Arthur J. Gallagher & Co.AJG
Arthur J. Gallagher & Co. Commitments Disclosure
Commitments, Contingencies and Off-Balance Sheet Arrangements
In connection with our investing and operating activities, we have entered into certain contractual obligations and commitments. See Note 7 to these consolidated financial statements for additional discussion of these obligations and commitments. Our future minimum cash payments, including interest, associated with our contractual obligations pursuant to the Senior Notes, Note purchase agreements, Credit Agreement, Premium Financing Debt Facility, operating leases and purchase commitments at December 31, 2025 were as follows (in millions):
| Payments Due by Period | |||||||||||||||||||||||||||||||||||||||||
| Contractual Obligations | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | ||||||||||||||||||||||||||||||||||
| Senior Notes | $ | — | $ | 750 | $ | — | $ | 750 | $ | — | $ | 8,050 | $ | 9,550 | |||||||||||||||||||||||||||
| Note purchase agreements | 640 | 478 | 200 | 350 | 466 | 1,189 | 3,323 | ||||||||||||||||||||||||||||||||||
| Credit Agreement | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Premium Financing Debt Facility | 226 | — | — | — | — | — | 226 | ||||||||||||||||||||||||||||||||||
| Interest on debt | 612 | 593 | 539 | 528 | 473 | 6,117 | 8,862 | ||||||||||||||||||||||||||||||||||
| Total debt obligations | 1,478 | 1,821 | 739 | 1,628 | 939 | 15,356 | 21,961 | ||||||||||||||||||||||||||||||||||
| Operating lease obligations | 173 | 148 | 111 | 84 | 73 | 184 | 773 | ||||||||||||||||||||||||||||||||||
| Less sublease arrangements | (3) | (2) | (2) | (2) | — | — | (9) | ||||||||||||||||||||||||||||||||||
| Outstanding purchase obligations | 278 | 227 | 101 | 50 | 26 | 42 | 724 | ||||||||||||||||||||||||||||||||||
| Total contractual obligations | $ | 1,926 | $ | 2,194 | $ | 949 | $ | 1,760 | $ | 1,038 | $ | 15,582 | $ | 23,449 | |||||||||||||||||||||||||||
The amounts presented in the table above may not necessarily reflect our actual future cash funding requirements, because the actual timing of the future payments made may vary from the stated contractual obligation.
Senior Notes, Note Purchase Agreements, Credit Agreement and Premium Financing Debt Facility - See Note 7 to these consolidated financial statements for a summary the amounts outstanding under the Senior Notes, Note purchase agreements, the Credit Agreement and Premium Financing Debt Facility.
Operating Lease Obligations - Our corporate segment’s executive offices and certain subsidiary and branch facilities of our brokerage and risk management segments are located in a building we own at 2850 Golf Road, Rolling Meadows, Illinois, where we have approximately 360,000 square feet of space and can accommodate approximately 2,000 employees. Relating to the development of our corporate headquarters, we expect to receive property tax related credits under a tax-increment financing note from Rolling Meadows and an Illinois state Economic Development for a Growing Economy (which we refer to as EDGE) tax credit. Since inception in 2017 through 2025, we have earned approximately $75 million of Edge credits, with fiscal year 2025 representing the final year of EDGE credit generation.
We generally operate in leased premises at our other locations. Certain of these leases have options permitting renewals for additional periods. In addition to minimum fixed rentals, a number of leases contain annual escalation clauses which are generally related to increases in an inflation index.
Total rent expense, including rent relating to cancelable leases and leases with initial terms of less than one year, amounted to $208 million in 2025, $183 million in 2024 and $184 million in 2023.
We have leased certain office space to several non-affiliated tenants under operating sublease arrangements. In the normal course of business, we expect that certain of these leases will not be renewed or replaced. We adjust charges for real estate taxes and common area maintenance annually based on actual expenses, and we recognize the related revenues in the year in which the expenses are incurred. These amounts are not included in the minimum future rentals to be received in the contractual obligations table above.
Outstanding Purchase Obligations - We typically do not have a material amount of outstanding purchase obligations at any point in time. The amount disclosed in the contractual obligations table above represents the aggregate amount of unrecorded purchase obligations that we had outstanding at December 31, 2025. These obligations represent agreements to purchase goods or services that were executed in the normal course of business.
Off-Balance Sheet Commitments - Our total unrecorded commitments associated with outstanding letters of credit, financial guarantees and funding commitments at December 31, 2025 were as follows (in millions):
| Amount of Commitment Expiration by Period | Total Amounts Committed | ||||||||||||||||||||||||||||||||||||||||
| Off-Balance Sheet Commitments | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | |||||||||||||||||||||||||||||||||||
| Letters of credit | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 14 | $ | 14 | |||||||||||||||||||||||||||
| Financial guarantees | — | — | — | — | — | 50 | 50 | ||||||||||||||||||||||||||||||||||
| Total commitments | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 64 | $ | 64 | |||||||||||||||||||||||||||
Since commitments may expire unused, the amounts presented in the table above do not necessarily reflect our actual future cash funding requirements. See the Off-Balance Sheet Debt section below for a discussion of letters of credit. All of the letters of credit represent multiple year commitments that have annual, automatic renewing provisions and are classified by the latest commitment date.
