☒
|
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
☐
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
DELAWARE
|
36-2151613
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
2850 Golf Road
Rolling Meadows, Illinois
|
60008-4050
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange
on which registered
|
||
Common Stock, par value $1.00 per share
|
AJG
|
New York Stock Exchange
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
|||
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
|||
|
|
Emerging growth company
|
☐
|
• | An economic downturn or unstable economic conditions whatever the cause, including pandemics like the coronavirus, Brexit, tariffs, trade wars or climate change and other long-term environmental risks; |
• | Volatility or declines in premiums or other adverse trends in the insurance industry; |
• | Competitive pressures, including as a result of innovation, in each of our businesses; |
• | Risks that could negatively affect the success of our acquisition strategy, including continuing consolidation in our industry and growing interest in acquiring insurance brokers on the part of private equity firms and newly public insurance brokers, which could make it more difficult to identify targets and could make them more expensive, the risk that we may not receive timely regulatory approval of desired transactions, execution risks, integration risks, the risk of post-acquisition deterioration leading to intangible asset impairment charges, and the risk we could incur or assume unanticipated liabilities such as cybersecurity issues or those relating to violations of anti-corruption and sanctions laws; |
• | Failure to successfully and cost-effectively integrate recently acquired businesses and their operations or fully realize synergies from such acquisitions in the expected time frame; |
• | Cyber attacks or other cybersecurity incidents; improper disclosure of confidential, personal or proprietary data; and changes to laws and regulations governing cybersecurity and data privacy; |
• | Risks arising from changes in U.S. or foreign tax laws, including our ability to effectively account for the U.S. Tax Cuts and Jobs Act (which we refer to as the Tax Act) and related regulations; |
• | Uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark; |
• | Our failure to attract and retain experienced and qualified talent, including our senior management team; |
• | Risks arising from our substantial international operations, including the risks posed by political and economic uncertainty in certain countries (such as the risks posed by Brexit), risks related to maintaining regulatory and legal compliance across multiple jurisdictions (such as those relating to violations of anti-corruption, sanctions and privacy laws), and risks arising from the complexity of managing businesses across different time zones, languages, geographies, cultures and legal regimes that conflict with one another at times; |
• | Risks particular to our risk management segment, including any slowing of the trend toward outsourcing claims administration, and of the concentration of large amounts of revenue with certain clients; |
• | The higher level of variability inherent in contingent and supplemental revenues versus standard commission revenues, particularly in light of the changed revenue recognition accounting standard; |
• | Sustained increases in the cost of employee benefits; |
• | Our failure to apply technology effectively in driving value for our clients through technology-based solutions, or failure to gain internal efficiencies and effective internal controls through the application of technology and related tools; |
• | A disaster or other significant disruption to business continuity; |
• | Damage to our reputation; |
• | Our failure to comply with regulatory requirements, including those related to governance and control requirements in particular jurisdictions, international sanctions, or a change in regulations or enforcement policies that adversely affects our operations (for example, relating to insurance broker compensation methods or the failure of state and local governments to follow through on agreed-upon income tax credits or other tax related incentives, relating to our corporate headquarters); |
• | Violations or alleged violations of the U.S. Foreign Corrupt Practices Act (which we refer to as FCPA), the U.K. Bribery Act 2010 or other anti-corruption laws and the Foreign Account Tax Compliance provisions of the Hiring Incentives to Restore Employment Act (which we refer to as FATCA); |
• | The outcome of any existing or future investigation, review, regulatory action or litigation; |
• | Unfavorable determinations related to contingencies and legal proceedings; |
• | Significant changes in foreign exchange rates; |
• | Changes to our financial presentation from new accounting estimates and assumptions (including as a result of the changed lease and revenue recognition standards or the Tax Act); |
• |
Changes in healthcare-related laws and regulations with the potential to negatively impact our employee benefits consulting business, including
“Medicare-for-all”
and other proposed laws expanding the role of public programs in healthcare;
|
• | Risks related to our clean energy investments, including intellectual property claims, utilities switching from coal to natural gas or renewable energy sources, environmental and product liability claims, environmental compliance costs and the risk of disallowance by the Internal Revenue Service (IRS) of previously claimed tax credits; |
• | The risk that our outstanding debt adversely affects our financial flexibility and restrictions and limitations in the agreements and instruments governing our debt; |
• | The risk we may not be able to receive dividends or other distributions from subsidiaries; |
• | The risk of share ownership dilution when we issue common stock as consideration for acquisitions and for other reasons; and |
• | Volatility of the price of our common stock. |
|
|
Page No.
|
|
|||
Part I
.
|
|
|
||||
Item 1.
|
Business
|
4-9
|
||||
Item 1A.
|
Risk Factors
|
10-22
|
||||
Item 1B.
|
Unresolved Staff Comments
|
22
|
||||
Item 2.
|
Properties
|
23
|
||||
Item 3.
|
Legal Proceedings
|
23
|
||||
Item 4.
|
Mine Safety Disclosures
|
23
|
||||
Information About Our Executive Officers
|
23
|
|||||
Part II.
|
|
|||||
Item 5.
|
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
23-24
|
||||
Item 6.
|
Selected Financial Data
|
25
|
||||
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
26-56
|
||||
Item 7A.
|
Quantitative and Qualitative Disclosure about Market Risk
|
56-57
|
||||
Item 8.
|
Financial Statements and Supplementary Data
|
58-112
|
||||
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
113
|
||||
Item 9A.
|
Controls and Procedures
|
113
|
||||
Item 9B.
|
Other Information
|
113
|
||||
Part III.
|
|
|
||||
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
113
|
||||
Item 11.
|
Executive Compensation
|
113
|
||||
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management
|
113
|
||||
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
113
|
||||
Item 14.
|
Principal Accountant Fees and Services
|
114
|
||||
Part IV.
|
|
|
||||
Item 15.
|
Exhibits and Financial Statement Schedules
|
114-116
|
||||
Item 16.
|
Form
10-K
Summary
|
116
|
||||
Signatures
|
117
|
|||||
Schedule II - Valuation and Qualifying Accounts
|
118
|
(i) | Identifying, negotiating and placing all forms of insurance or reinsurance coverages, as well as providing risk-shifting, risk-sharing and risk-mitigation consulting services, principally related to property/casualty, life, health, welfare and disability insurance. We also provide these services through, or in conjunction with, other unrelated agents and brokers, consultants and management advisors. |
(ii) | Acting as an agent or broker for multiple underwriting enterprises by providing services such as sales, marketing, selecting, negotiating, underwriting, servicing and placing insurance coverage on their behalf. |
(iii) | Providing consulting services related to health and welfare benefits, voluntary benefits, executive benefits, compensation, retirement planning, institutional investment and fiduciary, actuarial, compliance, private insurance exchange, human resource technology, communications and benefit administration. |
(iv) | Providing management and administrative services to captives, pools, risk-retention groups, healthcare exchanges, small underwriting enterprises, such as accounting, claims and loss processing assistance, feasibility studies, actuarial studies, data analytics and other administrative services. |
Aviation
|
Disability
|
General Liability
|
Products Liability
|
|||
Casualty
|
Earthquake
|
Health & Welfare
|
Professional Liability
|
|||
Claims Advocacy
|
Errors & Omissions
|
Healthcare Analytics
|
Property
|
|||
Commercial Auto
|
Exchange Solutions
|
Human Resources
|
Retirement
|
|||
Compensation
|
Executive Benefits
|
Institutional Investment
|
Surety Bond
|
|||
Cyber Liability
|
Fiduciary Services
|
Loss Control
|
Voluntary Benefits
|
|||
Dental
|
Fine Arts
|
Marine
|
Wind
|
|||
Directors & Officers Liability
|
Fire
|
Medical
|
Workers’ Compensation
|
Affinity
|
Equity Advisors
|
Law Firms
|
Real Estate/Hospitality
|
|||
Automotive
|
Financial Institutions
|
Life Sciences
|
Religious
|
|||
Aviation
|
Food/Agribusiness
|
Marine
|
Restaurant
|
|||
Construction
|
Global Risks
|
Not-for-Profit
|
Technology
|
|||
Energy
|
Healthcare
|
Personal
|
Trade Credit/Political Risk
|
|||
Entertainment
|
Higher Education
|
Private Client
|
Transportation
|
|||
Environmental
|
K12 Education
|
Public Entity
|
|
• | Mergers and acquisitions; |
• | Our niche/practice groups and middle-market accounts; |
• | Cross-selling other brokerage products to existing clients; and |
• |
Developing and managing alternative market mechanisms such as captives,
rent-a-captives
and deductible plans/
self-insurance.
|
• | Program business and the outsourcing of portions of underwriting enterprise claims departments; |
• | Increased levels of business with Fortune 1000 companies; |
• | Larger middle-market companies and captives; and |
• | Mergers and acquisitions. |
• | A corporate culture that matches our sales-oriented and ethics-based culture; |
• | A profitable, growing business whose ability to compete would be enhanced by gaining access to our greater resources; and |
• | Clearly defined financial criteria. |
• | Increased capital-raising by underwriting enterprises, which could result in new risk-taking capital in the industry, which in turn may lead to lower insurance premiums and commissions; |
• | Underwriting enterprises selling insurance directly to insureds without the involvement of a broker or other intermediary; |
• | Changes in our business compensation model as a result of regulatory developments; |
• | Federal and state governments establishing programs to provide health insurance or, in certain cases, property insurance in catastrophe-prone areas or other alternative market types of coverage, that compete with, or completely replace, insurance products currently offered by underwriting enterprises; |
• | Continued consolidation in the financial services industry, leading to larger financial services institutions offering a wider variety of services including insurance brokerage and risk management services; and |
• | Increased competition from new market participants such as banks, accounting firms, consulting firms and Internet or other technology firms offering risk management or insurance brokerage services, or new distribution channels for insurance such as payroll firms and professional employer organizations. |
• | Maintaining awareness of and complying with a wide variety of labor practices and foreign laws, including those relating to export and import duties, environmental policies and privacy issues, as well as laws and regulations applicable to U.S. business operations abroad. These and other international regulatory risks are described below under “Regulatory, Legal and Accounting Risks;” |
• | The potential costs, difficulties and risks associated with local regulations across the globe, including the risk of personal liability for directors and officers and “piercing the corporate veil” risks under the corporate law regimes of certain countries; |
• | Difficulties in staffing and managing foreign operations. For example, we are building our Latin American operations (which contributed $37.4 million in revenue from 18 locations in 2019) through acquisitions of local family-owned insurance brokerage firms. If we lose a local leader, recruiting a replacement locally or finding an internal candidate qualified to transfer to such location could be difficult; |
• | Less flexible employee relationships, which in certain circumstances has limited our ability to prohibit employees from competing with us after they are no longer employed with us or recovering damages, and made it more difficult and expensive to terminate their employment; |
• | Some of our foreign subsidiaries receive revenues or incur obligations in currencies that differ from their functional currencies. We must also translate the financial results of our foreign subsidiaries into U.S. dollars. Although we have used foreign currency hedging strategies in the past and currently have some in place, such risks cannot be eliminated entirely, and significant changes in exchange rates may adversely affect our results of operations; |
• | Conflicting regulations in the countries in which we do business; |
• | Political and economic instability (including risks relating to undeveloped or evolving legal systems, unstable governments, acts of terrorism and outbreaks of war); |
• | Coordinating our communications and logistics across geographic distances, multiple time zones and in different languages, including during times of crisis management; |
• | Adverse trade policies, and adverse changes to any of the policies of the U.S. or any of the foreign jurisdictions in which we operate; |
• | The transition away from LIBOR to the Secured Overnight Financing Rate as a benchmark reference for short-term interest rates; |
• |
Unfavorable audits and exposure to additional liabilities relating to various
non-income
taxes (such as payroll, sales, use, value-added, net worth, property and goods and services taxes) in foreign jurisdictions. In addition, our future effective tax rates could be unfavorably affected by changes in tax rates, discriminatory or confiscatory taxation, changes in the valuation of our deferred tax assets or liabilities, changes in tax laws or their interpretation and the financial results of our international subsidiaries. The Organization for Economic Cooperation and Development issued reports and recommendations as part of its Base Erosion and Profit Shifting project (which we refer to as BEPS), and in response many countries in which we do business are expected to adopt rules which may change various aspects of the existing framework under which our tax obligations are determined. For example, in response to BEPS, the U.K., Australia and New Zealand adopted rules that affect the deductibility of interest paid on intercompany debt, and other jurisdictions where we operate may do so as well in the near future;
|
• | Legal or political constraints on our ability to maintain or increase prices; |
• | Cash balances held in foreign banks and institutions where governments have not specifically enacted formal guarantee programs; |
• | Pandemics such as coronavirus; |
• | Lost business or other financial harm due to governmental actions affecting the flow of goods, services and currency, including protectionist policies that discriminate in favor of local competitors; and |
• | Governmental restrictions on the transfer of funds to us from our operations outside the U.S. |
• | The favorable trend among both underwriting enterprises and self-insured entities toward outsourcing various types of claims administration and risk management services will reverse or slow, causing our revenues or revenue growth to decline; |
• | Concentration of large amounts of revenue with certain clients results in greater exposure to the potential negative effects of lost business due to changes in management at such clients or changes in state government policies, in the case of our government-entity clients, or for other reasons; |
• | Contracting terms will become less favorable or the margins on our services will decrease due to increased competition, regulatory constraints or other developments; |
• | We will not be able to satisfy regulatory requirements related to third party administrators or regulatory developments (including those relating to security and data privacy) will impose additional burdens, costs or business restrictions that make our business less profitable; |
• | Volatility in our case volumes, which are dependent upon a number of factors and difficult to forecast accurately, could impact our revenues; |
• | Economic weakness or a slow-down in economic activity could lead to a reduction in the number of claims we process; |
• | If we do not control our labor and technology costs, we may be unable to remain competitive in the marketplace and profitably fulfill our existing contracts (other than those that provide cost-plus or other margin protection); |
• | We may be unable to develop further efficiencies in our claims-handling business and may be unable to obtain or retain certain clients if we fail to make adequate improvements in technology or operations; and |
• |
Underwriting enterprises or certain large self-insured entities may create
in-house
servicing capabilities that compete with our third party administration and other administration, servicing and risk management products.
|
• |
Environmental, political and regulatory concerns.
Chem-Mod
™
Solution. Within the past year there has been some negative publicity around our IRC Section 45 investments and clean coal generally, and certain members of Congress have raised questions about the methodologies clean coal refiners use to validate emission reductions under IRC Section 45. Negative publicity of this kind could exacerbate the risk referred to above or call into question the validity of existing tax credits. Additionally, several states have enacted mandates that electric power generating companies purchase a minimum amount of power from renewable energy sources such as wind, hydroelectric, solar, nuclear and geothermal. There have also been proposals to establish a similar national standard, although none have been enacted to date. If utilities burned less coal as a result of any such regulation, our ability to generate additional tax credits would be reduced.
|
• |
Demand for commercial refined coal plants.
|
• |
Market demand for coal.
|
• |
Intellectual property and litigation risks.
Chem-Mod
™
Solution to the same extent as U.S. laws, leaving us vulnerable to companies outside the U.S. who may attempt to copy such intellectual property. In addition, other companies may make claims of intellectual property infringement with respect to The
Chem-Mod
™
Solution. Such intellectual property claims, with or without merit, could require that
Chem-Mod
(or us and our investment and operational partners) obtain a license to use the intellectual property, which might not be obtainable on favorable terms, if at all. On July 17, 2019, Midwest Energy Emissions Corp. and MES Inc. (together, Midwest Energy) filed a patent infringement lawsuit in the United States District Court for the District of Delaware against us,
Chem-Mod
LLC and numerous other related and unrelated parties (some of whom are seeking indemnification from
Chem-Mod
LLC). The complaint alleges that the named defendants infringe two patents held exclusively by Midwest Energy and seeks unspecified damages and injunctive relief. We dispute the allegations contained in the complaint and intend to defend this matter vigorously. Litigation is inherently uncertain and, accordingly it is not possible for us to predict the ultimate outcome of these matters. While we believe the probability of a material loss is remote, if plaintiffs prevail on the infringement suit, or defendants cannot obtain necessary licenses on reasonable terms, that may limit the use of The
Chem-Mod
™
Solution by certain licensees.
|
• |
IRS audits.
co-investors
from claiming tax credits. The partnership defended its position in tax court and prevailed in August 2019. The IRS is appealing this ruling. Litigation is inherently uncertain and accordingly it is not possible for us to predict the ultimate outcome of this proceeding or other IRS audits, and their potential impact on us.
|
• |
Operational risks.
Chem-Mod’s
multi-pollutant reduction technologies (The
Chem-Mod
TM
Solution) require chemicals that may not be readily available in the marketplace at reasonable costs. Utilities that use the technologies could be idled for various reasons, including operational or environmental problems at the plants or in the boilers, disruptions in the supply or transportation of coal, revocation of their
Chem-Mod
technologies environmental permits, labor strikes, force majeure events such as hurricanes, or terrorist attacks, any of which could halt or impede the operations. Long-term operations using
Chem-Mod’s
multi-pollutant reduction technologies could also lead to unforeseen technical or other problems not evident in the short- or medium-term. A serious injury or death of a worker connected with the production of refined coal using
Chem-Mod’s
technologies could expose the operations to material liabilities, jeopardizing our
|
investment, and could lead to reputational harm. We could also be exposed to risk due to our lack of control over the operations if future developments, for example a regulatory change affecting public and private companies differently, causes our interests and those of our
co-investors
to diverge. Finally, our vendors responsible for operation and management could fail to run the operations in compliance with IRC Section 45. If any of these developments occur, our investment returns may be negatively impacted.
|
• |
Incompatible coal.
|
• |
Strategic alternatives risk.
|
• | General economic and political conditions such as recessions, economic downturns and acts of war or terrorism; |
• | Quarterly variations in our operating results; |
• | Seasonality of our business cycle; |
• | Changes in the market’s expectations about our operating results; |
• | Our operating results failing to meet the expectation of securities analysts or investors in a particular period; |
• | Changes in financial estimates and recommendations by securities analysts concerning us or the insurance brokerage or financial services industries in general; |
• | Operating and stock price performance of other companies that investors deem comparable to us; |
• | News reports relating to trends in our markets, including any expectations regarding an upcoming “hard” or “soft” market; |
• | Cyber attacks and other cybersecurity incidents; |
• | Changes in laws and regulations affecting our business; |
• | Material announcements by us or our competitors; |
• | The impact or perceived impact of developments relating to our investments, including the possible perception by securities analysts or investors that such investments divert management attention from our core operations; |
• | Market volatility; |
• | A negative market reaction to announced acquisitions; |
• | Competitive pressures in any of our segments; |
• | General conditions in the insurance brokerage and insurance industries; |
• | Legal proceedings or regulatory investigations; |
• | Regulatory requirements, including international sanctions and the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 or other anti-corruption laws; |
• |
Quarter-to-quarter
volatility in the earnings impact of IRC Section 45 tax credits from our clean energy investments, due to the application of accounting standards applicable to the recognition of tax credits; and
|
• | Sales of substantial amounts of common shares by our directors, executive officers or significant stockholders or the perception that such sales could occur. |
Name
|
Age
|
|
Position and Year First Elected
|
|||
J. Patrick Gallagher, Jr.
|
67
|
Chairman since 2006, President since 1990, Chief Executive Officer since 1995
|
||||
Walter D. Bay
|
57
|
Corporate Vice President, General Counsel, Secretary since 2007
|
||||
Richard C. Cary
|
57
|
Controller since 1997, Chief Accounting Officer since 2001
|
||||
Joel D. Cavaness
|
58
|
Corporate Vice President since 2000, President of our Wholesale Brokerage Operation since 1997
|
||||
Thomas J. Gallagher
|
61
|
Corporate Vice President since 2001, Chairman of our International Brokerage Operation 2010 - 2016, President of our Global Property/Casualty Brokerage Operation beginning in 2017
|
||||
Douglas K. Howell
|
58
|
Corporate Vice President, Chief Financial Officer since 2003
|
||||
Scott R. Hudson
|
58
|
Corporate Vice President and President of our Risk Management Operation since 2010
|
||||
Christopher E. Mead
|
52
|
Corporate Vice President, Chief Marketing Officer since 2017; Managing Director – Marketing Division, CME Group, 2005 - 2017
|
||||
Susan E. Pietrucha
|
53
|
Corporate Vice President, Chief Human Resource Officer since 2007
|
||||
William F. Ziebell
|
57
|
Corporate Vice President since 2011, regional leader in our Employee Benefit and Consulting Brokerage Operations 2004 - 2016, President beginning in 2017
|
Period
|
Total
Number of Shares Purchased (1) |
|
Average
Price Paid per Share (2) |
|
Total Number of
Shares Purchased as Part of Publicly Announced Plans or Programs (3) |
|
Maximum Number
of Shares that May Yet be Purchased Under the Plans or Programs (3) |
|
||||||||
October 1 through October 31, 2019
|
6,928
|
$ |
88.12
|
—
|
7,287,019
|
|||||||||||
November 1 through November 30, 2019
|
1,172
|
91.57
|
—
|
7,287,019
|
||||||||||||
December 1 through December 31, 2019
|
16,329
|
95.73
|
—
|
7,287,019
|
||||||||||||
Total
|
24,429
|
$ |
93.37
|
—
|
|
|||||||||||
(1) |
Amounts in this column include shares of our common stock purchased by the trustees of trusts established under our Deferred Equity Participation Plan (which we refer to as the DEPP), our Deferred Cash Participation Plan (which we refer to as the DCPP) and our Supplemental Savings and Thrift Plan (which we refer to as the Supplemental Plan), respectively. These plans are considered to be unfunded for purposes of federal tax law since the assets of these trusts are available to our creditors in the event of our financial insolvency. The DEPP is an unfunded,
non-qualified
deferred compensation plan that generally provides for distributions to certain of our key executives when they reach age 62 or upon or after their actual retirement. Under
sub-plans
of the DEPP for certain production staff, the plan generally provides for vesting and/or distributions no sooner than five years from the date of awards, although certain awards vest and/or distribute after the earlier of fifteen years or the participant reaching age 65. See Note 11 to our 2019 consolidated financial statements in this report for more information regarding the DEPP. The DCPP is an unfunded,
non-qualified
deferred compensation plan for certain key employees, other than executive officers, that generally provides for vesting and/or distributions no sooner than five years from the date of awards. Under the terms of the DEPP and the DCPP, we may contribute cash to the trust and instruct the trustee to acquire a specified number of shares of our common stock on the open market or in privately negotiated transactions. In the fourth quarter of 2019, we instructed the trustee for the DEPP and the DCPP to reinvest dividends on shares of our common stock held by these trusts and to purchase our common stock using cash that we contributed to the DCPP related to 2019 awards under the DCPP. The Supplemental Plan is an unfunded,
non-qualified
deferred compensation plan that allows certain highly compensated employees to defer compensation, including company match amounts, on a
before-tax
basis or
after-tax
basis. Under the terms of the Supplemental Plan, all amounts credited to an employee’s account may be deemed invested, at the employee’s election, in a number of investment options that include various mutual funds, an annuity product and a fund representing our common stock. When an employee elects to have some or all of the amounts credited to the employee’s account under the Supplemental Plan deemed to be invested in the fund representing our common stock, the trustee of the trust for the Supplemental Plan purchases shares of our common stock in a number sufficient to ensure that the trust holds a number of shares of our common stock with a value equal to all equivalent to the amounts deemed invested in the fund representing our common stock. We want to ensure that at the time when an employee becomes entitled to a distribution under the terms of the Supplemental Plan, any amounts deemed to be invested in the fund representing our common stock are distributed in the form of shares of our common stock held by the trust. We established the trusts for the DEPP, the DCPP and the Supplemental Plan to assist us in discharging our deferred compensation obligations under these plans. All assets of these trusts, including any shares of our common stock purchased by the trustees, remain, at all times, assets of the Company, subject to the claims of our creditors in the event of our financial insolvency. The terms of the DEPP, the DCPP and the Supplemental Plan do not provide for a specified limit on the number of shares of common stock that may be purchased by the respective trustees of the trusts.
