt covenant computations. Gallagher anticipates closing $398.0 million of private placement debt in early August 2017 to fund the repayment of debt maturing around such time and reduce the credit facility balance. Any such private placement notes have not been, and will not be, registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This earnings release shall not constitute an offer to sell or the solicitation of an offer to buy the notes.

Clean energy - Consists of the operating results related to our investments in 34 clean coal production plants and royalty income from clean coal licenses related to Chem-Mod LLC. Additional information regarding these results is available in the “CFO Commentary” at ajg.com/IR.

Acquisition costs - Consists mostly of external professional fees and other due diligence costs related to acquisitions.

Corporate - Consists of overhead allocations mostly related to corporate staff compensation and other corporate level activities. In the CFO commentary document as of June 13, 2017, we provided an estimate of our second quarter 2017 after-tax loss for this line ranging between $5.0 million and $6.0 million. As shown on the previous page, we actually reported a loss of $3.3 million. Most of the favorable variance occurred because of more income tax benefit from a new accounting standard for employee share-based compensation than we estimated in our June 2017 investor relations meeting.

Litigation Settlement - During the third quarter of 2015, Gallagher settled litigation against certain former U.K. executives and their advisors for a pretax gain of $31.0 million ($22.3 million net of costs and taxes). Incremental expenses that arose in connection with this matter resulted in quarterly after-tax charges being incurred through June 30, 2017.

Home Office Lease Termination/Move - During first quarter 2017, we relocated our corporate office headquarters to a nearby suburb of Chicago. Move-related after-tax charges were $1.8 million in the second quarter of 2017. Move related after-tax charges, including after-tax lease abandonment charges, are expected to total approximately $3.0 million in the third quarter of 2017.

Income Taxes

Gallagher allocates the provision for income taxes to its Brokerage and Risk Management segments using the local country statutory rates. Gallagher’s consolidated effective tax rate for the quarters ended June 30, 2017 and 2016 was (22.7)% and (13.2)%, respectively, which was lower than the statutory rate due to the amount of IRC Section 45 tax credits earned and the impact of the income tax benefit of stock compensation in second quarter 2017.

Webcast Conference Call

Gallagher will host a webcast conference call on Friday, July 28, 2017 at 9:00 a.m. ET/8:00 a.m. CT. To listen to this call, please go to ajg.com/IR. The call will be available for replay at such website for at least 90 days.

About Arthur J. Gallagher & Co.

Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Rolling Meadows, Illinois, has operations in 33 countries and offers client-service capabilities in more than 150 countries around the world through a network of correspondent brokers and consultants.

Cautionary Information

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words “anticipates,” “believes,” “contemplates,” “see,” “should,” “could,” “will,” “estimates,” “expects,” “intends,” “plans” and variations thereof and similar expressions, are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding (i) the amount of, and potential uses for, investment returns generated by Gallagher’s clean energy investments; (ii) our corporate income tax rate; (iii) anticipated future results or performance of any segment or the Company as a whole; (iv) the premium rate environment; (v) the economic environment; (vi) anticipated acquisition integration costs; and (vii) anticipated actions to be taken in connection with maturing debt.

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Gallagher’s actual results may differ materially from those contemplated by the forward-looking statements. Readers are therefore cautioned against relying on any of the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the following:

• Risks and uncertainties related to Gallagher’s clean energy investments, including uncertainties related to political and regulatory risks, such as potential actions by Congress or challenges by the IRS eliminating or reducing the availability of tax credits under IRC Section 45 retroactively and/or going forward; the ability to maintain and find co-investors; the potential for divergent business objectives by co-investors and other stakeholders; plant operational risks, including supply-chain risks; utilities’ future use of, or demand for, coal; the market price of coal; the costs of moving a clean coal plant; intellectual property litigation risks; and environmental risks - all of which could impact (i) and (ii) above; and

• Changes in worldwide and national economic conditions (including a possible economic downturn or recession in the U.K. because of Brexit); changes in premium rates and in insurance markets generally; changes in the insurance brokerage industry’s competitive landscape; and the uncertainties and challenges inherent in the acquisition integration process - all of which could impact (iii) - (vii) above.

Please refer to Gallagher’s filings with the SEC, including Item 1A, “Risk Factors,” of its Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for a more detailed discussion of these and other factors that could impact its forward-looking statements. Any forward-looking statement made by Gallagher in this press release speaks only as of the date on which it is made. Except as required by applicable law, Gallagher does not undertake to update the information included herein or the corresponding earnings release posted on Gallagher’s website.

