Gallagher's second quarter looks like a contradiction, and the explanation matters more than either number. Revenue rose 24.2% to $4,003 million while GAAP net earnings fell 12.0% to $324 million and diluted EPS slipped to $1.25 from $1.40. Almost none of that earnings decline is operating deterioration. It is the disappearance of interest income on the cash Gallagher had pre-raised to buy AssuredPartners, plus a step-up in acquisition amortization that will suppress reported profit through the end of the decade.
1. Consolidated Balance Sheet
1-1. Major asset items
| Item | Dec 31, 2025 ($M) | Jun 30, 2026 ($M) | Change % |
|---|---|---|---|
| Cash and cash equivalents | 1,396 | 1,386 | -0.7% |
| Fiduciary assets | 26,899 | 37,183 | +38.2% |
| Accounts receivable, net | 5,175 | 6,076 | +17.4% |
| Fixed assets - net | 789 | 765 | -3.0% |
| Goodwill | 22,593 | 23,026 | +1.9% |
| Amortizable intangible assets - net | 10,684 | 10,212 | -4.4% |
| Total assets | 70,665 | 81,808 | +15.8% |
One caution frames this entire table. AssuredPartners closed on August 18, 2025 for gross consideration of $13.8 billion, so it was already fully consolidated into the December 31, 2025 balance sheet. The six-month movements above are therefore not the acquisition itself — with one important exception noted below.
That distinction explains the largest line. Fiduciary assets — client premiums Gallagher holds in trust between payer and insurer — grew $10,284 million, which is 92% of the entire $11,143 million increase in total assets. This is pass-through money. An identical $37,183 million sits on the liability side as fiduciary liabilities, and the second quarter is when policy renewals cluster. Total assets grew 15.8%; the company's own asset base barely moved.
The goodwill and intangibles lines are not organic drift, and this deserves flagging. In the first quarter of 2026 Gallagher revised its provisional purchase price allocation for AssuredPartners, cutting the amount assigned to expiration lists by $222 million and raising trade names by $2 million — a non-cash reallocation that increased goodwill by $220 million. The filing attributes the lower expiration-list value to new information on average customer lives. Gallagher finalized that valuation in the second quarter with no further changes. So roughly half of the $433 million goodwill increase is an accounting reallocation rather than new deals, and a meaningful slice of the $472 million decline in net intangibles is that same reallocation rather than amortization alone. Readers comparing these lines to prior quarters should adjust for it. The residual movement is seasonality and small tuck-ins.
Receivables rose 17.4% over the six months to $6,076 million, but that six-month sequential balance change is not directly comparable to the 26.1% year-over-year revenue gain measured on a six-month basis ($8,761 million against $6,949 million; the 24.2% headline is the quarterly figure). The cash flow statement shows a $949 million receivables build this half against $681 million a year ago, and unbilled receivables jumped 44.6% to $2,686 million — both running faster than total revenue growth. The heavier working-capital drag is consistent with the enlarged post-AssuredPartners book entering its first full renewal season under Gallagher, and is worth revisiting at year-end once the billing cycle completes.
The intangibles picture is the one to watch. Goodwill and net intangibles together are $33,238 million. Strip out pass-through fiduciary assets and that is 74.5% of what remains. It is also 140% of total equity, meaning tangible book value is negative $9,491 million. For a serial acquirer with no underwriting risk and almost no fixed assets, that is structural rather than alarming — but it leaves no cushion if a large acquired book ever impairs.
Debt maturities are spread out at the long end, but the near end is not idle. Of $13,732 million in principal, $2,927 million (21.3%) comes due through 2028 and $9,239 million sits in 2031 and beyond. Within that near bucket, roughly $1.5 billion falls due in 2026 alone — the Credit Agreement at $1,365 million and the Premium Financing Debt Facility at $134 million — which is the reason the revolver refinancing below is the live task rather than a distant one. On cost: scheduled 2027 interest of $593 million against the roughly $12.2 billion still outstanding after those 2026 maturities implies a blended rate near 4.9%, while the remaining-2026 scheduled interest of $298 million annualized against the current, larger $13,732 million balance works out to about 4.3%. The two differ because the denominators and periods differ, not because the rate moved. The cleanest read is the actual second-quarter interest expense of $168 million, which annualizes to roughly 4.9% on the current balance. Right-of-use assets of $578 million and non-current lease liabilities of $497 million reflect ASC 842 and need no further comment.
1-2. Debt structure — financial vs operating
Financial debt of $13,732 million at face value rose 4.8% from $13,099 million. The composition changed more than the total. Gallagher repaid $640 million of fixed-rate private placement notes carrying 4.36% to 4.85% coupons, then drew $1,365 million on its revolving credit facility, which was undrawn at year-end. Current corporate borrowings jumped 137.5% to $1,520 million from $640 million. The company swapped locked-in fixed-rate funding for short-dated floating-rate funding, and refinancing that revolver is the clearest near-term balance sheet task.