|
(2) | The average price paid per share is calculated on a settlement basis and does not include commissions. |
(3) | We have a common stock repurchase plan that the board of directors adopted on May 10, 1988 and has periodically amended since that date to authorize additional shares for repurchase (the last amendment was on January 24, 2008 and approved the repurchase of 10,000,000 shares). The repurchase plan has no expiration date and we are under no commitment or obligation to repurchase any particular amount of our common stock under the plan. At our discretion, we may suspend the repurchase plan at any time. |
|
Year Ended December 31,
|
|||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015*
|
|
||||||||||
|
(In millions, except per share and employee data)
|
|||||||||||||||||||
Consolidated Statement of Earnings Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commissions
|
$ |
3,320.6
|
$ |
2,920.7
|
$ |
2,641.0
|
$ |
2,409.9
|
$ |
2,338.7
|
||||||||||
Fees
|
1,911.1
|
1,756.3
|
1,591.9
|
1,491.7
|
1,432.3
|
|||||||||||||||
Supplemental revenues
|
210.5
|
189.9
|
158.0
|
139.9
|
125.5
|
|||||||||||||||
Contingent revenues
|
135.6
|
98.0
|
99.5
|
97.9
|
93.7
|
|||||||||||||||
Investment income and other
|
1,478.6
|
1,827.5
|
1,622.6
|
1,409.0
|
1,402.2
|
|||||||||||||||
Revenue before reimbursements
|
7,056.4
|
6,792.4
|
6,113.0
|
5,548.4
|
5,392.4
|
|||||||||||||||
Reimbursements
|
138.6
|
141.6
|
136.0
|
132.1
|
—
|
|||||||||||||||
Total revenues
|
7,195.0
|
6,934.0
|
6,249.0
|
5,680.5
|
5,392.4
|
|||||||||||||||
Total expenses
|
6,568.9
|
6,454.6
|
5,889.2
|
5,346.9
|
5,098.9
|
|||||||||||||||
Earnings before income taxes
|
626.1
|
479.4
|
359.8
|
333.6
|
293.5
|
|||||||||||||||
Benefit for income taxes
|
(89.7
|
) |
(196.5
|
) |
(157.1
|
) |
(96.7
|
) |
(95.6
|
) | ||||||||||
Net earnings
|
715.8
|
675.9
|
516.9
|
430.3
|
389.1
|
|||||||||||||||
Net earnings attributable to noncontrolling interests
|
47.0
|
42.4
|
35.6
|
33.5
|
32.3
|
|||||||||||||||
Net earnings attributable to controlling interests
|
$ |
668.8
|
$ |
633.5
|
$ |
481.3
|
$ |
396.8
|
$ |
356.8
|
||||||||||
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Diluted net earnings per share (1)
|
3.52
|
3.40
|
2.64
|
2.22
|
2.06
|
|||||||||||||||
Dividends declared per common share (2)
|
1.72
|
1.64
|
1.56
|
1.52
|
1.48
|
|||||||||||||||
Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Shares outstanding at year end
|
188.1
|
184.0
|
181.0
|
178.3
|
176.9
|
|||||||||||||||
Weighted average number of common shares outstanding
|
186.0
|
182.7
|
180.1
|
177.6
|
172.2
|
|||||||||||||||
Weighted average number of common and common equivalent shares outstanding
|
190.1
|
186.2
|
182.1
|
178.4
|
173.2
|
|||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets
|
$ |
19,634.8
|
$ |
16,334.0
|
$ |
14,909.7
|
$ |
13,528.2
|
$ |
10,910.5
|
||||||||||
Long-term debt less current portion
|
3,823.0
|
3,098.0
|
2,698.0
|
2,150.0
|
2,075.0
|
|||||||||||||||
Total stockholders’ equity
|
5,215.5
|
4,569.7
|
4,299.7
|
3,775.5
|
3,688.2
|
|||||||||||||||
Return on beginning stockholders’ equity (3)
|
15
|
% |
15
|
% |
13
|
% |
11
|
% |
11
|
% | ||||||||||
Employee Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Number of employees - at year end
|
33,247
|
30,362
|
26,783
|
24,790
|
23,857
|
(1) | Based on the weighted average number of common and common equivalent shares outstanding during the year. |
(2) | Based on the total dividends declared on a share of common stock outstanding during the entire year. |
(3) | Represents net earnings divided by total stockholders’ equity, as of the beginning of the year. |
* | As of January 1, 2018, we adopted ASC 606, Revenues from Contracts with Customers related to Topic 606 using the full retrospective method to restate 2017 and 2016. The cumulative effect of the adoption was recognized as an increase to retained earnings of $125.3 million on January 1, 2016. As permitted under the guidelines issued by the SEC related to the adoption of Topic 606, we did not restate the 2015 information in the table above. |
Year Ended December 31 Reported GAAP to Adjusted
Non-GAAP
Reconciliation:
|
||||||||||||||||||||||||||||||||||||
|
Revenues Before
Reimbursements |
Net Earnings (Loss)
|
EBITDAC
|
Diluted Net
Earnings (Loss) Per Share |
||||||||||||||||||||||||||||||||
Segment
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Chg
|
|
||||||||||||||||||
|
(In millions, except per share data)
|
|
|
|||||||||||||||||||||||||||||||||
Brokerage, as reported
|
$ |
4,901.5
|
$ |
4,246.9
|
$ |
717.3
|
$ |
573.2
|
$ |
1,359.1
|
$ |
1,126.3
|
$ |
3.68
|
$ |
3.02
|
22
|
% | ||||||||||||||||||
Net gains on divestitures
|
(75.3
|
) |
(10.2
|
) |
(47.5
|
) |
(7.9
|
) |
(62.3
|
) |
(10.2
|
) |
(0.25
|
) |
(0.04
|
) |
|
|||||||||||||||||||
Acquisition integration
|
—
|
—
|
16.1
|
2.6
|
20.4
|
3.4
|
0.08
|
0.01
|
|
|||||||||||||||||||||||||||
Workforce and lease termination
|
—
|
—
|
35.1
|
29.1
|
44.8
|
38.7
|
0.19
|
0.16
|
|
|||||||||||||||||||||||||||
Acquisition related adjustments
|
—
|
—
|
5.8
|
16.3
|
16.8
|
14.2
|
0.03
|
0.09
|
|
|||||||||||||||||||||||||||
Levelized foreign currency translation
|
—
|
(50.8
|
) |
—
|
(2.0
|
) |
—
|
(7.9
|
) |
—
|
(0.01
|
) |
|
|||||||||||||||||||||||
Brokerage, as adjusted *
|
4,826.2
|
4,185.9
|
726.8
|
611.3
|
1,378.8
|
1,164.5
|
3.73
|
3.23
|
15
|
% | ||||||||||||||||||||||||||
Risk Management, as reported
|
838.5
|
798.3
|
66.2
|
70.4
|
137.9
|
134.0
|
0.35
|
0.38
|
-8
|
% | ||||||||||||||||||||||||||
Workforce and lease termination
|
—
|
—
|
5.2
|
3.5
|
7.9
|
4.7
|
0.03
|
0.01
|
|
|||||||||||||||||||||||||||
Acquisition related adjustments
|
—
|
—
|
(1.0
|
) |
(4.3
|
) |
—
|
—
|
(0.01
|
) |
(0.02
|
) |
|
|||||||||||||||||||||||
Levelized foreign currency translation
|
—
|
(9.1
|
) |
—
|
(1.4
|
) |
—
|
(2.3
|
) |
—
|
(0.01
|
) |
|
|||||||||||||||||||||||
Risk Management, as adjusted *
|
838.5
|
789.2
|
70.4
|
68.2
|
145.8
|
136.4
|
0.37
|
0.36
|
3
|
% | ||||||||||||||||||||||||||
Corporate, as reported
|
1,316.4
|
1,747.2
|
(67.7
|
) |
32.3
|
(201.4
|
) |
(213.9
|
) |
(0.51
|
) |
—
|
|
|||||||||||||||||||||||
Workforce
|
—
|
—
|
2.3
|
—
|
3.0
|
—
|
0.01
|
—
|
|
|||||||||||||||||||||||||||
Clean energy related
|
3.0
|
—
|
11.7
|
—
|
14.9
|
—
|
0.05
|
—
|
|
|||||||||||||||||||||||||||
Corporate legal entity restructuring
|
—
|
—
|
—
|
(22.0
|
) |
—
|
—
|
—
|
(0.12
|
) |
|
|||||||||||||||||||||||||
Impact of U.S. tax reform
|
—
|
—
|
—
|
(8.9
|
) |
—
|
—
|
—
|
(0.04
|
) |
|
|||||||||||||||||||||||||
Corporate, as adjusted *
|
1,319.4
|
1,747.2
|
(53.7
|
) |
1.4
|
(183.5
|
) |
(213.9
|
) |
(0.45
|
) |
(0.16
|
) |
|
||||||||||||||||||||||
Total Company, as reported
|
$ |
7,056.4
|
$ |
6,792.4
|
$ |
715.8
|
$ |
675.9
|
$ |
1,295.6
|
$ |
1,046.4
|
$ |
3.52
|
$ |
3.40
|
4
|
% | ||||||||||||||||||
Total Company, as adjusted *
|
$ |
6,984.1
|
$ |
6,722.3
|
$ |
743.4
|
$ |
680.9
|
$ |
1,341.1
|
$ |
1,087.0
|
$ |
3.65
|
$ |
3.43
|
6
|
% | ||||||||||||||||||
Total Brokerage and Risk
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Management, as reported
|
$ |
5,740.0
|
$ |
5,045.2
|
$ |
783.5
|
$ |
643.6
|
$ |
1,497.0
|
$ |
1,260.3
|
$ |
4.03
|
$ |
3.40
|
19
|
% | ||||||||||||||||||
Total Brokerage and Risk
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Management, as adjusted *
|
$ |
5,664.7
|
$ |
4,975.1
|
$ |
797.1
|
$ |
679.5
|
$ |
1,524.6
|
$ |
1,300.9
|
$ |
4.10
|
$ |
3.59
|
14
|
% | ||||||||||||||||||
* | For 2019, the pretax impact of the brokerage segment adjustments totals $10.4 million, with a corresponding adjustment to the provision for income taxes of $0.9 million relating to these items. The pretax impact of the risk management segment adjustments totals $5.5 million, with a corresponding adjustment to the provision for income taxes of $1.3 million relating to these items. The pretax impact of the corporate segment adjustments totals $17.9 million, with an adjustment to the benefit for income taxes of $3.9 million. For the Corporate segment, the clean energy related adjustments are described on pages 47 to 48. |
|
Earnings
(Loss) Before Income Taxes |
|
Provision
(Benefit) for Income Taxes |
|
Net
Earnings
(Loss)
|
|
Net Earnings
(Loss) Attributable to Noncontrolling Interests |
|
Net Earnings
(Loss) Attributable to Controlling Interests |
|
Diluted Net
Earnings (Loss) per Share |
|
||||||||||||
Year Ended Dec 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Brokerage, as reported
|
$
|
946.5
|
|
$
|
229.2
|
|
$
|
717.3
|
|
$
|
17.2
|
|
$
|
700.1
|
|
$
|
3.68
|
|
||||||
Net gains on divestitures
|
(62.3
|
) |
(14.8
|
) |
(47.5
|
) |
—
|
(47.5
|
) |
(0.25
|
) | |||||||||||||
Acquisition integration
|
20.4
|
4.3
|
16.1
|
—
|
16.1
|
0.08
|
||||||||||||||||||
Workforce and lease termination
|
44.8
|
9.7
|
35.1
|
—
|
35.1
|
0.19
|
||||||||||||||||||
Acquisition related adjustments
|
7.5
|
1.7
|
5.8
|
—
|
5.8
|
0.03
|
||||||||||||||||||
Brokerage, as adjusted
|
$ |
956.9
|
$ |
230.1
|
$ |
726.8
|
$ |
17.2
|
$ |
709.6
|
$ |
3.73
|
||||||||||||
Risk Management, as reported
|
$
|
88.4
|
|
$
|
22.2
|
|
$
|
66.2
|
|
$
|
—
|
|
$
|
66.2
|
|
$
|
0.35
|
|
||||||
Workforce and lease termination
|
7.9
|
2.7
|
5.2
|
—
|
5.2
|
0.03
|
||||||||||||||||||
Acquisition related adjustments
|
(2.4
|
) |
(1.4
|
) |
(1.0
|
) |
—
|
(1.0
|
) |
(0.01
|
) | |||||||||||||
Risk Management, as adjusted
|
$ |
93.9
|
$ |
23.5
|
$ |
70.4
|
$ |
—
|
$ |
70.4
|
$ |
0.37
|
||||||||||||
Corporate, as reported
|
$
|
(408.8
|
)
|
$
|
(341.1
|
)
|
$
|
(67.7
|
)
|
$
|
29.8
|
|
$
|
(97.5
|
)
|
$
|
(0.51
|
)
|
||||||
Workforce
|
3.0
|
0.7
|
2.3
|
—
|
2.3
|
0.01
|
||||||||||||||||||
Clean energy related
|
14.9
|
3.2
|
11.7
|
2.5
|
9.2
|
0.05
|
||||||||||||||||||
Corporate, as adjusted
|
$ |
(390.9
|
) | $ |
(337.2
|
) | $ |
(53.7
|
) | $ |
32.3
|
$ |
(86.0
|
) | $ |
(0.45
|
) | |||||||
Year Ended Dec 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Brokerage, as reported
|
$
|
764.2
|
|
$
|
191.0
|
|
$
|
573.2
|
|
$
|
10.7
|
|
$
|
562.5
|
|
$
|
3.02
|
|
||||||
Net gains on divestitures
|
(10.2
|
) |
(2.3
|
) |
(7.9
|
) |
—
|
(7.9
|
) |
(0.04
|
) | |||||||||||||
Acquisition integration
|
3.4
|
0.8
|
2.6
|
—
|
2.6
|
0.01
|
||||||||||||||||||
Workforce and lease termination
|
38.7
|
9.6
|
29.1
|
—
|
29.1
|
0.16
|
||||||||||||||||||
Acquisition related adjustments
|
21.6
|
5.3
|
16.3
|
—
|
16.3
|
0.09
|
||||||||||||||||||
Levelized foreign currency translation
|
(2.5
|
) |
(0.5
|
) |
(2.0
|
) |
—
|
(2.0
|
) |
(0.01
|
) | |||||||||||||
Brokerage, as adjusted
|
$ |
815.2
|
$ |
203.9
|
$ |
611.3
|
$ |
10.7
|
$ |
600.6
|
$ |
3.23
|
||||||||||||
Risk Management, as reported
|
$
|
95.7
|
|
$
|
25.3
|
|
$
|
70.4
|
|
$
|
—
|
|
$
|
70.4
|
|
$
|
0.38
|
|
||||||
Workforce and lease termination
|
4.7
|
1.2
|
3.5
|
—
|
3.5
|
0.01
|
||||||||||||||||||
Acquisition related adjustments
|
(6.0
|
) |
(1.7
|
) |
(4.3
|
) |
—
|
(4.3
|
) |
(0.02
|
) | |||||||||||||
Levelized foreign currency translation
|
(1.9
|
) |
(0.5
|
) |
(1.4
|
) |
—
|
(1.4
|
) |
(0.01
|
) | |||||||||||||
Risk Management, as adjusted
|
$ |
92.5
|
$ |
24.3
|
$ |
68.2
|
$ |
—
|
$ |
68.2
|
$ |
0.36
|
||||||||||||
Corporate, as reported
|
$
|
(380.5
|
)
|
$
|
(412.8
|
)
|
$
|
32.3
|
|
$
|
31.7
|
|
$
|
0.6
|
|
$
|
—
|
|
||||||
Corporate legal entity restructuring
|
—
|
22.0
|
(22.0
|
) |
—
|
(22.0
|
) |
(0.12
|
) | |||||||||||||||
Impact of U.S. tax reform
|
—
|
8.9
|
(8.9
|
) |
—
|
(8.9
|
) |
(0.04
|
) | |||||||||||||||
Corporate, as adjusted
|
$ |
(380.5
|
) | $ |
(381.9
|
) | $ |
1.4
|
$ |
31.7
|
$ |
(30.3
|
) | $ |
(0.16
|
) | ||||||||
• |
Adjusted measures
|
• | Net gains on divestitures, which are primarily net proceeds received related to sales of books of business and other divestiture transactions, such as the disposal of a business unit through sale or closure. |
• | Costs related to divestitures, which include legal and other costs related to certain operations that are being exited by us. |
• |
Acquisition integration costs, which include costs related to certain of our large acquisitions, outside the scope of our usual
tuck-in
strategy, not expected to occur on an ongoing basis in the future once we fully assimilate the applicable acquisition. These costs are typically associated with redundant workforce, extra lease space, duplicate services and external costs incurred to assimilate the acquisition with our IT related systems.
|
• | Workforce related charges, which primarily include severance costs (either accrued or paid) related to employee terminations and other costs associated with redundant workforce. |
• | Lease termination related charges, which primarily include costs related to terminations of real estate leases and abandonment of leased space. |
• |
Acquisition related adjustments, which include changes in estimated acquisition earnout payables adjustments, impacts of acquisition valuation
true-ups,
impairment charges and acquisition related compensation charges.
|
• | The impact of foreign currency translation, as applicable. The amounts excluded with respect to foreign currency translation are calculated by applying current year foreign exchange rates to the same period in the prior year. |
• |
Adjusted ratios
|
• |
EBITDAC
and EBITDAC Margin
|
• |
Adjusted EBITDAC
and Adjusted EBITDAC Margin
|
• |
Adjusted EPS and Adjusted Net Earnings
after-tax
impact of net gains on divestitures, acquisition integration costs, workforce related charges, lease termination related charges and acquisition related adjustments and the period-over-period impact of foreign currency translation, as applicable, (and for the Corporate segment, the clean energy related adjustments described on pages 47 to 48). Adjusted EPS is Adjusted Net Earnings divided by diluted weighted average shares outstanding. This measure provides a meaningful representation of our operating performance (and as such should not be used as a measure of our liquidity), and for the overall business is also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.
