Arthur J. Gallagher & Co.

AJG’s moat is built on multi‑layer switching costs (embedded workflows, compliance, claims advocacy, loss‑control programs), intangible assets (brand, specialist expertise, data/analytics), and efficient scale across retail brokerage, reinsurance intermediation, and third‑party claims administration.

Its global footprint and category depth create cross‑sell and renewal advantages that are hard for regional brokers to replicate. The firm’s culture (The Gallagher Way) and long‑tenured leadership support consistent client service and producer productivity.

Competitive pressure from Marsh McLennan and Aon remains, but the top‑tier broker oligopoly has proven resilient through cycles.

Risks to moat erosion include: softening rate cycle over time, continued consolidation that empowers carriers or alternative capital to disintermediate some placements, and technology platforms narrowing small‑commercial distribution spreads. Net, we view the moat as wide and durable.

January 2025 commentary noted premium increases above 5 percent in casualty lines, echoing healthy pricing that, while cyclical, augments the economic engine in the near term.

Quality Value Investing checklist (scores 0–100, concise rationale): 1) Wide/Narrow Moat (Morningstar framing): 90 – We independently assess a wide moat given scale and switching costs; third‑party methodologies typically classify leading brokers as wide. 2) High/Consistent ROC: 85 – Asset‑light model yields high returns despite GAAP amortization from M&A. 3) Revenue/FCF Growth: 85 – Double‑digit revenue growth in 2024; FCF growth strong over multi‑year periods. 4) High Margins: 80 – Adjusted segment margins robust; Q4 2024 adjusted EBITDAC margin 31.4 percent. 5) Owner‑CEO: 85 – Third‑generation leadership; long‑tenured CEO J.

Patrick Gallagher Jr. aligns culture and strategy. 6) Simplicity: 90 – Understandable fee‑for‑service model with recurring renewals. 7) Very Low Debt: 75 – Management targeted maintaining investment‑grade while funding AP; temporary leverage/dilution around deal close. 8) Dilution: 60 – Material equity raise in Dec 2024 to finance AP. 9) Favorable Jurisdiction: 95 – U.S.‑based with diversified global operations. 10) Trend Alignment & Boringness: 90 – Complexity of risk (cyber, supply chain, climate) supports long‑term advisory demand. 11) Superinvestor Inspiration: 85 – Fits the repeatable playbook (toll‑like, capital‑light compounder). 12) Valuation: 60 – On TTM FCF, fairness requires patience; see valuation section.