AJG US Equity☆

Item 1A. Risk Factors.

Risk Factor Summary

Risks Relating to the Acquisition of the Willis Towers Watson plc Treaty Reinsurance Brokerage Operations

Risks Relating to our Business Generally

• We face significant competitive pressures in each of our businesses.

• Damage to our reputation could have a material adverse effect on our business.

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Regulatory, Legal and Accounting Risks

Risks Relating to our Investments, Debt and Common Stock

• Our clean energy investments are subject to various risks and uncertainties.

Please carefully consider the following discussion of significant factors, events, and uncertainties that make an investment in our securities risky. The events and consequences discussed in these risk factors could, in circumstances we may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, growth, reputation, prospects, financial condition, operating results (including components of our financial results such as revenues and net earnings), cash flows, liquidity, and stock price. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. In addition, the global economic climate amplifies many of these risks.

Risks Relating to the Acquisition of Willis Towers Watson plc Treaty Reinsurance Brokerage Operations

We may encounter integration challenges and the Acquisition may not perform as expected.

On December 1, 2021, we completed the acquisition of the treaty reinsurance brokerage operations of Willis Towers Watson plc (the “Acquisition”). Upon completion of the Acquisition, we paid Willis Towers Watson plc an initial gross purchase price of $3.25 billion. Under the terms of the purchase agreement, the purchase price is subject to potential additional deferred consideration of up to $750 million, payable in 2025 based on revenues of the acquired operations in 2024. We can provide no assurance that we will be able to successfully integrate the operations acquired in the Acquisition, that the acquired operations will perform as expected, or that we will not incur unforeseen obligations or liabilities. It is possible that our experience in running the operations acquired in the Acquisition will require us to adjust our expectations regarding the impact of the acquisition on our operating results. In particular, the amount of revenue we expect the acquired operations to lose, due to the departure of key employees, the loss of key clients within the acquired operations, or for other reasons, is based upon estimates, assumptions and projections that may turn out to be incorrect. As a result, actual lost revenue within the acquired operations may be greater than anticipated. In addition, integration efforts are anticipated to be complex and may divert management’s attention and resources, which could adversely affect our operating results.

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The risk of non-compliance with non-U.S. laws, regulations and policies could adversely affect our results of operations, financial condition or strategic objectives.

The Acquisition will introduce us to several new geographic markets, subjecting us to additional non-U.S. laws, regulations and policies, which do not currently apply to us. These laws and regulations are complex, change frequently, have become more stringent over time, could increase our cost of doing business, and could result in conflicting legal requirements. These laws and regulations include international labor and employment laws, data privacy requirements, and local laws prohibiting corrupt payments to government officials. We will be subject to the risk that we, our employees, our agents, or our affiliated entities, or their respective officers, directors, employees and agents, may take actions determined to be in violation of any of these laws, regulations or policies, for which we might be held responsible. Actual or alleged violations could result in substantial fines, sanctions, civil or criminal penalties, debarment from government contracts, curtailment of operations in certain jurisdictions, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations, financial condition or strategic objectives.

While we believe that relations with work councils and trade unions in these countries are and will continue to be satisfactory, work stoppages could occur and we may not be successful in negotiating new collective bargaining agreements. In addition, collective bargaining negotiations may (1) result in significant increases in the cost of labor, (2) divert management’s attention away from operating the business or (3) break down and result in the disruption of operations. The occurrence of any of the preceding conditions could result in increased costs and impair our ability to operate our business.

We have made certain assumptions relating to the Acquisition, which may prove to be materially inaccurate.

We have made certain assumptions relating to the Acquisition, which assumptions may be inaccurate, including as a result of the failure to realize the expected benefits of the Acquisition, higher than expected transaction and integration costs and unknown liabilities as well as general economic and business conditions that adversely affect the combined company following the Acquisition. These assumptions relate to numerous matters, including:

• The amount of goodwill and intangibles that will result from the Acquisition;

• Acquisition costs, including restructuring charges and transaction costs; and

• Other financial and strategic risks of the Acquisition.

There can be no assurance that deferred closings in certain jurisdictions will occur or that we will realize the expected benefits of the Acquisition.

There are deferred closings in twelve jurisdictions scheduled for the first and second quarters of 2022, representing approximately $180 million of the initial purchase consideration. We can provide no assurance that the various conditions to these deferred closings will be satisfied, including the receipt of regulatory or other necessary approvals, or as to the terms on which any such approvals may be given.

Although we currently anticipate that the Acquisition will be accretive to earnings per share (on an as adjusted earnings basis for expected changes in operating expenses and other items that is not pursuant to GAAP) from and after its closing, this expectation is based on assumptions about our business, the operations to be acquired and preliminary estimates, which may change materially. As a result, certain other amounts to be paid in connection with the Acquisition may cause dilution to our earnings per share or decrease or delay the expected accretive effect of the Acquisition and cause a decrease in the market price of our common stock. In addition, a change in the assumptions may result in a change in future earnings, which could be material.

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Risks Relating to our Business Generally

The ongoing COVID-19 pandemic has and could continue to adversely affect our business, results of operations and financial condition.

The global spread of COVID-19 (including potentially more contagious strains of COVID-19 such as the Delta and Omicron variants) has created significant volatility and uncertainty and economic disruption. The extent to which the pandemic impacts our business, operations and financial results will depend on numerous evolving factors, many of which are not within our control and which we may not be able to accurately predict, including: its duration and scope; the ultimate availability, administration and effectiveness of vaccines around the world, and our employees’ and the general population’s willingness to receive them; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic, including vaccine mandates, which could be controversial for some employees; the impact of the pandemic on economic activity and actions taken in response; the ability of our clients to pay their insurance premiums which could impact our commission and fee revenues for our services; the nature and extent of claims impacting the ability of underwriting enterprises to pay supplemental and contingent commissions; the number of new arising workers’ compensation and general liability claims; and the long-term impact of employees working from home, including increased technology costs; and employees’ holistic wellbeing.

COVID-19 and the volatile regional and global economic and regulatory conditions stemming from the pandemic, as well as reactions to future pandemics or new strains or resurgences of COVID-19, could also precipitate or aggravate the other risk factors that we identify in this report, which in turn could materially adversely affect our business, financial condition, liquidity, results of operations (including revenues and profitability) and/or stock price. Further, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations.

An economic downturn, as well as unstable economic conditions in the countries and regions in which we operate, could adversely affect our results of operations and financial condition.

Apart from the impact of COVID-19, a decline in economic activity for any other reason (including inflation, climate change, the transition to a low-carbon economy, or the uncertainty caused by political violence and chaos), including repercussions from an attack by Russia on Ukraine, could adversely impact us in future years as a result of reductions in the amount of insurance coverage and

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consulting services that our clients purchasedue to reductions in their headcount, payroll, properties, and the market values of assets, among other factors. Any such reduction or decline (whether caused by an overall economic decline or declines in certain industries or in certain countries and regions in which we operate) could adversely impact our commission revenues,consulting revenues or revenues from managing third-party insurance claims. Some of our clients may experience liquidity problems or other financial difficulties in the event of a prolonged deterioration in the economy, which could have an adverse effect on our results of operations and financial condition. If our clients become financially less stable, enter bankruptcy, liquidate their operations or consolidate, our revenues and collectability of receivables could be adversely affected.

Economic conditions that result in financial difficulties for underwriting enterprises or lead to reduced risk-taking capital capacity could adversely affect our results of operations and financial condition.

We have a significant amount of receivables from certain of the underwriting enterprises with which we place insurance. If those companies experience liquidity problems or other financial difficulties, we could encounter delays or defaults in payments owed to us, which could have a significant adverse impact on our consolidated financial condition and results of operations. The failure of an underwriting enterprise with which we place business could result in errors and omissions claims against us by our clients. Further, the failure of errors and omissions underwriting enterprises could make the errors and omissions insurance we rely upon cost prohibitive or unavailable. Underwriting enterprises are also clients of our reinsurance brokerage operations, so any of the negative developments for underwriting enterprises referred to above could also reduce our commission revenues from such clients. Any of these developments could adversely affect our results of operations and financial condition. In addition, if underwriting enterprises merge or if a large underwriting enterprise fails or withdraws from offering certain lines of coverage, for example, because of large payouts related to climate change or other emerging risk areas, overall risk-taking capital capacity could be negatively affected, which could reduce our ability to place certain lines of coverage and, as a result, reduce our revenues and profitability.

We have historically acquired large numbers of insurance brokers, benefit consulting firms and, to a lesser extent, third party claims administration and risk management firms. We may not be able to continue such an acquisition strategy in the future and there are risks associated with such acquisitions, which could adversely affect our growth and results of operations.

Our ordinary-course acquisition program has been an important part of our historical growth, particularly in our brokerage segment, and we believe that similar acquisition activity will be important to maintaining comparable growth in the future. See also “Risks Relating to Acquisition of Willis Towers Watson plc Treaty reinsurance brokerage operations” above. Failure to successfully identify and complete acquisitions likely would result in us achieving slower growth. Continuing consolidation in our industry and growing interest in acquiring insurance brokers on the part of private equity firms, private equity-backed consolidators and newly public insurance brokers (one of which has a partnership tax structure that gives it an advantage in pricing acquisitions) has in some cases made and could in the future make appropriate acquisition targets more difficult to identify and more expensive. Even if we are able to identify appropriate acquisition targets, we may not have sufficient capital to fund acquisitions, be able to execute transactions on favorable terms or integrate targets in a manner that allows us to realize the benefits we have historically experienced from acquisitions. When regulatory approval of acquisitions is required, our ability to complete acquisitions may be limited by an ongoing regulatory review or other issues with the relevant regulator. Our ability to finance and integrate acquisitions may also decrease if we complete a greater number of larger acquisitions than we have historically. See Note 3 to the consolidated financial statements elsewhere in this report for information regarding the size of transactions in the reporting period.

Post-acquisition risks include poor cultural fit and risks relating to retention of personnel, retention of clients, entry into unfamiliar or complex markets or lines of business, contingencies or liabilities, such as violations of sanctions laws or anti-corruption laws including the FCPA and U.K. Bribery Act, risks relating to ensuring compliance with licensing and regulatory requirements, tax and accounting issues, the risk that the acquisition distracts management and personnel from our existing business, and integration difficulties relating to accounting, information technology, pay equity, human resources, or employee attrition, some or all of which could have an adverse effect on our results of operations and growth. The failure of acquisition targets to achieve anticipated revenue and earnings levels could also result in goodwill impairment charges.

We face significant competitive pressures in each of our businesses.

The insurance brokerage and employee benefit consulting businesses are highly competitive and many insurance brokerage and employee benefit consulting organizations actively compete with us in one or more areas of our business around the world. Three of the firms we compete with in the global risk management and brokerage markets have larger revenues than ours. In addition, many other smaller firms that operate nationally or that are strong in a particular country, region or locality may have, in that country, region or locality, an office with revenues as large as or larger than those of our corresponding local office. Our third party claims administration operation also faces significant competition from stand-alone firms as well as divisions of larger firms. Over the past decade or more, private equity sponsors have invested heavily in the insurance brokerage and third party claims administration industries, creating new competitors and strengthening existing ones. Across all of our operations, Insurtech and technology-based start-ups are entering the business. In most cases, these businesses complement or enhance our offerings, but in some cases, they compete with us.

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We believe that the primary factors determining our competitive position with other organizations in our industry are the quality of the services we render, the personalized attention we provide, the individual and corporate expertise of the brokers and consultants providing the actual service to the client,our data and analytics capabilities, and our ability to help our clients manage their overall risk exposure and insurance or reinsurance costs. Losing business to competitors offering similar services or products at a lower cost or having other competitive advantages would adversely affect our business.

Consolidation among our existing competitors could create additional competitive pressure on us as such firms grow their market share, take advantage of strategic and operational synergies and develop lower cost structures. In addition, any increase in competition due to new legislative or industry developments could adversely affect us.

These developments include:

New competition as a result of these or other legislative or industry developments could cause the demand for our products and services to decrease, which could in turn adversely affect our results of operations and financial condition.

Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability.

We derive much of our revenue from commissions and fees for our brokerage services. We do not determine the insurance premiums on which our commissions are generally based. Moreover, insurance premiums are cyclical in nature and may vary widely based on market conditions. Because of market cycles for insurance product pricing, which we cannot predict or control, our brokerage revenues and profitability can be volatile or remain depressed for significant periods of time.

As underwriting enterprises continue to outsource the production of premium revenue to non-affiliated brokers or agents such as us, those companies may seek to further minimize their expenses by reducing the commission rates payable to insurance agents or brokers. The reduction of these commission rates, along with general volatility and/or declines in premiums, may significantly affect our profitability. Because we do not determine the timing or extent of premium pricing changes, it is difficult to forecast our commission revenues precisely, including whether they will significantly decline. As a result, we may have to adjust our budgets for future acquisitions, capital expenditures, dividend payments, debt repayments and other expenditures to account for unexpected changes in revenues, and any decreases in premium rates may adversely affect the results of our operations.