Information Regarding Non-GAAP Measures

In addition to reporting financial results in accordance with GAAP, this press release provides information regarding EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, diluted net earnings per share, as adjusted (adjusted EPS), for the Brokerage and Risk Management segments, adjusted revenues, adjusted compensation and operating expenses, adjusted compensation expense ratio, adjusted operating expense ratio and organic revenue measures for each operating segment. These measures are not in accordance with, or an alternative to, the GAAP information provided in this press release. Gallagher’s management believes that these presentations provide useful information to management, analysts and investors regarding financial and business trends relating to Gallagher’s results of operations and financial condition. See further below for definitions and the reason each of these measures is useful to investors. Gallagher’s 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 provided by Gallagher should be used in addition to, but not as a substitute for, the GAAP information provided. As disclosed in its most recent Proxy Statement, beginning in first quarter 2017, Gallagher makes determinations regarding certain elements of executive officer compensation, performance share awards and annual cash incentive awards, partly on the basis of measures related to adjusted EBITDAC. Certain reclassifications have been made to the prior year amounts reported in this press release in order to conform them to the current year presentation.

Adjusted Non-GAAP presentation - Gallagher believes that the adjusted non-GAAP presentations of the current and prior year information, presented in this earnings release, provide stockholders and other interested persons with useful information regarding certain financial metrics of Gallagher that may assist such persons in analyzing Gallagher’s operating results as they develop a future earnings outlook for Gallagher. The after-tax amounts related to the adjustments were computed using the normalized effective tax rate for each respective period. See pages 13 and 14 for a reconciliation of the adjustments made to income taxes.

• Adjusted revenues and expenses - Revenues, compensation expense and operating expense, respectively, each adjusted to exclude the following:

• Net gains realized from sales of books of business, which are primarily net proceeds received related to sales of books of business and other divestiture transactions.

• Acquisition integration costs, which include costs related to certain of our large acquisitions, 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, extra lease space, duplicate services and external costs incurred to assimilate the acquisition with our IT related systems.

• Workforce related charges, which primarily include severance costs 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, which include change in estimated acquisition earnout payables adjustments, impacts of acquisition valuation true-ups, impairment charges and acquisition related compensation charges.

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• 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 periods in the prior year.

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

Non-GAAP Earnings Measures

• 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. These measures for the Brokerage and Risk Management segments provide a meaningful representation of Gallagher’s operating performance and, for the overall business, provide a meaningful way to measure its financial performance on an ongoing basis.

• Adjusted EBITDAC and Adjusted EBITDAC Margin - Adjusted EBITDAC is EBITDAC adjusted to exclude net gains realized from sales of books of business, acquisition integration costs, workforce related charges, lease termination related charges, acquisition related adjustments 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 Gallagher’s 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.

• Adjusted EPS for the Brokerage and Risk Management segments - Net earnings adjusted to exclude the after-tax impact of net gains realized from sales of books of business, acquisition integration costs, the impact of foreign currency translation, workforce related charges, lease termination related charges and acquisition related adjustments divided by diluted weighted average shares outstanding. This measure provides a meaningful representation of Gallagher’s operating performance (and as such should not be used as a measure of Gallagher’s liquidity), and 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 excludes the first twelve months of net commission and fee revenues generated from acquisitions and the net commission and fee revenues related to operations disposed of in each year presented. These commissions and fees are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of Gallagher in both the current and prior year. In addition, change in base commission and fee revenue organic growth excludes the period-over-period impact of foreign currency translation. For the Risk Management segment, organic change in fee revenues excludes the first twelve months of fee revenues generated from acquisitions and the fee revenues related to operations disposed of in each year presented. In addition, change in organic growth excludes the period-over-period impact of foreign currency translation to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability or are due to the limited-time nature of these revenue sources.

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. Gallagher has historically viewed organic revenue growth as an important indicator when assessing and evaluating the performance of its Brokerage and Risk Management segments. Gallagher also believes that using this non-GAAP measure allows readers of our financial statements to measure, analyze and compare the growth from its Brokerage and Risk Management segments in a meaningful and consistent manner.

