Gallagher CEO Calls Rate Question 'A Really Tough One' As Pricing Adds About A Point To Growth
The insurance broker's chief says the roughly 1% rate contribution should hold next year, and ties the growth story to new business and exposure.
Arthur J. Gallagher, the insurance brokerage, gets only about a point of organic growth from insurance pricing, Chairman and CEO J. Patrick Gallagher Jr. said on the company's third-quarter earnings call on Thursday, and he expects that to hold in 2027. Pressed on when rates would turn into a drag, he said "That's a really tough one."
Where rates would turn into a drag
Asked by a Wells Fargo analyst whether the contribution from rates persists next year, Gallagher answered: "No, I think the 1% will be consistent." The company said total organic growth was 5% in the quarter, with 18% total revenue growth for the combined brokerage and risk management segments.
An Evercore ISI analyst asked at what point the one-point contribution would flip to a drag. Gallagher said rate changes do not map directly to the company's revenue. A drag would come, he said, "if the casualty market falls on its face and goes the way of the cat property market," though he added that property "seems like" it is bottoming out.
If ex-catastrophe property pricing swung from rising 3% to falling 3%, it would "probably be a drag," he said, but it is hard to answer at that level of precision.
Property down 6%, casualty up 4%
In its global retail property and casualty business, property renewal premiums fell 6% in the third quarter, against a 10% decline in the second. Gallagher said the improvement mostly reflects the mix and seasonality of renewals, not a change in the underlying market.
Casualty renewal premiums rose 4% overall. Excluding property, renewal premium changes rose 3%, with bigger increases in the U.S. than abroad. Gallagher noted that premium changes include exposure, limits and coverage, not just rate, and said clients are using property savings to buy more coverage and higher limits.
Outlook for 2026 and 2027
Gallagher said he remains confident in organic growth of about 6% for 2026 across the brokerage and risk management segments. CFO Douglas K. Howell said early planning points to legacy brokerage organic growth that could look a lot like 2026, assuming broadly similar market conditions. He put the effect of rolling in Assured Partners, the brokerage bought last year, at about 40 to 50 basis points of headwind for the full year.
The company brokers insurance and reinsurance and administers claims. Brokerage produced 87% of 2025 revenue and risk management 13%, according to its annual report.
Howell said he will update accounting factors at the December investor day, though he said they should not change the organic growth figures given on the call.
Sources
- Seeking Clues to Arthur J. Gallagher (AJG) Q3 Earnings? A Peek Into Wall Street Projections for Key Metrics — Yahoo Finance
- Arthur J. Gallagher: Q3 Earnings Snapshot | wusa9.com — Associated Press
- What to Expect From These 3 Insurance Brokers This Earnings Season? — Yahoo Finance
- Arthur J. Gallagher to Report Q3 Earnings Soon: What to Expect? — Yahoo Finance
- Arthur J. Gallagher (AJG) Misses Q3 Earnings and Revenue Estimates — Yahoo Finance