In addition, there have been and may continue to be various trends in the insurance industry toward alternative insurance markets including, among other things, greater levels of self-insurance, captives, rent-a-captives, risk retention groups and non-insurance capital markets-based solutions to traditional insurance. While historically we have been able to participate in certain of these activities on behalf of our clients and obtain fee revenue for such services, there can be no assurance that we will realize revenues and profitability as favorable as those realized from our traditional brokerage activities. Our ability to generate premium-based commission revenue may also be challenged by the growing desire of some clients to compensate brokers based upon flat fees rather than a percentage of premium. This could negatively impact us because fees are generally not indexed for inflation and might not increase with premiums as commissions do or with the level of service provided.

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Contingent and supplemental revenues we receive from underwriting enterprises are less predictable than standard commission revenues, and any decrease in the amount of these forms of revenue could adversely affect our results of operations.

A meaningful portion of our revenues consists of contingent and supplemental revenues from underwriting enterprises. Contingent revenues are paid after the insurance contract period, generally in the first or second quarter, based on the growth and/or profitability of business we placed with an underwriting enterprise during the prior year. On the other hand, supplemental revenues are paid up front, on an annual or quarterly basis, generally based on our historical premium volumes with the underwriting enterprise and additional capabilities or services we bring to the engagement. While underwriting enterprises generally maintain supplemental revenues in the current year at a pre-determined rate, that rate can change in future years as described above. If, due to the current economic environment or for any other reason, we are unable to meet an underwriting enterprise’s particular profitability, volume or growth thresholds, as the case may be, or such companies increase their estimate of loss reserves (over which we have no control), actual contingent revenues or supplemental revenues could be less than anticipated, which could adversely affect our results of operations. In the case of contingent revenues, under revenue recognition accounting standards, this could lead to the reversal of revenues in future periods that were recognized in prior periods.

If we are unable to apply technology effectively in driving value for our clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of technology and related tools, our operating results, client relationships, growth and compliance programs could be adversely affected.

Our future success depends, in part, on our ability to anticipate and respond effectively to the threat and opportunity presented by digital disruption and developments in technology. These may include new applications or insurance-related services based on artificial intelligence, machine learning, robotics, blockchain or new approaches to data mining. We may be exposed to competitive risks related to the adoption and application of new technologies by established market participants (for example, through disintermediation) or new entrants such as technology companies, “Insurtech” start-up companies and others. These new entrants are focused on using technology and innovation, including artificial intelligence and blockchain, to simplify and improve the client experience, increase efficiencies, alter business models and effect other potentially disruptive changes in the industries in which we operate. We must also develop and implement technology solutions and technical expertise among our employees that anticipate and keep pace with rapid and continuing changes in technology, industry standards, client preferences and internal control standards. We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis and our ideas may not be accepted in the marketplace. Additionally, the effort to gain technological expertise and develop new technologies in our business requires us to incur significant expenses. Investments in technology systems may not deliver the benefits or perform as expected, or may be replaced or become obsolete more quickly than expected, which could result in operational difficulties or additional costs. If we cannot offer new technologies as quickly as our competitors, or if our competitors develop more cost-effective technologies or product offerings, we could experience a material adverse effect on our operating results, client relationships, growth and compliance programs.

In some cases, we depend on key third-party vendors and partners to provide technology and other support for our strategic initiatives. If these third parties fail to perform their obligations or cease to work with us, our ability to execute on our strategic initiatives could be adversely affected.

Damage to our reputation could have a material adverse effect on our business.

Our reputation is one of our key assets. We advise our clients on and provide services related to a wide range of subjects and our ability to attract and retain clients is highly dependent upon the external perceptions of our expertise, level of service, ability to protect client information, trustworthiness, business practices, financial condition and other subjective qualities such as ethics, culture and values. Our success is also dependent on maintaining a good reputation with existing and potential employees, investors, regulators and the communities in which we operate. Negative perceptions or publicity regarding the matters noted above, including our association with clients or business partners with damaged reputations, or from actual or alleged conduct by us or our employees, could damage our reputation. Our reputation could also be harmed by negative perceptions or publicity regarding ESG matters including concerns with environmental matters, climate change, workforce diversity, political spending, pay equity, harassment, racial justice, cybersecurity and data privacy. Any resulting erosion of trust and confidence could make it difficult for us to attract and retain clients, employees or investors; result in lower ESG ratings, exclusion of our stock from ESG-oriented indices, and reduced demand for our stock from ESG-focused investment funds; increase our cost of borrowing in the future; or harm our relationships with regulators and the communities in which we operate. Any of these matters could have a material adverse effect on our business, financial condition and results of operations. See below for additional risk factors regarding climate risks and ESG initiatives and disclosures.

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Climate risks, including the risk of an economic crisis, risks associated with the physical effects of climate change and disruptions caused by the transition to a low-carbon economy, could adversely affect our business, results of operations and financial condition.

Climate change has been widely identified by investors and regulators as a systemic risk to the global economy. The U.S. Federal Reserve has warned that a gradual change in investor sentiment regarding climate risk introduces the possibility of abrupt tipping points or significant swings in sentiment, which could create unpredictable follow-on effects in financial markets. If this occurred, not only would our business be negatively impacted by the general economic decline, but a drop in the stock market affecting our stock price could negatively impact our ability to grow through mergers and acquisitions financed using our common stock.

The transition to a low-carbon economy could harm specific industries or sectors such as oil and gas in ways that could impact our business. Our clients in such industries could go out of business or have reduced needs for insurance-related or consulting services, which could adversely impact our commission revenues, consulting revenues or revenues from managing third-party insurance claims. Negative publicity arising from our association with clients in disfavored businesses or industries, or the perception that we are not sufficiently focused on climate risks facing Gallagher or on reducing our own carbon emissions, could damage our reputation with investors, clients, employees and regulators. In addition, the transition to a low-carbon economy could give rise to the need for innovative insurance and risk management solutions for entirely new industries and companies, as well as advice and services to bolster climate resilience for existing companies. If we fail to innovate and provide valuable services to our clients in response to these changes, we could lose market share to our competitors or new market entrants that do.

We do not assume net underwriting risk, other than with respect to de minimis amounts necessary to provide minimum or regulatory capital, and thus do not experience direct material financial implications related to extreme weather events. In addition, we are a professional services firm with people as our most important asset and limited physical operations. However, if underwriting enterprises fail or withdraw from offering certain lines of coverage because of large payouts related to climate change, overall risk-taking capital capacity could be negatively affected, which could reduce our ability to place certain lines of coverage and, as a result, reduce our revenues and profitability. Underwriting enterprises are also clients of our reinsurance brokerage operations, so any of the negative developments for underwriting enterprises referred to above could also reduce our commission revenues from such clients.

Our ESG-related aspirations, goals and initiatives, and our public statements and disclosures regarding them, expose us to numerous risks.

Our business may face increased scrutiny from the investment community, other stakeholders, regulators and the media related to our ESG activities, including goals, targets and objectives we may announce in the future, and our methodologies and timelines for pursuing them. If our ESG practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, our reputation, our ability to attract or retain employees and our attractiveness as an investment, business partner or as an acquiror could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our goals, targets and objectives, to comply with ethical, environmental or other standards, regulations or expectations or to satisfy various reporting standards with respect to these matters, could have the same negative impacts, as well as expose us to government enforcement actions and private litigation.

Our future success depends, in part, on our ability to attract and retain experienced and qualified talent, including our senior management team.

We depend upon members of our senior management team, who possess extensive knowledge and a deep understanding of our business and strategy. We could be adversely affected if we fail to plan adequately for the succession of these leaders, including our chief executive officer. We could also be adversely affected if we fail to attract and retain talent and foster a diverse and inclusive workplace throughout our organization. Competition for talent is intense in many areas of our business, particularly in rapidly developing fields such as artificial intelligence and data engineering. In addition, our industry has experienced competition for leading brokers and in the past we have lost key brokers and groups of brokers, along with their clients, business relationships and intellectual property directly to our competition. We enter into agreements with many of our brokers and significant client-facing employees and all of our executive officers, which prohibit them from disclosing confidential information and/or soliciting our clients, prospects and employees upon their termination of employment. The confidentiality and non-solicitation provisions of such agreements terminate in the event of a hostile change in control, as defined in the agreements. Although we pursue legal actions for alleged breaches of non-compete or other restrictive covenants, theft of trade secrets, breaches of fiduciary duties, intellectual property infringement and related causes of action, such legal actions may not be effective in preventing such breaches, theft or infringement. Our failure to adequately address any of these issues could have a material adverse effect on our business, operating results and financial condition. See also “Risks related to remote work” in our COVID-19 risk factor above.

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Our substantial operations outside the U.S. expose us to risks different than those we face in the U.S.

In 2021, we generated approximately 33% of our combined brokerage and risk management revenues outside the U.S. The global nature of our business creates operational and economic risks. Adverse geopolitical or economic conditions may temporarily or permanently disrupt our operations outside the U.S. or create difficulties in staffing and managing such operations. For example, we have substantial operations in India that provide important services for our global organization. To date, the dispute between India and Pakistan involving the Kashmir region, rising tensions between India and China, incidents of terrorism in India and general geopolitical uncertainties have not adversely affected our operations in India. However, such factors could potentially affect our operations there in the future. Should our access to these services be disrupted, our business, operating results and financial condition could be adversely affected.

Operating outside the U.S. may also present other risks that are different from, or greater than, the risks we face doing comparable business in the U.S. These include, among others, risks relating to:

• Conflicting regulations in the countries in which we do business;

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• Legal or political constraints on our ability to maintain or increase prices;

• New pandemics (in addition to COVID-19) at a regional or global level; and

We face a variety of risks in our risk management third-party claims administration operations that are distinct from those we face in our insurance brokerage and benefit consulting operations.

In 2020, the COVID-19 pandemic caused a reduction in the number of claims we otherwise would have processed, negatively impacting our third party claims administration operations to a greater degree than the rest of our business. In 2021, the number of claims we processed increased, but not to the prepandemic level. This disproportionate negative impact could continue into 2022. Our third party claims administration operations also face a variety of additional risks distinct from those faced by the rest of our business, including the risks that:

If any of these risks materialize, our results of operations and financial condition could be adversely affected.

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We face a variety of risks in our benefit consulting operations distinct from those we face in our insurance brokerage operations.

Our benefit consulting operations face a variety of risks distinct from those faced by our brokerage operations. The portion of our revenue derived from consulting engagements and special project work is more vulnerable to reduction, postponement, cancellation or non-renewal during an economic downturn than traditional insurance brokerage commissions, and we did experience such a reduction for a portion of 2021. If the economic recovery stalls or reverses in 2022, we could again experience deterioration in these sources of revenue. Certain areas within our retirement consulting practice may attract a higher level of regulatory scrutiny due to regulators’ historical interest in such matters, including pension-related products and investment advisory and broker-dealer services. In addition, we have made significant investments in product and knowledge development to assist clients as they navigate the complex regulatory requirements relating to employer-sponsored healthcare. New laws or regulations reducing employer-sponsored health insurance could impact clients’ demand for our services. If we are unable to adapt our services to changes in the legal and regulatory landscape around employer-sponsored healthcare, our results of operations could be adversely impacted.

Sustained increases in the cost of employee benefits could reduce our profitability.

The cost of current employees’ medical and other benefits, as well as pension retirement benefits and postretirement medical benefits under our legacy defined benefit plans, substantially affects our profitability. In the past, we have occasionally experienced significant increases in these costs as a result of macro-economic factors beyond our control, including increases in health care costs, declines in investment returns on pension assets and changes in discount rates and actuarial assumptions used to calculate pension and related liabilities. A significant decrease in the value of our defined benefit pension plan assets, changes to actuarial assumptions used to determine pension plan liabilities, or decreases in the interest rates used to discount the pension plans’ liabilities could cause an increase in pension plan costs in future years. Although we have actively sought to control increases in these costs, we can make no assurance that we will succeed in limiting future cost increases, and continued upward pressure in these costs could reduce our profitability.

Business disruptions could have a material adverse effect on our operations, damage our reputation and impact client relationships.

Our ability to conduct business may be adversely affected by a disruption in the infrastructure that supports our business. Such a disruption could be caused by a cybersecurity incident (for example, as disclosed in previous filings, we experienced a ransomware attack in 2020), human error, capacity constraints, hardware failure or defect, natural disasters, fire, power loss, telecommunication failures, break-ins, sabotage, intentional acts of vandalism, acts of terrorism, political violence and unrest in the U.S. or elsewhere around the world, or war. Our disaster recovery procedures may not be effective and insurance may not continue to be available at reasonable prices and may not address all such losses or compensate us for the possible loss of clients or increase in claims and lawsuits directed against us. See our COVID-19 risk factor above.

For example, our third party claims administration operation is highly dependent on the continued and efficient functioning of RISX-FACS®, our proprietary risk management information system, to provide clients with insurance claim settlement and administration services. In addition, we are increasing our use of cloud storage and cloud computing application services supported, upgraded and maintained by third-party vendors. A disruption affecting RISX-FACS®, third-party cloud services or any other infrastructure supporting our business, including key customer relationship management software, could have a material adverse effect on our operations, cause reputational harm and damage our employee and client relationships.

Regulatory, Legal and Accounting Risks

Improper disclosure of confidential, personal or proprietary information and cybersecurity attacks could result in regulatory scrutiny, legal liability or reputational harm, and could adversely affect our business, financial condition and reputation.