Reconciliation of Non-GAAP Information Presented to GAAP Measures - This press release includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on pages 11 and 12), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on pages 2 and 3), for organic revenue measures (on pages 4 and 6, respectively, for the Brokerage and Risk Management segments), for adjusted compensation and operating expenses and adjusted EBITDAC margin (on pages 5, 6, and 7, respectively, for the Brokerage and Risk Management segments). Reported compensation and operating expense ratios can also be found in the “Supplemental Quarterly Data” available at ajg.com/IR.

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Arthur J. Gallagher & Co.

Reported Statement of Earnings and EBITDAC - 2nd Qtr Ended June 30,

(Unaudited - in millions except per share, percentage and workforce data)

Brokerage Segment	2nd Q Ended June 30, 2017			2nd Q Ended June 30, 2016			6 Mths Ended June 30, 2017			6 Mths Ended June 30, 2016
Commissions	$	690.2		$	663.4		$	1,280.7		$	1,229.4
Fees		222.4			198.3			410.4			357.4
Supplemental commissions		41.5			38.6			76.0			71.5
Contingent commissions		29.5			25.1			82.9			80.3
Investment income and gains realized on books of business sales		14.5			13.7			26.6			26.0
Revenues		998.1			939.1			1,876.6			1,764.6
Compensation		547.8			518.2			1,073.3			1,011.1
Operating		152.4			153.2			297.4			309.0
Depreciation		16.1			14.4			31.0			28.4
Amortization		64.4			61.9			128.0			120.8
Change in estimated acquisition earnout payables		4.9			13.2			16.7			17.1
Expenses		785.6			760.9			1,546.4			1,486.4
Earnings before income taxes		212.5			178.2			330.2			278.2
Provision for income taxes		73.0			63.3			112.6			97.4
Net earnings		139.5			114.9			217.6			180.8
Net earnings (loss) attributable to noncontrolling interests		2.1			(0.2	)		7.4			4.3
Net earnings attributable to controlling interests	$	137.4		$	115.1		$	210.2		$	176.5
EBITDAC
Net earnings	$	139.5		$	114.9		$	217.6		$	180.8
Provision for income taxes		73.0			63.3			112.6			97.4
Depreciation		16.1			14.4			31.0			28.4
Amortization		64.4			61.9			128.0			120.8
Change in estimated acquisition earnout payables		4.9			13.2			16.7			17.1
EBITDAC	$	297.9		$	267.7		$	505.9		$	444.5
Risk Management Segment	2nd Q Ended June 30, 2017			2nd Q Ended June 30, 2016			6 Mths Ended June 30, 2017			6 Mths Ended June 30, 2016
Fees	$	188.5		$	176.3		$	371.0		$	355.4
Investment income		0.2			0.2			0.3			0.4
Revenues		188.7			176.5			371.3			355.8
Compensation		110.4			104.0			218.2			209.5
Operating		46.5			42.8			90.3			85.6
Depreciation		8.0			6.6			15.4			13.2
Amortization		0.7			0.7			1.4			1.1
Change in estimated acquisition earnout payables		0.2			—			0.2			—
Expenses		165.8			154.1			325.5			309.4
Earnings before income taxes		22.9			22.4			45.8			46.4
Provision for income taxes		8.5			8.5			17.1			17.5
Net earnings		14.4			13.9			28.7			28.9
Net earnings attributable to noncontrolling interests		—			—			—			—
Net earnings attributable to controlling interests	$	14.4		$	13.9		$	28.7		$	28.9
EBITDAC
Net earnings	$	14.4		$	13.9		$	28.7		$	28.9
Provision for income taxes		8.5			8.5			17.1			17.5
Depreciation		8.0			6.6			15.4			13.2
Amortization		0.7			0.7			1.4			1.1
Change in estimated acquisition earnout payables		0.2			—			0.2			—
EBITDAC	$	31.8		$	29.7		$	62.8		$	60.7
Corporate Segment	2nd Q Ended June 30, 2017			2nd Q Ended June 30, 2016			6 Mths Ended June 30, 2017			6 Mths Ended June 30, 2016
Revenues from consolidated clean coal facilities	$	366.3		$	301.5		$	706.6		$	583.5
Royalty income from clean coal licenses		10.3			10.8			22.2			23.9
Loss from unconsolidated clean coal facilities		(0.2	)		(0.4	)		(0.6	)		(0.7	)
Other net (losses) revenues		0.2			(0.4	)		—			0.4
Revenues		376.6			311.5			728.2			607.1
Cost of revenues from consolidated clean coal facilities		397.1			325.0			764.0			629.4
Compensation		17.5			8.8			41.8			32.5
Operating		12.7			8.6			24.3			14.5
Interest		31.6			27.2			61.5			53.0
Depreciation		6.1			5.0			13.3			9.1
Expenses		465.0			374.6			904.9			738.5
Loss before income taxes		(88.4	)		(63.1	)		(176.7	)		(131.4	)
Benefit for income taxes		(114.9	)		(90.0	)		(178.6	)		(135.3	)
Net earnings		26.5			26.9			1.9			3.9
Net earnings attributable to noncontrolling interests		6.4			5.9			13.2			12.8
Net earnings (loss) attributable to controlling interests	$	20.1		$	21.0		$	(11.3	)	$	(8.9	)
EBITDAC
Net earnings	$	26.5		$	26.9		$	1.9		$	3.9
Benefit for income taxes		(114.9	)		(90.0	)		(178.6	)		(135.3	)
Interest		31.6			27.2			61.5			53.0
Depreciation		6.1			5.0			13.3			9.1
EBITDAC	$	(50.7	)	$	(30.9	)	$	(101.9	)	$	(69.3	)