|
(i) | Identifying, negotiating and placing all forms of insurance or reinsurance coverage, as well as providing risk-shifting, risk-sharing and risk-mitigation consulting services, principally related to property/casualty, life, health, welfare and disability insurance. We also provide these services through, or in conjunction with, other unrelated agents and brokers, consultants and management advisors. |
(ii) | Acting as an agent or broker for multiple underwriting enterprises by providing services such as sales, marketing, selecting, negotiating, underwriting, servicing and placing insurance coverage on their behalf. |
(iii) | Providing consulting services related to health and welfare benefits, voluntary benefits, executive benefits, compensation, retirement planning, institutional investment and fiduciary, actuarial, compliance, private insurance exchange, human resource technology, communications and benefits administration. |
(iv) | Providing management and administrative services to captives, pools, risk-retention groups, healthcare exchanges, small underwriting enterprises, such as accounting, claims and loss processing assistance, feasibility studies, actuarial studies, data analytics and other administrative services. |
Statement of Earnings
|
2019
|
|
2018
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
||||||||||||
Commissions
|
$ |
3,320.6
|
$ |
2,920.7
|
$ |
399.9
|
$ |
2,920.7
|
$ |
2,641.0
|
$ |
279.7
|
||||||||||||
Fees
|
1,074.2
|
958.5
|
115.7
|
958.5
|
855.1
|
103.4
|
||||||||||||||||||
Supplemental revenues
|
210.5
|
189.9
|
20.6
|
189.9
|
158.0
|
31.9
|
||||||||||||||||||
Contingent revenues
|
135.6
|
98.0
|
37.6
|
98.0
|
99.5
|
(1.5
|
) | |||||||||||||||||
Investment income
|
85.3
|
69.6
|
15.7
|
69.6
|
58.1
|
11.5
|
||||||||||||||||||
Net gains on divestitures
|
75.3
|
10.2
|
65.1
|
10.2
|
3.4
|
6.8
|
||||||||||||||||||
Total revenues
|
4,901.5
|
4,246.9
|
654.6
|
4,246.9
|
3,815.1
|
431.8
|
||||||||||||||||||
Compensation
|
2,745.9
|
2,447.1
|
298.8
|
2,447.1
|
2,212.3
|
234.8
|
||||||||||||||||||
Operating
|
796.5
|
673.5
|
123.0
|
673.5
|
614.0
|
59.5
|
||||||||||||||||||
Depreciation
|
66.6
|
60.9
|
5.7
|
60.9
|
61.8
|
(0.9
|
) | |||||||||||||||||
Amortization
|
329.1
|
286.9
|
42.2
|
286.9
|
261.8
|
25.1
|
||||||||||||||||||
Change in estimated acquisition earnout payables
|
16.9
|
14.3
|
2.6
|
14.3
|
29.3
|
(15.0
|
) | |||||||||||||||||
Total expenses
|
3,955.0
|
3,482.7
|
472.3
|
3,482.7
|
3,179.2
|
303.5
|
||||||||||||||||||
Earnings before income taxes
|
946.5
|
764.2
|
182.3
|
764.2
|
635.9
|
128.3
|
||||||||||||||||||
Provision for income taxes
|
229.2
|
191.0
|
38.2
|
191.0
|
221.2
|
(30.2
|
) | |||||||||||||||||
Net earnings
|
717.3
|
573.2
|
144.1
|
573.2
|
414.7
|
158.5
|
||||||||||||||||||
Net earnings attributable to noncontrolling interests
|
17.2
|
10.7
|
6.5
|
10.7
|
7.6
|
3.1
|
||||||||||||||||||
Net earnings attributable to controlling interests
|
$ |
700.1
|
$ |
562.5
|
$ |
137.6
|
$ |
562.5
|
$ |
407.1
|
$ |
155.4
|
||||||||||||
Diluted net earnings per share
|
$ |
3.68
|
$ |
3.02
|
$ |
0.66
|
$ |
3.02
|
$ |
2.23
|
$ |
0.79
|
||||||||||||
Other Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Change in diluted net earnings per share
|
22
|
% |
35
|
% |
|
35
|
% |
|
|
|||||||||||||||
Growth in revenues
|
15
|
% |
11
|
% |
|
11
|
% |
|
|
|||||||||||||||
Organic change in commissions and fees
|
6
|
% |
5
|
% |
|
5
|
% |
|
|
|||||||||||||||
Compensation expense ratio
|
56
|
% |
58
|
% |
|
58
|
% |
58
|
% |
|
||||||||||||||
Operating expense ratio
|
16
|
% |
16
|
% |
|
16
|
% |
16
|
% |
|
||||||||||||||
Effective income tax rate
|
24
|
% |
25
|
% |
|
25
|
% |
35
|
% |
|
||||||||||||||
Workforce at end of period (includes acquisitions)
|
25,211
|
22,934
|
|
22,934
|
20,049
|
|
||||||||||||||||||
Identifiable assets at December 31
|
$ |
16,741.9
|
$ |
13,785.1
|
|
$ |
13,785.1
|
$ |
12,404.3
|
|
|
2019
|
|
2018
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||
Net earnings, as reported
|
$ |
717.3
|
$ |
573.2
|
25.1
|
% | $ |
573.2
|
$ |
414.7
|
38.2
|
% | ||||||||||||
Provision for income taxes
|
229.2
|
191.0
|
|
191.0
|
221.2
|
|
||||||||||||||||||
Depreciation
|
66.6
|
60.9
|
|
60.9
|
61.8
|
|
||||||||||||||||||
Amortization
|
329.1
|
286.9
|
|
286.9
|
261.8
|
|
||||||||||||||||||
Change in estimated acquisition earnout payables
|
16.9
|
14.3
|
|
14.3
|
29.3
|
|
||||||||||||||||||
EBITDAC
|
1,359.1
|
1,126.3
|
20.7
|
% |
1,126.3
|
988.8
|
13.8
|
% | ||||||||||||||||
Net gains on divestitures
|
(62.3
|
) |
(10.2
|
) |
|
(10.2
|
) |
(3.4
|
) |
|
||||||||||||||
Acquisition integration
|
20.4
|
3.4
|
|
3.4
|
14.8
|
|
||||||||||||||||||
Acquisition related adjustments
|
16.8
|
14.2
|
|
14.2
|
9.1
|
|
||||||||||||||||||
Workforce and lease termination related charges
|
44.8
|
38.7
|
|
38.7
|
30.1
|
|
||||||||||||||||||
Levelized foreign currency translation
|
—
|
(7.9
|
) |
|
—
|
3.6
|
|
|||||||||||||||||
EBITDAC, as adjusted
|
$ |
1,378.8
|
$ |
1,164.5
|
18.4
|
% | $ |
1,172.4
|
$ |
1,043.0
|
12.4
|
% | ||||||||||||
Net earnings margin, as reported
|
14.6
|
% |
13.5
|
% |
+113 bpts
|
13.5
|
% |
10.9
|
% |
+263 bpts
|
||||||||||||||
EBITDAC margin, as adjusted
|
28.6
|
% |
27.8
|
% |
+75 bpts
|
27.7
|
% |
27.4
|
% |
+40 bpts
|
||||||||||||||
Reported revenues
|
$ |
4,901.5
|
$ |
4,246.9
|
|
$ |
4,246.9
|
$ |
3,815.1
|
|
||||||||||||||
Adjusted revenues - see page 28
|
$ |
4,826.2
|
$ |
4,185.9
|
|
$ |
4,236.7
|
$ |
3,811.7
|
|
||||||||||||||
|
2019 Organic Revenues
|
|
|
2018 Organic Revenues
|
|
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
||||||||||||
Base Commissions and Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commission and fees, as reported
|
$ |
4,394.8
|
$ |
3,879.2
|
13.3
|
% | $ |
3,879.2
|
$ |
3,496.1
|
11.0
|
% | ||||||||||||
Less commission and fee revenues from acquisitions
|
(382.8
|
) |
—
|
|
(200.4
|
) |
—
|
|
||||||||||||||||
Less divested operations
|
—
|
(31.0
|
) |
|
—
|
(18.2
|
) |
|
||||||||||||||||
Levelized foreign currency translation
|
—
|
(45.1
|
) |
|
—
|
13.3
|
|
|||||||||||||||||
Organic base commission and fees
|
$ |
4,012.0
|
$ |
3,803.1
|
5.5
|
% | $ |
3,678.8
|
$ |
3,491.2
|
5.4
|
% | ||||||||||||
Supplemental revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Supplemental revenues, as reported
|
$ |
210.5
|
$ |
189.9
|
10.9
|
% | $ |
189.9
|
$ |
158.0
|
20.2
|
% | ||||||||||||
Less supplemental revenues from acquisitions
|
(13.5
|
) |
—
|
|
(1.5
|
) |
—
|
|
||||||||||||||||
Levelized foreign currency translation
|
—
|
(2.4
|
) |
|
—
|
0.8
|
|
|||||||||||||||||
Organic supplemental revenues
|
$ |
197.0
|
$ |
187.5
|
5.1
|
% | $ |
188.4
|
$ |
158.8
|
18.6
|
% | ||||||||||||
Contingent revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Contingent revenues, as reported
|
$ |
135.6
|
$ |
98.0
|
38.4
|
% | $ |
98.0
|
$ |
99.5
|
-1.5
|
% | ||||||||||||
Less contingent revenues from acquisitions
|
(18.4
|
) |
—
|
|
(5.0
|
) |
—
|
|
||||||||||||||||
Less divested operations
|
—
|
—
|
|
—
|
(0.6
|
) |
|
|||||||||||||||||
Levelized foreign currency translation
|
—
|
(0.3
|
) |
|
—
|
0.1
|
|
|||||||||||||||||
Organic contingent revenues
|
$ |
117.2
|
$ |
97.7
|
20.0
|
% | $ |
93.0
|
$ |
99.0
|
-6.1
|
% | ||||||||||||
Total reported commissions, fees, supplemental revenues and contingent revenues
|
$ |
4,740.9
|
$ |
4,167.1
|
13.8
|
% | $ |
4,167.1
|
$ |
3,753.6
|
11.0
|
% | ||||||||||||
Less commission and fee revenues from acquisitions
|
(414.7
|
) |
—
|
|
(206.9
|
) |
—
|
|
||||||||||||||||
Less divested operations
|
—
|
(31.0
|
) |
|
—
|
(18.8
|
) |
|
||||||||||||||||
Levelized foreign currency translation
|
—
|
(47.8
|
) |
|
—
|
14.2
|
|
|||||||||||||||||
Total organic commissions, fees supplemental revenues and contingent revenues
|
$ |
4,326.2
|
$ |
4,088.3
|
5.8
|
% | $ |
3,960.2
|
$ |
3,749.0
|
5.6
|
% | ||||||||||||
Acquisition Activity
|
2019
|
|
2018
|
|
2017
|
|
||||||
Number of acquisitions closed
|
46
|
44
|
36
|
|||||||||
Estimated annualized revenues acquired (in millions)
|
$ |
452.3
|
$ |
317.9
|
$ |
159.0
|
||||||
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Full Year
|
|
||||||||||
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Reported supplemental revenues
|
$ |
56.7
|
$ |
46.9
|
$ |
49.8
|
$ |
57.1
|
$ |
210.5
|
||||||||||
Reported contingent revenues
|
48.0
|
29.5
|
30.4
|
27.7
|
135.6
|
|||||||||||||||
Reported supplemental and contingent revenues
|
$ |
104.7
|
$ |
76.4
|
$ |
80.2
|
$ |
84.8
|
$ |
346.1
|
||||||||||
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Reported supplemental revenues
|
$ |
52.0
|
$ |
48.1
|
$ |
43.9
|
$ |
45.9
|
$ |
189.9
|
||||||||||
Reported contingent revenues
|
34.9
|
21.8
|
25.7
|
15.6
|
98.0
|
|||||||||||||||
Reported supplemental and contingent revenues
|
$ |
86.9
|
$ |
69.9
|
$ |
69.6
|
$ |
61.5
|
$ |
287.9
|
||||||||||
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Reported supplemental revenues
|
$ |
47.3
|
$ |
35.8
|
$ |
36.9
|
$ |
38.0
|
$ |
158.0
|
||||||||||
Reported contingent revenues
|
35.0
|
21.3
|
21.8
|
21.4
|
99.5
|
|||||||||||||||
Reported supplemental and contingent revenues
|
$ |
82.3
|
$ |
57.1
|
$ |
58.7
|
$ |
59.4
|
$ |
257.5
|
||||||||||
|
2019
|
|
2018
|
|
2018
|
|
2017
|
|
||||||||
Compensation expense, as reported
|
$ |
2,745.9
|
$ |
2,447.1
|
$ |
2,447.1
|
$ |
2,212.3
|
||||||||
Acquisition integration
|
(12.4
|
) |
(2.5
|
) |
(2.5
|
) |
(7.6
|
) | ||||||||
Workforce related charges
|
(35.2
|
) |
(32.3
|
) |
(32.3
|
) |
(21.4
|
) | ||||||||
Acquisition related adjustments
|
(16.8
|
) |
(14.2
|
) |
(14.2
|
) |
(9.1
|
) | ||||||||
Levelized foreign currency translation
|
-
|
(34.0
|
) |
-
|
8.7
|
|||||||||||
Compensation expense, as adjusted
|
$ |
2,681.5
|
$ |
2,364.1
|
$ |
2,398.1
|
$ |
2,182.9
|
||||||||
Reported compensation expense ratios
|
56.0
|
% |
57.6
|
% |
57.6
|
% |
58.0
|
% | ||||||||
Adjusted compensation expense ratios
|
55.6
|
% |
56.5
|
% |
56.6
|
% |
57.1
|
% | ||||||||
Reported revenues
|
$ |
4,901.5
|
$ |
4,246.9
|
$ |
4,246.9
|
$ |
3,815.1
|
||||||||
Adjusted revenues - see page 28
|
$ |
4,826.2
|
$ |
4,185.9
|
$ |
4,236.7
|
$ |
3,824.7
|
||||||||
|
2019
|
|
2018
|
|
2018
|
|
2017
|
|
||||||||
Operating expense, as reported
|
$ |
796.5
|
$ |
673.5
|
$ |
673.5
|
$ |
614.0
|
||||||||
Acquisition integration
|
(8.0
|
) |
(0.9
|
) |
(0.9
|
) |
(7.2
|
) | ||||||||
Workforce and lease termination related charges
|
(9.6
|
) |
(6.4
|
) |
(6.4
|
) |
(8.7
|
) | ||||||||
Costs related to divestures
|
(13.0
|
) |
—
|
—
|
—
|
|||||||||||
Levelized foreign currency translation
|
—
|
(8.9
|
) |
—
|
0.7
|
|||||||||||
Operating expense, as adjusted
|
$ |
765.9
|
$ |
657.3
|
$ |
666.2
|
$ |
598.8
|
||||||||
Reported operating expense ratios
|
16.3
|
% |
15.9
|
% |
15.9
|
% |
16.1
|
% | ||||||||
Adjusted operating expense ratios
|
15.9
|
% |
15.7
|
% |
15.7
|
% |
15.7
|
% | ||||||||
Reported revenues
|
$ |
4,901.5
|
$ |
4,246.9
|
$ |
4,246.9
|
$ |
3,815.1
|
||||||||
Adjusted revenues - see page 28
|
$ |
4,826.2
|
$ |
4,185.9
|
$ |
4,236.7
|
$ |
3,824.7
|
||||||||
Statement of Earnings
|
2019
|
|
2018
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
||||||||||||
Fees
|
$ |
836.9
|
$ |
797.8
|
$ |
39.1
|
$ |
797.8
|
$ |
736.8
|
$ |
61.0
|
||||||||||||
Investment income
|
1.6
|
0.5
|
1.1
|
0.5
|
0.6
|
(0.1
|
) | |||||||||||||||||
Revenues before reimbursements
|
838.5
|
798.3
|
40.2
|
798.3
|
737.4
|
60.9
|
||||||||||||||||||
Reimbursements
|
138.6
|
141.6
|
(3.0
|
) |
141.6
|
136.0
|
5.6
|
|||||||||||||||||
Total revenues
|
977.1
|
939.9
|
37.2
|
939.9
|
873.4
|
66.5
|
||||||||||||||||||
Compensation
|
515.7
|
489.7
|
26.0
|
489.7
|
446.9
|
42.8
|
||||||||||||||||||
Operating
|
184.9
|
174.6
|
10.3
|
174.6
|
164.8
|
9.8
|
||||||||||||||||||
Reimbursements
|
138.6
|
141.6
|
|
141.6
|
136.0
|
|
||||||||||||||||||
Depreciation
|
46.2
|
38.7
|
7.5
|
38.7
|
31.1
|
7.6
|
||||||||||||||||||
Amortization
|
4.9
|
4.3
|
0.6
|
4.3
|
2.9
|
1.4
|
||||||||||||||||||
Change in estimated acquisition earnout payables
|
(1.6
|
) |
(4.7
|
) |
3.1
|
(4.7
|
) |
1.6
|
(6.3
|
) | ||||||||||||||
Total expenses
|
888.7
|
844.2
|
44.5
|
844.2
|
783.3
|
60.9
|
||||||||||||||||||
Earnings before income taxes
|
88.4
|
95.7
|
(7.3
|
) |
95.7
|
90.1
|
5.6
|
|||||||||||||||||
Provision for income taxes
|
22.2
|
25.3
|
(3.1
|
) |
25.3
|
34.4
|
(9.1
|
) | ||||||||||||||||
Net earnings
|
66.2
|
70.4
|
(4.2
|
) |
70.4
|
55.7
|
14.7
|
|||||||||||||||||
Net earnings attributable to noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Net earnings attributable to controlling interests
|
$ |
66.2
|
$ |
70.4
|
$ |
(4.2
|
) | $ |
70.4
|
$ |
55.7
|
$ |
14.7
|
|||||||||||
Diluted earnings per share
|
$ |
0.35
|
$ |
0.38
|
$ |
(0.03
|
) | $ |
0.38
|
$ |
0.31
|
$ |
0.07
|
|||||||||||
Other information
|
|
|
|
|
|
|
||||||||||||||||||
Change in diluted earnings per share
|
(8
|
%) |
23
|
% |
|
23
|
% |
|
|
|||||||||||||||
Growth in revenues (before reimbursements)
|
5
|
% |
8
|
% |
|
8
|
% |
|
|
|||||||||||||||
Organic change in fees (before reimbursements)
|
4
|
% |
7
|
% |
|
7
|
% |
|
|
|||||||||||||||
Compensation expense ratio (before reimbursements)
|
62
|
% |
61
|
% |
|
61
|
% |
61
|
% |
|
||||||||||||||
Operating expense ratio (before reimbursements)
|
22
|
% |
22
|
% |
|
22
|
% |
22
|
% |
|
||||||||||||||
Effective income tax rate
|
25
|
% |
26
|
% |
|
26
|
% |
38
|
% |
|
||||||||||||||
Workforce at end of period (includes acquisitions)
|
6,753
|
6,269
|
|
6,269
|
5,872
|
|
||||||||||||||||||
Identifiable assets at December 31
|
$ |
898.1
|
$ |
748.1
|
|
$ |
748.1
|
$ |
738.6
|
|
|
2019
|
|
2018
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
||||||||||||
Net earnings, as reported
|
$ |
66.2
|
$ |
70.4
|
-6.0
|
% | $ |
70.4
|
$ |
55.7
|
26.4
|
% | ||||||||||||
Provision for income taxes
|
22.2
|
25.3
|
|
25.3
|
34.4
|
|
||||||||||||||||||
Depreciation
|
46.2
|
38.7
|
|
38.7
|
31.1
|
|
||||||||||||||||||
Amortization
|
4.9
|
4.3
|
|
4.3
|
2.9
|
|
||||||||||||||||||
Change in estimated acquisition earnout payables
|
(1.6
|
) |
(4.7
|
) |
|
(4.7
|
) |
1.6
|
|
|||||||||||||||
Total EBITDAC
|
137.9
|
134.0
|
2.9
|
% |
134.0
|
125.7
|
6.6
|
% | ||||||||||||||||
Workforce and lease termination related charges
|
7.9
|
4.7
|
|
4.7
|
0.9
|
|
||||||||||||||||||
Levelized foreign currency translation
|
—
|
(2.3
|
) |
|
—
|
(0.5
|
) |
|
||||||||||||||||
EBITDAC, as adjusted
|
$ |
145.8
|
$ |
136.4
|
6.9
|
% | $ |
138.7
|
$ |
126.1
|
9.9
|
% | ||||||||||||
Net earnings margin, before reimbursements, as reported
|
7.9
|
% |
8.8
|
% |
-92 bpts
|
8.8
|
% |
7.6
|
% |
+127 bpts
|
||||||||||||||
EBITDAC margin, before reimbursements, as adjusted
|
17.4
|
% |
17.3
|
% |
+11 bpts
|
17.4
|
% |
17.2
|
% |
+21 bpts
|
||||||||||||||
Reported revenues before reimbursements
|
$ |
838.5
|
$ |
798.3
|
|
$ |
798.3
|
$ |
737.4
|
|
||||||||||||||
Adjusted revenues - before reimbursements - see page 28
|
$ |
838.5
|
$ |
789.2
|
|
$ |
798.3
|
$ |
734.7
|
|
||||||||||||||
|
2019 Organic Revenue
|
|
|
2018 Organic Revenue
|
|
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
||||||||||||
Fees
|
$ |
833.7
|
$ |
789.3
|
5.6
|
% | $ |
789.3
|
$ |
732.2
|
7.8
|
% | ||||||||||||
International performance bonus fees
|
3.2
|
8.5
|
|
8.5
|
4.6
|
|
||||||||||||||||||
Fees as reported
|
836.9
|
797.8
|
4.9
|
% |
797.8
|
736.8
|
8.3
|
% | ||||||||||||||||
Less fees from acquisitions
|
(13.6
|
) |
—
|
|
(11.5
|
) |
—
|
|
||||||||||||||||
Levelized foreign currency translation
|
—
|
(9.1
|
) |
|
—
|
(2.6
|
) |
|
||||||||||||||||
Organic fees
|
$ |
823.3
|
$ |
788.7
|
4.4
|
% | $ |
786.3
|
$ |
734.2
|
7.1
|
% | ||||||||||||
|
2019
|
|
2018
|
|
2018
|
|
2017
|
|
||||||||
Compensation expense, as reported
|
$ |
515.7
|
$ |
489.7
|
$ |
489.7
|
$ |
446.9
|
||||||||
Workforce and lease termination related charges
|
(5.9
|
) |
(4.3
|
) |
(4.3
|
) |
(0.9
|
) | ||||||||
Levelized foreign currency translation
|
—
|
(5.2
|
) |
—
|
(1.7
|
) | ||||||||||
Compensation expense, as adjusted
|
$ |
509.8
|
$ |
480.2
|
$ |
485.4
|
$ |
444.3
|
||||||||
Reported compensation expense ratios (before reimbursements)
|
61.5
|
% |
61.3
|
% |
61.3
|
% |
60.6
|
% | ||||||||
Adjusted compensation expense ratios (before reimbursements)
|
60.8
|
% |
60.9
|
% |
60.8
|
% |
60.5
|
% | ||||||||
Reported revenues (before reimbursements)
|
$ |
838.5
|
$ |
798.3
|
$ |
798.3
|
$ |
737.4
|
||||||||
Adjusted revenues (before reimbursements) - see page 28
|
$ |
838.5
|
$ |
789.2
|
$ |
798.3
|
$ |
734.7
|
||||||||
|
2019
|
|
2018
|
|
2018
|
|
2017
|
|
||||||||
Operating expense, as reported
|
$ |
184.9
|
$ |
174.6
|
$ |
174.6
|
$ |
164.8
|
||||||||
Workforce and lease termination related charges
|
(2.0
|
) |
(0.4
|
) |
(0.4
|
) |
—
|
|||||||||
Levelized foreign currency translation
|
—
|
(1.6
|
) |
—
|
(0.5
|
) | ||||||||||
Operating expense, as adjusted
|
$ |
182.9
|
$ |
172.6
|
$ |
174.2
|
$ |
164.3
|
||||||||
Reported compensation expense ratios (before reimbursements)
|
22.1
|
% |
21.9
|
% |
21.9
|
% |
22.4
|
% | ||||||||
Adjusted compensation expense ratios (before reimbursements)
|
21.8
|
% |
21.9
|
% |
21.8
|
% |
22.4
|
% | ||||||||
Reported revenues (before reimbursements)
|
$ |
838.5
|
$ |
798.3
|
$ |
798.3
|
$ |
737.4
|
||||||||
Adjusted revenues - (before reimbursements) see page 28
|
$ |
838.5
|
$ |
789.2
|
$ |
798.3
|
$ |
734.7
|
||||||||
Statement of Earnings
|
2019
|
|
2018
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
||||||||||||
Revenues from consolidated clean coal production plants
|
$ |
1,255.1
|
$ |
1,694.6
|
$ |
(439.5
|
) | $ |
1,694.6
|
$ |
1,515.6
|
$ |
179.0
|
|||||||||||
Royalty income from clean coal licenses
|
66.7
|
54.1
|
12.6
|
54.1
|
46.4
|
7.7
|
||||||||||||||||||
Loss from unconsolidated clean coal production plants
|
(2.5
|
) |
(2.4
|
) |
(0.1
|
) |
(2.4
|
) |
(1.5
|
) |
(0.9
|
) | ||||||||||||
Other net (losses) gains
|
(2.9
|
) |
0.9
|
(3.8
|
) |
0.9
|
—
|
0.9
|
||||||||||||||||
Total revenues
|
1,316.4
|
1,747.2
|
(430.8
|
) |
1,747.2
|
1,560.5
|
186.7
|
|||||||||||||||||
Cost of revenues from consolidated clean coal production plants
|
1,352.8
|
1,816.0
|
(463.2
|
) |
1,816.0
|
1,635.9
|
180.1
|
|||||||||||||||||
Compensation
|
77.9
|
89.5
|
(11.6
|
) |
89.5
|
88.2
|
1.3
|
|||||||||||||||||
Operating
|
87.1
|
55.6
|
31.5
|
55.6
|
50.3
|
5.3
|
||||||||||||||||||
Interest
|
179.8
|
138.4
|
41.4
|
138.4
|
124.1
|
14.3
|
||||||||||||||||||
Depreciation
|
27.6
|
28.2
|
(0.6
|
) |
28.2
|
28.2
|
—
|
|||||||||||||||||
Total expenses
|
1,725.2
|
2,127.7
|
(402.5
|
) |
2,127.7
|
1,926.7
|
201.0
|
|||||||||||||||||
Loss before income taxes
|
(408.8
|
) |
(380.5
|
) |
(28.3
|
) |
(380.5
|
) |
(366.2
|
) |
(14.3
|
) | ||||||||||||
Benefit for income taxes
|
(341.1
|
) |
(412.8
|
) |
71.7
|
(412.8
|
) |
(412.7
|
) |
(0.1
|
) | |||||||||||||
Net earnings (loss)
|
(67.7
|
) |
32.3
|
(100.0
|
) |
32.3
|
46.5
|
(14.2
|
) | |||||||||||||||
Net earnings attributable to noncontrolling interests
|
29.8
|
31.7
|
(1.9
|
) |
31.7
|
28.0
|
3.7
|
|||||||||||||||||
Net earnings (loss) attributable to controlling interests
|
$ |
(97.5
|
) | $ |
0.6
|
$ |
(98.1
|
) | $ |
0.6
|
$ |
18.5
|
$ |
(17.9
|
) | |||||||||
Diluted net earnings (loss) per share
|
$ |
(0.51
|
) | $ |
—
|
$ |
(0.51
|
) | $ |
—
|
$ |
0.10
|
$ |
(0.10
|
) | |||||||||
Identifiable assets at December 31
|
$ |
1,994.8
|
$ |
1,800.8
|
|
$ |
1,800.8
|
$ |
1,766.8
|
|
||||||||||||||
EBITDAC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earnings (loss)
|
$ |
(67.7
|
) | $ |
32.3
|
$ |
(100.0
|
) | $ |
32.3
|
$ |
46.5
|
$ |
(14.2
|
) | |||||||||
Benefit for income taxes
|
(341.1
|
) |
(412.8
|
) |
71.7
|
(412.8
|
) |
(412.7
|
) |
(0.1
|
) | |||||||||||||
Interest
|
179.8
|
138.4
|
41.4
|
138.4
|
124.1
|
14.3
|
||||||||||||||||||
Depreciation
|
27.6
|
28.2
|
(0.6
|
) |
28.2
|
28.2
|
—
|
|||||||||||||||||
EBITDAC
|
$ |
(201.4
|
) | $ |
(213.9
|
) | $ |
12.5
|
$ |
(213.9
|
) | $ |
(213.9
|
) | $ |
—
|
||||||||
• | Revenues from consolidated clean coal production plants represents revenues from the consolidated IRC Section 45 facilities in which we have a majority ownership position and maintain control over the operations at the related facilities. |
• |
Royalty income from clean coal licenses represents revenues related to
Chem-Mod
LLC. We hold a 46.5% controlling interest in
Chem-Mod
LLC. As
Chem-Mod
LLC’s manager, we are required to consolidate its operations.
