Gallagher sees brokerage acquisition multiples coming down

Gallagher held its Q2 2026 earnings call on July 30. Here are the key takeaways.

AI could add four percentage points to margins

Gallagher estimates that AI could eventually produce 600 basis points of potential margin improvement. After accounting for offsets and reinvestment, management believes it may retain roughly 400 basis points over the next three to five years.

“Now that math would produce 600 basis points of margin expansion. I’d caution that may be — those are going to be offsets to a certain extent. So maybe we can harvest 2/3 of that. So maybe there’s 400 basis points there in the way we look at it. We have 1,000 projects. The flowers are blooming now. We’ve got dozens and dozens of real tangible projects that are showing immediate results. So I’m still very comfortable in viewing that it can make us better and more cost efficient.”

Gallagher won’t announce a major AI transformation

The broker has approximately 1,000 technology and automation projects underway, with dozens already delivering tangible results. Management expects the savings to emerge gradually rather than through a formal restructuring program.

“It’s not something where we’re going to announce a huge transformation exercise. You’ll just see us naturally do that over time.”

Most of the preparation for AI is already complete

Gallagher says two decades of standardizing workflows, centralizing operations and organizing data have created the foundation needed to deploy AI inexpensively.

“I think the cost of AI will be de minimis for the savings that we will be able to realize because we have already put in the cost effort to centralize and standardize our data and our processes.”

AI saved one client $100 million in fraud losses

Gallagher Bassett is using AI to detect potentially problematic claims and direct them to experienced professionals earlier. Gallagher said one client has already recorded $100 million in auditable savings from its fraud-detection capabilities.

“Just our AI fraud detection capabilities has saved one – and this is auditable numbers – we saved one client $100 million. And I don’t know an insurance company that has the capability we put forward on that account.”

Only one point of organic growth came from rates

Gallagher reported 6% organic growth across its Brokerage and Risk Management businesses. Unlike recent years, insurance pricing contributed only about one percentage point, with the remainder coming from new business, retention and exposure growth.

This isn’t a broad soft market

Management characterized current conditions as a property pricing reset rather than a traditional soft market affecting every insurance line simultaneously.

“Every other past soft market, the market has dropped like a brick across every line all at once. This is a property reset, that’s what this really is.”

Property pricing fell 10%

Property renewal premiums declined 10% during the quarter, with the greatest competition in large and catastrophe-exposed accounts. Casualty renewal premiums increased 3%, while professional lines rose 1%.

Clients are using savings to purchase more coverage

Lower property prices do not translate directly into lower brokerage revenue. Some clients are using the savings to restore limits, improve structures or purchase coverage they previously dropped.

E&S is no longer the market of last resort

Gallagher is not seeing a significant return of complex risks from excess and surplus lines to the admitted market. Management believes E&S has established a durable role because of its flexibility and specialized underwriting expertise.

“I think E&S is here to stay. I think the complexity of a lot of risk that we write, I think the nimbleness of that business and just not flowing back into the admitted market that maybe we would have seen 20 years ago. The E&S market is not the market of last resort anymore. And I think it provides a really good deep niche of underwriting expertise and our producers do a great job of making sure that they offer that to their customers because it is a viable solution.”

Reinsurance growth is coming from new business

Despite declining property-catastrophe reinsurance pricing, Gallagher Re continues to grow by winning accounts. Management said nearly all of its growth is attributable to net new business.

Gallagher has $10 billion available for acquisitions

The company estimates that cash, free cash flow and future investment-grade borrowing capacity will provide nearly $10 billion for deployment over the next two years. Acquisitions remain the priority.

“We estimate close to $10 billion of capacity to deploy over the next 2 years. We still favor M&A, but it might also do share repurchases opportunistically. Currently, our M&A pipeline remains strong as full of targets at attractive multiples.”

Brokerage acquisition multiples are falling

Gallagher says sellers are beginning to accept that the elevated valuations available during the brokerage consolidation boom are no longer realistic.

“They’re realizing that the days of 15, 16, and if you got a platform, maybe 17 times EBITDAC are over.”

Gallagher has $500 million of acquisition revenue in its pipeline

The broker completed seven tuck-in acquisitions representing approximately $63 million in annualized revenue during the quarter. It also has more than 30 term sheets signed or in preparation.

“We have over 30 term sheets signed or being prepared, representing around $500 million of annualized revenues.”

AssuredPartners could generate $325 million in synergies

Gallagher expects annualized run-rate synergies from the AssuredPartners acquisition to reach $160 million by the end of 2026 and as much as $325 million by early 2028.

“We still see annualized run rate synergies of $160 million by the end of ’26 and then up to $325 million by early ’28.”

Gallagher sees more AssuredPartners revenue synergies

Management says the combination is producing more cross-selling and revenue opportunities than originally anticipated. Gallagher is also absorbing the acquired business without adding as much technology, real estate and back-office expense as expected.

“I think we’re getting more revenue synergies than we maybe initially looked at and announced.”

Risk Management is gaining scale

Gallagher Bassett generated 12% organic growth and expanded its adjusted EBITDAC margin by 140 basis points to 22.3%. Management expects full-year margins to remain above 22%.

Gallagher thinks insurers will outsource more claims work

Management believes many insurance companies will struggle to match Gallagher Bassett’s investments in claims technology, fraud detection and specialized claims expertise.

Data centers and emerging risks support future growth

Gallagher sees multiyear opportunities in data centers, infrastructure, digital liability and other risks that require specialized insurance structures and access to multiple markets.

“Gallagher thrives on change, the complexity of the world today, what’s going on in data centers, the supply chains and war risk, I think it tease us up very, very well for continued growth.”