See “Information Regarding Non-GAAP Measures” on page 9 of 14.

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Arthur J. Gallagher & Co.

Reported Statement of Earnings and EBITDAC - 2nd Qtr Ended June 30,

(Unaudited - in millions except share and per share data)

Total Company	2nd Q Ended June 30, 2017			2nd Q Ended June 30, 2016			6 Mths Ended June 30, 2017			6 Mths Ended June 30, 2016
Commissions	$	690.2		$	663.4		$	1,280.7		$	1,229.4
Fees		410.9			374.6			781.4			712.8
Supplemental commissions		41.5			38.6			76.0			71.5
Contingent commissions		29.5			25.1			82.9			80.3
Investment income and gains realized on books of business sales		14.7			13.9			26.9			26.4
Revenues from clean coal activities		376.4			311.9			728.2			606.7
Other net (losses) revenues—Corporate		0.2			(0.4	)		—			0.4
Revenues		1,563.4			1,427.1			2,976.1			2,727.5
Compensation		675.7			631.0			1,333.3			1,253.1
Operating		211.6			204.6			412.0			409.1
Cost of revenues from clean coal activities		397.1			325.0			764.0			629.4
Interest		31.6			27.2			61.5			53.0
Depreciation		30.2			26.0			59.7			50.7
Amortization		65.1			62.6			129.4			121.9
Change in estimated acquisition earnout payables		5.1			13.2			16.9			17.1
Expenses		1,416.4			1,289.6			2,776.8			2,534.3
Earnings before income taxes		147.0			137.5			199.3			193.2
Benefit for income taxes		(33.4	)		(18.2	)		(48.9	)		(20.4	)
Net earnings		180.4			155.7			248.2			213.6
Net earnings attributable to noncontrolling interests		8.5			5.7			20.6			17.1
Net earnings attributable to controlling interests	$	171.9		$	150.0		$	227.6		$	196.5
Diluted net earnings per share	$	0.95		$	0.84		$	1.26		$	1.10
Dividends declared per share	$	0.39		$	0.38		$	0.78		$	0.76
EBITDAC
Net earnings	$	180.4		$	155.7		$	248.2		$	213.6
Benefit for income taxes		(33.4	)		(18.2	)		(48.9	)		(20.4	)
Interest		31.6			27.2			61.5			53.0
Depreciation		30.2			26.0			59.7			50.7
Amortization		65.1			62.6			129.4			121.9
Change in estimated acquisition earnout payables		5.1			13.2			16.9			17.1
EBITDAC	$	279.0		$	266.5		$	466.8		$	435.9

Arthur J. Gallagher & Co.