|
• | Loss from unconsolidated clean coal production plants represents our equity portion of the pretax operating results from the unconsolidated IRC Section 45 facilities. The production of refined coal generates pretax operating losses. |
• | Other net (losses) gains include the following: |
Change in interest expense related to:
|
2019 / 2018
|
|
2018 / 2017
|
|
||||
Interest on borrowings from our Credit Agreement
|
$ |
5.5
|
$ |
(0.1
|
) | |||
Interest on the maturity of the Series B notes
|
—
|
(11.2
|
) | |||||
Interest on the maturity of the Series C notes
|
(2.9
|
) |
(0.3
|
) | ||||
Interest on the maturity of the Series K and L notes
|
(1.5
|
) |
(0.7
|
) | ||||
Interest on the $250.0 million notes funded on June 27, 2017
|
—
|
5.1
|
||||||
Interest on the $398.0 million notes funded on August 2 and 4, 2017
|
0.1
|
9.9
|
||||||
Interest on the $500.0 million notes funded on June 13, 2018
|
10.1
|
12.2
|
||||||
Interest on the $340.0 million notes funded on February 13, 2019
|
14.6
|
—
|
||||||
Interest on the $260.0 million notes funded on March 13, 2019
|
10.8
|
—
|
||||||
Interest on the $175.0 million notes funded on June 12, 2019
|
4.5
|
—
|
||||||
Amortization of hedge gains
|
0.2
|
(0.6
|
) | |||||
Net change in interest expense
|
$ |
41.4
|
$ |
14.3
|
||||
|
2019
|
2018
|
2017
|
|||||||||||||||||||||||||||||||||
Components of
Corporate Segment
|
Pretax
Loss |
|
Income
Tax Benefit |
|
Net
Earnings (Loss) |
|
Pretax
Loss |
|
Income
Tax Benefit |
|
Net
Earnings (Loss) |
|
Pretax
Loss |
|
Income
Tax Benefit |
|
Net
Earnings (Loss) |
|
||||||||||||||||||
As Reported
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Interest and banking costs
|
$ |
(184.0
|
) | $ |
47.4
|
$ |
(136.6
|
) | $ |
(141.9
|
) | $ |
36.9
|
$ |
(105.0
|
) | $ |
(126.8
|
) | $ |
50.8
|
$ |
(76.0
|
) | ||||||||||||
Clean energy related (1)
|
(151.9
|
) |
240.4
|
88.5
|
(188.1
|
) |
306.7
|
118.6
|
(161.3
|
) |
294.0
|
132.7
|
||||||||||||||||||||||||
Acquisition costs
|
(21.2
|
) |
3.2
|
(18.0
|
) |
(13.9
|
) |
1.5
|
(12.4
|
) |
(11.2
|
) |
2.9
|
(8.3
|
) | |||||||||||||||||||||
Corporate (2)
|
(81.5
|
) |
50.1
|
(31.4
|
) |
(68.3
|
) |
67.7
|
(0.6
|
) |
(70.6
|
) |
57.4
|
(13.2
|
) | |||||||||||||||||||||
Litigation settlement
|
—
|
—
|
—
|
—
|
—
|
—
|
(11.1
|
) |
2.3
|
(8.8
|
) | |||||||||||||||||||||||||
Home office lease termination/move
|
—
|
—
|
—
|
—
|
—
|
—
|
(13.2
|
) |
5.3
|
(7.9
|
) | |||||||||||||||||||||||||
Reported full year
Adjustments
|
(438.6
|
) |
341.1
|
(97.5
|
) |
(412.2
|
) |
412.8
|
0.6
|
(394.2
|
) |
412.7
|
18.5
|
|||||||||||||||||||||||
Workforce
|
3.0
|
(0.7
|
) |
2.3
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||||
Clean energy related (3)
|
12.4
|
(3.2
|
) |
9.2
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||||
Impact of U.S. tax reform
|
—
|
—
|
—
|
—
|
(8.9
|
) |
(8.9
|
) |
2.5
|
(4.0
|
) |
(1.5
|
) | |||||||||||||||||||||||
Corporate legal entity restructuring
|
—
|
—
|
—
|
—
|
(22.0
|
) |
(22.0
|
) |
—
|
—
|
—
|
|||||||||||||||||||||||||
Litigation settlement
|
—
|
—
|
—
|
—
|
—
|
—
|
11.1
|
(2.3
|
) |
8.8
|
||||||||||||||||||||||||||
Home office lease termination/move
|
—
|
—
|
—
|
—
|
—
|
—
|
13.2
|
(5.3)
|
7.9
|
|||||||||||||||||||||||||||
As Adjusted
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Interest and banking costs
|
(184.0
|
) |
47.4
|
(136.6
|
) |
(141.9
|
) |
36.9
|
(105.0
|
) |
(126.8
|
) |
50.8
|
(76.0
|
) | |||||||||||||||||||||
Clean energy related (1)
|
(139.5
|
) |
237.2
|
97.7
|
(188.1
|
) |
306.7
|
118.6
|
(161.3
|
) |
294.0
|
132.7
|
||||||||||||||||||||||||
Acquisition costs
|
(21.2
|
) |
3.2
|
(18.0
|
) |
(13.9
|
) |
1.5
|
(12.4
|
) |
(11.2
|
) |
2.9
|
(8.3
|
) | |||||||||||||||||||||
Corporate (2)
|
(78.5
|
) |
49.4
|
(29.1
|
) |
(68.3
|
) |
36.8
|
(31.5
|
) |
(68.1
|
) |
53.4
|
(14.7
|
) | |||||||||||||||||||||
Litigation settlement
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||||||
Home office lease termination/move
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||||||||
Adjusted full year
|
$ |
(423.2
|
) | $ |
337.2
|
$ |
(86.0
|
) | $ |
(412.2
|
) | $ |
381.9
|
$ |
(30.3
|
) | $ |
(367.4
|
) | $ |
401.1
|
$ |
33.7
|
|||||||||||||
(1) | Pretax earnings (loss) are presented net of amounts attributable to noncontrolling interests of $29.8 million in 2019, $31.7 million in 2018 and $28.0 million in 2017. |
(2) | Corporate includes the impact of tax reform and corporate legal entity restructuring. |
(3) |
Clean Energy Related Adjustments – During third quarter of 2019, we and/or our 46.5% owned affiliate,
Chem-Mod
LLC, incurred costs related to (a) settling certain patent infringement litigation, (b) prevailing in a tax court matter, (c) defending a new patent matter, and (d) moving three 2011 Era plants into different locations that could generate more
after-tax
earnings in 2020 than in 2019.
|
|
|
|
Our Portion of Estimated
|
|||||||||||
|
Our Book Value At
December 31, 2019 |
|
Low Range
2020
After-tax
Earnings |
|
High Range
2020
After-tax
Earnings |
|
||||||||
Investments that own 2009 Era Plants
|
|
|
|
|
|
|
|
|
|
|||||
14 2009 Plants are idle as IRC Section 45 qualification expired as of December 31, 2019
|
$ |
—
|
$ |
—
|
$ |
—
|
||||||||
Investments that own 2011 Era Plants
|
|
|
|
|||||||||||
20 2011 Plants are under long-term production contracts
|
29.5
|
60.0
|
75.0
|
|||||||||||
Chem-Mod
royalty income, net of noncontrolling interests
|
4.0
|
20.0
|
25.0
|
Calendar Year
|
IRS Reference
Price per Ton |
|
IRS Beginning
Phase Out Price |
|
IRS 100%
Phase Out Price |
|
Conclusion
|
|
||||||||
2010
|
$ |
54.74
|
$ |
77.78
|
$ |
86.53
|
No phase out
|
|||||||||
2011
|
55.66
|
78.41
|
87.16
|
No phase out
|
||||||||||||
2012
|
58.49
|
80.25
|
89.00
|
No phase out
|
||||||||||||
2013
|
58.23
|
81.69
|
90.44
|
No phase out
|
||||||||||||
2014
|
56.88
|
81.82
|
90.57
|
No phase out
|
||||||||||||
2015
|
57.64
|
83.17
|
91.92
|
No phase out
|
||||||||||||
2016
|
53.74
|
84.38
|
93.13
|
No phase out
|
||||||||||||
2017
|
51.09
|
85.64
|
94.39
|
No phase out
|
||||||||||||
2018
|
49.69
|
87.16
|
95.91
|
No phase out
|
||||||||||||
2019
|
49.23
|
88.92
|
97.67
|
No phase out
|
||||||||||||
2020
|
(1
|
) |
(1
|
) |
(1
|
) |
(1)
|
(1) | The IRS will not release the factors for 2020 until April or May 2020. Based on our analysis of the factors used in the IRS’ phase out calculations, it is our belief that there will be no phase out in 2020. |
|
2019
|
|
2018
|
|
2017
|
|
||||||
Net change in premiums and fees receivable
|
$ |
(434.7
|
) | $ |
(783.1
|
) | $ |
(47.7
|
) | |||
Net change in premiums payable to underwriting enterprises
|
461.6
|
819.7
|
166.9
|
|||||||||
Net cash provided by the above
|
$ |
26.9
|
$ |
36.6
|
$ |
119.2
|
||||||
• | $100.0 million of 4.72% senior notes due in 2024; |
• | $140.0 million of 4.85% senior notes due in 2026; |
• | $100.0 million of 5.04% senior notes due in 2029; |
• | $180.0 million of 5.14% senior notes due in 2031; |
• | $40.0 million of 5.29% senior notes due in 2034; and |
• | $40.0 million of 5.45% senior notes due in 2039 |
• | $30.0 million of 3.75% senior notes due in 2027; |
• | $341.0 million of 3.99% senior notes due in 2030; |
• | $69.0 million of 4.09% senior notes due in 2032; |
• | $79.0 million of 4.24% senior notes due in 2035; and |
• | $56.0 million of 4.49% senior notes due in 2040 |
|
Payments Due by Period
|
|||||||||||||||||||||||||||
Contractual Obligations
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Note purchase agreements
|
$ |
100.0
|
$ |
75.0
|
$ |
200.0
|
$ |
300.0
|
$ |
475.0
|
$ |
2,773.0
|
$ |
3,923.0
|
||||||||||||||
Credit Agreement
|
520.0
|
—
|
—
|
—
|
—
|
—
|
520.0
|
|||||||||||||||||||||
Premium Financing Debt Facility
|
170.6
|
—
|
—
|
—
|
—
|
—
|
170.6
|
|||||||||||||||||||||
Interest on debt
|
173.6
|
167.5
|
161.8
|
152.5
|
134.7
|
574.7
|
1,364.8
|
|||||||||||||||||||||
Total debt obligations
|
964.2
|
242.5
|
361.8
|
452.5
|
609.7
|
3,347.7
|
5,978.4
|
|||||||||||||||||||||
Operating lease obligations
|
105.6
|
100.4
|
80.3
|
63.8
|
45.1
|
84.1
|
479.3
|
|||||||||||||||||||||
Less sublease arrangements
|
(0.6
|
) |
(0.6
|
) |
(0.3
|
) |
(0.3
|
) |
(0.2
|
) |
(0.7
|
) |
(2.7
|
) | ||||||||||||||
Outstanding purchase obligations
|
49.9
|
38.2
|
23.2
|
9.0
|
5.7
|
17.4
|
143.4
|
|||||||||||||||||||||
Total contractual obligations
|
$ |
1,119.1
|
$ |
380.5
|
$ |
465.0
|
$ |
525.0
|
$ |
660.3
|
$ |
3,448.5
|
$ |
6,598.4
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
||||||||||||||
|
Amount of Commitment Expiration by Period
|
Amounts
|
|
|||||||||||||||||||||||||
Off-Balance
Sheet Commitments
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Committed
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Letters of credit
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
17.1
|
$ |
17.1
|
||||||||||||||
Financial guarantees
|
0.2
|
0.2
|
0.2
|
0.2
|
0.2
|
0.4
|
1.4
|
|||||||||||||||||||||
Total commitments
|
$ |
0.2
|
$ |
0.2
|
$ |
0.2
|
$ |
0.2
|
$ |
0.2
|
$ |
17.5
|
$ |
18.5
|
||||||||||||||
|
Year Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Commissions
|
$ |
3,320.6
|
$ |
2,920.7
|
$ |
2,641.0
|
||||||
Fees
|
1,911.1
|
1,756.3
|
1,591.9
|
|||||||||
Supplemental revenues
|
210.5
|
189.9
|
158.0
|
|||||||||
Contingent revenues
|
135.6
|
98.0
|
99.5
|
|||||||||
Investment income
|
86.9
|
70.1
|
58.7
|
|||||||||
Net gains on divestitures
|
75.3
|
10.2
|
3.4
|
|||||||||
Revenues from clean coal activities
|
1,319.3
|
1,746.3
|
1,560.5
|
|||||||||
Other net (losses) revenue
|
(2.9
|
) |
0.9
|
—
|
||||||||
Revenues before reimbursements
|
7,056.4
|
6,792.4
|
6,113.0
|
|||||||||
Reimbursements
|
138.6
|
141.6
|
136.0
|
|||||||||
Total revenues
|
7,195.0
|
6,934.0
|
6,249.0
|
|||||||||
Compensation
|
3,339.5
|
3,026.3
|
2,747.4
|
|||||||||
Operating
|
1,068.5
|
903.7
|
829.1
|
|||||||||
Reimbursements
|
138.6
|
141.6
|
136.0
|
|||||||||
Cost of revenues from clean coal activities
|
1,352.8
|
1,816.0
|
1,635.9
|
|||||||||
Interest
|
179.8
|
138.4
|
124.1
|
|||||||||
Depreciation
|
140.4
|
127.8
|
121.1
|
|||||||||
Amortization
|
334.0
|
291.2
|
264.7
|
|||||||||
Change in estimated acquisition earnout payables
|
15.3
|
9.6
|
30.9
|
|||||||||
Total expenses
|
6,568.9
|
6,454.6
|
5,889.2
|
|||||||||
Earnings before income taxes
|
626.1
|
479.4
|
359.8
|
|||||||||
Benefit for income taxes
|
(89.7
|
) |
(196.5
|
) |
(157.1
|
) | ||||||
Net earnings
|
715.8
|
675.9
|
516.9
|
|||||||||
Net earnings attributable to noncontrolling interests
|
47.0
|
42.4
|
35.6
|
|||||||||
Net earnings attributable to controlling interests
|
$ |
668.8
|
$ |
633.5
|
$ |
481.3
|
||||||
Basic net earnings per share
|
$ |
3.60
|
$ |
3.47
|
$ |
2.67
|
||||||
Diluted net earnings per share
|
3.52
|
3.40
|
2.64
|
|||||||||
Dividends declared per common share
|
1.72
|
1.64
|
1.56
|
|
Year Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Net earnings
|
$ |
715.8
|
$ |
675.9
|
$ |
516.9
|
||||||
Change in pension liability, net of taxes
|
4.7
|
(10.3
|
) |
4.3
|
||||||||
Foreign currency translation, net of taxes in 2019
|
44.0
|
(197.7
|
) |
180.9
|
||||||||
Change in fair value of derivative instruments, net of taxes
|
(22.7
|
) |
(15.6
|
) |
16.0
|
|||||||
Comprehensive earnings
|
741.8
|
452.3
|
718.1
|
|||||||||
Comprehensive earnings attributable to noncontrolling interests
|
47.3
|
40.4
|
36.4
|
|||||||||
Comprehensive earnings attributable to controlling interests
|
$ |
694.5
|
$ |
411.9
|
$ |
681.7
|
||||||
|
December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Cash and cash equivalents
|
$ |
604.8
|
$ |
607.2
|
||||
Restricted cash
|
2,019.1
|
1,629.6
|
||||||
Premiums and fees receivable
|
5,419.2
|
4,857.5
|
||||||
Other current assets
|
1,074.4
|
1,024.4
|
||||||
Total current assets
|
9,117.5
|
8,118.7
|
||||||
Fixed assets - net
|
467.4
|
436.9
|
||||||
Deferred income taxes
|
945.6
|
806.2
|
||||||
Other noncurrent assets
|
773.6
|
573.6
|
||||||
Right-of-use
assets
|
393.5
|
—
|
||||||
Goodwill - net
|
5,618.5
|
4,625.6
|
||||||
Amortizable intangible assets - net
|
2,318.7
|
1,773.0
|
||||||
Total assets
|
$ |
19,634.8
|
$ |
16,334.0
|
||||
Premiums payable to underwriting enterprises
|
$ |
6,348.5
|
$ |
5,740.2
|
||||
Accrued compensation and other accrued liabilities
|
1,347.8
|
1,055.1
|
||||||
Deferred revenue - current
|
434.1
|
379.3
|
||||||
Premium financing borrowings
|
170.6
|
154.0
|
||||||
Corporate related borrowings - current
|
620.0
|
365.0
|
||||||
Total current liabilities
|
8,921.0
|
7,693.6
|
||||||
Corporate related borrowings - noncurrent
|
3,816.1
|
3,091.4
|
||||||
Deferred revenue - noncurrent
|
69.7
|
78.4
|
||||||
Lease liabilities - noncurrent
|
340.9
|
—
|
||||||
Other noncurrent liabilities
|
1,271.6
|
900.9
|
||||||
Total liabilities
|
14,419.3
|
11,764.3
|
||||||
Stockholders’ equity:
|
|
|
||||||
Common stock - authorized 400.0 shares; issued and outstanding 188.1 shares in 2019
and 184.0 shares in 2018 |
188.1
|
184.0
|
||||||
Capital in excess of par value
|
3,825.7
|
3,541.9
|
||||||
Retained earnings
|
1,901.3
|
1,558.6
|
||||||
Accumulated other comprehensive loss
|
(759.6
|
) |
(785.6
|
) | ||||
Stockholders’ equity attributable to controlling interests
|
5,155.5
|
4,498.9
|
||||||
Stockholders’ equity attributable to noncontrolling interests
|
60.0
|
70.8
|
||||||
Total stockholders’ equity
|
5,215.5
|
4,569.7
|
||||||
Total liabilities and stockholders’ equity
|
$ |
19,634.8
|
$ |
16,334.0
|
||||
|
Year Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Cash flows from operating activities:
|
|
|
|
|||||||||
Net earnings
|
$ |
715.8
|
$ |
675.9
|
$ |
516.9
|
||||||
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
|||||||||
Net gain on investments and other
|
(72.0
|
) |
(8.4
|
) |
(0.1
|
) | ||||||
Depreciation and amortization
|
474.4
|
419.0
|
385.8
|
|||||||||
Change in estimated acquisition earnout payables
|
15.3
|
9.6
|
30.9
|
|||||||||
Amortization of deferred compensation and restricted stock
|
47.2
|
41.6
|
33.5
|
|||||||||
Stock-based and other noncash compensation expense
|
14.0
|
13.7
|
17.3
|
|||||||||
Payments on acquisition earnouts in excess of original estimates
|
(16.6
|
) |
(64.6
|
) |
(57.9
|
) | ||||||
Effect of changes in foreign exchange rate
|
6.7
|
(2.9
|
) |
3.9
|
||||||||
Net change in premium and fees receivable
|
(434.7
|
) |
(783.1
|
) |
(47.7
|
) | ||||||
Net change in deferred revenue
|
12.8
|
18.4
|
0.9
|
|||||||||
Net change in premiums payable to underwriting enterprises
|
461.6
|
819.7
|
166.9
|
|||||||||
Net change in other current assets
|
(60.5
|
) |
(134.7
|
) |
(35.3
|
) | ||||||
Net change in accrued compensation and other accrued liabilities
|
77.0
|
44.9
|
69.6
|
|||||||||
Net change in income taxes payable
|
35.5
|
(46.0
|
) |
2.0
|
||||||||
Net change in deferred income taxes
|
(150.7
|
) |
(216.0
|
) |
(219.3
|
) | ||||||
Net change in other noncurrent assets and liabilities
|
(6.6
|
) |
(22.0
|
) |
(13.2
|
) | ||||||
Net cash provided by operating activities
|
1,119.2
|
765.1
|
854.2
|
|||||||||
Cash flows from investing activities:
|
|
|
|
|||||||||
Capital expenditures
|
(138.8
|
) |
(124.4
|
) |
(129.2
|
) | ||||||