We maintain confidential, personal and proprietary information relating to our company, our employees and our clients. This information includes personally identifiable information, protected health information, financial information and intellectual property.

We rely on information technology and third party vendors to support our business activities, including our secure processing of confidential, sensitive, proprietary and other types of information. Cybersecurity or data breaches of certain of the systems on which we rely have occurred, although to date we have not been materially impacted by any such breach. In the future, breaches of any such third-party or internal system may result from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error, malfeasance, social engineering, physical breaches or other actions.

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We have from time to time experienced cybersecurity incidents, such as computer viruses or unauthorized parties gaining access to our information technology systems, and privacy incidents, such as loss or inadvertent transmission of data, which to date have not had a material impact on our business. For example, we have previously disclosed a ransomware incident that occurred in 2020.

Additionally, we are an acquisitive organization and the process of integrating the information systems of the businesses we acquire is complex and exposes us to additional risk as we might not adequately identify weaknesses in the targets’ information systems or information handling, privacy and security policies and protocols, which could expose us to unexpected liabilities or make our own systems and data more vulnerable to attack. Our recent acquisition of the Willis Towers Watson plc treaty reinsurance brokerage operations may enhance this risk.

In the future, any material cybersecurity or data incidents, or media reports of the same, even if untrue, could cause us to experience reputational harm, loss of clients and revenue, loss of proprietary data, regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard clients’ information or financial losses. Such incidents could result in confidential, personal or proprietary information being lost or stolen, used to perpetuate fraud, maliciously made public, surreptitiously modified, or rendered inaccessible for a period of time. As we experienced in connection with the 2020 ransomware incident referred to above, during a cyber-attack we might have to take our systems offline, which could interfere with services to our clients or damage our reputation. Such losses may not be insured against or not fully covered through insurance we maintain.

We maintain policies, procedures and technical safeguards designed to protect the security and privacy of confidential, personal and proprietary information. Nonetheless, we cannot eliminate the risk of human error or malfeasance. It is possible that our security controls and employee training may not be effective. See “Risks related to remote work” in our COVID-19 risk factor above for a discussion of how remote work enhances these risks.

We have invested and continue to invest in technology security initiatives, policies and resources and employee training. The cost and operational consequences of implementing, maintaining and enhancing further system protections measures could increase significantly as cybersecurity threats increase and as technology changes. As these threats evolve, cybersecurity and data incidents will be more difficult to detect, defend against and remediate. If we are unable to effectively maintain and upgrade our system safeguards, including in connection with the integration of acquisitions, we may incur unexpected costs and certain of our systems may become more vulnerable to unauthorized access.

Any of the foregoing may have a material adverse effect on our business, financial condition and reputation.

With respect to our commercial arrangements with third party vendors, we have processes designed to require third party IT outsourcing, offsite storage and other vendors to agree to maintain certain standards with respect to the storage, protection and transfer of confidential, personal and proprietary information. However, we remain at risk of a data breach due to the intentional or unintentional non-compliance by a vendor’s employee or agent, the breakdown of a vendor’s data protection processes, or a cyber attack on a vendor’s information systems.

Changes in data privacy and protection laws and regulations, or any failure to comply with such laws and regulations, could adversely affect our business and financial results.

We are subject to a variety of continuously evolving and developing laws and regulations globally regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data. These laws apply to transfers of information among our affiliates, as well as to transactions we enter into with third party vendors. Significant uncertainty exists as privacy and data protection laws may be interpreted and applied differently from country to country, which may create inconsistent or conflicting requirements. Some of these laws provide rights to individuals to access, correct, and delete their personal information and to obtain copies at the expense of the business entities that process their data. Some of these laws carry heavy penalties for violations, e.g., fines of up to 4% of worldwide revenue under the European Union General Data Protection Regulation (GDPR) and to $7,500 per intentional violation under the California Consumer Privacy Act (CCPA). In the U.S., there is pending federal legislation and several states have proposed their own comprehensive data privacy bills similar to the GDPR and CCPA.

In addition, in the U.S., legislators are continuing to enact comprehensive cybersecurity laws. For example, we are subject to the New York State Department of Financial Services Cybersecurity Regulation for Financial Services Companies and CCPA. India and other countries where we have operations outside the U.S. have also proposed sweeping new data protection laws, in some cases including data localization laws that may require that personal data stay within their borders.

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Complying with enhanced obligations imposed by various new and emerging laws is resulting in significant costs of developing, implementing or securing our servers and is requiring us to allocate more resources to new privacy compliance processes and to improved technologies, adding to our IT and compliance costs. In addition, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase. The enactment of more restrictive laws, rules, regulations, or future enforcement actions or investigations could impact us through increased costs or restrictions on our business, and noncompliance could result in regulatory penalties and significant legal liability.

We are subject to regulation worldwide. If we fail to comply with regulatory requirements or if regulations change in a way that adversely affects our operations, we may not be able to conduct our business, or we may be less profitable.

Many of our activities throughout the world are subject to supervision and regulations promulgated by regulatory or self-regulatory bodies such as the SEC, the NYSE, the DOJ, the IRS, the Office of Foreign Assets Control, the Federal Trade Commission and the Financial Industry Regulatory Authority (FINRA) in the U.S., the Financial Conduct Authority in the U.K., the Australian Securities and Investments Commission in Australia and insurance regulators in nearly every jurisdiction in which we operate. Our retirement-related consulting and investment services are subject to pension law and financial regulation in many countries. Our activities are also subject to a variety of other laws, rules and regulations addressing licensing, data privacy, wage-and-hour standards, employment and labor relations, anti-competition, anti-corruption, currency, reserves and the amount of local investment with respect to our operations in certain countries. This regulatory supervision could reduce our profitability or growth by increasing the costs of compliance, restricting the products or services we sell, the markets we enter, the methods by which we sell our products and services, or the prices we can charge for our services and the form of compensation we can accept from our clients, underwriting enterprises and third parties. As our operations grow around the world, it is increasingly difficult to monitor and enforce regulatory compliance across the organization. A compliance failure by even one of our smallest branches could lead to litigation and/or disciplinary actions that may include compensating clients for loss, the imposition of penalties, and/or the loss of our authorization to operate. In all such cases, we would also likely incur significant internal investigation costs and legal fees.

The global nature of our operations increases the complexity and cost of compliance with laws and regulations, including increased staffing needs, the development of new policies, procedures and internal controls and providing training to employees in multiple locations, adding to our cost of doing business. Many of these laws and regulations may have differing or conflicting legal standards across jurisdictions, increasing further the complexity and cost of compliance. In emerging markets and other jurisdictions with less developed legal systems, local laws and regulations may not be established with sufficiently clear and reliable guidance to provide us with adequate assurance that we are aware of all necessary licenses to operate our business, that we are operating our business in a compliant manner, or that our rights are otherwise protected. In addition, major political and legal developments in jurisdictions in which we do business may lead to new regulatory costs and challenges. For example, China recently adopted a “blocking” statute similar to that of the EU requiring compliance with certain Chinese laws if they conflict with U.S. laws. In 2022, we expect to have a reinsurance operation in China, following a deferred closing of the acquisition of the Willis Towers Watson plc treaty reinsurance brokerage operations in that jurisdiction. Rising global tensions and protectionism may also lead other countries to adopt similar blocking statutes, which could make it more difficult and costly for us to expand our operations globally.

Changes in legislation or regulations and actions by regulators, including changes in administration and enforcement policies, or the failure of state and local governments to follow through on agreed-upon state and local tax credits or other tax related incentives, could adversely affect our results of operations or require operational changes that could result in lost revenues or higher costs or hinder our ability to operate our business.

For example, the method by which insurance brokers are compensated has received substantial scrutiny in the past because of the potential for conflicts of interest. The potential for conflicts of interest arises when a broker is compensated by two parties in connection with the same or similar transactions. The vast majority of the compensation we receive for our work as insurance brokers is in the form of retail commissions and fees. We receive additional revenue from underwriting enterprises, separate from retail commissions and fees, including, among other things, contingent and supplemental revenues and payments for consulting and analytics services we provide them. Future changes in the regulatory environment may impact our ability to collect these amounts. Adverse regulatory, legal or other developments regarding these revenues could have a material adverse effect on our business, results of operations or financial condition, expose us to negative publicity and reputational damage and harm our relationships with clients, underwriting enterprises or other business partners.

On December 22, 2017, the U.S. enacted tax legislation commonly referred to as the TCJA, which significantly revised the U.S. tax code by, among other things, lowering the corporate income tax rate from 35.0% to 21.0%; limiting the deductibility of interest expense; implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. If the U.S. passes legislation reversing part or all of the TCJA and corresponding regulations, our tax rate could increase.

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We could be adversely affected by violations or alleged violations of laws that impose requirements for the conduct of our overseas operations, including the FCPA, the U.K. Bribery Act or other anti-corruption laws,sanctioned parties restrictions, and FATCA.

In countries outside the U.S., a risk exists that our employees, third party partners or agents could engage in business practices prohibited by applicable laws and regulations, such as the FCPA and the U.K. Bribery Act. Such anti-corruption laws generally prohibit companies from making improper payments to foreign officials and require companies to keep accurate books and records and maintain appropriate internal controls. We operate in some parts of the world that have experienced governmental corruption. In such parts of the world, in certain circumstances, local customs and practice might not be consistent with the requirements of anti-corruption laws. In addition, in recent years, two of the five publicly traded insurance brokerage firms were investigated in the U.S. and the U.K. for improper payments to foreign officials. These firms undertook internal investigations and paid significant settlements.

Our policies mandate strict compliance with such laws and we devote substantial resources to programs to ensure compliance, including investigating business practices and taking steps to address the risk that our employees, third party partners or agents will engage in business practices that are prohibited by our policies and/or such laws and regulations. We use third party partners and agents in certain jurisdictions where it is common industry practice to do so. Violations by us or a third party acting on our behalf could result in significant internal investigation costs and legal fees, civil and criminal penalties, including prohibitions on the conduct of our business, and reputational harm. Although we have not been materially impacted by any such violations, within the past year, we investigated certain business practices that violated our policies and terminated those found to be involved.

We may also be subject to legal liability and reputational damage if we violate trade sanctions laws of the U.S., the EU and other jurisdictions in which we operate. In addition, FATCA requires certain of our subsidiaries, affiliates and other entities to obtain valid FATCA documentation from payees prior to remitting certain payments to such payees and our failure to do so properly could result in penalties.

We are subject to a number of contingencies and legal proceedings which, if determined unfavorably to us, would adversely affect our financial results.

We are or have been subject to numerous claims, tax assessments, lawsuits and proceedings that arise in the ordinary course of business. Such claims, lawsuits and other proceedings include claims for damages based on allegations that our employees or sub-agents improperly failed to procure coverage, (including with respect to business interruption or other potential coverage for COVID‐19 losses), report claims on behalf of clients, provide underwriting enterprises with complete and accurate information relating to the risks being insured, or provide clients with appropriate consulting, advisory, pension and claims handling services. There is the risk that our employees or sub-agents may fail to appropriately apply funds that we hold for our clients on a fiduciary basis. Certain of our benefits and retirement consultants provide investment advice or decision-making services to clients. Additionally, our recent acquisition of the Willis Towers Watson plc reinsurance brokerage operations includes a securities business. If our clients experience investment losses, our reputation could be damaged and our financial results could be negatively affected as a result of claims asserted against us and lost business. Where appropriate, we have established provisions against these matters that we believe are adequate in light of current information and legal advice, and we adjust such provisions from time to time based on current material developments. The damages claimed in such matters are or may be substantial, including, in many instances, claims for punitive, treble or other extraordinary damages. It is possible that, if the outcomes of these contingencies and legal proceedings were not favorable to us, it could materially adversely affect our future financial results. In addition, our results of operations, financial condition or liquidity may be adversely affected if, in the future, our insurance coverage proves to be inadequate or unavailable or we experience an increase in liabilities for which we self-insure. We have purchased errors and omissions insurance and other insurance to provide protection against losses that arise in such matters. Accruals for these items, net of insurance receivables, when applicable, have been provided to the extent that losses are deemed probable and are reasonably estimable. These accruals and receivables are adjusted from time to time as current developments warrant.

As more fully described in Note 17 to our 2021 consolidated financial statements, we are a defendant in various legal actions incidental to our business, including but not limited to matters related to employment practices, alleged breaches of non-compete or other restrictive covenants, theft of trade secrets, breaches of fiduciary duties, intellectual property infringement and related causes of action. We are also periodically the subject of inquiries and investigations by regulatory and taxing authorities into various matters related to our business. For example, our micro-captive advisory services business has been under investigation by the IRS since 2013. In addition, we are defending a lawsuit (along with Chem-Mod LLC and other defendants) asserting infringement of patents held by Midwest Energy Emissions Corp. and MES Inc. We cannot reasonably predict the outcomes of these or other matters that we may become involved with in the future. An adverse outcome in connection with one or more of these matters could have a material adverse effect on our business, results of operations or financial condition in any given quarterly or annual period, or on an ongoing basis. In addition, regardless of any eventual monetary costs, any such matter could expose us to negative publicity, reputational

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damage, harm to our client or employee relationships, or diversion of personnel and management resources, which could adversely affect our ability to recruit quality brokers and other significant employees to our business, and otherwise adversely affect our results of operations.