Consolidated Balance Sheet

(Unaudited - in millions except per share data)

	June 30, 2017			Dec 31, 2016
Cash and cash equivalents	$	587.8		$	545.5
Restricted cash		1,481.1			1,392.1
Premiums and fees receivable		2,374.2			1,844.8
Other current assets		664.1			633.7
Total current assets		5,107.2			4,416.1
Fixed assets—net		387.6			377.6
Deferred income taxes (includes tax credit carryforwards of $552.9 in 2017 and $477.9 in 2016)		861.9			796.5
Other noncurrent assets		561.3			504.3
Goodwill—net		3,989.0			3,767.8
Amortizable intangible assets—net		1,662.6			1,627.3
Total assets	$	12,569.6		$	11,489.6
Premiums payable to insurance and reinsurance companies	$	3,546.4		$	2,996.1
Accrued compensation and other accrued liabilities		711.1			772.1
Unearned fees		74.0			69.0
Other current liabilities		58.5			70.9
Premium financing debt		100.0			125.6
Corporate related borrowings—current		368.0			578.0
Total current liabilities		4,858.0			4,611.7
Corporate related borrowings—noncurrent		2,644.8			2,144.6
Other noncurrent liabilities		1,156.8			1,077.5
Total liabilities		8,659.6			7,833.8
Stockholders’ equity:
Common stock—issued and outstanding		180.2			178.3
Capital in excess of par value		3,323.5			3,265.5
Retained earnings		1,002.9			916.4
Accumulated other comprehensive loss		(661.9	)		(763.6	)
Total controlling interests stockholders’ equity		3,844.7			3,596.6
Noncontrolling interests		65.3			59.2
Total stockholders’ equity		3,910.0			3,655.8
Total liabilities and stockholders’ equity	$	12,569.6		$	11,489.6

See “Information Regarding Non-GAAP Measures” on page 9 of 14.

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Arthur J. Gallagher & Co.

Other Information

(Unaudited - data is rounded where indicated)

OTHER INFORMATION	2nd Q Ended June 30, 2017		2nd Q Ended June 30, 2016		6 Mths Ended June 30, 2017		6 Mths Ended June 30, 2016
Basic weighted average shares outstanding (000s)		179,860		177,415		179,375		177,226
Diluted weighted average shares outstanding (000s)		181,609		178,272		181,106		177,965
Number of common shares outstanding at end of period (000s)						180,164		177,031
Workforce at end of period (includes acquisitions):
Brokerage						19,425		18,278
Risk Management						5,781		5,480
Total Company						25,935		24,447

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

(Unaudited - in millions except share and per share data)

	Earnings (Loss) Before Income Taxes			Provision (Benefit) for Income Taxes			Net Earnings			Net Earnings (Loss) Attributable to Noncontrolling Interests			Net Earnings (Loss) Attributable to Controlling Interests			Diluted Net Earnings (Loss) per Share
2nd Q Ended June 30, 2017
Brokerage, as reported	$	212.5		$	73.0		$	139.5		$	2.1		$	137.4		$	0.76
Gains on book sales		(1.1	)		(0.3	)		(0.8	)		—			(0.8	)		—
Acquisition integration		3.3			1.0			2.3			—			2.3			0.01
Workforce & lease termination		5.4			1.7			3.7			—			3.7			0.02
Acquisition related adjustments		5.3			1.6			3.7			—			3.7			0.02
Brokerage, as adjusted	$	225.4		$	77.0		$	148.4		$	2.1		$	146.3		$	0.81
Risk Management, as reported	$	22.9		$	8.5		$	14.4		$	—		$	14.4		$	0.08
Workforce & lease termination		0.3			0.1			0.2			—			0.2			—
Risk Management, as adjusted	$	23.2		$	8.6		$	14.6		$	—		$	14.6		$	0.08
Corporate, as reported	$	(88.4	)	$	(114.9	)	$	26.5		$	6.4		$	20.1		$	0.11
Litigation settlement		5.6			1.2			4.4			—			4.4			0.02
Home office lease termination/move		3.0			1.2			1.8			—			1.8			0.01
Corporate, as adjusted	$	(79.8	)	$	(112.5	)	$	32.7		$	6.4		$	26.3		$	0.14
2nd Q Ended June 30, 2016
Brokerage, as reported	$	178.2		$	63.3		$	114.9		$	(0.2	)	$	115.1		$	0.64
Gains on book sales		(1.4	)		(0.4	)		(1.0	)		—			(1.0	)		—
Acquisition integration		11.9			3.5			8.4			—			8.4			0.05
Workforce & lease termination		4.5			1.3			3.2			—			3.2			0.02
Acquisition related adjustments		11.3			3.3			8.0			—			8.0			0.04
Levelized foreign currency translation		(3.1	)		(0.9	)		(2.2	)		—			(2.2	)		(0.01	)
Brokerage, as adjusted	$	201.4		$	70.1		$	131.3		$	(0.2	)	$	131.5		$	0.74
Risk Management, as reported	$	22.4		$	8.5		$	13.9		$	—		$	13.9		$	0.08
Workforce & lease termination		0.4			0.1			0.3			—			0.3			—
Levelized foreign currency translation		(0.4	)		(0.1	)		(0.3	)		—			(0.3	)		—
Risk Management, as adjusted	$	22.4		$	8.5		$	13.9		$	—		$	13.9		$	0.08
Corporate, as reported	$	(63.1	)	$	(90.0	)	$	26.9		$	5.9		$	21.0		$	0.12
Litigation settlement		5.5			1.1			4.4			—			4.4			0.02
Corporate, as adjusted	$	(57.6	)	$	(88.9	)	$	31.3		$	5.9		$	25.4		$	0.14