Cash paid for acquisitions, net of cash and restricted cash acquired
|
(1,266.8
|
) |
(784.8
|
) |
(376.1
|
) | ||||||
Net proceeds from sales of operations/books of business
|
81.0
|
14.5
|
3.2
|
|||||||||
Net funding of investment transactions
|
(52.0
|
) |
(15.6
|
) |
(8.9
|
) | ||||||
Net cash used by investing activities
|
(1,376.6
|
) |
(910.3
|
) |
(511.0
|
) | ||||||
Cash flows from financing activities:
|
|
|
|
|||||||||
Payments on acquisition earnouts
|
(46.3
|
) |
(62.1
|
) |
(41.7
|
) | ||||||
Proceeds from issuance of common stock
|
101.2
|
81.9
|
60.4
|
|||||||||
Repurchases of common stock
|
—
|
(11.3
|
) |
(17.7
|
) | |||||||
Payments to noncontrolling interests
|
(75.4
|
) |
(54.2
|
) |
(35.0
|
) | ||||||
Dividends paid
|
(321.1
|
) |
(301.8
|
) |
(282.7
|
) | ||||||
Net borrowings on premium financing debt facility
|
19.2
|
32.9
|
0.6
|
|||||||||
Borrowings on line of credit facility
|
4,315.0
|
3,075.0
|
3,643.0
|
|||||||||
Repayments on line of credit facility
|
(4,060.0
|
) |
(3,000.0
|
) |
(3,731.0
|
) | ||||||
Net borrowings of corporate related long-term debt
|
725.0
|
400.0
|
348.0
|
|||||||||
Debt acquisition costs
|
(3.9
|
) |
(1.3
|
) |
—
|
|||||||
Settlements on terminated interest rate swaps
|
(15.3
|
) |
2.9
|
8.3
|
||||||||
Net cash provided (used) by financing activities
|
638.4
|
162.0
|
(47.8
|
) | ||||||||
Effect of changes in foreign exchange rates on cash, cash equivalents and restricted cash
|
6.1
|
(85.0
|
) |
72.0
|
||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
387.1
|
(68.2
|
) |
367.4
|
||||||||
Cash, cash equivalents and restricted cash at beginning of year
|
2,236.8
|
2,305.0
|
1,937.6
|
|||||||||
Cash, cash equivalents and restricted cash at end of year
|
$ |
2,623.9
|
$ |
2,236.8
|
$ |
2,305.0
|
||||||
|
Common Stock
|
Capital in
Excess of |
|
Retained
|
|
Accumulated Other
Comprehensive |
|
Noncontrolling
|
|
|
|
|||||||||||||||||
|
Shares
|
|
Amount
|
|
Par Value
|
|
Earnings
|
|
Earnings (Loss)
|
|
Interests
|
|
Total
|
|
||||||||||||||
Balance at December 31, 2016
|
178.3
|
$
|
178.3
|
$
|
3,265.5
|
$
|
1,024.1
|
$
|
(756.6
|
) |
$
|
64.2
|
$
|
3,775.5
|
||||||||||||||
Net earnings
|
—
|
—
|
—
|
481.3
|
—
|
35.6
|
516.9
|
|||||||||||||||||||||
Net purchase of subsidiary shares from noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
(2.1
|
) |
(2.1
|
) | |||||||||||||||||||
Dividends paid to noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
(34.4
|
) |
(34.4
|
) | |||||||||||||||||||
Net change in pension asset/liability, net of taxes of $2.8 million
|
—
|
—
|
—
|
—
|
4.3
|
—
|
4.3
|
|||||||||||||||||||||
Foreign currency translation
|
—
|
—
|
—
|
—
|
180.9
|
0.8
|
181.7
|
|||||||||||||||||||||
Change in fair value of derivative instruments, net of taxes of $4.0 million
|
—
|
—
|
—
|
—
|
16.0
|
—
|
16.0
|
|||||||||||||||||||||
Compensation expense related to stock option plan grants
|
—
|
—
|
17.3
|
—
|
—
|
—
|
17.3
|
|||||||||||||||||||||
Common stock issued in:
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Twelve purchase transactions
|
1.0
|
1.0
|
59.6
|
—
|
—
|
—
|
60.6
|
|||||||||||||||||||||
Stock option plans
|
1.3
|
1.3
|
39.8
|
—
|
—
|
—
|
41.1
|
|||||||||||||||||||||
Employee stock purchase plan
|
0.4
|
0.4
|
18.9
|
—
|
—
|
—
|
19.3
|
|||||||||||||||||||||
Deferred compensation and restricted stock
|
0.3
|
0.3
|
4.5
|
—
|
—
|
—
|
4.8
|
|||||||||||||||||||||
Common stock repurchases
|
(0.3
|
) |
(0.3
|
) |
(17.4
|
) |
—
|
—
|
—
|
(17.7
|
) | |||||||||||||||||
Cash dividends declared on common stock
|
—
|
—
|
—
|
(283.6
|
) |
—
|
—
|
(283.6
|
) | |||||||||||||||||||
Balance at December 31, 2017
|
181.0
|
181.0
|
3,388.2
|
1,221.8
|
(555.4
|
) |
64.1
|
4,299.7
|
||||||||||||||||||||
Reclassification of the income tax effects within accumulated other comprehensive loss related to the Tax Act
|
—
|
—
|
—
|
6.6
|
(6.6
|
) |
—
|
—
|
||||||||||||||||||||
Net earnings
|
—
|
—
|
—
|
633.5
|
—
|
42.4
|
675.9
|
|||||||||||||||||||||
Net purchase of subsidiary shares from noncontrolling interests
|
—
|
—
|
(5.0
|
) |
—
|
—
|
4.3
|
(0.7
|
) | |||||||||||||||||||
Dividends paid to noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
(38.0
|
) |
(38.0
|
) | |||||||||||||||||||
Net change in pension asset/liability, net of taxes of $6.2 million
|
—
|
—
|
—
|
—
|
(10.3
|
) |
—
|
(10.3
|
) | |||||||||||||||||||
Foreign currency translation
|
—
|
—
|
—
|
—
|
(197.7
|
) |
(2.0
|
) |
(199.7
|
) | ||||||||||||||||||
Change in fair value of derivative instruments, net of taxes of ($5.6) million
|
—
|
—
|
—
|
—
|
(15.6
|
) |
—
|
(15.6
|
) | |||||||||||||||||||
Compensation expense related to stock option plan grants
|
—
|
—
|
13.7
|
—
|
—
|
—
|
13.7
|
|||||||||||||||||||||
Common stock issued in:
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Ten purchase transactions
|
0.8
|
0.8
|
60.8
|
—
|
—
|
—
|
61.6
|
|||||||||||||||||||||
Stock option plans
|
1.6
|
1.6
|
57.0
|
—
|
—
|
—
|
58.6
|
|||||||||||||||||||||
Employee stock purchase plan
|
0.4
|
0.4
|
22.9
|
—
|
—
|
—
|
23.3
|
|||||||||||||||||||||
Deferred compensation and restricted stock
|
0.3
|
0.3
|
15.5
|
—
|
—
|
—
|
15.8
|
|||||||||||||||||||||
Common stock repurchases
|
(0.1
|
) |
(0.1
|
) |
(11.2
|
) |
—
|
—
|
—
|
(11.3
|
) | |||||||||||||||||
Cash dividends declared on common stock
|
—
|
—
|
—
|
(303.3
|
) |
—
|
—
|
(303.3
|
) | |||||||||||||||||||
Balance at December 31, 2018
|
184.0
|
$ |
184.0
|
$ |
3,541.9
|
$ |
1,558.6
|
$ |
(785.6
|
) | $ |
70.8
|
$ |
4,569.7
|
||||||||||||||
|
Common Stock
|
Capital in
Excess of |
|
Retained
|
|
Accumulated Other
Comprehensive |
|
Noncontrolling
|
|
|
|
|||||||||||||||||
|
Shares
|
|
Amount
|
|
Par Value
|
|
Earnings
|
|
Earnings (Loss)
|
|
Interests
|
|
Total
|
|
||||||||||||||
Balance at December 31, 2018
|
184.0
|
$ |
184.0
|
$ |
3,541.9
|
$ |
1,558.6
|
$ |
(785.6
|
) | $ |
70.8
|
$ |
4,569.7
|
||||||||||||||
Cumulative effects of adoption of lease and hedging accounting standards
|
—
|
—
|
—
|
(2.2
|
) |
(0.2
|
) |
—
|
(2.4
|
) | ||||||||||||||||||
Net earnings
|
—
|
—
|
—
|
668.8
|
—
|
47.0
|
715.8
|
|||||||||||||||||||||
Net purchase of subsidiary shares from noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
(15.1
|
) |
(15.1
|
) | |||||||||||||||||||
Dividends paid to noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
(43.0
|
) |
(43.0
|
) | |||||||||||||||||||
Net change in pension asset/liability, net of taxes of $1.1 million
|
—
|
—
|
—
|
—
|
4.7
|
—
|
4.7
|
|||||||||||||||||||||
Foreign currency translation
|
—
|
—
|
—
|
—
|
44.2
|
0.3
|
44.5
|
|||||||||||||||||||||
Change in fair value of derivative instruments, net of taxes of ($8.9) million
|
—
|
—
|
—
|
—
|
(22.7
|
) |
—
|
(22.7
|
) | |||||||||||||||||||
Compensation expense related to stock option plan grants
|
—
|
—
|
14.0
|
—
|
—
|
—
|
14.0
|
|||||||||||||||||||||
Common stock issued in:
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Twenty-one
purchase transactions
|
1.9
|
1.9
|
166.1
|
—
|
—
|
—
|
168.0
|
|||||||||||||||||||||
Stock option plans
|
1.8
|
1.8
|
71.9
|
—
|
—
|
—
|
73.7
|
|||||||||||||||||||||
Employee stock purchase plan
|
0.3
|
0.3
|
27.2
|
—
|
—
|
—
|
27.5
|
|||||||||||||||||||||
Deferred compensation and restricted stock
|
0.1
|
0.1
|
4.6
|
—
|
—
|
—
|
4.7
|
|||||||||||||||||||||
Cash dividends declared on common stock
|
—
|
—
|
—
|
(323.9
|
) |
—
|
—
|
(323.9
|
) | |||||||||||||||||||
Balance at December 31, 2019
|
188.1
|
$ |
188.1
|
$ |
3,825.7
|
$ |
1,901.3
|
$ |
(759.6
|
) | $ |
60.0
|
$ |
5,215.5
|
||||||||||||||
(i) | Identifying, negotiating and placing all forms of insurance or reinsurance coverage, as well as providing risk-shifting, risk-sharing and risk-mitigation consulting services, principally related to property/casualty, life, health, welfare and disability insurance. We also provide these services through, or in conjunction with, other unrelated agents and brokers, consultants and management advisors. |
(ii) | Acting as an agent or broker for multiple underwriting enterprises by providing services such as sales, marketing, selecting, negotiating, underwriting, servicing and placing insurance coverage on their behalf. |
(iii) | Providing consulting services related to health and welfare benefits, voluntary benefits, executive benefits, compensation, retirement planning, institutional investment and fiduciary, actuarial, compliance, private insurance exchange, human resource technology, communications and benefits administration. |
(iv) | Providing management and administrative services to captives, pools, risk-retention groups, healthcare exchanges, small underwriting enterprises, such as accounting, claims and loss processing assistance, feasibility studies, actuarial studies, data analytics and other administrative services. |
(i) |
Costs to obtain - we incur costs to obtain a contract with a client. Those costs would not have been incurred if the contract had not been obtained. Almost all of our costs to obtain are incurred prior to, or on, the effective date of the contract and consist primarily of incentive compensation we pay to our production employees. Our costs to obtain are expensed as incurred as described in Note
4
to these consolidated financial statements.
|
(ii) | Costs to fulfill - we incur costs to fulfill a contract (or anticipated contract) with a client. Those costs are incurred prior to the effective date of the contract and relate to fulfilling our primary placement obligations to our clients. Our costs to fulfill prior to the effective date are capitalized and amortized on the effective date. These fulfillment activities include collecting underwriting information from our client, assessing their insurance needs and negotiating their placement with one or more underwriting enterprises. The majority of costs that we incur relate to compensation and benefits of our client service employees. Costs incurred during preplacement activities are expected to be recovered in the future. If the capitalized costs are no longer deemed to be recoverable, then they would be expensed. |
(iii) | Other costs that are not costs to obtain or fulfill are expensed as incurred. Examples include other operating costs such as rent, utilities, management costs, overhead costs, legal and other professional fees, technology costs, insurance related costs, communication and advertising, and travel and entertainment. Depreciation, amortization and change in estimated acquisition earnout payable are expensed as incurred. |
|
Useful Life
|
|
Office equipment
|
Three to ten years
|
|
Furniture and fixtures
|
Three to ten years
|
|
Computer equipment
|
Three to
five years
|
|
Building
|
Fifteen to forty years
|
|
Software
|
Three to five years
|
|
Refined fuel plants
|
Ten years
|
|
Leasehold improvements
|
Shorter of the lease term or useful life of the asset
|
• | Level 1 - Valuations are based on unadjusted quoted prices in active markets for identical financial instruments; |
• | Level 2 - Valuations are based on quoted market prices, other than quoted prices included in Level 1, in markets that are not active or on inputs that are observable either directly or indirectly for the full term of the financial instrument; and |
• | Level 3 - Valuations are based on pricing or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement of the financial instrument. Such inputs may reflect management’s own assumptions about the assumptions a market participant would use in pricing the financial instrument. |
Name and Effective
Date of Acquisition
|
Common
Shares Issued |
|
Common
Share Value |
|
Cash Paid
|
|
Accrued
Liability |
|
Escrow
Deposited |
|
Recorded
Earnout Payable |
|
Total
Recorded Purchase Price |
|
Maximum
Potential Earnout Payable |
|
||||||||||||||||
|
(000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Inversion Holding Company, LLC (IHC)
|
452
|
$ |
35.9
|
$ |
31.2
|
$ |
—
|
$ |
4.5
|
$ |
20.8
|
$ |
92.4
|
$ |
35.0
|
|||||||||||||||||
Jones Brown Inc. (JBI)
|
—
|
—
|
65.9
|
—
|
8.7
|
—
|
74.6
|
—
|
||||||||||||||||||||||||
Stackhouse Poland Group Limited (SPG)
|
—
|
—
|
326.8
|
—
|
4.8
|
—
|
331.6
|
—
|
||||||||||||||||||||||||
RPA Insurance Services LLC (RPA)
|
—
|
—
|
44.0
|
—
|
3.9
|
16.9
|
64.8
|
22.0
|
||||||||||||||||||||||||
JLT Aerospace (JLT)
|
—
|
—
|
162.8
|
—
|
—
|
67.9
|
230.7
|
75.1
|
||||||||||||||||||||||||
RGA Group (RGA)
|
—
|
—
|
42.8
|
6.0
|
4.7
|
8.0
|
61.5
|
9.3
|
||||||||||||||||||||||||
LSG Insurance Partners, Inc. (LSG)
|
395
|
36.2
|
127.2
|
—
|
6.0
|
50.1
|
219.5
|
71.5
|
||||||||||||||||||||||||
The EHE Group, LLC dba BonusDrive (EHE)
|
458
|
42.0
|
41.0
|
0.2
|
1.0
|
27.0
|
111.2
|
77.0
|
||||||||||||||||||||||||
Horseshoe Insurance
Services Holdings, Ltd. (HIS) |
—
|
—
|
43.3
|
8.5
|
5.0
|
7.1
|
63.9
|
10.0
|
||||||||||||||||||||||||
40 other acquisitions completed in 2019
|
482
|
41.8
|
389.5
|
1.7
|
34.2
|
74.4
|
541.6
|
177.2
|
||||||||||||||||||||||||
|
1,787
|
$ |
155.9
|
$ |
1,274.5
|
$ |
16.4
|
$ |
72.8
|
$ |
272.2
|
$ |
1,791.8
|
$ |
477.1
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 Other
|
|
|
|
||||||||||||||||||||||
|
IHC
|
|
JBI
|
|
SPG
|
|
RPA
|
|
JLT
|
|
RGA
|
|
LSG
|
|
EHE
|
|
HIS
|
|
Acquisitions
|
|
Total
|
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Cash
|
$ |
—
|
$ |
2.7
|
$ |
13.6
|
$ |
—
|
$ |
—
|
$ |
6.0
|
$ |
—
|
$ |
2.6
|
$ |
8.9
|
$ |
11.7
|
$ |
45.5
|
||||||||||||||||||||||
Other current assets
|
3.8
|
22.2
|
35.9
|
10.6
|
6.7
|
5.1
|
6.6
|
4.2
|
2.6
|
69.8
|
167.5
|
|||||||||||||||||||||||||||||||||
Fixed assets
|
0.3
|
1.1
|
3.1
|
0.2
|
—
|
0.2
|
0.7
|
0.1
|
1.5
|
3.3
|
10.5
|
|||||||||||||||||||||||||||||||||
Noncurrent assets
|
0.5
|
2.9
|
9.9
|
0.7
|
3.3
|
5.7
|
—
|
0.1
|
1.9
|
13.6
|
38.6
|
|||||||||||||||||||||||||||||||||
Goodwill
|
41.5
|
49.5
|
255.9
|
34.5
|
127.1
|
36.7
|
126.0
|
50.2
|
10.0
|
244.3
|
975.7
|
|||||||||||||||||||||||||||||||||
Expiration lists
|
51.7
|
25.4
|
123.0
|
32.6
|
105.1
|
19.5
|
94.3
|
67.5
|
39.8
|
282.4
|
841.3
|
|||||||||||||||||||||||||||||||||
Non-compete
agreements
|
0.2
|
0.1
|
0.5
|
0.1
|
0.3
|
2.7
|
0.5
|
0.8
|
2.9
|
3.6
|
11.7
|
|||||||||||||||||||||||||||||||||
Trade names
|
—
|
0.1
|
0.2
|
—
|
0.7
|
—
|
—
|
—
|
2.9
|
0.1
|
4.0
|
|||||||||||||||||||||||||||||||||
Total assets acquired
|
98.0
|
104.0
|
442.1
|
78.7
|
243.2
|
75.9
|
228.1
|
125.5
|
70.5
|
628.8
|
2,094.8
|
|||||||||||||||||||||||||||||||||
Current liabilities
|
5.1
|
20.4
|
76.7
|
13.2
|
12.5
|
10.6
|
8.6
|
2.4
|
6.6
|
61.8
|
217.9
|
|||||||||||||||||||||||||||||||||
Noncurrent liabilities
|
0.5
|
9.0
|
33.8
|
0.7
|
—
|
3.8
|
—
|
11.9
|
—
|
25.4
|
85.1
|
|||||||||||||||||||||||||||||||||
Total liabilities assumed
|
5.6
|
29.4
|
110.5
|
13.9
|
12.5
|
14.4
|
8.6
|
14.3
|
6.6
|
87.2
|
303.0
|
|||||||||||||||||||||||||||||||||
Total net assets acquired
|
$ |
92.4
|
$ |
74.6
|
$ |
331.6
|
$ |
64.8
|
$ |
230.7
|
$ |
61.5
|
$ |
219.5
|
$ |
111.2
|
$ |
63.9
|
$ |
541.6
|
$ |
1,791.8
|
||||||||||||||||||||||
|
Year Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Total revenues
|
$ |
7,390.5
|
$ |
7,383.1
|
||||
Net earnings attributable to controlling interests
|
669.1
|
659.3
|
||||||
Basic earnings per share
|
3.57
|
3.57
|
||||||
Diluted earnings per share
|
3.50
|
3.51
|
4.
