dealraker

Roaring back. Do believe I read and listened to CSX state "We were understaffed and lost business." BNSF has the best model and the best management in my view. https://seekingalpha.com/news/4058690-union-pacific-loses-major-intermodal-contract-rival

Some forty years ago I began to acknowledge my own false bravado as a sustainable investment model. For me, as opposed to Parsad (who I both admire and support as to his view here), I'm unable to heavily overweight new positions as to my total investments particularly when it involves selling in a taxable account and paying massive tax. I did, and it largely came from processing Parsad's message to me, wipe out my retirement account and go to a more condensed portfolio. The outcome? Simply fantastic. But what I am getting to is I think overall the China game is false bravado. It is fine that Charlie Munger could go here, but few are like he was. One of my insights as to this is reading British/English history, particularly the Wars of the Roses era of absolute gyrating politics, the behavior of those taking sides and simply how fragile both beliefs and bravo was. One shout in the field during crisis and everybody ran...and I mean everybody. I got out of debt and the insurance business in 1994 and I pledged on my knees to my inner self never to do it again. "It" involved getting to know myself. After acknowledging to myself who I am? Amazing stuff came. Best with China is to know yourself most of all. Who are you and what are you going to do with all the mouthing, threats, and crazy beliefs surely coming as to it all. That said, I'll wager a boom upwards at some point too. Castanza too though has a valid point that the US jargon is in game too. That jargon is going to ratchet up intermittently even if those chanting are in business and making money there. Count on it. Life is great...if you can stand it!

In 1999 one of my cousins in the builders supply/millwork business went with me to the Berkshire annual meeting. Jerry just delighted in a very upbeat way in reading and watching Charlie Munger. It was so special that after the meeting Munger was standing behind a table at the jewelry area (so too was Buffett) and I watched Jerry go up to meet him. The two talked for several minutes. So if you think Munger is all down and unhappy maybe it is a lack of connection to what makes some people thrive. I'll sit on the porch of an old farmhouse on Sunday afternoon soon and I'm going to remember to ask Jerry what he so much enjoyed during that discussion with Munger--- because I've not seen Jerry so giddy ever as he was after that interaction with CM!

Very interesting comment. So you think a guy with the IQ and brilliance of Munger is supposed to sit around being happy? I live with two somewhat autistic people (my wife and one of many nephews) who are very fulfilled but "happy" isn't one of their dominating moods...maybe somewhat affected by one of them having a 160 IQ. Ever heard about Charlie's lakehouses at Star Island? There are thee of them and I do believe Mr. Munger physically built a lot of it all.

I had my North Carolina General Contractors License before I finished grad school and built my house here on the waterfront in 1980. I have added to it a couple of times since and it is plenty big at 2600 sq ft and a full basement. We own 30 acres across the street and with my nephew (who will inherit this house) we own half of another almost 250 acres. The big tract across the street has an old house and trails on it with about 1/3 mile of waterfront. The house we live in is very much a reflection of the chill-out life we've chosen, it is white cedar with no stain or paint, with high end windows and doors (so we don't have to mess with them over time), wood decks, outdoor (under a roof) pool table, and "tree house" deck right next to the water about 25 feet above the water where I am most of the time in the April to November good weather. It faces south so we are warm in the winter and get the terrific southwest wind in the summer. Everything in the house is original, bathrooms and all else very dated but functional. They'll likely never change although we've discussed a walk in shower which for some reason we didn't do. 3 bedrooms and 3 baths, a sort of terrific kitchen and den areas. I broke the building code and restrictions building the house (my cousins developed this property so it was kind of the fun discussion they often embarrassed me with) by being 45 feet from the water (code is 75 feet) but I left all the trees so you can barely see the house from the water. An Air Nautique wakeboard boat with a boat ramp and Marshall 22 Catboat sits year round at the dock. Angela and I use the boats a bunch, we both wakeboard and generally motor (Kubota 3 cylinder) the Catboat out to dinner and such. Great neighbors mostly our age or about. Life...NC style. Had a beach sound front home for years and the happiest day of my life was when the deed was no longer in my name!