See “Information Regarding Non-GAAP Measures” on page 9 of 14.

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Reconciliation of Non-GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share (Unaudited) - Continued

(Unaudited - in millions except share and per share data)

	Earnings (Loss) Before Income Taxes			Provision (Benefit) for Income Taxes			Net Earnings			Net Earnings (Loss) Attributable to Noncontrolling Interests		Net Earnings (Loss) Attributable to Controlling Interests			Diluted Net Earnings (Loss) per Share
6 Months Ended June 30, 2017
Brokerage, as reported	$	330.2		$	112.6		$	217.6		$	7.4	$	210.2		$	1.16
Gains on book sales		(2.5	)		(0.7	)		(1.8	)		—		(1.8	)		(0.01	)
Acquisition integration		6.2			1.9			4.3			—		4.3			0.02
Workforce & lease termination		9.3			2.9			6.4			—		6.4			0.04
Acquisition related adjustments		14.3			4.4			9.9			—		9.9			0.05
Brokerage, as adjusted	$	357.5		$	121.1		$	236.4		$	7.4	$	229.0		$	1.26
Risk Management, as reported	$	45.8		$	17.1		$	28.7		$	—	$	28.7		$	0.16
Workforce & lease termination		0.5			0.2			0.3			—		0.3			—
Risk Management, as adjusted	$	46.3		$	17.3		$	29.0		$	—	$	29.0		$	0.16
Corporate, as reported	$	(176.7	)	$	(178.6	)	$	1.9		$	13.2	$	(11.3	)	$	(0.06	)
Litigation settlement		11.1			2.3			8.8			—		8.8			0.05
Home office lease termination/move		7.0			2.8			4.2			—		4.2			0.02
Corporate, as adjusted	$	(158.6	)	$	(173.5	)	$	14.9		$	13.2	$	1.7		$	0.01
6 Months Ended June 30, 2016
Brokerage, as reported	$	278.2		$	97.4		$	180.8		$	4.3	$	176.5		$	0.99
Gains on book sales		(3.6	)		(1.1	)		(2.5	)		—		(2.5	)		(0.01	)
Acquisition integration		26.1			7.7			18.4			—		18.4			0.10
Workforce & lease termination		6.1			1.8			4.3			—		4.3			0.02
Acquisition related adjustments		11.8			3.5			8.3			—		8.3			0.05
Levelized foreign currency translation		(4.0	)		(1.2	)		(2.8	)		—		(2.8	)		(0.01	)
Brokerage, as adjusted	$	314.6		$	108.1		$	206.5		$	4.3	$	202.2		$	1.14
Risk Management, as reported	$	46.4		$	17.5		$	28.9		$	—	$	28.9		$	0.16
Workforce & lease termination		0.9			0.3			0.6			—		0.6			0.01
Levelized foreign currency translation		0.1			0.1			—			—		—			—
Risk Management, as adjusted	$	47.4		$	17.9		$	29.5		$	—	$	29.5		$	0.17
Corporate, as reported	$	(131.4	)	$	(135.3	)	$	3.9		$	12.8	$	(8.9	)	$	(0.05	)
Litigation settlement		10.2			2.1			8.1			—		8.1			0.04
Corporate, as adjusted	$	(121.2	)	$	(133.2	)	$	12.0		$	12.8	$	(0.8	)	$	(0.01	)

See “Information Regarding Non-GAAP Measures” on page 9 of 14.

Contact:

Ray Iardella

Vice President - Investor Relations

630-285-3661 or ray_iardella@ajg.com

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