|
Contracts with Customers
|
|
|
December 31,
2019 |
|
|
December 31,
2018 |
|
||
Unbilled receivables
|
|
$
|
556.4
|
|
|
$
|
496.2
|
|
Deferred contract costs
|
|
|
98.3
|
|
|
|
91.6
|
|
Deferred revenue
|
|
|
503.8
|
|
|
|
457.7
|
|
|
|
Brokerage
|
|
|
Risk
Management
|
|
|
Total
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue at December 31, 2017
|
|
$
|
258.7
|
|
|
$
|
171.9
|
|
|
$
|
430.6
|
|
Incremental deferred revenue
|
|
|
244.0
|
|
|
|
138.1
|
|
|
|
382.1
|
|
Revenue recognized during the year ended December 31, 2018 included in deferred revenue at December 31, 2017
|
|
|
(236.5
|
)
|
|
|
(137.0
|
)
|
|
|
(373.5
|
)
|
Deferred revenue recognized from business acquisitions
|
|
|
18.5
|
|
|
|
—
|
|
|
|
18.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue at December 31, 2018
|
|
|
284.7
|
|
|
|
173.0
|
|
|
|
457.7
|
|
Incremental deferred revenue
|
|
|
276.2
|
|
|
|
136.9
|
|
|
|
413.1
|
|
Revenue recognized during the year ended December 31, 2019 included in deferred revenue at December 31, 2018
|
|
|
(254.3
|
)
|
|
|
(143.3
|
)
|
|
|
(397.6
|
)
|
Deferred revenue recognized from business acquisitions
|
|
|
30.6
|
|
|
|
—
|
|
|
|
30.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue at December 31, 2019
|
|
$
|
337.2
|
|
|
$
|
166.6
|
|
|
$
|
503.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Risk
Management
|
|
|
Total
|
|
|||
2020
|
|
$
|
309.6
|
|
|
$
|
93.2
|
|
|
$
|
402.8
|
|
2021
|
|
|
23.6
|
|
|
|
33.8
|
|
|
|
57.4
|
|
2022
|
|
|
1.8
|
|
|
|
15.7
|
|
|
|
17.5
|
|
2023
|
|
|
1.1
|
|
|
|
8.5
|
|
|
|
9.6
|
|
2024
|
|
|
0.5
|
|
|
|
4.9
|
|
|
|
5.4
|
|
Thereafter
|
|
|
0.6
|
|
|
|
10.5
|
|
|
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
337.2
|
|
|
$
|
166.6
|
|
|
$
|
503.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
Other Current Assets
|
|
December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Premium finance advances and loans
|
$ |
388.1
|
$ |
316.2
|
||||
Accrued supplemental, direct bill and other receivables
|
369.1
|
348.2
|
||||||
Refined coal production related receivables
|
103.4
|
160.2
|
||||||
Deferred contract costs
|
98.3
|
91.6
|
||||||
Prepaid expenses
|
115.5
|
108.2
|
||||||
Total other current assets
|
$ |
1,074.4
|
$ |
1,024.4
|
||||
6.
|
Fixed Assets
|
|
December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Office equipment
|
$ |
32.6
|
$ |
30.0
|
||||
Furniture and fixtures
|
126.0
|
116.9
|
||||||
Leasehold improvements
|
150.2
|
132.1
|
||||||
Computer equipment
|
176.3
|
145.1
|
||||||
Land and buildings - corporate headquarters
|
144.9
|
144.3
|
||||||
Software
|
392.3
|
346.0
|
||||||
Other
|
19.0
|
12.4
|
||||||
Work in process
|
18.0
|
14.9
|
||||||
|
1,059.3
|
941.7
|
||||||
Accumulated depreciation
|
(591.9
|
) |
(504.8
|
) | ||||
Net fixed assets
|
$ |
467.4
|
$ |
436.9
|
||||
7.
|
Intangible Assets
|
|
|
|
Risk
|
|
|
|
|
|
||||||||
|
Brokerage
|
|
Management
|
|
Corporate
|
|
Total
|
|
||||||||
|
|
|
|
|
||||||||||||
At December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States
|
$ |
3,163.8
|
$ |
33.1
|
$ |
—
|
$ |
3,196.9
|
||||||||
United Kingdom
|
1,177.8
|
12.9
|
—
|
1,190.7
|
||||||||||||
Canada
|
454.4
|
—
|
—
|
454.4
|
||||||||||||
Australia
|
416.5
|
10.5
|
—
|
427.0
|
||||||||||||
New Zealand
|
208.0
|
10.1
|
—
|
218.1
|
||||||||||||
Other foreign
|
128.4
|
—
|
3.0
|
131.4
|
||||||||||||
Total goodwill - net
|
$ |
5,548.9
|
$ |
66.6
|
$ |
3.0
|
$ |
5,618.5
|
||||||||
At December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States
|
$ |
2,715.3
|
$ |
29.6
|
$ |
—
|
$ |
2,744.9
|
||||||||
United Kingdom
|
753.7
|
9.2
|
—
|
762.9
|
||||||||||||
Canada
|
378.6
|
—
|
—
|
378.6
|
||||||||||||
Australia
|
406.3
|
0.3
|
—
|
406.6
|
||||||||||||
New Zealand
|
209.6
|
10.2
|
—
|
219.8
|
||||||||||||
Other foreign
|
110.1
|
—
|
2.7
|
112.8
|
||||||||||||
Total goodwill - net
|
$ |
4,573.6
|
$ |
49.3
|
$ |
2.7
|
$ |
4,625.6
|
||||||||
|
|
|
Risk
|
|
|
|
|
|
||||||||
|
Brokerage
|
|
Management
|
|
Corporate
|
|
Total
|
|
||||||||
Balance as of December 31, 2017
|
$ |
4,119.2
|
$ |
42.6
|
$ |
3.0
|
$ |
4,164.8
|
||||||||
Goodwill acquired during the year
|
574.7
|
9.9
|
—
|
584.6
|
||||||||||||
Goodwill adjustments related to appraisals and other acquisition adjustments
|
2.2
|
(2.3
|
) |
—
|
(0.1
|
) | ||||||||||
Foreign currency translation adjustments during the year
|
(122.5
|
) |
(0.9
|
) |
(0.3
|
) |
(123.7
|
) | ||||||||
Balance as of December 31, 2018
|
4,573.6
|
49.3
|
2.7
|
4,625.6
|
||||||||||||
Goodwill acquired during the year
|
958.4
|
16.9
|
0.4
|
975.7
|
||||||||||||
Goodwill adjustments related to appraisals and other acquisition adjustments
|
0.2
|
(0.2
|
) |
—
|
—
|
|||||||||||
Goodwill
written-off
related to sales of business
|
(7.2
|
) |
—
|
—
|
(7.2
|
) | ||||||||||
Foreign currency translation adjustments during the year
|
23.9
|
0.6
|
(0.1
|
) |
24.4
|
|||||||||||
Balance as of December 31, 2019
|
$ |
5,548.9
|
$ |
66.6
|
$ |
3.0
|
$ |
5,618.5
|
||||||||
|
December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Expiration lists
|
$ |
4,246.0
|
$ |
3,379.4
|
||||
Accumulated amortization - expiration lists
|
(2,004.3
|
) |
(1,676.8
|
) | ||||
|
2,241.7
|
1,702.6
|
||||||
Non-compete
agreements
|
68.4
|
58.0
|
||||||
Accumulated amortization -
non-compete
agreements
|
(52.5
|
) |
(48.5
|
) | ||||
|
15.9
|
9.5
|
||||||
Trade names
|
91.8
|
86.0
|
||||||
Accumulated amortization - trade names
|
(30.7
|
) |
(25.1
|
) | ||||
|
61.1
|
60.9
|
||||||
Net amortizable assets
|
$ |
2,318.7
|
$ |
1,773.0
|
||||
2020
|
$ |
366.5
|
||
2021
|
342.7
|
|||
2022
|
316.6
|
|||
2023
|
290.3
|
|||
2024
|
254.0
|
|||
Thereafter
|
748.6
|
|||
Total
|
$ |
2,318.7
|
||
8.
|
Credit and Other Debt Agreements
|
|
December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Note Purchase Agreements:
|
|
|
||||||
Semi-annual payments of interest, fixed rate of
3.20
ball
due
o
June 24
, 2019
|
$ |
—
|
$ |
50.0
|
||||
Semi-annual payments of interest, fixed rate of
5.85
Nove
,
mber 30
2019
|
—
|
50.0
|
||||||
Semi-annual payments of interest, fixed rate of
3.48
2020
|
50.0
|
50.0
|
||||||
Semi-annual payments of interest, fixed rate of
3.99
2020
|
50.0
|
50.0
|
||||||
Semi-annual payments of interest, fixed rate of
5.18
2021
|
75.0
|
75.0
|
||||||
Semi-annual payments of interest, fixed rate of
3.69
2022
|
200.0
|
200.0
|
||||||
Semi-annual payments of interest, fixed rate of
5.49
2023
|
50.0
|
50.0
|
||||||
Semi-annual payments of interest, fixed rate of
4.13
2023
|
200.0
|
200.0
|
||||||
Quarterly payments of interest, floating rate of
90 day LIBOR plus
1.65
August 2,
2023
|
50.0
|
50.0
|
||||||
Semi-annual payments of interest, fixed rate of
4.72
2024
|
100.0
|
—
|
||||||
Semi-annual payments of interest, fixed rate of
4.58
2024
|
325.0
|
325.0
|
||||||
Quarterly payments of interest, floating rate of
90 day LIBOR plus
1.40
June 13,
2024
|
50.0
|
50.0
|
||||||
Semi-annual payments of interest, fixed rate of
4.31
%, balloon due June 24,
2025
|
200.0
|
200.0
|
||||||
Semi-annual payments of interest, fixed rate of
4.85
%, balloon due February 13,
2026
|
140.0
|
—
|
||||||
Semi-annual payments of interest, fixed rate of
4.73
%, balloon due February 27,
2026
|
175.0
|
175.0
|
||||||
Semi-annual payments of interest, fixed rate of
4.40
%, balloon due June 2,
2026
|
175.0
|
175.0
|
||||||
Semi-annual payments of interest, fixed rate of
4.36
%, balloon due June 24,
2026
|
150.0
|
150.0
|
||||||
Semi-annual payments of interest, fixed rate of
4.09
%, balloon due June 27,
2027
|
125.0
|
125.0
|
||||||
Semi-annual payments of interest, fixed rate of
4.09
%, balloon due August 2,
2027
|
125.0
|
125.0
|
||||||
Semi-annual payments of interest, fixed rate of
4.14
%, balloon due August 4,
2027
|
98.0
|
98.0
|
||||||
Semi-annual payments of interest, fixed rate of
3.46
%, balloon due December 1,
2027
|
100.0
|
100.0
|
||||||
Semi-annual payments of interest, fixed rate of 4.55%, balloon due June 2, 2028
|
75.0
|
75.0
|
||||||
Semi-annual payments of interest, fixed rate of 4.34%, balloon due June 13, 2028
|
125.0
|
125.0
|
||||||
Semi-annual payments of interest, fixed rate of 5.04%, balloon due February 13, 2029
|
100.0
|
—
|
||||||
Semi-annual payments of interest, fixed rate of 4.98%, balloon due February 27, 2029
|
100.0
|
100.0
|
||||||
Semi-annual payments of interest, fixed rate of 4.19%, balloon due June 27, 2029
|
50.0
|
50.0
|
||||||
Semi-annual payments of interest, fixed rate of 4.19%, balloon due August 2, 2029
|
50.0
|
50.0
|
||||||
Semi-annual payments of interest, fixed rate of 3.48%, balloon due December 2, 2029
|
50.0
|
—
|
||||||
Semi-annual payments of interest, fixed rate of 4.44%, balloon due June 13, 2030
|
125.0
|
125.0
|
||||||
Semi-annual payments of interest, fixed rate of 5.14%, balloon due March 13, 2031
|
180.0
|
—
|
||||||
Semi-annual payments of interest, fixed rate of 4.70%, balloon due June 2, 2031
|
25.0
|
25.0
|
||||||
Semi-annual payments of interest, fixed rate of 4.34%, balloon due June 27, 2032
|
75.0
|
75.0
|
||||||
Semi-annual payments of interest, fixed rate of 4.34%, balloon due August 2, 2032
|
75.0
|
75.0
|
||||||
Semi-annual payments of interest, fixed rate of 4.59%, balloon due June 13, 2033
|
125.0
|
125.0
|
||||||
Semi-annual payments of interest, fixed rate of 5.29%, balloon due March 13, 2034
|
40.0
|
—
|
||||||
Semi-annual payments of interest, fixed rate of 4.48%, balloon due June 12, 2034
|
175.0
|
—
|
||||||
Semi-annual payments of interest, fixed rate of 4.69%, balloon due June 13, 2038
|
75.0
|
75.0
|
||||||
Semi-annual payments of interest, fixed rate of 5.45%, balloon due March 13, 2039
|
40.0
|
—
|
||||||
Total Note Purchase Agreements
|
3,923.0
|
3,198.0
|
||||||
Credit Agreement:
|
|
|
||||||
Periodic payments of interest and principal, prime or LIBOR plus up to 1.45%, expires June 7,
2024
|
520.0
|
265.0
|
||||||
Premium Financing Debt Facility - expires July 18, 2021:
|
|
|
||||||
Facility B
|
|
|
||||||
AUD denominated tranche, interbank rates plus 1.100%
|
142.1
|
133.9
|
||||||
NZD denominated tranche, interbank rates plus 1.150%
|
—
|
10.1
|
||||||
Facility C and D
|
|
|
||||||
AUD denominated tranche, interbank rates plus 0.575%
|
18.8
|
—
|
||||||
NZD denominated tranche, interbank rates plus 0.600%
|
9.7
|
10.0
|
||||||
Total Premium Financing Debt Facility
|
170.6
|
154.0
|
||||||
Total corporate and other debt
|
4,613.6
|
3,617.0
|
||||||
Less unamortized debt acquisition costs on Note Purchase Agreements
|
(6.9
|
) |
(6.6
|
) | ||||
Net corporate and other debt
|
$ |
4,606.7
|
$ |
3,610.4
|
||||
• | $125.0 million of 4.34% senior notes due in 2028 (4.00% after giving effect to hedging gains); |
• | $125.0 million of 4.44% senior notes due in 2030; |
• | $125.0 million of 4.59% senior notes due in 2033; |
• | $75.0 million of 4.69% senior notes due in 2038; and |
• |
$50.0 million of floating rate notes due in
2024
, at an interest rate of 1.40% plus three-month LIBOR, calculated quarterly.
|
• |
$100.0 million of 4.72% senior notes due in
2024
;
|
• | $140.0 million of 4.85% senior notes due in 2026; |
• | $100.0 million of 5.04% senior notes due in 2029; |
• | $180.0 million of 5.14% senior notes due in 2031; |
• | $40.0 million of 5.29% senior notes due in 2034; and |
• | $40.0 million of 5.45% senior notes due in 2039 |
• | $30.0 million of 3.75% senior notes due in 2027; |
• | $341.0 million of 3.99% senior notes due in 2030; |
• | $69.0 million of 4.09% senior notes due in 2032; |
• | $79.0 million of 4.24% senior notes due in 2035; and |
• | $56.0 million of 4.49% senior notes due in 2040 |
9.
|
Earnings per Share
|
|
Year Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Net earnings attributable to controlling interests
|
$ |
668.8
|
$ |
633.5
|
$ |
481.3
|
||||||
Weighted average number of common shares outstanding
|
186.0
|
182.7
|
180.1
|
|||||||||
Dilutive effect of stock options using the treasury stock method
|
4.1
|
3.5
|
2.0
|
|||||||||
Weighted average number of common and common equivalent shares outstanding
|
190.1
|
186.2
|
182.1
|
|||||||||
Basic net earnings per share
|
$ |
3.60
|
$ |
3.47
|
$ |
2.67
|
||||||
Diluted net earnings per share
|
$ |
3.52
|
$ |
3.40
|
$ |
2.64
|
||||||
10.
|
Stock Option Plans
|
|
Year Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Expected dividend yield
|
1.7
|
% |
2.3
|
% |
2.8
|
% | ||||||
Expected risk-free interest rate
|
2.5
|
% |
2.7
|
% |
2.3
|
% | ||||||
Volatility
|
15.6
|
% |
15.1
|
% |
27.2
|
% | ||||||
Expected life (in years)
|
5.5
|
5.5
|
5.0
|
|
Shares
Under
Option
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
(in
years) |
|
Aggregate
Intrinsic
Value
|
|
||||||||
|
|
|
|
|
||||||||||||
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning balance
|
8.8
|
$ |
50.16
|
|
|
|||||||||||
Granted
|
1.3
|
79.59
|
|
|
||||||||||||
Exercised
|
(1.9
|
) |
42.91
|
|
|
|||||||||||
Forfeited or canceled
|
(0.3
|
) |
57.33
|
|
|
|||||||||||
Ending balance
|
7.9
|
$ |
56.40
|
3.75
|
$ |
308.6
|
||||||||||
Exercisable at end of year
|
2.0
|
$ |
45.03
|
1.82
|
$ |
101.9
|
||||||||||
Ending unvested and expected to vest
|
5.7
|
$ |
59.76
|
4.36
|
$ |
201.5
|
||||||||||
Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning balance
|
9.5
|
$ |
45.27
|
|
|
|||||||||||
Granted
|
1.3
|
70.74
|
|
|
||||||||||||
Exercised
|
(1.6
|
) |
37.85
|
|
|
|||||||||||
Forfeited or canceled
|
(0.4
|
) |
49.23
|
|
|
|||||||||||
Ending balance
|
8.8
|
$ |
50.16
|
3.86
|
$ |
206.8
|
||||||||||
Exercisable at end of year
|
2.1
|
$ |
42.84
|
1.83
|
$ |
64.4
|
||||||||||
Ending unvested and expected to vest
|
6.5
|
$ |
52.14
|
4.46
|
$ |
140.3
|
|
|
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||
Range of Exercise Prices
|
|
Number
Outstanding
|
|
Weighted
Average
Remaining
Contractual
Term
(in
years) |
|
Weighted
Average
Exercise
Price
|
|
Number
Exercisable
|
|
Weighted
Average
Exercise
Price
|
|
|||||||||||
$
39.17
-
$
39.17
|
0.2
|
0.20
|
$ |
39.17
|
0.3
|
$ |
39.17
|
|||||||||||||||
43.71
-
43.71
|
1.9
|
3.21
|
43.71
|
0.4
|
43.71
|
|||||||||||||||||
46.17
-
46.87
|
1.9
|
1.82
|
46.43
|
1.3
|
46.54
|
|||||||||||||||||
47.92
-
63.60
|
1.5
|
4.21
|
56.81
|
—
|
—
|
|||||||||||||||||
70.74
-
70.74
|
1.2
|
5.21
|
70.74
|
—
|
—
|
|||||||||||||||||
79.59
-
79.59
|
1.2
|
6.21
|
79.59
|
—
|
—
|
|||||||||||||||||
$
39.17
- $
79.59
|
7.9
|
3.75
|
$ |
56.40
|
2.0
|
$ |
45.03
|
|||||||||||||||
|
Restricted Stock Units Granted
|
|||||||||||
Vesting Period
|
2019
|
|
2018
|
|
2017
|
|
||||||
One year
|
14,800
|
18,900
|
21,600
|
|||||||||
Two years
|
12,000
|
12,700
|
12,750
|
|||||||||
Five years
|
387,900
|
407,500
|
442,000
|
|||||||||
Total shares granted
|
414,700
|
439,100
|
476,350
|
|||||||||
|
Year Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Change in pension benefit obligation:
|
|
|
|
|
|
|
||
Benefit obligation at beginning of year
|
$ |
253.2
|
$ |
271.4
|
||||
Service cost
|
1.6
|
0.8
|
||||||
Interest cost
|
9.8
|
9.3
|
||||||
Net actuarial
loss
(gain)
|
24.7
|
(14.3
|
) | |||||
Benefits paid
|
(14.9
|
) |
(14.0
|
) | ||||
Benefit obligation at end of year
|
$ |
274.4
|
$ |
253.2
|
||||
Change in plan assets:
|
|
|
|
|
|
|
||
Fair value of plan assets at beginning of year
|
$ |
220.0
|
$ |
219.4
|
||||
Actual return on plan assets
|
38.6
|
(15.4
|
) | |||||
Contributions by the company
|
—
|
30.0
|
||||||
Benefits paid
|
(14.9
|
) |
(14.0
|
) | ||||
Fair value of plan assets at end of year
|
$ |
243.7
|
$ |
220.0
|
||||
Funded status of the plan (underfunded)
|
$ |
(30.7
|
) | $ |
(33.2
|
) | ||
Amounts recognized in the consolidated balance sheet consist of:
|
|
|
|
|
|
|
||
Noncurrent liabilities - accrued benefit liability
|
$ |
(30.7
|
) | $ |
(33.2
|
) | ||
Accumulated other comprehensive loss - net actuarial loss
|
69.8
|
76.0
|
||||||
Net amount included in retained earnings
|
$ |
39.1
|
$ |
42.8
|
||||
|
Year Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Net periodic pension cost:
|
|
|
|
|
|
|
|
|
|
|||
Service cost
|
$ |
1.6
|
$ |
0.8
|
$ |
1.7
|
||||||
Interest cost on benefit obligation
|
9.8
|
9.3
|
10.0
|
|||||||||
Expected return on plan assets
|
(14.8
|
) |
(16.0
|
) |
(14.0
|
) | ||||||
Amortization of net loss
|
7.0
|
4.9
|
5.0
|
|||||||||
Net periodic benefit cost
|
3.6
|
(1.0
|
) |
2.7
|
||||||||
Other changes in plan assets and obligations recognized in other comprehensive earnings:
|
|
|
|
|
|
|
|
|
|
|||
Net loss incurred
|
0.8
|
17.2
|
0.8
|
|||||||||
Amortization of net loss
|
(7.0
|
) |
(4.9
|
) |
(5.0
|
) | ||||||
Total recognized in other comprehensive loss
|
(6.2
|
) |
12.3
|
(4.2
|
) | |||||||
Total recognized in net periodic pension cost and other comprehensive loss
|
$ |
(2.6
|
) | $ |
11.3
|
$ |
(1.5
|
) | ||||
Estimated amortization for the following year:
|
|
|
|
|
|
|
|
|
|
|||
Amortization of net loss
|
$ |
6.1
|
$ |
7.2
|
$ |
5.0
|
||||||
|
December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Discount rate
|
3.00
|
% |
4.00
|
% | ||||
Weighted average expected long-term rate of return on plan assets
|
7.00
|
% |
7.00
|
% |
|
Year Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Discount rate
|
4.00
|
% |
3.50
|
% |
4.00
|
% | ||||||
Weighted average expected long-term rate of return on plan assets
|
7.00
|
% |
7.00
|
% |
7.00
|
% |
2020
|
$ |
16.2
|
||
2021
|
16.4
|
|||
2022
|
16.6
|
|||
2023
|
16.7
|
|||
2024
|
16.7
|
|||
Years 2025 to 2029
|
83.2
|
|
December 31,
|
|||||||
Asset Category
|
2019
|
|
2018
|
|
||||
Equity securities
|
61.0
|
% |
57.0
|
% | ||||
Debt securities
|
32.0
|
% |
36.0
|
% | ||||
Real estate
|
7.0
|
% |
7.0
|
% | ||||
Total
|
100.0
|
% |
100.0
|
% | ||||
|
December 31,
|
|||||||
Fair Value Hierarchy
|
2019
|
|
2018
|
|
||||
Level 1
|
$ |
—
|
$ |
—
|
||||
Level 2
|
135.8
|
125.1
|
||||||
Level 3
|
107.9
|
94.9
|
||||||
Total fair value
|
$ |
243.7
|
$ |
220.0
|
||||
|
Year Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Fair value at January 1
|
$ |
94.9
|
$ |
111.9
|
||||
Settlements
|
—
|
(9.6
|
) | |||||
Unrealized
gain
(loss)
|
13.0
|
(7.4
|
) | |||||
Fair value at December 31
|
$ |
107.9
|
$ |
94.9
|
||||
|
December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Chem-Mod LLC
|
$ |
4.0
|
$ |
4.0
|
||||
Chem-Mod International LLC
|
2.0
|
2.0
|
||||||
Clean-coal investments:
|
|
|
||||||
Controlling interest in 6 limited liability companies that own 14 2009 Era Clean Coal Plants
|
—
|
5.1
|
||||||
Non-controlling
interest in one limited liability companies that owns one 2011 Era Clean Coal Plant
|
0.3
|
0.4
|
||||||
Controlling interest in 17 limited liability companies that own 19 2011 Era Clean Coal Plants
|
29.2
|
43.0
|
||||||
Other investments
|
4.5
|
5.0
|
||||||
Total investments
|
$ |
40.0
|
$ |
59.5
|
||||
• | We have investments in limited liability companies that own 34 refined coal production plants which produce refined coal using proprietary technologies owned by Chem-Mod LLC. We believe the production and sale of refined coal at these plants is qualified to receive refined coal tax credits under IRC Section 45. The 14 plants placed in service prior to December 31, 2009 (which we refer to as the 2009 Era Plants) were eligible to receive tax credits through 2019 and the 20 plants placed in service prior to December 31, 2011 (which we refer to as the 2011 Era Plants) are eligible to receive tax credits through 2021. |
• | As of December 31, 2019: |
• | Twenty of the plants have long-term production contracts. |
• |
We have a noncontrolling interest in one plant, which is owned by a limited liability company (which we refer to as a LLC). We have determined that this LLC is a VIE, for which we are not the primary beneficiary
and therefore do not consolidate it.