Angela unfortunately has both an ear infection and bronchitis, bad bronchitis, so our "trip" is less active than we'd hoped. We are out on Bald Head Island and also spending three additional nights in Southport, NC. We do a trip about every six weeks where we stay somewhere for a few days to a couple of weeks. Not all are far away or in other countries though. This guy https://www.legacy.com/us/obituaries/greensboro/name/marshall-johnson-obituary?id=16271917 as GFP states, operated in Greensboro, NC and oh lordy what a life he had as far as investing given it was truly off-beat and unique. But he had all his clients in Berkshire early on. Often it is hard for people to grasp that there are those around you, you'll likely not know them, who have owned stocks like Berkshire for a long time. Marshall Johnson ran McDaniel Lewis and Co (McDaniel Lewis, the man, was Marshall's father-in-law) and I worked for him for two years until others convinced me to take a flyer into the insurance business. Marshall made a market in smaller southeast otc banks and insurance companies. For instance, while I was there as I've written before, one day I go in and Marshall says, "Charlie, we need to immediately update the spread sheet for First Citizens NC as that 'crackerjack' Warren Buffett has bought a slug of FCNCA from High Point (NC) Bank and Trust at half of book value." Marshall also represented High Point Bank and Trust and he has brokered that deal. So on an electric typewriter using a lot of white-out I updated the spread sheet on legal paper size for FCNCA. By the way there was also First Citizens SC, a completely separate bank, run and controlled by the same Holding family. FCNCA today continues to thrive by the way and I'll bet you a plug nickel Buffett didn't sell all his stock personally. I have no knowledge of that, it is just a guess. So my dad, who played both ways for Duke (his image is on the column of Walace Wade Statium holding the Sugar Bowl) when Duke beat Alabama in the Sugar Bowl, was the least interested in business man you'd ever meet. He was 20% owner of the local newspaper, other brothers and his mother owned the remaining stock, and he was publisher and editor. (The paper was later sold to the NY Times). Marshall handled my dad's and all his brothers stock investments. Interestingly, all his brothers at one time owned Berkshire stock, but either they or their children sold of course. I do remember most of his brothers (they all outlived dad by years) discussing tax free bonds so that's likely where they went to "make it out of this world" or whatever. I assure you Marshall didn't lead that parade though! Dad died young, Mom died years previously, so Central Carolina Bank and Trust (my mother's family thingy, her father was mayor of Durham, NC) held the stocks in a trust until I was 30 and Berk was one of them. So it is a few years later when I'm working for Marshall, I have stock in Berkshire, and of course I'm clueless as to who Warren Buffett is. Marshall's training me but I'm an off-the-charts extrovert with what you'd describe as hyperactive attention deficit tendencies. The only savior for this is the trust dad set up on Marshall's suggestion...I could only watch and not get my greedy little hand on it. 12 years later? I'm beginning to understand Warren Buffett! And I do get constant credit from my cousins now, those in the builders suppy and millwork, for getting them invested big time in Berkshire by 1990. They were selling the out-of-town builders supply businesses (Lowe's was killing us!) and buying stocks...and Berkshire was about 1/3rd of what they bought. Turned in to being about 3/4 of what they owned. Another interesting point is this. Dad dies in 1975 and both state and federal inheritance taxes are beyond anyone, any of you guys, imagination. On top of that, dad and his brothers also owned 4 radio stations: Cheraw, SC, Benson, NC, Ridgeland, SC, and one other one that for some reason I can't remember right now. All a.m. stations, all lucrative for years after they were bought. But........along comes F.M. stereo radio and....... So dad's estate was $1.2 million in 1975; we paid right around $500,000 in taxes; luckily family lawyers did the estate for free. But by the time the estate was getting settled up the value of our a.m. radio stations was plummeting in a fashion you'd find crazy alarming. In the end two were shut down and the other two sold for about 15% of the value when dad died, the value we were taxed based on. The very same stations I remember hearing dad say, "We paid $35,000 for it and it has a $35,000 net profit each year." Yep huge profits went to losses! F.M. ruled! Rambling. Have a good day. No spell check so pardon what doesn't make sense. So in the end, my brother, sister, step-mom, and I inherited very little....but Marshall's presence was such that all of us kept our stocks and we all ended up doing fabulously because of that decision

They are not $-wise significant. But...in order of significance in my view here's my financial life's major decisions: 1) holding the stocks I inherited from dad and the one from granny Sink. Some haven't done well, one went to basically zero, but overall it was simply crazy good luck. They began in a trust so I had no access for years, plus all those "old people" I knew telling me not to sell my stocks and a family that never sold anything ever. 2) taking AJG stock (wife's idea not to cash out was maybe the best of all decisions). 3) selling Brookfield and about 100 other small stocks to buy land (or parts of land) and to buy the stocks like Joe. While I do have more money coming in than going out Berkshire pays no div and AJG in comparison to value pays little. So to do something I significant I have to first do something else that I'm not particularly comfortable with...but getting better over time. Headed out on a trip on a Boeing airplane. Wish me luck and I probably won't read too much here for a couple of weeks.