Changes in our accounting estimates and assumptions could negatively affect our financial position and operating results.

We prepare our financial statements in accordance with U.S. generally accepted accounting principles (which we refer to as GAAP). These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements. We are also required to make certain judgments and estimates that affect the disclosed and recorded amounts of revenues and expenses related to revenue recognition and deferred costs - see Note 4 to our 2021 consolidated financial statements. We periodically evaluate our estimates and assumptions, including those relating to the valuation of goodwill and other intangible assets, investments, income taxes, revenue recognition, deferred costs, stock-based compensation, claims handling obligations, retirement plans, litigation and contingencies. We base our estimates on historical experience and various assumptions that we believe to be reasonable based on specific circumstances. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed in our consolidated financial statements. Further, as additional guidance relating to the TCJA is released or if the current U.S. president’s administration takes action to reverse portions of the TCJA, our estimates related to the TCJA may change. Additionally, changes in accounting standards (see Note 2 to our 2021 consolidated financial statements) could increase costs to the organization and could have an adverse impact on our future financial position and results of operations. See also “We have made certain assumptions relating to the Acquisition which may prove to be materially inaccurate” above.

Limited protection of our intellectual property could harm our business and our ability to compete effectively, and we face the risk that our services or products may infringe upon the intellectual property rights of others.

We cannot guarantee that trade secret, trademark and copyright law protections, or our internal policies and procedures regarding our management of intellectual property, are adequate to deter misappropriation of our intellectual property. Existing laws of some countries in which we provide services or products may offer only limited protection of our intellectual property rights. Also, we may be unable to detect the unauthorized use of our intellectual property and take the necessary steps to enforce our rights, which may have a material adverse impact on our business, financial condition or results of operations. We cannot be sure that our services and products, or the products of others that we offer to our clients, do not infringe on the intellectual property rights of third parties, and we may have infringement claims asserted against us or our clients. These claims may harm our reputation, result in financial liability, consume financial resources to pursue or defend, and prevent us from offering some services or products. In addition, these claims, whether with or without merit, could be expensive, take significant time and divert management’s focus and resources from business operations. Successful challenges against us could require us to modify or discontinue our use of technology or business processes where such use is found to infringe or violate the rights of others, or require us to purchase licenses from third parties, any of which could adversely affect our business, financial condition and operating results.

Risks Relating to our Investments, Debt and Common Stock

Our clean energy investments are subject to various risks and uncertainties.

We began generating tax credits under IRC Section 45 in 2009. As of December 31, 2021, we had generated a total of $1,706.1 million in IRC Section 45 tax credits, of which approximately $655.6 million have been used to offset U.S. federal tax liabilities and $1,050.5 million remain unused and available to offset future U.S. federal tax liabilities. Our IRC Section 45 investments’ ability to generate additional tax credits expired on December 31, 2021.

Our ability to use tax credits under IRC Section 45 depends upon the operations in which we invested having satisfied the conditions set forth in IRC Section 45. These include, among others, the “placed-in-service” condition and requirements relating to qualified emissions reductions, coal sales to unrelated parties and at least one of the operations’ owners qualifying as a “producer” of refined coal. While we have received some degree of confirmation from the IRS relating to our ability to claim these tax credits, the IRS could ultimately determine that the operations did not satisfy the conditions set forth in IRC Section 45. Similarly, the law permitting us to claim IRC Section 29 tax credits (related to our prior synthetic coal operations) expired on December 31, 2007. At December 31, 2021, we had exposure with respect to $108.0 million of previously earned tax credits under IRC Section 29. We believe our claim for IRC Section 29 tax credits in 2007 and prior years was in accordance with IRC Section 29 and four private letter rulings previously obtained by IRC Section 29-related limited liability companies in which we had an interest. We understand these private letter rulings were consistent with those issued to other taxpayers and we have received no indication from the IRS that it will seek to revoke or modify them. In addition, the IRS audited certain of the IRC Section 29 facilities without requiring any changes.

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While none of our prior IRC Section 29 operations are currently under audit, several of the IRC Section 45 operations in which we are invested are under audit by the IRS. One of these partnerships received a notice from the IRS disallowing our co-investors from claiming tax credits. The partnership defended its position in tax court and prevailed in August 2019. The IRS is appealing this ruling. Litigation is inherently uncertain and accordingly it is not possible for us to predict the ultimate outcome of this proceeding or other IRS audits, and their potential impact on us. The IRS could place the remaining IRC Section 45 operations and any of the prior IRC Section 29 operations under audit. An adverse outcome with respect to our ability to claim tax credits under any such audit would likely cause a material loss or cause us to be subject to liability under indemnification obligations related to prior sales of partnership interests in IRC Section 29 tax credits.

There is a risk that foreign laws will not protect the intellectual property associated with The Chem-ModTM Solution to the same extent as U.S. laws, leaving us vulnerable to companies outside the U.S. who may attempt to copy such intellectual property. In addition, other companies may make claims of intellectual property infringement with respect to The Chem-ModTM Solution. On July 17, 2019, Midwest Energy Emissions Corp. and MES Inc. (together, Midwest Energy) filed a patent infringement lawsuit in the United States District Court for the District of Delaware against us, Chem‐Mod LLC and numerous other related and unrelated parties (some of whom are seeking indemnification from Chem-Mod LLC). The complaint alleges that the named defendants infringed patents held exclusively by Midwest Energy and seeks unspecified damages and injunctive relief. We dispute the allegations contained in the complaint and intend to continue defending this matter vigorously. Litigation is inherently uncertain and, accordingly it is not possible for us to predict the ultimate outcome of this matter. However, we believe the probability of a material loss is remote.

The IRC Section 45 operations in which we have invested and the by-products from such operations may result in environmental and product liability claims and environmental compliance costs.

The construction and operation of the IRC Section 45 operations were subject to federal, state and local laws, regulations and potential liabilities arising under or relating to the protection or preservation of the environment, natural resources and human health and safety. Some environmental laws, without regard to fault or the legality of a party’s conduct, impose liability on certain entities that are considered to have contributed to, or are otherwise responsible for, the release or threatened release of hazardous substances into the environment. One party may, under certain circumstances, be required to bear more than its share or the entire share of investigation and cleanup costs at a site if payments or participation cannot be obtained from other responsible parties. By having used The Chem‐ModTM Solution at locations owned and operated by others, we and our partners may be exposed to the risk of being held liable for environmental damage from releases of hazardous substances we may have had little, if any, involvement in creating. Such risk remains even after production ceases at an operation to the extent the environmental damage can be traced to the types of chemicals or compounds used or operations conducted in connection with The Chem-ModTM Solution. Increasing attention to global climate change has resulted in an increased possibility of regulatory attention and private litigation. For example, claims have been made against certain energy companies alleging that greenhouse gas emissions constitute a public nuisance. In addition to the possibility of our being named in such actions, we and our partners could face the risk of environmental and product liability claims related to concrete incorporating fly ash produced using The Chem-ModTM Solution. No assurances can be given that contractual arrangements and precautions taken to ensure assumption of these risks by facility owners or operators, or other end users, will result in that facility owner or operator, or other end user, accepting full responsibility for any environmental or product liability claim. Nor can we or our partners be certain that facility owners or operators, or other end users, fully complied with all applicable laws and regulations, and this could result in environmental or product liability claims. It is also not uncommon for private claims by third parties alleging contamination to also include claims for personal injury, property damage, nuisance, diminution of property value, or similar claims. Furthermore, many environmental, health and safety laws authorize citizen suits, permitting third parties to make claims for violations of laws or permits. Our insurance may not cover all environmental risk and costs or may not provide sufficient coverage in the event of an environmental or product liability claim, and defense of such claims can be costly, even when such defense prevails. If significant uninsured losses arise from environmental or product liability claims, or if the costs of environmental compliance increase for any reason, our results of operations and financial condition could be adversely affected.

We have debt outstanding that could adversely affect our financial flexibility and subjects us to restrictions and limitations that could significantly impact our ability to operate our business.

As of December 31, 2021, we had total consolidated debt outstanding of approximately $6.3 billion (including $1.6 billion that we added in connection with our acquisition of Willis Towers Watson’s plc treaty reinsurance brokerage operations). The level of debt outstanding each period could adversely affect our financial flexibility. We also bear risk at the time our debt matures. Our ability to make interest and principal payments, to refinance our debt obligations and to fund our acquisition program and planned capital expenditures will depend on our ability to generate cash from operations. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, such as an environment of rising interest rates. A small portion of our private placement debt consists of floating rate notes and interest payments under our senior revolving credit facility are based on a floating rate which exposes us to the risk of a changing or unknown rate environment. Our indebtedness will also reduce the ability to use that cash for other purposes, including working capital, dividends to stockholders, acquisitions,

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capital expenditures, share repurchases, and general corporate purposes. If we cannot service our indebtedness, we may have to take actions such as selling assets, issuing additional equity or reducing or delaying capital expenditures, strategic acquisitions, and investments, any of which could impede the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business. Additionally, we may not be able to effect such actions, if necessary, or refinance any of our indebtedness on commercially reasonable terms, or at all.

The agreements governing our debt include covenants that, among other things, restrict our ability to dispose of assets, incur additional debt, engage in certain asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in certain transactions with affiliates, change our business or make investments, and require us to comply with certain financial and legal covenants. The restrictions in the agreements governing our debt may prevent us from taking actions that we believe would be in the best interest of our business and our stockholders and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted. We may also incur future debt obligations that might subject us to additional or more restrictive covenants that could affect our financial and operational flexibility, including our ability to pay dividends. We cannot make any assurances that we will be able to refinance our debt or obtain additional financing on terms acceptable to us, or at all. A failure to comply with the restrictions under the agreements governing our debt could result in a default under the financing obligations or could require us to obtain waivers from our lenders for failure to comply with these restrictions. The occurrence of a default that remains uncured or the inability to secure a necessary consent or waiver could cause our obligations with respect to our debt to be accelerated and have a material adverse effect on our financial condition and results of operations.

The reinsurance securities business we acquired as part of the Acquisition serves from time to time as the underwriter and initial purchaser of securities (such as catastrophe bonds) issued by our reinsurance company clients. This involves us, acting as an intermediary, to use our capital on hand and short-term borrowings to cover the purchase price of the securities. We place the securities with investors and use the funds we receive from them to repay our obligations. Risks specific to these short-term borrowings include counterparty risk (which is the risk that arises due to uncertainty about a counterparty’s ability to meet its obligations) with respect to the investors. Non-performance by any of our counterparties in these transactions for financial or other reasons could potentially expose us to material losses.

Credit rating downgrades would increase our financing costs and could subject us to operational risk.

If we need to raise capital in the future (for example, in order to maintain adequate liquidity, fund maturing debt obligations or finance acquisitions or other initiatives), credit rating downgrades would increase our financing costs, and could limit our access to financing sources. We would also face the risk of a credit rating downgrade if we do not retire or refinance the debt to levels acceptable to the credit rating agencies in a timely manner. Further, a downgrade to a rating below investment-grade could result in greater operational risks through increased operating costs and increased competitive pressures.

We are a holding company and, therefore, may not be able to receive dividends or other distributions in needed amounts from our subsidiaries.

We are organized as a holding company, a legal entity separate and distinct from our operating subsidiaries. As a holding company without significant operations of our own, we are dependent upon dividends and other payments from our operating subsidiaries to meet our obligations for paying principal and interest on outstanding debt obligations, for paying dividends to stockholders, repurchasing our common stock and for corporate expenses. In the event our operating subsidiaries are unable to pay sufficient dividends and other payments to us, we may not be able to service our debt, pay our obligations, pay dividends on or repurchase our common stock.

Further, we derive a meaningful portion of our revenue and operating profit from operating subsidiaries located outside the U.S. Since the majority of financing obligations as well as dividends to stockholders are paid from the U.S., it is important to be able to access the cash generated by our operating subsidiaries located outside the U.S. in the event we are unable to meet these U.S. based cash requirements.

Funds from our operating subsidiaries outside the U.S. may be repatriated to the U.S. via stockholder distributions and intercompany financings, where necessary. A number of factors may arise that could limit our ability to repatriate funds or make repatriation cost prohibitive, including, but not limited to the imposition of currency controls and other government restrictions on repatriation in the jurisdictions in which our subsidiaries operate, fluctuations in foreign exchange rates, the imposition of withholding and other taxes on such payments and our ability to repatriate earnings in a tax-efficient manner.

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In the event we are unable to generate or repatriate cash from our operating subsidiaries for any of the reasons discussed above, our overall liquidity could deteriorate and our ability to finance our obligations, including to pay dividends on or repurchase our common stock, could be adversely affected.

Future sales or other dilution of our equity could adversely affect the market price of our common stock.