At December 31, 2019, total assets and total liabilities of this VIE were $31.1 million and $30.0 million, respectively. For 2019, total revenues and expenses of this VIE were $64.9 million and $79.8 million, respectively.
|
• |
We and our
co-investors
each fund our portion of the
on-going
operations of the limited liability companies in proportion to our investment ownership percentages. Other than our portion of the
on-going
operational funding, there are no additional amounts that we are committed to related to funding these investments.
|
Lease Components
|
Statement of Earnings
Classification
|
Year ended
December 31, 2019 |
|
||||
Operating lease expense
|
Operating expense
|
$ |
120.4
|
||||
Variable lease expense
|
Operating expense
|
18.8
|
|||||
Sublease income
|
Investment income
|
(1.2
|
) | ||||
|
|
|
|
|
|||
Net lease expense
|
$ |
138.0
|
|||||
|
|
|
|
|
Supplemental Cash Flow Information Related to Leases (in millions)
|
Year ended
December 31, 2019
|
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|||
Operating cash flows from operating leases
|
$ |
116.1
|
||
Right-of-use
assets obtained in exchange for new operating lease liabilities
|
90.8
|
Lease Components
|
Balance Sheet Classification
|
December 31, 2019
|
|
|||
Lease
right-of-use
assets
|
Right-of-use
assets
|
$ |
393.5
|
|||
Other current lease liabilities
|
Accrued compensation and other current liabilities
|
$ |
86.4
|
|||
Lease liabilities
|
Lease liabilities - noncurrent
|
340.9
|
||||
Total lease liabilities
|
|
$ |
427.3
|
|||
Weighted-average remaining lease term, years
|
|
5.4 years
|
||||
Weighted-average discount rate
|
|
3.8
|
% |
2020
|
$ |
105.6
|
||
2021
|
100.4
|
|||
2022
|
80.3
|
|||
2023
|
63.8
|
|||
2024
|
45.1
|
|||
Thereafter
|
84.1
|
|||
Total lease payments
|
479.3
|
|||
Less interest
|
(52.0
|
) | ||
Total
|
$ |
427.3
|
||
|
|
|
Derivative Assets
|
Derivative Liabilities
|
||||||||||||
Instrument
|
Notional
Amount |
|
Balance Sheet
Classification
|
Fair
Value
|
|
Balance Sheet
Classification
|
Fair
Value |
|
||||||||
At December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest rate contracts
|
$ |
800.0
|
Other current assets
|
$ |
2.8
|
Accrued compensation and
|
$
|
25.0
|
||||||||
|
|
Other noncurrent assets
|
5.4
|
other current liabilities
|
|
|||||||||||
|
|
|
|
Other noncurrent liabilities
|
23.0
|
|||||||||||
Foreign exchange contracts (1)
|
31.7
|
Other current assets
|
4.5
|
Accrued compensation and
|
1.8
|
|||||||||||
|
|
|
|
other current liabilities
|
|
|||||||||||
|
|
Other noncurrent assets
|
8.5
|
Other noncurrent liabilities
|
2.6
|
|||||||||||
Total
|
$ |
831.7
|
|
$
|
21.2
|
|
$ |
52.4
|
||||||||
At December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest rate contracts
|
$ |
850.0
|
Other current assets
|
$ |
3.0
|
Accrued compensation and
|
$ |
13.0
|
||||||||
|
|
|
|
other current liabilities
|
|
|||||||||||
Foreign exchange contracts (1)
|
51.4
|
Other current assets
|
0.9
|
Accrued compensation and
|
4.9
|
|||||||||||
|
|
|
|
other current liabilities
|
|
|||||||||||
|
|
Other noncurrent assets
|
5.7
|
Other noncurrent liabilities
|
7.9
|
|||||||||||
Total
|
$ |
901.4
|
|
$ |
9.6
|
|
$ |
25.8
|
||||||||
(1) | Included within foreign exchange contracts at December 31, 2019 were $342.0 million of call options offset with $342.0 million of put options, and $12.1 million of buy forwards offset with $43.8 million of sell forwards. Included within foreign exchange contracts at December 31, 2018 were $276.4 million of call options offset with $276.4 million of put options, and $23.1 million of buy forwards offset with $72.9 million of sell forwards. |
Instrument
|
Amount of
Gain (Loss)
Recognized in
Accumulated
Other Comprehensive Loss (1) |
|
Amount of
Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Earnings |
|
Amount of
Gain (Loss) Recognized in Earnings Related to Amount Excluded from Effectiveness Testing |
|
Statement of Earnings
Classification
|
|||||||
Year ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate contracts
|
$ |
(47.0
|
) | $ |
(1.2
|
) | $ |
—
|
Interest expense
|
|||||
Foreign exchange contracts
|
9.9
|
(1.6
|
) |
(0.8
|
) |
Commission revenue
|
||||||||
|
|
(1.4
|
) |
1.2
|
Compensation expense
|
|||||||||
|
|
(1.0
|
) |
0.9
|
Operating expense
|
|||||||||
Total
|
$ |
(37.1
|
) | $ |
(5.2
|
) | $ |
1.3
|
|
|||||
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate contracts
|
$ |
(9.3
|
) | $ |
1.1
|
$ |
—
|
Interest expense
|
||||||
Foreign exchange contracts
|
(6.4
|
) |
2.3
|
—
|
Commission revenue
|
|||||||||
|
|
1.3
|
—
|
Compensation expense
|
||||||||||
|
|
1.0
|
—
|
Operating expense
|
||||||||||
Total
|
$ |
(15.7
|
) | $ |
5.7
|
$ |
—
|
|
||||||
(1) | During 2019, the amount excluded from the assessment of hedge effectiveness for our foreign exchange contracts recognized in accumulated other comprehensive loss were a loss of $0.2 million. |
17.
|
Commitments, Contingencies and
Off-Balance
Sheet Arrangements
|
|
Payments Due by Period
|
|||||||||||||||||||||||||||
Contractual Obligations
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
|
||||||||||||||
Note purchase agreements
|
$ |
100.0
|
$ |
75.0
|
$ |
200.0
|
$ |
300.0
|
$ |
475.0
|
$ |
2,773.0
|
$ |
3,923.0
|
||||||||||||||
Credit Agreement
|
520.0
|
—
|
—
|
—
|
—
|
—
|
520.0
|
|||||||||||||||||||||
Premium Financing Debt Facility
|
170.6
|
—
|
—
|
—
|
—
|
—
|
170.6
|
|||||||||||||||||||||
Interest on debt
|
173.6
|
167.5
|
161.8
|
152.5
|
134.7
|
574.7
|
1,364.8
|
|||||||||||||||||||||
Total debt obligations
|
964.2
|
242.5
|
361.8
|
452.5
|
609.7
|
3,347.7
|
5,978.4
|
|||||||||||||||||||||
Operating lease obligations
|
105.6
|
100.4
|
80.3
|
63.8
|
45.1
|
84.1
|
479.3
|
|||||||||||||||||||||
Less sublease arrangements
|
(0.6
|
) |
(0.6
|
) |
(0.3
|
) |
(0.3
|
) |
(0.2
|
) |
(0.7
|
) |
(2.7
|
) | ||||||||||||||
Outstanding purchase obligations
|
49.9
|
38.2
|
23.2
|
9.0
|
5.7
|
17.4
|
143.4
|
|||||||||||||||||||||
Total contractual obligations
|
$ |
1,119.1
|
$ |
380.5
|
$ |
465.0
|
$ |
525.0
|
$ |
660.3
|
$ |
3,448.5
|
$ |
6,598.4
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
||||||||||||||
|
Amount of Commitment Expiration by Period
|
Amounts
|
|
|||||||||||||||||||||||||
Off-Balance
Sheet Commitments
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Committed
|
|
||||||||||||||
Letters of credit
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
17.1
|
$ |
17.1
|
||||||||||||||
Financial guarantees
|
0.2
|
0.2
|
0.2
|
0.2
|
0.2
|
0.4
|
1.4
|
|||||||||||||||||||||
Total commitments
|
$ |
0.2
|
$ |
0.2
|
$ |
0.2
|
$ |
0.2
|
$ |
0.2
|
$ |
17.5
|
$ |
18.5
|
||||||||||||||
|
|
|
Compensation
|
|
Maximum
|
|
Liability
|
|
||||||||
Description, Purpose and Trigger
|
Collateral
|
|
to Us
|
|
Exposure
|
|
Recorded
|
|
||||||||
Credit support under letters of credit (LOC) for deductibles due by us on our own insurance coverages - expires after 2023 Trigger - We do not reimburse the insurance companies for deductibles the insurance companies advance on our behalf
|
None
|
None
|
$ |
9.4
|
$ |
16.5
|
||||||||||
Credit enhancement under letters of credit for our captive insurance operations to meet minimum statutory capital requirements - expires after 2023 Trigger - Dissolution or catastrophic financial results of the operation
|
None
|
Reimbursement of LOC fees
|
6.3
|
—
|
||||||||||||
Collateral related to claims funds held in a fiduciary capacity by a recent acquisition - expires 2020 Trigger - Claim payments are not made
|
None
|
None
|
0.9
|
—
|
||||||||||||
Credit support under letters of credit in lieu of a security deposit for an acquisition’s lease - expires 2023 Trigger - Lease payments do not get made
|
None
|
None
|
0.5
|
—
|
||||||||||||
Financial guarantees of loans to 6 Canadian-based employees - expires when loan balances are reduced to zero through May 2029 - Principal and interest payments are paid quarterly Trigger - Default on loan payments
|
(1)
|
None
|
1.4
|
—
|
||||||||||||
|
|
|
$ |
18.5
|
$ |
16.5
|
||||||||||
(1) | The guarantees are collateralized by shares in minority holdings of our Canadian operating companies. |
18.
|
Insurance Operations
|
|
2019
|
2018
|
2017
|
|||||||||||||||||||||
|
Written
|
|
Earned
|
|
Written
|
|
Earned
|
|
Written
|
|
Earned
|
|
||||||||||||
Direct
|
$ |
44.6
|
$ |
59.1
|
$ |
57.6
|
$ |
53.2
|
$ |
60.7
|
$ |
60.4
|
||||||||||||
Assumed
|
1.0
|
1.9
|
4.7
|
4.6
|
5.0
|
4.5
|
||||||||||||||||||
Ceded
|
(45.6
|
) |
(61.0
|
) |
(62.3
|
) |
(57.8
|
) |
(65.7
|
) |
(64.9
|
) | ||||||||||||
Net
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
||||||||||||
19.
|
Income Taxes
|
|
Year Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Earnings before income taxes:
|
|
|
|
|||||||||
United States
|
$ |
388.4
|
$ |
337.6
|
$ |
274.1
|
||||||
Foreign, principally Australia, Canada, New Zealand and the U.K.
|
237.7
|
141.8
|
85.7
|
|||||||||
Total earnings before income taxes
|
$ |
626.1
|
$ |
479.4
|
$ |
359.8
|
||||||
Provision (benefit) for income taxes:
|
|
|
|
|||||||||
Federal:
|
|
|
|
|||||||||
Current
|
$ |
3.8
|
$ |
—
|
$ |
7.1
|
||||||
Deferred
|
(142.5
|
) |
(214.0
|
) |
(183.5
|
) | ||||||
|
(138.7
|
) |
(214.0
|
) |
(176.4
|
) | ||||||
State and local:
|
|
|
|
|||||||||
Current
|
11.1
|
15.4
|
11.6
|
|||||||||
Deferred
|
(6.0
|
) |
(29.0
|
) |
(3.9
|
) | ||||||
|
5.1
|
(13.6
|
) |
7.7
|
||||||||
Foreign:
|
|
|
|
|||||||||
Current
|
66.6
|
60.7
|
25.9
|
|||||||||
Deferred
|
(22.7
|
) |
(29.6
|
) |
(14.3
|
) | ||||||
|
43.9
|
31.1
|
11.6
|
|||||||||
Total benefit for income taxes
|
$ |
(89.7
|
) | $ |
(196.5
|
) | $ |
(157.1
|
) | |||
|
Year Ended December 31,
|
|||||||||||||||||||||||
|
2019
|
2018
|
2017
|
|||||||||||||||||||||
|
Amount
|
|
% of
Pretax Earnings |
|
Amount
|
|
% of
Pretax Earnings |
|
Amount
|
|
% of
Pretax Earnings |
|
||||||||||||
Federal statutory rate
|
$ |
131.5
|
21.0
|
$ |
100.7
|
21.0
|
$ |
126.0
|
35.0
|
|||||||||||||||
State income taxes - net of
|
|
|
|
|
|
|
||||||||||||||||||
Federal benefit
|
4.4
|
0.7
|
8.5
|
1.8
|
5.0
|
1.4
|
||||||||||||||||||
Differences related to non U.S. operations
|
(10.1
|
) |
(1.6
|
) |
(14.8
|
) |
(3.1
|
) |
(46.9
|
) |
(13.0
|
) | ||||||||||||
Alternative energy and other tax credits
|
(196.1
|
) |
(31.3
|
) |
(252.9
|
) |
(52.8
|
) |
(230.1
|
) |
(64.0
|
) | ||||||||||||
Other permanent differences
|
(7.6
|
) |
(1.2
|
) |
0.9
|
0.2
|
(10.6
|
) |
(2.9
|
) | ||||||||||||||
U.S. repatriation tax
|
—
|
—
|
(1.8
|
) |
(0.4
|
) |
36.8
|
10.2
|
||||||||||||||||
Stock-based compensation
|
(16.2
|
) |
(2.6
|
) |
(15.0
|
) |
(3.1
|
) |
(15.1
|
) |
(4.2
|
) | ||||||||||||
Changes in unrecognized tax benefits
|
0.8
|
0.1
|
(0.2
|
) |
—
|
(0.9
|
) |
(0.3
|
) | |||||||||||||||
Change in valuation allowance
|
7.5
|
1.2
|
(22.0
|
) |
(4.6
|
) |
12.3
|
3.4
|
||||||||||||||||
Change in tax rates
|
(3.7
|
) |
(0.6
|
) |
—
|
—
|
(33.2
|
) |
(9.2
|
) | ||||||||||||||
Other
|
(0.2
|
) |
—
|
0.1
|
—
|
(0.4
|
) |
(0.1
|
) | |||||||||||||||
Benefit for income taxes
|
$ |
(89.7
|
) |
(14.3
|
) | $ |
(196.5
|
) |
(41.0
|
) | $ |
(157.1
|
) |
(43.7
|
) | |||||||||
|
December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Gross unrecognized tax benefits at January 1
|
$ |
10.7
|
$ |
10.9
|
||||
Increases in tax positions for current year
|
2.1
|
1.7
|
||||||
Settlements
|
(0.4
|
) |
—
|
|||||
Lapse in statute of limitations
|
(1.1
|
) |
(1.4
|
) | ||||
Increases in tax positions for prior years
|
0.6
|
0.4
|
||||||
Decreases in tax positions for prior years
|
(0.4
|
) |
(0.9
|
) | ||||
Gross unrecognized tax benefits at December 31
|
$ |
11.5
|
$ |
10.7
|
||||
|
December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Deferred tax assets:
|
|
|
||||||
Alternative minimum tax and other credit carryforwards
|
$ |
962.1
|
$ |
856.9
|
||||
Accrued and unfunded compensation and employee benefits
|
156.0
|
158.8
|
||||||
Amortizable intangible assets
|
54.3
|
48.8
|
||||||
Compensation expense related to stock options
|
11.3
|
12.2
|
||||||
Accrued liabilities
|
63.9
|
63.8
|
||||||
Accrued pension liability
|
9.9
|
11.5
|
||||||
Investments
|
0.9
|
1.5
|
||||||
Net operating loss carryforwards
|
37.2
|
36.8
|
||||||
Capital loss carryforwards
|
12.6
|
12.2
|
||||||
Lease liabilities
|
65.3
|
4.2
|
||||||
Hedging instruments
|
11.7
|
1.9
|
||||||
Other
|
4.3
|
3.4
|
||||||
Total deferred tax assets
|
1,389.5
|
1,212.0
|
||||||
Valuation allowance for deferred tax assets
|
(80.5
|
) |
(67.4
|
) | ||||
Deferred tax assets
|
1,309.0
|
1,144.6
|
||||||
Deferred tax liabilities:
|
|
|
||||||
Nondeductible amortizable intangible assets
|
322.4
|
297.6
|
||||||
Investment-related partnerships
|
9.1
|
13.6
|
||||||
Depreciable fixed assets
|
22.4
|
25.4
|
||||||
Right-of-use assets
|
|
|
62.6
|
|
|
|
—
|
|
Revenue recognition
|
63.7
|
98.1
|
||||||
Other prepaid items
|
10.6
|
10.6
|
||||||
Total deferred tax liabilities
|
490.8
|
445.3
|
||||||
Net deferred tax assets
|
$ |
818.2
|
$ |
699.3
|
||||
20.
|
Supplemental Disclosures of Cash Flow Information
|
|
Year ended December 31,
|
|||||||||||
Supplemental disclosures of cash flow information (in millions):
|
2019
|
|
2018
|
|
2017
|
|
||||||
Interest paid
|
$ |
169.2
|
$ |
139.2
|
$ |
124.8
|
||||||
Income taxes paid, net
|
22.2
|
68.1
|
55.8
|
|
December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Cash and cash equivalents
|
$ |
604.8
|
$ |
607.2
|
$ |
681.2
|
||||||
Restricted cash
|
2,019.1
|
1,629.6
|
1,623.8
|
|||||||||
Total cash, cash equivalents and restricted cash
|
$ |
2,623.9
|
$ |
2,236.8
|
$ |
2,305.0
|
||||||
21.