Various accounts so I may miss something. Year begun included: Berkshire: inherited 1975, Dad had a whopping 100 A shares which wasn't worth much back then at all. My bro, sis, step-mom and me all got 25 when dad died in 1975. Even after I worked for the broker that sold the stock to dad (and he obsessed over Buffett)...it was at least 12 years (it was in a trust) before I knew much about Warren Buffett. Hyper-active brain dead young man I was. AJG begun 1994 Berk and AJG are 80% or so. This bunch below including what I posted in the initial post quoted above gets it to 96% or so, so another 16%: Coke 1975 Pepsi 1975 Note: every damn body in my area owned these two above back then...and I mean every damn body. Norfolk Southern 1976 I inherited 1/27th of granny Sink's shares and it has now been in the family for 84 years and according to my cousin CPA who is a financial whiz it has compounded at 10 plus percent in these 84 years. I have added to it multiple times including recently below $192 or so. Erie Indemnity I think the year 2004 if I am not mistaken as my former insurance partner uses them in his firm and recommended it Brown and Brown begun as Poe and Brown bought once 1994 Aon 1994 Marsh 1994 CSX late 1990's Canadian National 2003 or so Canadian Pacific about 2011 Mondelez begun as Cadbury in 2000 Tootsie Roll 1988 Markel 1988 Family worked there before beginning their own CPA firm and every damn body in Richmond clammored for Markel stock Lowes early 1990's when they were destroying our builders supply business. Back then we sold carpet, paint, basically everything that Lowes does. Today we are a contractors only builders supply and millwork. We sell via the millwork all over the southeast. Fairfax early 1990's but substantially added to in the last almost 3 years St Joe 2023 or whenever at $36.5 is the largest initial investment I've ever made Think that's it except for a slew of small holdings which include some attained in tiny amounts long-long-long ago. Biggest sale for me ever was the Brookfield bunch. I sold not because I thought I knew something bad, I sold because despite the business and stock dominating my time and mind I simply knew zero. Best riddance in my life regardless of where the stocks go. My mind is free of it and that's what counts most for me.

I trust your investment slices quite regularly!

Let me re-write this: Populism is a threat in my view. Can already written contracts be altered by a president (one past pres did mention this) seeking support? Many of the brokers have their views on this and are constantly publishing on the subject of political, populist, and isolationist movements throughout the world. In the early 2000's Elliott Spitzer, Mr. lawbreaker himself, was one of the most popular people in the US for several years because he attacked the insurance brokers with a vengeance over contingency commissions.

May the stock price drive us all to insanity! Given there ain't much around to buy, we may very well miss the current stock price we incessantly complain about.

I agree with this Greg and have for some time.

Nice Greg.

I missed this post. Superb investing Parsad and your posts are a nice part of my life to read. I'm not and could never be as certain as you are as to buy/sell investment concentration and it would be a disaster for me to try to mimic it. But I do invest using my best skill and my best skill is knowing who is good at what they do as to investing. And you are damn good.

I think you're right. Most everything I write these days has errors...no matter how much time I spend creating it. Drives me nuts! One of those things that creeps up on you with time, or at least on me.

I'll take your portfolio... ....and your age! Any day.

So I'm off on my quick Brk calculation. 12%.

I'm most wanting to hear from Parsad on this year. Gotta be a barn burner for him!

Interestingly my decision in the 1990's to invest with Prem Watsa and Fairfax was somewhat based on valuation but mostly all about reading about the people and the business. I had Berkshire and Markel as the models of course, otherwise nothing would have made much sense or been seen as attractive for investment. Through the years I've thought a little, but not a lot, about some of what Fairfax was doing investment wise and it wasn't something I was interested in nor thought was much of a good idea. But I never lost faith that it would end up all being ok so I stuck around. I do like the long tail insurance business but I don't want a whole bunch of money in it. In the last three years I've steadily added to the position, including last week. But for me, while I read all posted here, I'm just a believer regardless. As I mentioned before, the fact that I got to invest in Hub (the broker) because being a shareholder made me aware of it, was such a massive jolt for me financially--- it simply makes the names Prem/Fairfax something I'm a "lifer" to hold. Nothing but positive association in my head.

