AJG · 10-Q · 2026Q3 · Full report

Operating Expense Trends

Arthur J. Gallagher & Co. · 2026-11-05 · Importance 53 · Surprise 48 · In source text

Brokerage compensation expense increased $1.365 billion, or approximately 28%, in the nine months ended September 30, 2026, primarily reflecting $1.096 billion from acquisitions, $133 million in base compensation supporting organic growth, $65 million of acquisition integration costs, and $55 million of increased acquisition earnout adjustments. Brokerage operating expense rose $416 million, or approximately 36%, with $276 million from acquisitions, $87 million of acquisition integration costs, and $44 million of additional technology investment. For the quarter, operating expense increased $74 million, including $48 million of acquisition-related expense, $14 million of integration costs, and $14 million of technology investment. The nine-month reported compensation expense ratio rose to 54.6% from 53.1%, while the adjusted ratio increased to 51.1% from 50.2%.

Key facts

• Brokerage compensation expense increased $1,365 million in the first nine months of 2026; $1,096 million was associated with acquisitions completed in the prior 12 months, $133 million with base compensation increases supporting organic growth, $65 million with acquisition integration costs, $55 million with increased acquisition earnout adjustments and $16 million with workforce and lease termination charges. source
• Brokerage operating expense increased $416 million in the first nine months of 2026, primarily due to $276 million of expenses from acquisitions completed in the prior 12 months, $87 million of acquisition integration costs, $44 million of additional technology investment and $9 million of workforce and lease termination charges. source
• Brokerage compensation expense increased $280 million in the third quarter of 2026; $199 million was associated with acquisitions completed in the prior 12 months, $28 million with base compensation increases to support organic growth, $23 million with acquisition integration costs, $15 million with increased acquisition earnout adjustments and $15 million with workforce and lease termination charges. source
• Arthur J. Gallagher & Co. initiated a process to fully terminate its defined benefit pension plan in 2025 and completed the termination process in the second quarter of 2026 without making additional plan funding. source
• Corporate operating expense in the nine months ended September 30, 2026 included $49 million of external acquisition-related professional and due diligence costs, including $36 million of transaction-related costs, and $102 million of other corporate and clean-energy-related expenses. source
• Risk management segment effective tax rates were 26.5% and 26.6% for the three months ended September 30, 2026 and 2025, and 26.6% in both nine-month periods; the company anticipates an adjusted effective tax rate of approximately 25.0% to 27.0% in future periods. source
• In the second quarter of 2026, Arthur J. Gallagher & Co. completed its defined benefit pension plan termination and recognized a non-cash pretax operating expense loss of approximately $17 million, with no additional funding to the plan. source
• Brokerage operating expense increased $74 million in the third quarter of 2026, primarily due to $48 million of expenses from acquisitions completed in the prior 12 months, $14 million of acquisition integration costs and $14 million of technology investment, partly offset by a $2 million decrease in workforce and lease termination charges. source

Impact estimates