An important way we grow our business is through acquisitions. One method of acquiring companies or otherwise funding our corporate activities is through the issuance of additional equity securities. The issuance of any additional shares of common or of preferred stock or convertible securities could be substantially dilutive to holders of our common stock. Moreover, to the extent that we issue restricted stock units, performance stock units, options or warrants to purchase shares of our common stock in the future and those options or warrants are exercised or as the restricted stock units or performance stock units vest, our stockholders may experience further dilution. Holders of our common stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our stockholders. The market price of our common stock could decline as a result of sales of shares of our common stock or the perception that such sales could occur.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

The executive offices of our corporate segment and certain subsidiary and branch facilities of our brokerage and risk management segments are located at 2850 Golf Road, Rolling Meadows, Illinois, where we own approximately 360,000 square feet of space, and can accommodate 2,000 employees at peak capacity.

Elsewhere, we generally operate in leased premises related to the facilities of our brokerage and risk management operations. We prefer to lease office space rather than own real estate related to the branch facilities of our brokerage and risk management segments. Certain of our office space leases have options permitting renewals for additional periods. In addition to minimum fixed rentals, a number of our leases contain annual escalation clauses generally related to increases in an inflation index. See Notes 15 and 17 to our 2021 consolidated financial statements for information with respect to our lease commitments as of December 31, 2021.

Item 3. Legal Proceedings.

Please see the information set forth in Note 17 to our consolidated financial statements, included herein, under “Litigation, Regulatory and Taxation Matters.”

Item 4. Mine Safety Disclosures.

Not applicable.

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Information About OurExecutive Officers

Set forth below are the names, ages, positions and business backgrounds of our executive officers as of the date hereof:

Name Age Position and Year First Elected

Walter D. Bay 59 Corporate Vice President, General Counsel, Secretary since 2007

Richard C. Cary 59 Controller since 1997, Chief Accounting Officer since 2001

With the exception of Mr. Mead, we have employed each such person principally in management capacities for more than the past five years. All executive officers are appointed annually and serve at the pleasure of our board of directors.

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Part II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is listed on the New York Stock Exchange, trading under the symbol “AJG.”

As of January 31, 2022, there were approximately 1,000 holders of record of our common stock.

(c) Issuer Purchases of Equity Securities

The following table shows the purchases of our common stock made by or on behalf of us or any “affiliated purchaser” (as such term is defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of us for each fiscal month in the three-month period ended December 31, 2021:

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Item 6. [Reserved].

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included in Item 8 of this annual report. In addition, please see “Information Regarding Non-GAAP Measures and Other” beginning on page 35 for a reconciliation of the non-GAAP measures for adjusted total revenues, organic commission, fee and supplemental revenues and adjusted EBITDAC to the comparable GAAP measures, as well as other important information regarding these measures.

We are engaged in providing insurance brokerage and consulting services, and third-party property/casualty claims settlement and administration services to entities in the U.S. and abroad. We believe that one of our major strengths is our ability to deliver comprehensively structured insurance and risk management services to our clients. Our brokers, agents and administrators act as intermediaries between underwriting enterprises and our clients and we do not assume net underwriting risks. We are headquartered in Rolling Meadows, Illinois, have operations in 68 countries and offer client-service capabilities in more than 150 countries globally through a network of correspondent brokers and consultants. In 2021, we expanded, and expect to continue to expand, our international operations through both acquisitions and organic growth. We generate approximately 67% of our revenues for the combined brokerage and risk management segments domestically, with the remaining 33% generated internationally, primarily in the U.K., Australia, Canada, New Zealand and Bermuda (based on 2021 revenues). We expect that our international revenue as a percentage of our total revenues in 2022 will increase compared to 2021, in part due to our acquisition of the Willis Towers Watson plc treaty reinsurance brokerage operations (see further below). We have three reportable segments: brokerage, risk management and corporate, which contributed approximately 73%, 13% and 14%, respectively, to 2021 revenues. Our major sources of operating revenues are commissions, fees and supplemental and contingent revenues from brokerage operations and fees from risk management operations. Investment income is generated from invested cash and fiduciary funds, clean energy investments, and interest income from premium financing. Our ability to generate additional tax credits from our Section 45 clean energy investments ended in December 2021. Unless Congress reinstates the law allowing for such tax credits, we do not expect to generate any revenue or earnings from such investments in 2022.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain statements relating to future results which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Please see “Information Concerning Forward-Looking Statements” at the beginning of this annual report, for certain cautionary information regarding forward-looking statements and a list of factors that could cause our actual results to differ materially from those predicted in the forward-looking statements.

Prior Year Discussion of Results and Comparisons

For information on fiscal 2020 results and similar comparisons, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the fiscal year ended December 31, 2020.

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Summary of Financial Results - Year Ended December 31,

See the reconciliations of non-GAAP measures on page 33.

(In millions, except per share data)

Brokerage Segment

Net earnings margin 17.0 % 16.8 % +28 bpts

Adjusted EBITDAC margin 33.9 % 32.7 % +123 bpts

Risk Management Segment

Net earnings margin (before reimbursements) 9.3 % 8.1 % +111 bpts

Adjusted EBITDAC margin (before reimbursements) 19.1 % 18.2 % +88 bpts

Corporate Segment

Diluted net loss per share $ (0.92 ) $ (0.46 ) $ (0.56 ) $ (0.57 )

Total Company

Total Brokerage and Risk Management Segment

In our corporate segment, net after-tax earnings from our clean energy investments was $97.4 million and $69.8 million in 2021 and 2020, respectively. At this time, we do not anticipate our clean energy investments will produce after-tax earnings in 2022.

The following provides information that management believes is helpful when comparing revenues before reimbursements, net earnings, EBITDAC and diluted net earnings per share for 2021 and 2020. In addition, these tables provide reconciliations to the most

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comparable GAAP measures for adjusted revenues, adjusted EBITDACand adjusted diluted net earnings per share. Reconciliations of EBITDAC for the brokerage and risk management segments are provided on pages 39and 45of this filing.

Year Ended December 31 Reported GAAP to Adjusted Non-GAAP Reconciliation:

(In millions, except per share data)

Levelized foreign currency translation — 110.1 — 17.4 — 36.2 — 0.09

Net gains on divestures (0.1 ) — (0.1 ) — (0.1 ) — — —

Acquisition related adjustments — — 2.1 0.4 0.4 — 0.01 —

Levelized foreign currency translation — 11.4 — 0.7 — 2.0 — —

Loss on extinguishment of debt — — 12.2 — — — 0.06 —

Transaction-related costs — — 38.5 — 47.9 — 0.19 —

Total Brokerage and Risk

Total Brokerage and Risk

For the year ended December 31, 2020, the pretax impact of the brokerage segment adjustments totals $148.5 million, with a corresponding adjustment to the provision for income taxes of $33.4 million relating to these items. For the year ended December 31, 2021, the pretax impact of the risk management segment adjustments totals $9.5 million, with a corresponding adjustment to the provision for income taxes of $2.4 million relating to these items. For the year ended December 31, 2021, there is no pretax impact of the corporate segment adjustments, but there is an adjustment to the provision for income taxes of $1.1 million. For the corporate segment, the clean energy related adjustments are described on page 50.

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

(In millions except share and per share data)

Net gains on divestitures (0.1 ) — (0.1 ) — (0.1 ) —

Acquisition related adjustments 0.6 0.2 0.4 — 0.4 —

Levelized foreign currency translation 1.0 0.3 0.7 — 0.7 —

Income tax related — 1.1 (1.1 ) — (1.1 ) (0.01 )

Acquisition of the Willis Towers Watson plc Treaty Reinsurance Brokerage Operations

On December 1, 2021, we acquired substantially all of the Willis Towers Watson’s plc treaty reinsurance brokerage operations for an initial gross consideration of $3.25 billion, and potential additional consideration of $750 million subject to certain third-year revenue targets. There are twelve remaining international operations with deferred closings that comprise approximately $180 million of the initial purchase consideration that are subject to local regulatory approval and are expected to close in the first and second quarters of 2022. We funded the transaction using cash on hand, including the $1.4 billion of net cash raised in our May 17, 2021 follow-on common stock offering, $850 million of net cash borrowed in our May 20, 2021 30-year senior note issuance, $750 million of net cash borrowed in our November 9, 2021 10-year ($400 million) and 30-year ($350 million) senior note issuances and short‐term borrowings.

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Significant Developments and Trends

Impact of COVID 19 Pandemic Recovery

Relative to fourth quarter 2020, during fourth quarter 2021;

If economic conditions continue to improve, we believe we may continue to see favorable revenue benefits in our brokerage and risk management segments in the first quarter of 2022 relative to the same quarter in 2021. However, if the economic recovery slows, due to the Omicron variant or other factors, we could see less revenue benefits than we experienced in second, third and fourth quarters of 2021.

During the second, third and fourth quarters of 2020 and first quarter of 2021, we realized significant expense savings (totaling approximately $60 million to $75 million per quarter relative to the prior year same quarters, adjusted for pro forma full‐quarter costs related to acquisitions) as a result of reduced travel, entertainment and advertising expenses, reduced costs from lower employee medical plan utilization, a reduction in workforce, wage controls, and reduced use of external consultants. During the second, third and fourth quarters of 2021, as we increased our business activities relative to the second, third and fourth quarters of 2020, we experienced increases in travel and entertainment, full restoration of advertising and more normalized usage of our employee medical plan, resumption of annual support-layer wage increases, increased use of external consultants, further investment in support of our hybrid employee environment, continued investment in cyber security and an increase in incentive compensation. These incremental costs totaled approximately $15 million, $25 million and $30 million in our brokerage segment relative to the second, third and fourth quarters of 2020, respectively. Looking forward to 2022, we believe we will see incrementally higher brokerage segment costs relative to 2021, and if the pace of economic recovery accelerates beyond our expectations, we could see expense increases higher than our current estimates.

For a discussion of risk and uncertainties relating to COVID‐19 for our business, results of operations and financial condition, see Part I, Item 1A. Risk Factors in our Form 10-K pages 13-14.

Insurance Market Overview

Fluctuations in premiums charged by property/casualty underwriting enterprises have a direct and potentially material impact on the insurance brokerage industry. Commission revenues are generally based on a percentage of the premiums paid by insureds and normally follow premium levels. Insurance premiums are cyclical in nature and may vary widely based on market conditions. Various factors, including competition for market share among underwriting enterprises, increased underwriting capacity and improved economies of scale following consolidations, can result in flat or reduced property/casualty premium rates (a “soft” market). A soft market tends to put downward pressure on commission revenues. Various countervailing factors, such as greater than anticipated loss experience, unexpected loss exposure and capital shortages, can result in increasing property/casualty premium rates (a “hard” market). A hard market tends to favorably impact commission revenues. Hard and soft markets may be broad-based or more narrowly focused across individual product lines or geographic areas. As markets harden, buyers of insurance (such as our brokerage clients), have historically tried to mitigate premium increases and the higher commissions these premiums generate, including by raising their deductibles and/or reducing the overall amount of insurance coverage they purchase. As the market softens, or costs decrease, these trends have historically reversed. During a hard market, buyers may switch to negotiated fee in lieu of commission arrangements to compensate us for placing their risks, or may consider the alternative insurance market, which includes self-insurance, captives, rent-a-captives, risk retention groups and capital market solutions to transfer risk. Our brokerage units are very active in these markets as well. While increased use by insureds of these alternative markets historically has reduced commission revenue to us, such trends generally have been accompanied by new sales and renewal increases in the areas of risk management, claims management, captive insurance and self-insurance services and related growth in fee revenue. Inflation tends to increase the levels of insured values and risk exposures, resulting in higher overall premiums and higher commissions. However, the impact of hard and soft market fluctuations has historically had a greater impact on changes in premium rates, and therefore on our revenues, than inflationary pressures.

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We typically cite the Council of Insurance Agents & Brokers (which we refer to as the CIAB) insurance pricing quarterly survey at this time as an indicator of the current insurance rate environment. The fourth quarter 2021survey had not been published as of the filing date of this report. The first three 2021quarterly surveys indicated that U.S. commercial property/casualty rates increased by 10.0%, 8.3%, and 8.9% on average, for the first, second and third quarters of 2021, respectively. We expect a similar trend to be noted when the CIAB fourth quarter 2021survey report is issued, which would signaloverall continued price firming and hardening in some items. The CIAB represents the leading domestic and international insurance brokers, who write approximately 85% of the commercial property/casualty premiums in the U.S.

We believe increases in property/casualty rates, will continue in 2022 due to rising loss costs resulting from replacement cost inflation, increased frequency of catastrophe losses and social inflation, and continued low fixed income investment returns. The economies of the U.S. and other countries around the world contracted during 2020 as a result of COVID-19. Global economic conditions in many geographies improved during 2021, and have resumed growth despite supply chain disruptions and new COVID-19 variants. Global economic growth is expected to continue in 2022 and is likely to lead to higher exposure units, inflation, a tight labor market and lower unemployment. Additionally, we expect that our history of strong new business generation, solid retentions and enhanced value-added services for our carrier partners should all result in further organic growth opportunities around the world. Overall, we believe that in a positive rate environment with growing exposure units, our professionals can demonstrate their expertise and high-quality, value-added capabilities by strengthening our clients’ insurance portfolios and delivering insurance and risk management solutions within our clients’ budget. Based on our experience, there is adequate capacity in the insurance market for most lines of coverage, terms and conditions are tightening, most insurance carriers appear to be making rational pricing decisions and clients can broadly still obtain coverage.