For Cramer to be successful in such a show as his he must operate in the short term business news cycle, the news that dominates all business media. I enjoy hearing and reading this sort of thing but I almost never include any of such short term news as an input variable for investment decisions. While I've done almost unbelievably well using published thoughts from several here on COBF as far as investment decisions (Spek, Parsad, Greg, Viking, etc) I find that only Greg (that I know of) thus far is on my timeline as to what determines what/how long to hold investments. But this doesn't stop me from reading all of the board...except crypto which I simply have no interest in.

Angela and I watch Jim regularly because we can keep up on strictly business stuff, things that otherwise I'd be ignorant of and even more aged-out than I already am. Its a delightful thing we enjoy quite a bit. No we don't use it specifically as an investment choice model, but as information about the current happenings in publicly traded entities. Over time I'll admit that I do find his interest and energy to be a good thing to model in life, I see the 95% other side of that with late 60's mental shutdowns and declines.

Unfortunately that's not in their time framewook of analyzing things much like others it is just more short term. It just doesn't exist anywhere at least as far as I know. I basically hang out all the time with a (I'm 69.5 years old) guy who is turning 64 and his father was in the agency business here in my town and he was my partner years ago (when his father wanted him to work else where for a while). The man is crazy good and successful in three towns now. While he's far-far-far from a showoff type he has homes here on my lake and in the local town of substantial value, pays cash....and makes hundreds of thousand of community project donations. So you'd think between the two of us, particularly him at least, that he'd be a whiz at describing and analyzing this sort of business while I'll tell you flat out that he hasn't a clue and doesn't even think about it. He is dynamic man, superb cyclist road and mtn....and he's as straight shooting as they come. I knew him coming out of high school and all I remember is "this guy means business." I have had mutliple business dealings with him, he's blunt. loyal, and beyond honest. He says the big boys call him weekly, sometimes the do a Trojan Horse type of thing where they say they want to discuss this or that and of course the only goal is to buy him out. He has sons in the business, neither very capable (his words) but still he says he plans to run the business until he's out of here. The "until I'm out of here" thing to me implies something on the order of "things must be damn good....and looking damn good for the future." I know nothing about the long term and I'd almost assure you he'd not even know how to talk about it. Day-to-day though.....he's incredibly good at this.

Greg wrote me too... I said, "I've read every word on the forum but like our now gone other Charlie I had nothing to add." Have a good day gfp!