Operating liabilities moved the other way. Accrued compensation and other current liabilities fell 11.7% to $3,548 million on the normal bonus payment cycle. Total deferred revenue rose to $965 million from $892 million.
1-3. Capital structure
Retained earnings rose 13.5% to $6,588 million, and the roll ties exactly: $5,806 million plus $1,146 million of earnings attributable to controlling interests less $364 million of declared dividends. Capital in excess of par fell 1.2% to $17,567 million, a $213 million decline — buybacks were charged against it, partly offset by share issuance under equity plans. Accumulated other comprehensive loss widened by $169 million to $694 million, driven by $154 million of foreign currency translation. Total equity edged up 1.7% to $23,747 million — earnings retention almost exactly offsetting shareholder returns and currency.
2. Consolidated Statement of Earnings
2-1. Core figures
| Item | Q2 2025 ($M) | Q2 2026 ($M) | Change % |
|---|---|---|---|
| Commissions | 1,808 | 2,442 | +35.1% |
| Fees | 962 | 1,183 | +23.0% |
| Supplemental + contingent revenues | 176 | 232 | +31.8% |
| Interest, premium finance and other income | 233 | 98 | -57.9% |
| Revenues before reimbursements | 3,179 | 3,955 | +24.4% |
| Reimbursements | 43 | 48 | +11.6% |
| Total revenues | 3,222 | 4,003 | +24.2% |
| Compensation expense | 1,804 | 2,330 | +29.2% |
| Amortization | 180 | 301 | +67.2% |
| Pretax earnings | 473 | 414 | -12.5% |
| Net earnings | 368 | 324 | -12.0% |
| Net margin (%) | 11.4% | 8.1% | -3.3%p |
| Diluted EPS ($) | 1.40 | 1.25 | -10.7% |
Note the two revenue subtotals. Gallagher's press headline of "+24.4%" is measured before reimbursements — the pass-through cost recoveries in the risk management segment — while the +24.2% used throughout this article is total revenues. Both are correct; they are simply different lines.
Two items account for essentially the whole earnings decline, and neither is about serving clients worse.
The first is float income. Interest, premium finance and other income fell $135 million in the quarter. The filing states the cause directly, on a six-month basis: dividend income on money market accounts dropped $296 million to $184 million from $480 million. Through mid-2025 Gallagher was parked on the AssuredPartners war chest — $13.5 billion of acquisition financing plus $1.3 billion received in January 2025 from the underwriters' overallotment exercise on its follow-on stock offering. Non-restricted cash was $14,069 million in June 2025 against $1,137 million in June 2026. (That $1,137 million is the non-restricted portion; the $1,386 million on the balance sheet above is the total cash and cash equivalents line, which includes restricted balances.) That cash earned interest that flowed straight into revenue at nearly 100% margin. The deal closed, the cash left, and the income went with it. The interest expense on the debt, however, stayed — $168 million in the quarter.
The second is amortization, up $121 million to $301 million as the acquired customer lists began amortizing for a full quarter.
Strip out float income from both periods and the operating picture inverts. Revenue ex-float rose 30.6% to $3,905 million. EBITDAC ex-float — pretax earnings plus interest, depreciation, amortization and earnout changes, less that float income — rose 36.1% to $848 million. Margin on that basis improved to 21.7% from 20.8%, about 0.9 percentage points. Each 1% of core revenue growth produced roughly 1.2% of core EBITDAC growth. That is real operating leverage, though it reflects acquisition integration more than organic volume.
Discrete items were modest and broadly offsetting: a $21 million intangible write-off in the brokerage segment during the quarter (plus $1 million in risk management), an $11 million unfavorable swing in estimated earnout payables, and a $24 million favorable swing in foreign exchange (a $2 million loss versus $26 million). The effective tax rate was 21.7% against 22.2%.
2-2. Cost structure
Gallagher's cost base is overwhelmingly people. Compensation was $2,330 million, or 58.2% of total revenue, against operating expense of $679 million.
Headline ratios look worse than reality because 2025's denominator contained float income that carried no compensation. On the ex-float basis, the brokerage compensation ratio was 59.1% versus 59.5% — flat to slightly better despite absorbing the more than 10,900 employees AssuredPartners brought across the U.S., U.K. and Ireland. The brokerage operating expense ratio rose to 15.7% from 14.4%, consistent with integration spending that management treats as temporary.
The segments diverged usefully. Brokerage revenue rose 25.7% to $3,502 million with pretax earnings of $604 million. Risk management, which is fee-based claims administration with negligible float, is the cleaner read: revenue before reimbursements rose 15.6% to $453 million and segment EBITDAC margin improved to 21.2% from 19.1%.
