AJG · 10-Q · 2026Q2 · Full report

Operating Expense Trends

Arthur J. Gallagher & Co. · 2026-08-05 · Importance 57 · Surprise 50 · No source text

Six-month 2026 brokerage compensation expense increased $1,085 million to $4,228 million, primarily from $897 million of acquisition-related compensation, $105 million supporting organic growth, $42 million of acquisition integration costs, and $40 million of higher earnout adjustments. The reported compensation expense ratio increased to 54.2% from 51.5%, while the adjusted ratio increased to 51.0% from 48.8%. Brokerage operating expense increased $342 million, driven by $228 million of acquired-business expenses, $73 million of acquisition integration costs, $30 million of technology investments, and $11 million of workforce and lease termination charges. The reported operating expense ratio rose to 13.6% from 11.7%, and the adjusted ratio rose to 12.0% from 11.2%.

Key facts

• Reported compensation expense for the three-month period ended June 30, 2026: $2,017 million; for same period 2025: $1,526 million; compensation expense, as adjusted: $1,865 million (2026) and $1,428 million (2025). source
• Reported compensation expense for the six-month period ended June 30, 2026: $4,228 million; for same period 2025: $3,143 million; compensation expense, as adjusted: $3,965 million (2026) and $3,000 million (2025). source
• For the three-month period ended June 30, 2026, the pretax impact of adjustments for the brokerage, risk management and corporate segments totals $505 million, $12 million and $33 million, respectively, and corresponding adjustment to the provision (benefit) for income taxes of $130 million, $3 million and ($7) million, respectively. source
• For the six-month period ended June 30, 2026, the pretax impact of adjustments for the brokerage, risk management and corporate segments totals $936 million, $27 million and $63 million, respectively, and corresponding adjustment to the provision (benefit) for income taxes of $241 million, $7 million and ($27) million, respectively. source
• Reported operating expense for the six-month period ended June 30, 2026 increased by $342 million compared to same period in 2025, primarily due to $228 million from acquisitions, $73 million acquisition integration costs, $30 million technology investments, and $11 million workforce and lease termination charges. source
• Reported operating expense for the three-month period ended June 30, 2026 increased by $168 million compared to same period in 2025, primarily due to $113 million from acquisitions, $39 million acquisition integration, $10 million workforce and lease termination charges, and $6 million technology investments. source
• We wrote off $21 million and $22 million of amortizable assets during the three and six-month periods ended June 30, 2026, respectively, and wrote off $41 million of amortizable assets during the six-month period ended June 30, 2025. source
• The $63 million increase in compensation expense for the six-month period ended June 30, 2026 compared to the same period in 2025 was primarily due to higher base and incentive compensation and employee benefit costs - $43 million, compensation associated with acquisitions completed in the twelve-month period ended June 30, 2026 - $18 million, acquisition earnout related adjustments - $7 million, partially offset by lower workforce and lease termination related charges - $3 million, and acquisition integration costs - $2 million. source

Impact estimates