For what it's worth, Wells on AJG below. I've owned AJG since 1994, even with today's share price fall I wouldn't buy it today...but I'm in a taxable account here and will never sell. For an actual long term perspective, and I see so little of this online I do think it should be posted even if it seems somewhat fictional, convoluted, or whatever: I got almost $500,000 of AJG in 1994 and toay it is about $14 mil or so. I receive about $130,000 in dividends today I think. Berkshire and AJG, about the same weighting for me, are 81% or so of my total assets and I have no debt. I began my life with $47,000 inherited in stocks and never made a salary above $55,000. I never sold stocks unless I had a specific reason to do so, later that's to pariticipate in buying big tracts of land (with others) mostly for industrial growth in our area --- which to be honest is so spectacular these days I find it astonishing. Lastly while I'm chirping, I can assure you there are a bunch of people like me out there in the world. Unlike me they aren't on investment forums chumming it up with others. My wife is probably most of the reason I'm here, she wants me interacting as much in some intellectual or challenging way as much as possible. She's younger, she's seen the retired bunch and doesn't want that blisteringly fast decline stuff with me. AJG below as per Wells and with the exception of BRP, at least for a while, Wells in my view does an excellent job with the insurance brokers. Insurance Brokers Arthur J. Gallagher & Co. (AJG) AJG: Live from New York City; December Investor Day Takes Our Call AJG provided a consistent view with organic and margin color unchanged for Q4 and for 2024. Estimates go down modestly for slightly higher corporate costs. The tax credit balance is now $200m due to change in accounting with its October tax return. Estimate and price target changes: Our 2023, 2024 and 2025 EPS estimates are now $8.76, $10.40 and $11.80 (from $8.80, $10.50, and $11.90) with the only major change higher corporate expenses relative to our prior model. We are looking for 8% Brokerage organic growth in 2024, leaving upside if AJG comes in at the high-end of its 7-9% target. Our price target goes up modestly to $274 (from $266) reflecting higher multiples being assigned to the group. Positive, but consistent organic color: Brokerage organic should be in the upper half of the 8-9% range this year (with 7-7.5% in Q4, but 9% when adjusting for last year's accounting adjustment). Gallagher continues to expect 2024 to be like 2023 with organic of 7-9% (which is the same as its initial 2023 outlook). Risk Management organic is expected to be 13% in Q4 (they lap new business wins which is a headwind), 15% for FY and 9-11% in 24. See Exhibit 1 for organic guidance by business. Stable pricing: Renewal premium (which includes rate and exposure) is expected to come in ~9% for Q4, similar to levels seen in the first 3 quarters and 8-10% throughout 2022. AJG feels that pricing declines in D&O and cyber are starting to bottom. In other lines, property is up 18%, umbrella is up 13% and workers' comp is up around 3%. On the reinsurance side, they are seeing strong rates for NA cat and also said they would accrue ~ $300m in Q4 for the earn out associated with Willis. Margin discussion unchanged: Brokerage margin guidance is unchanged and should expand by 40-50 basis points in the Q4 and for FY 2023 margin expansion should be 30-40bps (80-90bps excluding the impact of the Buck acquisition). Risk Management margins should be nicely above 19.5% in Q4 and around 20.0% for the full year (same as the prior guide). Strong M&A pipeline: Gallagher has $500 million of cash on hand presently and views deployable capital for M&A as $3.5 billion for 2024 (which includes potential debt issuance). The company stressed again that it does not look for acquisitions that fill gaps geographically or by LOB, but rather looks to acquire firms that fit in with its culture (AJG brokers have no geographical restrictions irregardless of office locations). Equity Analyst(s) Elyse Greenspan, CFA Equity Analyst | Wells Fargo Securities, LLC Matthew Byrnes, CFA Associate Equity Analyst | Wells Fargo Securities, LLC Hristian Getsov Associate Equity Analyst | Wells Fargo Securities, LLC Rating Overweight Ticker AJG Price Target/Prior: $274.00/$266.00 Upside/(Downside) to