3. Consolidated Statement of Cash Flows
| Item (six months) | H1 2025 ($M) | H1 2026 ($M) | Change |
|---|---|---|---|
| Operating cash flow | 448 | 967 | +115.8% |
| Investing cash flow | (1,621) | (591) | +63.5% |
| Financing cash flow | 1,317 | 528 | -59.9% |
| Capital expenditures | (68) | (87) | +27.9% |
| Free cash flow | 380 | 880 | +131.6% |
Operating cash flow more than doubled. The swing factor is earnout payments: Gallagher paid $141 million in excess of original estimates this year against $480 million last year. Add the $206 million of scheduled earnout payments sitting in financing and total earnout outflow was $347 million versus $830 million.
Free cash flow of $880 million against capital expenditure of just 1.0% of six-month revenue confirms how asset-light the model is. Gallagher's growth capital goes into acquisitions, not equipment — $616 million of it this half, down from $1,662 million.
Earnings quality needs a caveat. Operating cash flow was 0.84 times net earnings, up sharply from 0.42 times but still below 1.0. The driver is a $949 million seasonal receivables build during renewal season, and the first half is structurally the heavy working-capital half for a broker. This ratio is worth re-testing at year-end rather than treating as a warning now. Interest paid rose 49.1% to $334 million — the cash cost of the acquisition, now fully visible.
Financing tells the capital allocation story plainly. Gallagher repurchased $480 million of stock against zero a year ago, paid $359 million of dividends, and still reduced share count to 256.3 million from 257.0 million.
4. What Else Matters
The amortization runway is the central fact. The filing schedules $558 million of remaining 2026 amortization, then $1,092 million in 2027, $1,050 million in 2028, $992 million in 2029 and $933 million in 2030. Full-year 2026 lands near $1,137 million. This is a non-cash charge above $900 million annually for five straight years. It is the single largest reason GAAP and adjusted results diverge — and under US GAAP it cannot be avoided or revalued away. The one lever Gallagher has is the offsetting benefit it is promising: management has guided to roughly $325 million of annual AssuredPartners cost synergies, which if delivered would broadly cover the incremental amortization on a pretax cash-versus-accounting basis.
Mind the gap on non-GAAP. Gallagher reported adjusted EPS of $2.84 against GAAP EPS of $1.25, a $1.59 difference. Amortization alone explains roughly $0.91 of it ($301 million taxed at the effective 21.7%, spread over 258.7 million diluted shares); acquisition integration costs, earnout revaluation and currency account for the rest. Note that adjusted EPS, adjusted EBITDAC and organic revenue are non-GAAP measures disclosed in the MD&A, not in the audited financial statements. The filing discloses that adjusted EBITDAC in particular is used in determining executive officer incentive compensation, performance share awards and annual cash incentive awards. Investors should treat $2.84 as a cash-proximate measure and $1.25 as the accounting one, and note that the amortization being added back is a genuine economic cost of buying growth — Gallagher paid cash for those customer lists.
Organic growth against a softening market. Reported brokerage organic growth was 5% in the quarter and risk management 12%, for roughly 6% combined. Insurance brokerage is not cyclical in the industrial sense, but it does ride a property and casualty rate cycle. Commissions are a percentage of premium, so falling property rates mechanically drag organic growth — and the drag is now quantified: property renewal premiums fell about 10% in the quarter as the global property market continued to ease, particularly for large and catastrophe-exposed risks. Mid-single-digit brokerage organic growth against a 10% rate decline is a respectable outcome, not a disappointing one.
Watch the guidance, not the quarter. Management's full-year 2026 framework is approximately 5.5% organic for brokerage and about 9% for risk management, or roughly 6% combined. The brokerage number implies modest acceleration from the 5% just reported. The risk management number does not — it implies the 12% posted this quarter decelerates materially over the second half. That gap between a strong printed quarter and a softer full-year guide is the single most useful forward signal in this filing, and it is the line to test when third-quarter results land.
Acquired growth carries its own lag. The 2026 tuck-ins represent roughly $122 million of annualized revenue but contributed just $27 million of revenue against a $14 million pretax loss and negative $2 million of EBITDAC in the first half. That is normal — deals close mid-period, transaction costs land immediately, and earnings follow later. But it is a reminder that the reported growth rate and the earned growth rate are not the same thing, and that for a serial acquirer the gap between them never fully closes as long as the deals keep coming.
The bottom line. The 12% GAAP earnings decline is an artifact of a financing cycle, not a business in trouble: the float income vanished on schedule when the cash was spent, and the amortization arrived on schedule when the assets were booked. The genuine open questions are narrower — whether the $1.5 billion of 2026 maturities gets refinanced on decent terms, whether the $325 million synergy target lands, and whether risk management's 12% quarter was the peak.