Clean energy investments - We have investments in limited liability companies that own 29 clean coal production plants developed by us and six clean coal production plants we purchased from a third party. All 35 plants produce refined coal using propriety technologies owned by Chem-Mod. We believe that the production and sale of refined coal at these plants are qualified to receive refined coal tax credits under IRC Section 45. The plants which were placed in service prior to December 31, 2009(which we refer to as the 2009 Era Plants) received tax credits through 2019 and the 21 plants which were placed in service prior to December 31, 2011 (which we refer to as the 2011 Era Plants) received tax credits through 2021. All twenty-one of the 2011 Era Plants were under long‐term production contracts with several utilities. Those agreements ended December 31, 2021 due to the expiration of the IRC Section 45 program.

We also own a 46.5% controlling interest in Chem-Mod, which has been marketing The Chem‐ModTM Solution proprietary technologies principally to refined fuel plants that sell refined fuel to coal-fired power plants owned by utility companies, including those plants in which we hold interests. Currently, Chem-Mod is not anticipated to generate after-tax earnings after 2021.

All estimates set forth above regarding the future results of our clean energy investments are subject to significant risks, including those set forth in the risk factors regarding our IRC Section 45 investments under Item 1A, “Risk Factors.”

Business Combinations and Dispositions

See Note 3 to our 2021 consolidated financial statements for a discussion of our 2021 business combinations.

Results of Operations

Information Regarding Non-GAAP Measures and Other

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

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Adjusted Non-GAAP presentation - We believe that the adjusted non-GAAP presentation of our 2021 and 2020information, presented on the following pages, provides stockholders and other interested persons with useful information regarding certain financial metrics that may assist such persons in analyzing our operating results as they develop a future earnings outlook for us. The after-tax amounts related to the adjustments were computed using the normalized effective tax rate for each respective period.

Non-GAAP Earnings Measures

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

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Organic Revenues (a non-GAAP measure) - For the brokerage segment, organic change in base commission and fee revenues, supplemental revenues and contingent revenues excludes the first twelve months of such revenues generated from acquisitions and such revenues related to divested operations in each year presented. These revenues are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of our business in both the current and prior year. In addition, organic change in base commission and fee revenues, supplemental revenues and contingent revenues exclude 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. For the risk management segment, organic change in fee revenues excludes the first twelve months of fee revenues generated from acquisitions 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.

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 2022 and beyond. We have historically viewed organic revenue growth as an important indicator when assessing and evaluating the performance of our brokerage and risk management segments. We also believe that using this non-GAAP measure allows readers of our financial statements to measure, analyze and compare the growth from our brokerage and risk management segments in a meaningful and consistent manner.

Reconciliation of Non-GAAP Information Presented to GAAP Measures - This report includes tabular reconciliations to the most comparable GAAP measures for adjusted revenues, adjusted compensation expense and adjusted operating expense, EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, adjusted EBITDAC (before acquisitions), diluted net earnings per share (as adjusted) and organic revenue measures.

Brokerage

The brokerage segment accounted for 73% of our revenue in 2021. Our brokerage segment is primarily comprised of retail and wholesale brokerage operations. Our brokerage segment generates revenues by:

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

Financial information relating to our brokerage segment results for 2021 and 2020 (in millions, except per share, percentages and workforce data):

Net gains (losses) on divestitures 18.8 (5.8 ) 24.6

Change in estimated acquisition earnout payables 116.3 (29.7 ) 146.0

Net earnings attributable to noncontrolling interests 8.4 4.9 3.5

Net earnings attributable to controlling interests $ 1,008.2 $ 861.1 $ 147.1

Diluted net earnings per share $ 4.86 $ 4.42 $ 0.44

Other Information

Change in diluted net earnings per share 10 % 20 %

Growth in revenues 15 % 5 %

Organic change in commissions and fees 8 % 3 %

Compensation expense ratio 55 % 56 %

Operating expense ratio 13 % 13 %

Effective income tax rate 24 % 24 %

Workforce at end of period (includes acquisitions) 29,869 24,717

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The following provides information that management believes is helpful when comparing EBITDAC and adjusted EBITDAC for 2021 and 2020 (in millions):

Change in estimated acquisition earnout payables 116.3 (29.7 )

Net (gains) loss on divestitures (18.8 ) 5.8

Acquisition integration 31.7 25.1

Acquisition related adjustments 27.4 19.2

Workforce and lease termination related charges 20.6 43.9

Levelized foreign currency translation — 36.2

Net earnings margin, as reported 17.0 % 16.8 % +28 bpts

EBITDAC margin, as adjusted 33.9 % 32.7 % +123 bpts

Commissions and fees - The aggregate increase in base commissions and fees for 2021 was due to revenues associated with acquisitions that were made during 2021 and 2020 ($255.9 million) and organic revenue growth. Commission revenues increased 15% and fee revenues increased 14% in 2021 compared to 2020, respectively. The organic change in base commission and fee revenues was 8% in 2021 and 3% in 2020.

In our property/casualty brokerage operations, during the three-month period ended December 31, 2021, we saw continued strong customer retention and new business generation, improving renewal exposure units (i.e., insured values, payrolls, employees, miles driven, gross receipts, etc.) and continued increases in premium rates across most geographies and lines of coverage. In our employee benefits brokerage operations, during the three-month period ended December 31, 2021 we saw continued improvement in covered lives on renewal business and new consulting and special project work. We believe these favorable trends should continue in 2022; however, if the economic recovery slows or reverses course, we could see our revenue growth soften from first half levels of 2021.

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Items excluded from organic revenue computations yet impacting revenue comparisons for 2021 and 2020include the following (in millions):

2021 Organic Revenues

Base Commissions and Fees

Less commission and fee revenues from acquisitions (255.9 ) —

Less divested operations — (13.7 )

Levelized foreign currency translation — 97.3

Supplemental revenues

Supplemental revenues, as reported $ 248.7 $ 221.9 12.1 %

Less supplemental revenues from acquisitions (3.1 ) —

Levelized foreign currency translation — 5.5

Organic supplemental revenues $ 245.6 $ 227.4 8.0 %

Contingent revenues

Less contingent revenues from acquisitions (3.3 ) —

Levelized foreign currency translation — 1.6

Less divested operations and program repricing — (13.7 )

Levelized foreign currency translation — 104.4

Number of acquisitions closed 36 27

Estimated annualized revenues acquired (in millions) $ 952.0 $ 251.4

For 2021 and 2020, we issued 1,423,000 and 1,857,000 shares, respectively, of our common stock at the request of sellers and/or in connection with tax-free exchange acquisitions. In addition, on May 17, 2021 we completed a follow-on common stock offering in which we issued 10.3 million shares of our common stock, the net proceeds of which were used to fund a portion of the acquisition of the Willis Towers Watson plc treaty reinsurance brokerage operations.

On December 1, 2021, we acquired substantially all of the Willis Towers Watson’s plc treaty reinsurance brokerage operations for an initial gross consideration of $3.25 billion, and potential additional consideration of $750 million subject to certain third-year revenue targets. There are twelve remaining international operations with deferred closings that comprise approximately $180 million of the initial purchase consideration that are subject to local regulatory approval and are expected to close in first and second quarters of 2022. We funded the transaction using cash on hand, including the $1.4 billion of net cash raised in our May 17, 2021 follow-on common stock offering, the $850 million of net cash borrowed in our May 20, 2021 30-year senior note issuance, $750 million of net cash borrowed in our November 9, 2021 10-year ($400 million) and 30-year ($350 million) senior note issuances and short‐term borrowings.

Following the completion of the acquisition of the reinsurance brokerage operations discussed above, we and Willis Towers Watson (which we refer to as WTW) entered into transition service agreements (which we refer to as TSA). Under the agreement, WTW will provide certain specified back office support services globally on a transitional basis for a period of up to two years from December 1, 2021, based on the specific location and type of services being provided by WTW. Such services include among other things, client related billings, collections and carrier remittances, payroll and other human resource services, information systems, real estate as well as accounting support. The charges for the transition services are generally intended to allow the providing companyto fully recover the allocated direct costs of providing the services, plus all out-of-pocket costs and expenses. Under the TSA, there is the option at our request for two extension periods for each service provided for up to six months each. If we do exercise the extensions there is a profit margin markup added in each period.

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On November 9, 2021, we closed and funded an offering of $750.0 million of unsecured senior notes in two tranches. The $400.0 million aggregate principal amount of 2.40% Senior Notes are due 2031 (which we refer to as the 2031 November Notes) and $350.0 million aggregate principal amount of 3.05% Senior Notes are due 2052 (which we refer to as the 2052 November Notes and together with the 2031 November Notes, the November Notes). The weighted average interest rate is 2.80% per annum after giving effect to underwriting costs. We used the net proceeds of the November Notes to fund a portion of the cash consideration payable in connection with the Willis Tower Watson plc treaty reinsurance transaction.

On May 20, 2021, we closed and funded an offering of $1,500.0 million of unsecured senior notes in two tranches. The $650.0 million aggregate principal amount of 2.50% Senior Notes were due 2031 (which we refer to as the 2031 Notes) and the $850.0 million aggregate principal amount of 3.50% Senior Notes are due 2051 (which we refer to as the 2051 Notes). The weighted average interest rate was 3.31% per annum after giving effect to underwriting costs and the net hedge loss. In conjunction with the termination of the Willis Tower Watson plc treaty reinsurance transaction, on July 29, 2021, we exercised the special option redemption feature for the 2031 Senior Notes. These notes were redeemed on August 13, 2021, which resulted in a loss on extinguishment of debt of $16.2 million. We used the net proceeds of this offering related to the 2051 Notes to fund a portion of the cash consideration payable in connection with the Willis Towers Watson plc treaty reinsurance transaction.

On May 17, 2021, we closed on a follow-on public offering of our common stock whereby 10.3 million shares of our stock were issued for net proceeds, after underwriting discounts and other expenses related to this offering, of $1,437.9 million. We used the net proceeds of the offering to fund the acquisition of the Willis Towers Watson plc treaty reinsurance brokerage operations.

Supplemental and contingent revenues - Reported supplemental and contingent revenues recognized in 2021 and 2020 by quarter are as follows (in millions):

Q1 Q2 Q3 Q4 Full Year

Investment incomeand net gains on divestitures - This primarily represents (1) interest income earned on cash, cash equivalents and restricted funds and interest income from premium financing and (2) net gains (losses) related to divestitures and sales of books of business, which were $18.8 million and $(5.8) million in 2021 and 2020, respectively. Also included in net gains in 2021 is a $8.7 million gain we recognized related to our acquisition of an additional 70% equity interest in Edelweiss Gallagher Insurance Brokers Limited (which we refer to as Edelweiss), which increased our ownership in Edelweiss to 100%. The gain represents the increase in fair value of our initial 30.0% equity interest in Edelweiss based on the purchase price paid to acquire the additional 70% equity interest. On December 16, 2020, we completed the sale of a U.K. wealth management business we purchased over four years ago, that no longer strategically fit in our benefits operations. In fourth quarter 2020, we recognized a net pretax non-cash loss on the sale of approximately $12.0 million, primarily due to the write‐off of the remaining net book value of the amortizable intangible assets.

Investment income in 2021 increased compared to 2020 primarily due to increases in interest income from our U.S. operations primarily due to increases in interest income related to premium funding operations and increases in income from our partially owned entities accounted for using the equity method, partially offset by decreases in interest income due to decreases in interest rates earned on our funds.

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Compensation expense- The following provides non-GAAP information that management believes is helpful when comparing 2021 and 2020 compensation expense(in millions):

Compensation expense, as reported $ 3,252.4 $ 2,882.5

Acquisition integration (22.3 ) (14.9 )

Workforce related charges (16.2 ) (35.7 )

Acquisition related adjustments (27.4 ) (19.2 )

Levelized foreign currency translation — 61.6

Compensation expense, as adjusted $ 3,186.5 $ 2,874.3

Reported compensation expense ratios 54.5 % 55.8 %

Adjusted compensation expense ratios 53.6 % 54.4 %

The $369.9 million increase in compensation expense in 2021 compared to 2020 was primarily due to compensation associated with the acquisitions completed in the twelve month period ended December 31, 2021 - $102.9 million, producer compensation and other incentive compensation linked to operating results - $266.0 million in the aggregate and an increase in temporary-staffing - $1.0 million. During 2021, relative to 2020, as we increased our business activities, we saw more normalized usage of our employee medical plan and resumption of annual support-layer wage increases.

Operating expense - The following provides non-GAAP information that management believes is helpful when comparing 2021 and 2020 operating expense (in millions):

Operating expense, as reported $ 757.9 $ 687.2

Acquisition integration (9.4 ) (10.2 )

Workforce and lease termination related charges (4.4 ) (8.2 )

Levelized foreign currency translation — 12.3

Operating expense, as adjusted $ 744.1 $ 681.1

Reported operating expense ratios 12.7 % 13.3 %

Adjusted operating expense ratios 12.5 % 12.9 %

The $70.7 million increase in operating expense in 2021 compared to 2020, was due primarily due to expenses associated with the acquisitions completed in the twelve month period ended December 31, 2021 - $39.5 million and an increase in technology expenses - $33.9 million, partially offset by a decrease of $2.7 million in the aggregate due to continued operating control measures. During 2021, relative to 2020, as we increased our business activities, we saw increases in travel and entertainment, full restoration of advertising and increased use of external consultants.