Target 11.7% Price (12/13/2023) $245.21 52 Week Range $174.45 - 254.00 Shares Outstanding 215,900,000 Market Cap (MM) $52,941 Enterprise Value (MM) $58,428 Average Daily Volume 871,247 Average Daily Value (MM) $214 Dividend (NTM) $2.04 Dividend Yield 0.8% Net Debt (MM) - last reported $5,487 ROIC - Current year est. 18% 3 Yr EPS CAGR from current year (unless otherwise noted) 14% $ 2022A 2023E 2023E 2024E 2024E EPS Curr. Prior Curr. Prior Q1 (Mar) 2.81 A 3.03 A NC 3.54 E 3.53E Q2 (Jun) 1.69 A 1.90 A NC 2.30 E 2.35E Q3 (Sep) 1.71 A 2.00 A NC 2.37 E 2.40E Q4 (Dec) 1.54 A 1.84 E 1.88E 2.18 E 2.22E FY 7.74 A 8.76 E 8.80E 10.40 E 10.50E P/E 31.7x 28.0x 23.6x ROIC - Current year est.: Represents return on equity (ROE)EPS: Represents adjusted EPS Source: Company Data, Wells Fargo Securities estimates, and Refinitiv. NA = Not Available, Volatility = Historical trading volatility All estimates/forecasts are as of 12/13/2023 unless otherwise stated. 12/13/2023 20:52:10EST. Please see page 8 for rating definitions, important disclosures and required analyst certifications. Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision. Insurance Brokers Equity Research Wells Fargo Express Takeaways Arthur J. Gallagher & Co. (AJG) | Rating: Overweight | Price Target: $274.00 Analyst: Elyse Greenspan Financials FY (Dec) 2022A 2023E 2024E $ ESTIMATES EPS Q1 2.81 A 3.03 A 3.54 E Q2 1.69 A 1.90 A 2.30 E Q3 1.71 A 2.00 A 2.37 E Q4 1.54 A 1.84 E 2.18 E AN 7.74 A 8.76 E 10.40 E Rev. (MM) 8,513.9 A 10,062.9 E 11,610.3 E FCF (MM) 1,942.7 A 1,600.6 E 2,322.0 E EBIT (MM) 2,096.7 A 2,484.9 E 3,068.4 E EBITDA (MM) 2.69B A 3.22B E 3.79B E Organic Growth (%) 9.7% A 9.1% E 8.0% E WELLS FARGO vs. CONSENSUS Consensus Estimate - 8.76 E 9.95 E Difference from Consensus 0.0% 4.5% VALUATION P/E 31.7x 28.0x 23.6x EV/Revenue 6.9x 5.8x 5.0x EV/FCF 30.1x 36.5x 25.2x FCF Yield 4.7% 3.9% 5.7% EV/EBIT 27.9x 23.5x 19.0x EV/EBITDA 21.7x 18.1x 15.4x EPS: Represents adjusted EPS EBIT (MM): Excludes corporate EBITDA (MM): Excludes corporate Organic Growth (%): Organic growth reflects the brokerage segment only Consensus Estimate: Consensus EPS Estimate; Source: FactSet Source: Company Data, Wells Fargo Securities estimates, and Refinitiv. NA = Not Available, NE = No Estimate Investment Thesis AJG is positioned to show strong organic revenue growth, continues to add bolt-on acquisitions, and is growing its EBITDA. Further, the company should benefit from increased scale in reinsurance following acquiring Willis Re's treaty reinsurance business. Typically, brokers generating the strongest margins have tended to have the highest valuations. As a result, we would expect AJG's valuation to expand to reflect its stronger ongoing margin profile. We have an Overweight rating on the shares. Risk vs. Reward – Upside/Downside Price Target Scenarios $170 $216 $262 $308 $354 Upside Scenario Base Case Downside Scenario * $245.21 $295.00 $274.00 $212.00 *As of 12/13/23 Source: Wells Fargo Securities, LLC estimates and Refinitiv. Base Case | $274.00 • Our price target of $274 is based on the combination of a ~26.0x multiple of our projected 2024 adjusted EPS estimate plus around $4.00 of value we ascribed to the NPV of its clean coal investments. Our multiple gives AJG a premium to its peers, as the company is reporting strong organic growth, seeing industryleading margins, and has a healthy M&A pipeline. Upside Scenario | $295.00 • Our upside scenario of $295 is based off of a ~28.0x multiple our projected 2024 adjusted EPS estimate plus just under $4.00 for the company's clean coal investments. • While AJG currently trades at a premium to its peers, if the company can continue to drive strong organic revenue growth and expand margins above peer levels we feel that there is room for additional multiple expansion. Downside Scenario | $212.00 • Our downside scenario of $212 reflects a roughly ~20x multiple of our projected 2024 adjusted EPS estimate plus just under $4.00 for the company's clean coal investments. • Our downside case reflects AJG garnering a multiple that is more closely inline with the group average, which we would anticipate should the company's organic growth and margin expansion slow from recent levels. Upcoming Catalysts • Q4 2023 earnings at the end of January • More detailed 2024 guidance, including reaffirming its organic growth