Substantially all of the purchase agreements related to these acquisitions we do contain provisions for potential earnout obligations. For all of our acquisitions made in the period from 2022 to 2025 that contain potential earnout obligations, such obligations are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration for the respective acquisition. The amounts recorded as earnout payables are primarily based upon estimated future potential operating results of the acquired entities over a - to three-year period subsequent to the acquisition date. The aggregate amount of the maximum earnout obligations related to these acquisitions was $1,518 million, of which $773 million was recorded in our consolidated balance sheet as of December 31, 2025 based on the estimated fair value of the expected future payments to be made, of which approximately $535 million can be settled in cash or common stock at our option and $238 million must be settled in cash.
Off-Balance Sheet Debt - Our unconsolidated investment portfolio includes investments in enterprises where our ownership interest is between 1% and 50%, in which management has determined that our level of influence and economic
interest is not sufficient to require consolidation. As a result, these investments are accounted for under the equity method. None of these unconsolidated investments had any outstanding debt at December 31, 2025 and 2024 that was recourse to us.
At December 31, 2025, we had posted one letter of credit related to our self-insurance deductibles, for which we had a recorded liability of $11 million. We have an equity investment in a rent-a-captive facility, which we use as a placement facility for certain of our insurance brokerage operations. At December 31, 2025, we had posted eleven letters of credit totaling $13 million to allow certain of our captive operations to meet minimum statutory surplus requirements plus additional collateral related to premium and claim funds held in a fiduciary capacity and one letter of credit totaling $1 million for collateral related to claim funds held in a fiduciary capacity by a recent acquisition. These letters of credit have never been drawn upon.
Our commitments associated with outstanding letters of credit, financial guarantees and funding commitments at December 31, 2025 were as follows (all dollar amounts in table are in millions):
| Description, Purpose and Trigger | Collateral | Compensation to Us | Maximum Exposure | Liability Recorded | ||||||||||||||||||||||
| Credit support under letters of credit (LOC) for deductibles due by us on our own insurance coverages - expires 2028 | None | None | $ | — | $ | 11 | ||||||||||||||||||||
| Trigger - We do not reimburse the insurance companies for deductibles the insurance companies advance on our behalf | ||||||||||||||||||||||||||
| Credit enhancement under letters of credit for our captive insurance operations to meet minimum statutory capital requirements - expires 2028 | None | Reimbursement of LOC fees | 13 | — | ||||||||||||||||||||||
| Trigger - Dissolution or catastrophic financial results of the operation | ||||||||||||||||||||||||||
| Collateral related to claims funds held in a fiduciary capacity by a recent acquisition - expires 2028 | None | None | 1 | — | ||||||||||||||||||||||
| Trigger - Claim payments are not made | ||||||||||||||||||||||||||
| $ | 14 | $ | 11 | |||||||||||||||||||||||
(1)The guarantees are collateralized by shares in minority holdings of our Canadian operating companies.
Since commitments may expire unused, the amounts presented in the table above do not necessarily reflect our actual future cash funding requirements.
Litigation, Regulatory and Taxation Matters - We routinely are involved in legal proceedings, claims, disputes, regulatory matters and governmental inspections or investigations arising in the ordinary course of or incidental to our business, including relating errors and omissions (which we refer to as E&O) claims and those noted below in this section. We record accruals in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. For the matters we disclose that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is immaterial, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies, unless disclosed below. We currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations or cash flows. However, legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other adverse events could occur, including the payment of substantial monetary damages or an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices or requiring other remedies, which may result in a material adverse impact on our business, results of operations or financial position.
As previously disclosed, our IRC 831(b) (or “micro-captive”) advisory services businesses has been under a promoter investigation 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.
Contingent Liabilities - We purchase insurance to provide protection from E&O claims that may arise during the ordinary course of business. Currently we retain the first $15 million of each and every E&O claim. In addition, we retain, in aggregate up to another $2 million between $15 million and $100 million, plus up to another $10 million between $100 million and $200 million, and up to another $20 million between $200 million and $400 million. We have historically maintained self-insurance reserves for the portion of our E&O exposure that is not insured. We periodically determine a range of possible reserve levels using actuarial techniques that rely heavily on projecting historical claim data into the future. Our E&O reserve in the December 31, 2025 consolidated balance sheet is above the lower end of the most recently determined actuarial range by $8 million and below the upper end of the actuarial range by $9 million. We can make no assurances that the historical claim data used to project the current reserve levels will be indicative of future claim activity. Thus, the E&O reserve level and corresponding actuarial range could change in the future as more information becomes known, which could materially impact the amounts reported and disclosed herein.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 9, 2024 | |
| 2022 | Feb 10, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 8, 2021 | |
| 2019 | Feb 7, 2020 | |
| 2018 | Feb 8, 2019 | |
| 2017 | Feb 12, 2018 | |
| 2016 | Feb 13, 2017 | |
| 2015 | Feb 10, 2016 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.