Depreciation - The increase in depreciation expense in 2021 compared to 2020 was due primarily to the impact of purchases of furniture, equipment and leasehold improvements related to office expansions and moves, and expenditures related to upgrading computer systems. Also contributing to the increases in depreciation expense in 2021 was the depreciation expense associated with acquisitions completed in 2021.

Amortization - The decrease in amortization in 2021 compared to 2020 was due primarily to the write-off of amortizable assets in 2021 (see impairment discussion below), partially offset by the impact of amortization expense of intangible assets associated with acquisitions completed in 2021 and 2020. Expiration lists, non‐compete agreements and trade names are amortized using the straight-line method over their estimated useful lives (two to fifteen years for expiration lists, two to six years for non-compete agreements and two to fifteen years for trade names). Based on the results of impairment reviews performed on amortizable intangible assets in 2021 and 2020, we wrote off $16.8 million and $51.5 million, respectively, of amortizable intangible assets related to the brokerage segment. We review all of our intangible assets for impairment periodically (at least annually for goodwill) and whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. We perform such impairment reviews at the division (i.e., reporting unit) level with respect to goodwill and at the business unit level for amortizable intangible

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assets. In reviewing amortizable intangible assets, if the undiscounted future cash flows were less than the carrying amount of the respective (or underlying) asset, an indicator of impairment would exist and further analysis would be required to determine whether or not a loss would need to be charged against current period earnings as a component of amortization expense. We performed aqualitative impairmentreview oncarrying value of our goodwill for all of our reporting units as of December 31, 2021 and no indicators of impairment were noted.

Change in estimated acquisition earnout payables - The change in the expense from the change in estimated acquisition earnout payables in 2021 compared to 2020 was due primarily to adjustments made to the estimated fair value of earnout obligations related to revised projections of future performance. During 2021 and 2020, we recognized $34.7 million and $32.0 million, respectively, of expense related to the accretion of the discount recorded for earnout obligations in connection with our acquisitions made from 2017 to 2021. During 2021 and 2020, we recognized $81.6 million of expense and $61.7 million of income, respectively, related to net adjustments in the estimated fair market values of earnout obligations in connection with revised projections of future performance for 95 and 131 acquisitions, respectively.

The amounts initially recorded as earnout payables for our 2017 to 2021 acquisitions were measured at fair value as of the acquisition date and are primarily based upon the estimated future operating results of the acquired entities over a two- to three‐year period subsequent to the acquisition date. The fair value of these earnout obligations is based on the present value of the expected future payments to be made to the sellers of the acquired entities in accordance with the provisions outlined in the respective purchase agreements. In determining fair value, we estimate the acquired entity’s future performance using financial projections developed by management for the acquired entity and market participant assumptions that were derived for revenue growth and/or profitability. We estimate future earnout payments using the earnout formula and performance targets specified in each purchase agreement and these financial projections. Subsequent changes in the underlying financial projections or assumptions will cause the estimated earnout obligations to change and such adjustments are recorded in our consolidated statement of earnings when incurred. Increases in the earnout payable obligations will result in the recognition of expense and decreases in the earnout payable obligations will result in the recognition of income.

Provision for income taxes - The brokerage segment’s effective tax rate in 2021 and 2020 was 24.4% and 24.2% respectively. We anticipate reporting an effective tax rate of approximately 23.0% to 25.0% in our brokerage segment for the foreseeable future.

Net earnings attributable to noncontrolling interests - The amounts reported in this line for 2021 and 2020 include noncontrolling interest earnings of $8.4 million and $4.9 million, respectively.

Litigation, Regulatory and Taxation Matters

As previously disclosed, our IRC 831(b) (or “micro-captive”) advisory services business has been under audit by the IRS since 2013. Among other matters, the IRS is investigating whether we have been acting as a tax shelter promoter in connection with these operations. Additionally, the IRS is conducting a criminal investigation related to IRC 831(b) micro-captive underwriting enterprises. We have been advised that we are not a target of the criminal investigation. We are fully cooperating with both matters. While we are not able to reasonably estimate the ultimate amount of any potential loss in connection with these investigations, we do not expect any loss to be material to our consolidated financial statements.

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Risk Management

The risk management segment accounted for 13% of our revenue in 2021. Our risk management segment operations provide contract claim settlement, claim administration, loss control services and risk management consulting for commercial, not for profit, captive and public entities, and various other organizations that choose to self-insure property/casualty coverages or choose to use a third-party claims management organization rather than the claim services provided by underwriting enterprises. Revenues for our risk management segment are comprised of fees generally negotiated (i) on a per-claim or per-service basis, (ii) on a cost-plus basis, or (iii) as performance-based fees. We also provide risk management consulting services that are recognized as the services are delivered.

Financial information relating to our risk management segment results for 2021 and 2020 (in millions, except per share, percentages and workforce data):

Investment income 0.3 0.7 (0.4 )

Net gains on divestitures 0.1 — 0.1

Change in estimated acquisition earnout payables 3.3 (3.2 ) 6.5

Net earnings attributable to noncontrolling interests — — —

Net earnings attributable to

Diluted earnings per share $ 0.43 $ 0.34 $ 0.09

Other information

Change in diluted earnings per share 26 % (3 %)

Growth in revenues (before reimbursements) 18 % (2 %)

Organic change in fees (before reimbursements) 12 % (3 %)

Compensation expense ratio (before reimbursements) 60 % 63 %

Operating expense ratio (before reimbursements) 22 % 20 %

Effective income tax rate 25 % 25 %

Workforce at end of period (includes acquisitions) 7,308 6,378

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The following provides non-GAAP information that management believes is helpful when comparing 2021 and 2020 EBITDAC and adjusted EBITDAC in millions):

Net earnings, as reported $ 89.5 $ 66.9 33.8 %

Provision for income taxes 30.6 22.5

Change in estimated acquisition earnout payables 3.3 (3.2 )

Net gains on divestitures (0.1 ) —

Workforce and lease termination related charges 7.1 7.9

Acquisition related adjustments 0.4 —

Levelized foreign currency translation — 2.0

Net earnings margin, before reimbursements, as reported 9.3 % 8.1 % +111 bpts

EBITDAC margin, before reimbursements, as adjusted 19.1 % 18.2 % +88 bpts

Reported revenues before

Adjusted revenues - before reimbursements - see page 32 $ 967.5 $ 833.1

Fees - In 2021, our risk management operations, new workers’ compensation and general liability claims arising improved due to our clients’ improving business conditions and are well above second quarter 2020 pandemic lows. We believe these favorable trends should continue for 2022, however, a slower recovery, reversal in the number of workers employed, new COVID variants or surge in cases could cause fewer new workers’ compensation claims to arise in future quarters. Organic change in fee revenues was 12% in 2021 and (3%) in 2020.

Items excluded from organic fee computations yet impacting revenue comparisons in 2021 and 2020 include the following (in millions):

International performance bonus fees 13.2 5.7

Less fees from acquisitions (33.3 ) —

Levelized foreign currency translation — 11.4

Reimbursements - Reimbursements represent amounts received from clients reimbursing us for certain third-party costs associated with providing our claims management services. In certain service partner relationships, we are considered a principal because we direct the third party, control the specified service and combine the services provided into an integrated solution. Given this principal relationship, we are required to recognize revenue on a gross basis and service partner vendor fees in the operating expense line in our consolidated statement of earnings. The decrease in reimbursements in 2021 compared to 2020 was primarily due to a change in business mix that is processed internally versus using outside service partners.

Investment income - Investment income primarily represents interest income earned on our cash and cash equivalents. Investment income in 2021 decreased compared to 2020 primarily due to decreases in interest income from our U.S. operations due to decreases in interest rates earned on our funds.

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Compensation expense- The following provides non-GAAP information that management believes is helpful when comparing 2021 and 2020 compensation expense compensation expense (in millions):

Compensation expense, as reported $ 580.7 $ 517.5

Workforce and lease termination related charges (2.3 ) (7.5 )

Acquisition related adjustments (0.4 ) —

Levelized foreign currency translation — 7.7

Compensation expense, as adjusted $ 578.0 $ 517.7

Reported compensation expense ratios (before reimbursements) 60.0 % 63.0 %

Adjusted compensation expense ratios (before reimbursements) 59.7 % 62.1 %

Reported revenues (before reimbursements) $ 967.6 $ 821.7

Adjusted revenues (before reimbursements) - see page 32 $ 967.5 $ 833.1

The $63.2 million increase in compensation expense in 2021 compared to 2020 was primarily due to compensation and other incentive compensation linked to operating results - $31.5 million in the aggregate, compensation associated with the acquisitions completed in the twelve month period ended December 31, 2021 - $23.9 million and an increase in temporary‐staffing expense ‐ $7.8 million.

Operating expense - The following provides non-GAAP information that management believes is helpful when comparing 2021 and 2020 operating expense operating expense (in millions):

Operating expense, as reported $ 209.8 $ 162.6

Workforce and lease termination related charges (4.8 ) (0.4 )

Levelized foreign currency translation — 1.7

Operating expense, as adjusted 205.0 $ 163.9

Reported operating expense ratios (before reimbursements) 21.7 % 19.8 %

Adjusted operating expense ratios (before reimbursements) 21.2 % 19.7 %

Reported revenues (before reimbursements) $ 967.6 $ 821.7

Adjusted revenues - (before reimbursements) see page 32 $ 967.5 $ 833.1

The $47.2 million increase in operating expense in 2021 compared to 2020 was primarily due to increases in professional fees associated with revenue growth in certain products ‐ $18.2 million, technology expense - $9.8 million, business insurance - $5.0 million, lease termination costs - $4.4 million, professional fees - $3.7 million and expenses associated with the acquisitions completed in the twelve month period ended December 31, 2021 - $5.9 million.

Depreciation - Depreciation expense decreased in 2021 compared to 2020, which reflects the impact of office consolidations that occurred as leases expired in 2021 and 2020 (less depreciation associated with furniture, equipment and leasehold improvements), partially offset by expenditures related to upgrading computer systems.

Amortization - Amortization expense increased in 2021 compared to 2020. The increase in amortization in 2021 compared to 2020 was primarily due to the impact of amortization expense of intangible assets associated with acquisitions completed in 2021 and to an intangible asset impairment in 2021. Based on the results of impairment reviews performed on amortizable intangible assets during 2021 and 2020, we wrote off $0.8 million and $0.2 million, respectively, of amortizable assets related to the risk management segment.

Change in estimated acquisition earnout payables - The change in expense from the change in estimated acquisition earnout payables in 2021 compared to 2020, were due primarily to adjustments made in 2021 and 2020 to the estimated fair value of an earnout obligation related to revised projections of future performance. During 2021 and 2020, we recognized $1.0 million and $0.5 million, respectively, of expense related to the accretion of the discount recorded for earnout obligations in connection with our 2018 to 2021 acquisitions, respectively. During 2021, we recognized $2.3 million of expense related to net adjustments in the

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estimated fair value of earnout obligations related to revised projections of future performance for four acquisitions. During 2020, we recognized $3.7 million of income related to net adjustments in the estimated fair value of earnout obligations related to revised projections of future performance for four acquisitions.

Provision for income taxes -We allocate the provision for income taxes to the risk management segment using local statutory rates. The risk management segment’s effective tax rate in 2021 and 2020 was 25.5% and 25.2%, respectively. We anticipate reporting an effective tax rate on adjusted results of approximately 24.0% to 26.0% in our risk management segment for the foreseeable future.

Corporate

The corporate segment reports the financial information related to our clean energy and other investments, our debt, certain corporate and acquisition-related activities and the impact of foreign currency translation. See Note 14 to our 2021 consolidated financial statements for a summary of our investments at December 31, 2021 and 2020 and a detailed discussion of the nature of these investments. See Note 8 to our 2021 consolidated financial statements for a summary of our debt at December 31, 2021 and 2020.

Financial information relating to our corporate segment results for 2021 and 2020 (in millions, except per share and percentages):

Revenues from consolidated clean coal facilities $ 1,075.4 $ 802.0 $ 273.4

Royalty income from clean coal licenses 67.7 62.4 5.3

Loss from unconsolidated clean coal facilities (2.3 ) (0.9 ) (1.4 )

Other net revenues (losses) 0.5 (0.4 ) 0.9

Cost of revenues from consolidated clean coal facilities 1,173.2 882.1 291.1

Loss on extinguishment of debt 16.2 — 16.2

Net earnings attributable to noncontrolling interests 39.8 34.4 5.4

Net loss attributable to controlling interests $ (190.9 ) $ (109.2 ) $ (81.7 )

Diluted net loss per share $ (0.92 ) $ (0.56 ) $ (0.36 )

EBITDAC

Loss on extinguishment of debt 16.2 — 16.2

Revenues - Revenues in the corporate segment consist of the following:

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Loss from unconsolidated clean coal production plants represents our equity portion of the pretax operating results from the unconsolidated IRC Section 45 facilities. The production of refined coal generates pretax operating losses.