view • Monthly pricing surveys • Any change in GDP forecasts • Any additional M&A transactions that are announced Company Description AJG is the third largest insurance broker, with $8.5 billion of revenue from its Brokerage and Risk Management businesses in 2022. The company generates approximately 86% of revenue from its brokerage business (which includes its benefits business), with the remaining roughly 14% from its Risk Management (third party claims payment services) operations. AJG has 33,300 employees and generates 75% of its revenue in the U.S. 2 | Equity Research Arthur J. Gallagher & Co. Equity Research Highlights Of Guidance Organic Growth - Brokerage Should Approach 9% in 2023; Range of 7-9% For 2024 AJG's outlook for Brokerage organic remains consistent. In brokerage, AJG continues to expect organic to be 7-7.5% in the Q4 (around 9% on an underlying basis ex. one-time items). AJG reiterated that it's organic growth excludes fiduciary investment income (MMC and WTW are the two brokers that include FII in organic). Gallagher continues to feel that market conditions in 2024 will be similar to what is being seen in 2023, and maintained its outlook for 7-9% organic growth in 2024. Q4 Brokerage organic growth by line: Exhibit 1 below shows AJG's organic growth assumptions by line of business, which the company did not provide any material updates to during the investor day. While the company did not provide updates by line, the company expects that investments it is making in technology will enable the company to offer a better product and drive growth across all LOBs. 2024 Brokerage outlook: Regarding 2024 organic growth, AJG continues to expect Brokerage organic to fall within the 7-9% range. The company also expects that organic contributors will remain roughly evenly split between rate, exposure, and net new business. Gallagher did note that it is starting to see lines such as D&O and cyber bottom, which should offset any deceleration in property pricing (which could occur due to rate fatigue after a few years of healthy price increases). Risk Management organic to remain strong: The risk management organic outlook remains healthy, with AJG expecting Q4 organic to come in around 13%, and above 15% for FY 2023. Exhibit 1 - Organic Growth by Quarter and Year Segment 2020 Q1 Q2 Q3 Q4 2021 Q1 Q2 Q3 Q4 2022 Q1 Q2 Q3 Q4E 2023E 2024E U.S. Retail 5% 8% 10% 13% 11% 11% 9% 8% 7.0% 13% about 8% International Retail - - 6% 10% U.K 7%+ 9%+ 9%+ 12% 14% 8% 15% 17% more than 7% 11% 7% Australia & New Zealand 3% 6%+ 8%+ Nearly 10% 11%+ 9% 12% 10% 10%+ 13% Canada 13% Nearly 10% 13%+ 12%+ 14%+ 13% 9% 6% 6% 10% U.K. Specialty 17% 19% 18% Ghallagher Re 12% 11% 20% Wholesale 6% 12% 16% 15% 10% 8% 9% Above 9% nearly 8% 10% 7% Benefits 2% 4% 5% 7% 7%+ ~9% ~3% 3% nearly 7% about 2% 6% Total Brokerage 3% 6% 7% 9% 11% 8% 9.6% 10.8% 7.8% 11.0% ~9.7% 9.1% 9.7% 9.3% 7-7.5% Pushing 9% 7-9% Adjusted 13.0% Pushing 9% Risk Management -3% 1% 20% 16.5% 13% 12% 15.2% 10% 12.2% 15.6% 13.6% 14.3% 18.1% 17.9% 13.0% Above 15% 9-11% *Benefits business benefited from a one-off large life insurance funding product sale in Q3 2020. Excluding this, Q3 2021 organic would have been ~10% Source: Comapny reports and Wells Fargo Securities, LLC Margin View Unchanged Consistent margin view as well: Brokerage margin guidance is unchanged and should expand by 30-40 basis points for FY 2023 including Buck and 80-90 basis points excluding Buck with 40-50 basis points of expansion in Q4. Risk Management margins should be nicely above 19% in the Q4 and around 19.0% for the full year (although the company sees upside should the end of the year close strong). Other Guided Items - Slightly Larger FX Hit and 2024 Corporate Items FX changes: Not much was adjusted in the CFO commentary. The FX impact in the Q4 is now expected to be ($0.01) versus no impact previously. For FY 2023 the FX impact is now expected to be ($0.08), a bit worse than the prior ($0.07). Modestly higher corporate loss: The corporate loss is now expected to be $302-308m, higher than the $293-299m previously. The two moving items were slightly greater acquisition costs and FX remeasurement. AJG rolled out 2024 expectations of a loss of between $331-356m, which is anticipated to be evenly split amongst the four quarters (AJG will provide updated guidance in 2024). Tax cash update: The balance of its tax credits is now higher than it was as of the end of the Q3 (current $856.7m, as compared to $669.4m with Q3 earnings) as they changed the method of accounting when they filed their tax returns in October which added about $200 million of tax credits that they can use in the future. Equity Research | 3 Insurance Brokers Equity Research Summary of Our Estimate Changes Lowering our EPS estimates. Our 2023, 2024 and 2025 estimates go to $8.76, $10.40, and $11.80 from $8.80, $10.50 and $11.90 respectively. The only major change to our estimates is higher corporate expenses relative to our prior model and company guidance. Our price target goes up modestly to $274 from $266 which primarily reflects higher multiples that are being assigned to the group. Exhibit 2 - Sumary of Estimate Changes ($ in millions, except per share data) 2023E 2024E 2025E 2023E 2024E 2025E 2023E 2024E 2025E 2023 Outlook Adjusted EPS: Brokerage $9.43 $11.12 $12.50 $9.43 $11.11 $12.49 $0.00 $0.01 $0.01 Risk Management $0.73 $0.80 $0.88 $0.73 $0.80 $0.88 $0.00 $0.00 $0.00 Corporate ($1.39) ($1.52) ($1.58) ($1.35) ($1.41) ($1.47) ($0.04) ($0.12) ($0.11) Adjusted EPS $8.76 $10.40 $11.80 $8.80 $10.50 $11.90 -$0.04 -$0.11 -$0.10 Share Count 219.2 222.2 224.2 219.2 222.2 224.2 0.0 0.0 0.0 Brokerage Results: Revenue $8,650 $10,071 $11,179 $8,652 $10,092 $11,200 ($2) -$20 -$22 Growth in revenue 18.4% 16.4% 11.0% 18.5% 16.6% 11.0% (0.0%) (0.2%) 0.0% Growth in organic revenue 9.1% 8.0% 6.4% 9.1% 8.0% 6.4% (0.0%) (0.0%) 0.0% High end of 8-9% organic revenue growth for FY EBITDAC $2,970 $3,513 $3,957 $2,971 $3,521 $3,960 ($1) -$7 -$2 EBITDAC margin 34.4% 34.9% 35.4% 34.4% 34.9% 35.4% 0.0% (0.0%) 0.0% 30-40 basis points of FY margin expansion with Buck (80-90 bps ex Buck) EBITDAC margin improvement 0.2% 0.5% 0.5% 0.2% 0.5% 0.5% 0.0% (0.0%) 0.0% Tax Rate 25.2% 25.1% 25.1% 25.2% 25.5% 25.5% 0.0% (0.4%) (0.4%) Risk Management Results: Revenue $1,419 $1,539 $1,654 $1,419 $1,539 $1,654 $0 $0 $0 Growth in revenue 16.0% 8.4% 7.5% 16.0% 8.4% 7.5% 0.0% 0.0% 0.0% Growth in organic revenue 15.4% 10.0% 8.5% 15.4% 10.0% 8.5% 0.0% 0.0% 0.0% Above 15% organic growth for the FY EBITDAC $252 $277 $303 $252 $277 $303 $0 $0 $0 EBITDAC margin 19.7% 19.8% 20.0% 19.7% 19.8% 20.0% 0.0% 0.0% 0.0% Margin above 20% EBITDAC margin improvement 0.6% 0.1% 0.2% 2.1% 0.1% 0.2% (1.5%) 0.0% 0.0% Tax Rate 26.3% 25.9% 25.9% 26.3% 25.9% 25.9% (0.0%) 0.0% 0.0% Current Prior Change Source: Company reports and Wells Fargo Securities, LLC estimates 4 | Equity Research Arthur J. Gallagher & Co. Equity Research Valuation Current valuation remains attractive. On a price-to-earnings basis, AJG shares are trading at 25.4x our 2023E EPS estimate and 22.0x our 2024 EPS estimate. On an Enterprise Value-to-EBITDA basis, shares are trading at 19.4x our 2023E estimate and 16.3x our 2024E estimate. This is above the 22.3x multiple the shares have traded at on average over the past 5 years on a P/E basis (prior to March 2022, the shares were previously valued on estimates that included intangible amortization resulting in a lower EPS and higher multiple), but above the14.0x they have traded at on an Enterprise Valueto-EBITDA basis (based on one-year forward estimates). To us, the valuation of the shares remains attractive as Gallagher is generating strong organic growth, good margin improvement, and continues to point to a healthy M&A pipeline. Exhibit 3 - AJG Historical Price to Earnings Multiple 7.5x 10.0x 12.5x 15.0x 17.5x 20.0x 22.5x 25.0x 27.5x 30.0x Dec '13 Dec '14 Dec '15 Dec '16 Dec '17 Dec '18 Dec '19 Dec '20 Dec '21 Dec '22 Dec '23 Price / NTM Earnings 10-Year Average 10-year Standard Deviation 5-Year Trend 2024 Forward - 21.9x • Average - 22.3x • Peak - 28.8x • Low - 14.7x 10-Year Trend • Average - 19.4x • Peak - 28.8x • Low - 12.2x Source: FactSet and Wells Fargo Securities, LLC estimates Exhibit 4 - AJG Historical EV/EBITDA 5.0x 7.5x 10.0x 12.5x 15.0x 17.5x 20.0x Dec '13 Dec '14 Dec '15 Dec '16 Dec '17 Dec '18 Dec '19 Dec '20 Dec '21 Dec '22 EV / EBITDA 10-Year Average 10-Year Standard Deviation 2024 Forward - 16.3x 5-Year Trend • Average - 14.0x • Peak - 17.5x • Low - 9.7x 10-Year Trend • Average - 11.8x • Peak - 17.5x • Low - 6.8x Source: Company reports, FactSet and Wells Fargo Securities, LLC estimates

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