The losses from unconsolidated clean coal production plants were greater in 2021 compared to 2020 due to higher production levels in 2021.

Cost of revenues - Cost of revenues from consolidated clean coal production plants in 2021 and 2020 consists of the cost of coal, labor, equipment maintenance, chemicals, supplies, management fees and depreciation incurred by the clean coal production plants to generate the consolidated revenues discussed above. The increase in cost of revenues in 2021 compared to 2020, was primarily due to increased production of refined coal.

Compensation expense - Compensation expense for 2021 and 2020 includes salary, incentive compensation, and associated benefit expenses of $94.4 million and $66.5 million, respectively. The $27.9 million increase in 2021 compensation expense compared to 2020 was primarily due to transaction-related costs as described on page 50 in note (2) as well as higher incentive compensation recognized in 2021 compared to 2020.

Operating expense -Operating expense for 2021 includes banking and related fees of $3.6 million, external professional fees and other due diligence costs related to 2021 acquisitions of $40.8 million, which includes specific transaction-related costs as described on page 50 in note (2), other corporate and clean energy related expenses of $59.6 million, including legal fees, and costs associated with the idling of the Section 45 program, and a net unrealized foreign exchange remeasurement loss of $0.7 million.

Operating expense for 2020 includes banking and related fees of $5.1 million, external professional fees and other due diligence costs related to 2020 acquisitions of $9.4 million, other corporate and clean energy related expenses of $41.9 million, including legal fees, and costs related to corporate data and branding initiatives, and a net unrealized foreign exchange remeasurement loss of $0.3 million.

Interest expense - The increase in interest expense in 2021 compared to 2020 was due to the following (in millions):

Change in interest expense related to: 2021 / 2020

Interest on borrowings from our Credit Agreement $ (2.9 )

Interest on the maturity of the Series C notes (3.5 )

Interest on the maturity of the Series K and L notes (1.9 )

Interest on the $348.0 million notes funded on August 2 and 4, 2017 (1.1 )

Interest on the $500.0 million notes funded on June 13, 2018 (0.3 )

Interest on the $575.0 million notes funded on January 30, 2020 1.8

Interest on the $100.0 million notes funded on February 10, 2020 2.2

Interest on the $75.0 million notes funded on May 5, 2021 2.1

Interest on the $1,500.0 million senior notes funded on May 20, 2021 22.6

Interest on the $750.0 million notes funded on November 9, 2021 3.0

Amortization of hedge gains 7.7

Net change in interest expense $ 29.7

Depreciation - Depreciation expense in 2021 decreased compared to 2020, primarily due to the write-off of two of the 2011 Era Plants in 2020.

Net earnings attributable to noncontrolling interests- The amounts reported in this line for 2021 and 2020 primarily include noncontrolling interest earnings of $39.8 million and $34.4 million, respectively, related to our investment in Chem-Mod LLC. As of December 31, 2021 and 2020, we held a 46.5% controlling interest in Chem-Mod LLC. Also, included in net earnings attributable to noncontrolling interests are offsetting amounts related to non-Gallagher owned interests in several clean energy investments.

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Benefit for income taxes -We allocate the provision for income taxes to the brokerage and risk management segments using local statutory rates. As a result, the provision for income taxes for the corporate segment reflects the entire benefit to us of the IRC Section 45 credits generated, because that is the segment which produced the credits. The law that provides for IRC Section 45 tax credits expired in December 2019 for our fourteen 2009 Era Plants and expiredin December 2021 for our twenty-one 2011 Era Plants.Our consolidated effective tax rate was2.1% and 1.5%, for 2021 and 2020, respectively. The tax rates for 2021 and 2020were lower than the statutory rate primarily due to the amount of IRC Section 45 tax credits recognized during the year. There were$193.4 million and $148.6 million of IRC Section45 tax credits generated and recognized in 2021 and 2020, respectively.The income tax benefit of stock based awards that vested or were settled in the years ended December 31, 2021and 2020was $40.0 million and $25.3million, respectively.

U.S. Federal Income Tax Law Changes- On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act contains several significant business tax provisions that could affect a company’s accounting for income taxes. See discussion of the various impact of the CARES Act below.

U.S. Federal Income Tax Law Changes Items Impacting the Company Going Forward

Alternative Minimum Tax Credit- The CARES Act amends Section 53(e) of the TCJA so that all prior year minimum tax credits are available for refund for the first taxable year of a corporation beginning in 2018. We have adjusted the classification of the remaining Alternative Minimum Tax (which we refer to as AMT) credits as a result of the AMT credit acceleration. All remaining AMT credits were utilized as part of our 2019 federal income tax return or refunded in 2020.

Interest Expense Limitation- The CARES Act contains modifications on the limitations of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. This modification would significantly increase the allowable interest expense deduction of the company. We have evaluated the impact and determined there is no limit on our interest deductibility for federal income tax purposes for the years ended December 31, 2021 and 2020.

The following provides non-GAAP information that we believe is helpful when comparing 2021 and 2020 operating results for the corporate segment (in millions):

Net Earnings Net Earnings

(Loss) (Loss)

Income Attributable to Income Attributable to

Pretax Tax Controlling Pretax Tax Controlling

Loss Benefit Interests Loss Benefit Interests

Components of Corporate Segment, as reported

Adjustments

Loss on extinguishment of debt (2) 16.2 (4.0 ) 12.2 — — —

Transaction-related costs (2) 47.9 (9.4 ) 38.5 — — —

Components of Corporate Segment, as adjusted

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

Clean energy related - Includes the operating results related to our investments in clean coal production plants and Chem-Mod LLC.

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

Corporate - Consists of overhead allocations mostly related to corporate staff compensation, other corporate level activities, other corporate level activities and net unrealized foreign exchange remeasurement. In addition, includes the tax expense related to partial taxation of foreign earnings, nondeductible executive compensation and entertainment expenses and the tax benefit from vesting of employee equity awards. The income tax benefit of stock based awards that vested or were settled in the years ended December 31, 2021 and 2020 was $40.0 million and $25.3 million, respectively, and is included in the table above in the Corporate line.

Impact of U.K. Brexit Decision- During the third and fourth quarters of 2020, our U.K. operations completed the transfer of its EEA books of business to our EU affiliate in connection with the U.K. exiting the EU on December 31, 2020. The transfer related after-tax charges reported in 2020 were a net $1.1 million of income tax benefit, reflecting the amortization of those assets at the Swedish tax rate and utilization of historical U.K. capital losses that previously had valuation allowances against them.

Clean Energy Investments - We have investments in limited liability companies that own 29 clean coal production plants developed by us and six clean coal production plants we purchased from a third party. All 35 plants produced refined coal using propriety technologies owned by Chem-Mod LLC. We believe that the production and sale of refined coal at these plants were qualified to receive refined coal tax credits under IRC Section 45. The 14 2009 Era Plants received tax credits through 2019 and the 21 2011 Era Plants received tax credits through 2021.

Our investment in Chem-Mod LLC generates royalty income from refined coal production plants owned by those limited liability companies in which we invest as well as refined coal production plants owned by other unrelated parties.

See the risk factors regarding our IRC Section 45 investments under Item 1A, “Risk Factors.” for a more detailed discussion of these and other factors could impact the information above. See Note 14 to our 2021 consolidated financial statements for more information regarding risks and uncertainties related to these investments.

Liquidity and Capital Resources

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations. The insurance brokerage industry is not capital intensive. Historically, our capital requirements have primarily included dividend payments on our common stock, repurchases of our common stock, funding of our investments, acquisitions of brokerage and risk management operations and capital expenditures.

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In light of the economic uncertainty caused by COVID-19, subsequent to the first quarter of 2020, we preserved liquidity during 2020 by reducing capital expenditures for the remainder of 2020 and made working capital process changes such as moved more cash into the U.S. from our international operations, pursued collections on receivables from our customers and partners and renegotiated longer payment terms on vendor payables. We also slowed down our acquisition program in the second and third quarters of 2020. Some of these initiatives and trends continued into 2021, however, as economic conditions continue to improve our capital expenditures and acquisition activity have moved towards pre-pandemic levels. We believe we have sufficient liquidity on hand to continue business operations during this uncertain period. If we experience a significant reduction in revenue in the future, we have additional alternatives to maintain liquidity, including use of common stock to fund future acquisitions.

On December 1, 2021, we acquired substantially all of the Willis Towers Watson plc treaty reinsurance brokerage operations for an initial gross consideration of $3.25 billion, and potential additional consideration of $750 million subject to certain third-year revenue targets. There are twelve remaining international operations with deferred closings that comprise approximately $180 million of the initial purchase consideration that are subject to local regulatory approval and are expected to close in first and second quarters of 2022. We funded the transaction using cash on hand, including the $1.4 billion of net cash raised in our May 17, 2021 follow-on common stock offering, $850 million of net cash borrowed in our May 20, 2021 30-year senior note issuance, $750 million of net cash borrowed in our November 9, 2021 10-year ($400 million) and 30-year ($350 million) senior note issuances and short‐term borrowings.

Operating Cash Flows

Historically, we have depended on our ability to generate positive cash flow from operations to meet a substantial portion of our cash requirements. We believe that our cash flows from operations and borrowings under our Credit Agreement will provide us with adequate resources to meet our liquidity needs in the foreseeable future. To fund acquisitions made during 2021 and 2020, we relied on a combination of net cash flows from operations, proceeds from borrowings under our Credit Agreement, proceeds from issuances of senior unsecured notes and the follow-on common stock offering.

Cash provided by operating activities was $1,704.1 million and $1,807.1 million for 2021 and 2020, respectively. See Note 20 to our 2021 consolidated financial statements for a discussion on reclassifications that were made to the 2020 and 2019 consolidated statement of cash flows in 2021. The decrease in cash provided by operating activities during 2021 compared to the same period in 2020 was primarily due to increases in the amount of net income taxes paid, payments on acquisition earnouts in excess of original estimates and interest on debt paid in 2021 and to timing differences between periods with cash receipts and disbursements related to other current assets compared to 2020. The 2020 income taxes paid amount was favorably impacted due to an AMT refund of $28.5 million and approximately $20.0 million from tax-payment deferrals and refunds as a result of the CARES Act and other similar temporary relief measures available globally. The 2021 income taxes paid amount was unfavorably impacted due to payment of the $20.0 million of 2020 tax-payments deferrals (as noted in the previous sentence) and also approximately $106.0 million of tax prepayments made in 2021 with regards to tax method changes filed with our 2020 tax returns in the fourth quarter of 2021. Those method changes also effected our 2021 estimated tax payments. These payments would have been made in future periods, and do not represent additional taxes due.

During 2021, we managed our working capital in terms of receivables and payables as a cautionary step to protect liquidity during this uncertain period. During 2021, employee matching contributions to the 401(k) plan of $63.6 million relating to 2020 were funded using common stock. During 2020, employee matching contributions to the 401(k) plan of $59.4 million relating to 2019 were funded using cash.

Our cash flows from operating activities are primarily derived from our earnings from operations, as adjusted, for our non-cash expenses, which include depreciation, amortization, change in estimated acquisition earnout payables, deferred compensation, restricted stock, and stock-based and other non-cash compensation expenses. Cash provided by operating activities can be unfavorably impacted if the amount of IRC Section 45 tax credits generated (which is the amount we recognize for financial reporting purposes) is greater than the amount of tax credits utilized to reduce our tax cash obligations. Excess tax credits produced during the period result in an increase to our deferred tax assets, which is a net use of cash related to operating activities. Please see “Clean energy investments” below for more information on their potential future impact on cash provided by operating activities.

When assessing our overall liquidity, we believe that the focus should be on net earnings as reported in our consolidated statement of earnings, adjusted for non-cash items (i.e., EBITDAC), and cash provided by operating activities in our consolidated statement of cash flows. Consolidated EBITDAC was $1,903.3 million and $1,596.8 million for 2021 and 2020, respectively. Net earnings attributable to controlling interests were $906.8 million and $818.8 million for 2021 and 2020, respectively. We believe that EBITDAC items are indicators of trends in liquidity. From a balance sheet perspective, we believe the focus should not be on premium and fees receivable, premiums payable or restricted cash for trends in liquidity. Net cash flows provided by operations will vary substantially from quarter to quarter and year to year because of the variability in the timing of premiums and fees receivable and premiums payable. We believe that in order to consider these items in assessing our trends in liquidity, they should be looked at in a combined manner, because changes in these balances are interrelated and are based on the timing of premium payments, both to and from us. In addition, funds legally restricted as to our use relating to premiums and clients’ claim funds held by us in a fiduciary capacity are presented in our consolidated balance sheet as “Restricted cash” and have not been included in determining our overall liquidity.

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Fiduciary Funds

In addition, cash provided by operating activities in 2021 was favorably impacted by timing differences in the receipts and disbursements of client fiduciary related balances in 2021 compared to 2020. The following table summarizes two lines from our consolidated statement of cash flows and provides information that management believes is helpful when comparing changes in client fiduciary related balances for 2021 and 2020 (in millions):

Net change in premiums and fees receivable $ 132.9 $ (796.5 )

Net change in premiums payable to underwriting enterprises 35.5 1,154.2

Net cash provided by the above $ 168.4 $ 357.7