|
Accumulated Other Comprehensive Earnings
|
|
Pension
Liability |
|
Foreign
Currency Translation |
|
Fair Value
of Derivative Instruments |
|
Accumulated
Comprehensive Earnings (Loss) |
|
||||||||
Balance as of January 1, 2017
|
$ |
(47.3
|
) | $ |
(702.2
|
) | $ |
(7.1
|
) | $ |
(756.6
|
) | ||||
Adoption of Topic 606
|
—
|
(2.5
|
) |
—
|
(2.5
|
) | ||||||||||
Net change in period
|
4.3
|
183.4
|
16.0
|
203.7
|
||||||||||||
Balance as of December 31, 2017
|
(43.0
|
) |
(521.3
|
) |
8.9
|
(555.4
|
) | |||||||||
Reclassification to retained earnings of income tax effects related to the Tax Act
|
(7.9
|
) |
—
|
1.3
|
(6.6
|
) | ||||||||||
Net change in period
|
(10.3
|
) |
(197.7
|
) |
(15.6
|
) |
(223.6
|
) | ||||||||
Balance as of December 31, 2018
|
(61.2
|
) |
(719.0
|
) |
(5.4
|
) |
(785.6
|
) | ||||||||
Cumulative effect of adoption of new accounting standards
|
—
|
—
|
(0.2
|
) |
(0.2
|
) | ||||||||||
Net change in period
|
4.7
|
44.2
|
(22.7
|
) |
26.2
|
|||||||||||
Balance as of December 31, 2019
|
$ |
(56.5
|
) | $ |
(674.8
|
) | $ |
(28.3
|
) | $ |
(759.6
|
) | ||||
22.
|
Quarterly Operating Results (unaudited)
|
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
|
||||||||
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues
|
$ |
1,990.6
|
$ |
1,657.8
|
$ |
1,825.2
|
$ |
1,721.4
|
||||||||
Total expenses
|
1,668.8
|
1,552.3
|
1,710.4
|
1,637.4
|
||||||||||||
Earnings before income taxes
|
$ |
321.8
|
$ |
105.5
|
$ |
114.8
|
$ |
84.0
|
||||||||
Net earnings attributable to controlling interests
|
$ |
334.1
|
$ |
110.1
|
$ |
126.1
|
$ |
98.5
|
||||||||
Basic net earnings per share
|
$ |
1.81
|
$ |
0.59
|
$ |
0.68
|
$ |
0.53
|
||||||||
Diluted net earnings per share
|
$ |
1.77
|
$ |
0.58
|
$ |
0.66
|
$ |
0.51
|
||||||||
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues
|
$ |
1,837.7
|
$ |
1,660.4
|
$ |
1,778.5
|
$ |
1,657.4
|
||||||||
Total expenses
|
1,595.4
|
1,556.8
|
1,688.2
|
1,614.2
|
||||||||||||
Earnings before income taxes
|
$ |
242.3
|
$ |
103.6
|
$ |
90.3
|
$ |
43.2
|
||||||||
Net earnings attributable to controlling interests
|
$ |
273.7
|
$ |
114.9
|
$ |
127.6
|
$ |
117.3
|
||||||||
Basic net earnings per share
|
$ |
1.51
|
$ |
0.63
|
$ |
0.70
|
$ |
0.64
|
||||||||
Diluted net earnings per share
|
$ |
1.48
|
$ |
0.62
|
$ |
0.68
|
$ |
0.63
|
||||||||
23.
|
Segment Information
|
Year Ended December 31, 2019
|
Brokerage
|
|
Risk
Management |
|
Corporate
|
|
Total
|
|
||||||||
Revenues:
|
|
|
|
|
||||||||||||
Commissions
|
$ |
3,320.6
|
$ |
—
|
$ |
—
|
$ |
3,320.6
|
||||||||
Fees
|
1,074.2
|
836.9
|
—
|
1,911.1
|
||||||||||||
Supplemental revenues
|
210.5
|
—
|
—
|
210.5
|
||||||||||||
Contingent revenues
|
135.6
|
—
|
—
|
135.6
|
||||||||||||
Investment income
|
85.3
|
1.6
|
—
|
86.9
|
||||||||||||
Net gains on divestitures
|
75.3
|
—
|
—
|
75.3
|
||||||||||||
Revenue from clean coal activities
|
—
|
—
|
1,319.3
|
1,319.3
|
||||||||||||
Other net
losses
|
—
|
—
|
(2.9
|
) |
(2.9
|
) | ||||||||||
Revenues before reimbursements
|
4,901.5
|
838.5
|
1,316.4
|
7,056.4
|
||||||||||||
Reimbursements
|
—
|
138.6
|
—
|
138.6
|
||||||||||||
Total revenues
|
4,901.5
|
977.1
|
1,316.4
|
7,195.0
|
||||||||||||
Compensation
|
2,745.9
|
515.7
|
77.9
|
3,339.5
|
||||||||||||
Operating
|
796.5
|
184.9
|
87.1
|
1,068.5
|
||||||||||||
Reimbursements
|
—
|
138.6
|
—
|
138.6
|
||||||||||||
Cost of revenues from clean coal activities
|
—
|
—
|
1,352.8
|
1,352.8
|
||||||||||||
Interest
|
—
|
—
|
179.8
|
179.8
|
||||||||||||
Depreciation
|
66.6
|
46.2
|
27.6
|
140.4
|
||||||||||||
Amortization
|
329.1
|
4.9
|
—
|
334.0
|
||||||||||||
Change in estimated acquisition earnout payables
|
16.9
|
(1.6
|
) |
—
|
15.3
|
|||||||||||
Total expenses
|
3,955.0
|
888.7
|
1,725.2
|
6,568.9
|
||||||||||||
Earnings (loss) before income taxes
|
946.5
|
88.4
|
(408.8
|
) |
626.1
|
|||||||||||
Provision (benefit) for income taxes
|
229.2
|
22.2
|
(341.1
|
) |
(89.7
|
) | ||||||||||
Net earnings
(loss)
|
717.3
|
66.2
|
(67.7
|
) |
715.8
|
|||||||||||
Net earnings attributable to noncontrolling interests
|
17.2
|
—
|
29.8
|
47.0
|
||||||||||||
Net earnings
(loss)
attributable to controlling interests
|
$ |
700.1
|
$ |
66.2
|
$ |
(97.5
|
) | $ |
668.8
|
|||||||
Net foreign exchange loss
|
$ |
(1.0
|
) | $ |
(0.1
|
) | $ |
(5.6
|
) | $ |
(6.7
|
) | ||||
Revenues:
|
|
|
|
|
||||||||||||
United States
|
$ |
3,234.3
|
$ |
828.4
|
$ |
1,316.4
|
$ |
5,379.1
|
||||||||
United Kingdom
|
921.8
|
41.6
|
—
|
963.4
|
||||||||||||
Australia
|
211.3
|
87.3
|
—
|
298.6
|
||||||||||||
Canada
|
221.4
|
4.6
|
—
|
226.0
|
||||||||||||
New Zealand
|
145.6
|
15.2
|
—
|
160.8
|
||||||||||||
Other foreign
|
167.1
|
—
|
—
|
167.1
|
||||||||||||
Total revenues
|
$ |
4,901.5
|
$ |
977.1
|
$ |
1,316.4
|
$ |
7,195.0
|
||||||||
At December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Identifiable assets:
|
|
|
|
|
||||||||||||
United States
|
$ |
8,132.3
|
$ |
655.6
|
$ |
1,994.8
|
$ |
10,782.7
|
||||||||
United Kingdom
|
4,964.5
|
126.6
|
—
|
5,091.1
|
||||||||||||
Australia
|
1,217.9
|
90.0
|
—
|
1,307.9
|
||||||||||||
Canada
|
913.6
|
3.1
|
—
|
916.7
|
||||||||||||
New Zealand
|
695.9
|
22.8
|
—
|
718.7
|
||||||||||||
Other foreign
|
817.7
|
—
|
—
|
817.7
|
||||||||||||
Total identifiable assets
|
$ |
16,741.9
|
$ |
898.1
|
$ |
1,994.8
|
$ |
19,634.8
|
||||||||
Goodwill - net
|
$ |
5,548.9
|
$ |
66.6
|
$ |
3.0
|
$ |
5,618.5
|
||||||||
Amortizable intangible assets - net
|
2,289.9
|
28.8
|
—
|
2,318.7
|
Year Ended December 31, 2018
|
Brokerage
|
|
Risk
Management |
|
Corporate
|
|
Total
|
|
||||||||
Revenues:
|
|
|
|
|
||||||||||||
Commissions
|
$ |
2,920.7
|
$ |
—
|
$ |
—
|
$ |
2,920.7
|
||||||||
Fees
|
958.5
|
797.8
|
—
|
1,756.3
|
||||||||||||
Supplemental revenues
|
189.9
|
—
|
—
|
189.9
|
||||||||||||
Contingent revenues
|
98.0
|
—
|
—
|
98.0
|
||||||||||||
Investment income
|
69.6
|
0.5
|
—
|
70.1
|
||||||||||||
Net gains on divestitures
|
10.2
|
—
|
—
|
10.2
|
||||||||||||
Revenue from clean coal activities
|
—
|
—
|
1,746.3
|
1,746.3
|
||||||||||||
Other net revenues
|
—
|
—
|
0.9
|
0.9
|
||||||||||||
Revenues before reimbursements
|
4,246.9
|
798.3
|
1,747.2
|
6,792.4
|
||||||||||||
Reimbursements
|
—
|
141.6
|
—
|
141.6
|
||||||||||||
Total revenues
|
4,246.9
|
939.9
|
1,747.2
|
6,934.0
|
||||||||||||
Compensation
|
2,447.1
|
489.7
|
89.5
|
3,026.3
|
||||||||||||
Operating
|
673.5
|
174.6
|
55.6
|
903.7
|
||||||||||||
Reimbursements
|
—
|
141.6
|
—
|
141.6
|
||||||||||||
Cost of revenues from clean coal activities
|
—
|
—
|
1,816.0
|
1,816.0
|
||||||||||||
Interest
|
—
|
—
|
138.4
|
138.4
|
||||||||||||
Depreciation
|
60.9
|
38.7
|
28.2
|
127.8
|
||||||||||||
Amortization
|
286.9
|
4.3
|
—
|
291.2
|
||||||||||||
Change in estimated acquisition earnout payables
|
14.3
|
(4.7
|
) |
—
|
9.6
|
|||||||||||
Total expenses
|
3,482.7
|
844.2
|
2,127.7
|
6,454.6
|
||||||||||||
Earnings (loss) before income taxes
|
764.2
|
95.7
|
(380.5
|
) |
479.4
|
|||||||||||
Provision (benefit) for income taxes
|
191.0
|
25.3
|
(412.8
|
) |
(196.5
|
) | ||||||||||
Net earnings
|
573.2
|
70.4
|
32.3
|
675.9
|
||||||||||||
Net earnings attributable to noncontrolling interests
|
10.7
|
—
|
31.7
|
42.4
|
||||||||||||
Net earnings attributable to controlling interests
|
$ |
562.5
|
$ |
70.4
|
$ |
0.6
|
$ |
633.5
|
||||||||
Net foreign exchange gain
|
$ |
—
|
$ |
—
|
$ |
2.9
|
$ |
2.9
|
||||||||
Revenues:
|
|
|
|
|
||||||||||||
United States
|
$ |
2,840.9
|
$ |
789.7
|
$ |
1,747.2
|
$ |
5,377.8
|
||||||||
United Kingdom
|
738.5
|
35.4
|
—
|
773.9
|
||||||||||||
Australia
|
195.9
|
94.7
|
—
|
290.6
|
||||||||||||
Canada
|
181.1
|
4.3
|
—
|
185.4
|
||||||||||||
New Zealand
|
141.7
|
15.8
|
—
|
157.5
|
||||||||||||
Other foreign
|
148.8
|
—
|
—
|
148.8
|
||||||||||||
Total revenues
|
$ |
4,246.9
|
$ |
939.9
|
$ |
1,747.2
|
$ |
6,934.0
|
||||||||
At December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Identifiable assets:
|
|
|
|
|
||||||||||||
United States
|
$ |
6,865.4
|
$ |
571.4
|
$ |
1,800.8
|
$ |
9,237.6
|
||||||||
United Kingdom
|
3,758.5
|
103.8
|
—
|
3,862.3
|
||||||||||||
Australia
|
1,096.1
|
47.2
|
—
|
1,143.3
|
||||||||||||
Canada
|
783.1
|
4.4
|
—
|
787.5
|
||||||||||||
New Zealand
|
688.5
|
21.3
|
—
|
709.8
|
||||||||||||
Other foreign
|
593.5
|
—
|
—
|
593.5
|
||||||||||||
Total identifiable assets
|
$ |
13,785.1
|
$ |
748.1
|
$ |
1,800.8
|
$ |
16,334.0
|
||||||||
Goodwill - net
|
$ |
4,573.7
|
$ |
49.2
|
$ |
2.7
|
$ |
4,625.6
|
||||||||
Amortizable intangible assets - net
|
1,753.7
|
19.3
|
—
|
1,773.0
|
Year Ended December 31, 2017
|
Brokerage
|
|
Risk
Management |
|
Corporate
|
|
Total
|
|
||||||||
Revenues:
|
|
|
|
|
||||||||||||
Commissions
|
$ |
2,641.0
|
$ |
—
|
$ |
—
|
$ |
2,641.0
|
||||||||
Fees
|
855.1
|
736.8
|
—
|
1,591.9
|
||||||||||||
Supplemental revenues
|
158.0
|
—
|
—
|
158.0
|
||||||||||||
Contingent revenues
|
99.5
|
—
|
—
|
99.5
|
||||||||||||
Investment income
|
58.1
|
0.6
|
—
|
58.7
|
||||||||||||
Net gains on divestitures
|
3.4
|
—
|
—
|
3.4
|
||||||||||||
Revenue from clean coal activities
|
—
|
—
|
1,560.5
|
1,560.5
|
||||||||||||
Revenues before reimbursements
|
3,815.1
|
737.4
|
1,560.5
|
6,113.0
|
||||||||||||
Reimbursements
|
—
|
136.0
|
—
|
136.0
|
||||||||||||
Total revenues
|
3,815.1
|
873.4
|
1,560.5
|
6,249.0
|
||||||||||||
Compensation
|
2,212.3
|
446.9
|
88.2
|
2,747.4
|
||||||||||||
Operating
|
614.0
|
164.8
|
50.3
|
829.1
|
||||||||||||
Reimbursements
|
—
|
136.0
|
—
|
136.0
|
||||||||||||
Cost of revenues from clean coal activities
|
—
|
—
|
1,635.9
|
1,635.9
|
||||||||||||
Interest
|
—
|
—
|
124.1
|
124.1
|
||||||||||||
Depreciation
|
61.8
|
31.1
|
28.2
|
121.1
|
||||||||||||
Amortization
|
261.8
|
2.9
|
—
|
264.7
|
||||||||||||
Change in estimated acquisition earnout payables
|
29.3
|
1.6
|
—
|
30.9
|
||||||||||||
Total expenses
|
3,179.2
|
783.3
|
1,926.7
|
5,889.2
|
||||||||||||
Earnings (loss) before income taxes
|
635.9
|
90.1
|
(366.2
|
) |
359.8
|
|||||||||||
Provision (benefit) for income taxes
|
221.2
|
34.4
|
(412.7
|
) |
(157.1
|
) | ||||||||||
Net earnings
|
414.7
|
55.7
|
46.5
|
516.9
|
||||||||||||
Net earnings attributable to noncontrolling interests
|
7.6
|
—
|
28.0
|
35.6
|
||||||||||||
Net earnings attributable to controlling interests
|
$ |
407.1
|
$ |
55.7
|
$ |
18.5
|
$ |
481.3
|
||||||||
Net foreign exchange loss
|
$ |
(2.0
|
) | $ |
(0.1
|
) | $ |
(1.8
|
) | $ |
(3.9
|
) | ||||
Revenues:
|
|
|
|
|
||||||||||||
United States
|
$ |
2,533.7
|
$ |
745.1
|
$ |
1,560.5
|
$ |
4,839.3
|
||||||||
United Kingdom
|
679.3
|
30.6
|
—
|
709.9
|
||||||||||||
Australia
|
191.1
|
78.2
|
—
|
269.3
|
||||||||||||
Canada
|
149.4
|
4.2
|
—
|
153.6
|
||||||||||||
New Zealand
|
134.4
|
15.3
|
—
|
149.7
|
||||||||||||
Other foreign
|
127.2
|
—
|
—
|
127.2
|
||||||||||||
Total revenues
|
$ |
3,815.1
|
$ |
873.4
|
$ |
1,560.5
|
$ |
6,249.0
|
||||||||
At December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Identifiable assets:
|
|
|
|
|
||||||||||||
United States
|
$ |
5,890.5
|
$ |
572.9
|
$ |
1,766.8
|
$ |
8,230.2
|
||||||||
United Kingdom
|
3,496.2
|
91.3
|
—
|
3,587.5
|
||||||||||||
Australia
|
1,102.9
|
48.9
|
—
|
1,151.8
|
||||||||||||
Canada
|
743.3
|
6.8
|
—
|
750.1
|
||||||||||||
New Zealand
|
709.9
|
18.7
|
—
|
728.6
|
||||||||||||
Other foreign
|
461.5
|
—
|
—
|
461.5
|
||||||||||||
Total identifiable assets
|
$ |
12,404.3
|
$ |
738.6
|
$ |
1,766.8
|
$ |
14,909.7
|
||||||||
Goodwill - net
|
$ |
4,119.2
|
$ |
42.6
|
$ |
3.0
|
$ |
4,164.8
|
||||||||
Amortizable intangible assets - net
|
1,630.6
|
14.0
|
—
|
1,644.6
|
|
Business acquisitions – Accounting for acquisitions
|
|
Description of the Matter
|
As described in Note 3 to the financial statements, Gallagher completed 49 acquisitions during 2019 for total net consideration of $1,791.8 million. From these, those considered significant acquisitions from an audit perspective were (1) the acquisition of all outstanding equity of Jardine Lloyd Thompson Group plc’s global aerospace operations (JLT) for net consideration of $230.7 million and (2) the acquisition of all outstanding equity of Stackhouse Poland Group Limited (SPG) for net consideration of $331.6 million. These acquisitions have been accounted for using the acquisition method for recording business combinations. The excess of the purchase price over the estimated fair value of the tangible net assets acquired at the acquisitions date was allocated to goodwill,
acquired customer
lists,
non-compete
agreements and trade names. Gallagher established these allocations using a third-party valuation firm.
Auditing the accounting for these acquisitions involved a high degree of subjectivity in evaluating management’s estimates. Specifically, the identification and measurement of intangible assets and earnout obligations, as well as the sensitivity of the respective fair values to the underlying significant assumptions. Gallagher, with the assistance of a third-party valuation firm, used the discounted cash flow method to measure the fair value of these intangible assets and earnout obligations. The significant assumptions used to estimate the fair value of the intangible assets and earnout obligations included discount rates, estimated useful lives, revenue growth rates, attrition rates, projected profit margins and the expected rate of return. These assumptions are forward-looking and could be affected by future economic and market conditions.
|
How We Addressed the Matter in Our Audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over Gallagher’s accounting for the acquisitions noted above. For example, we tested controls over the recognition and measurement of assets acquired and consideration paid and payable, and management’s review of significant assumptions used in the determination of the fair value of intangible assets and earnout obligations.
To test the estimated fair value of the acquisitions noted above, our audit procedures were performed with the assistance of our valuation specialists and included, among other things, an evaluation of (1) the identification of intangible assets, such as acquired customer lists, trade names and noncompetition agreements against the terms of the purchase agreements, (2) the fair value measurement of earnout obligations, specifically the terms of the arrangements and the conditions that must be met for the arrangements to become payable, as noted in the agreements; and (3) the significant assumptions, including discount rates, estimated useful lives, revenue growth rates, attrition rates, projected profit margins and the expected rate of return, used in valuing these intangibles. Specifically, when evaluating the noted assumptions, we compared the assumptions to the historical results of the acquired company, past performance of similar acquisitions, Gallagher’s history related to similar acquisitions, and current market conditions.
|
|
|
Brokerage and risk management revenue recognition
|
|
Description of the Matter
|
As described in Note 1 to the financial statements, Gallagher accounts for its brokerage and risk management revenue transactions by deferring a portion of the revenue to reflect delivery of services over the contract period. Total deferred revenue as of December 31, 2019 was $337.1 million and $166.6 million, for the brokerage and risk management segments, respectively, which represents the remaining performance obligations under contracts Gallagher has with its customers.
Auditing the accounting for revenue recognition involved subjectivity and complexity in evaluating management’s estimates, specifically, the impact of significant assumptions, including revenue deferral rates and patterns, on the timing of revenue recognition for Gallagher’s brokerage and risk management revenue. These revenue deferral rates and patterns are used to estimate future service obligations and contain significant subjectivity and variability.
|
|
How We Addressed the Matter in Our Audit
|
We obtained an understanding of Gallagher’s key revenue recognition processes and tested the design and operating effectiveness of revenue recognition controls, including controls over management’s review of the significant revenue deferral assumptions. We also tested controls over the completeness and accuracy of the inputs used in the determination of the estimated deferred revenue, including reconciliation controls.
Our audit procedures over brokerage and risk management revenue included, among other things, an evaluation of Gallagher’s identification of performance obligations against contractual terms, and the significant assumptions used by management in estimating deferred revenue and recognition patterns, including time studies and actuarial projections. Our procedures also included testing the accuracy and completeness of the underlying data used by management in determining such assumptions by comparing a sample of transactions to source documentation and recalculating the application of deferral rates for a sample of product lines and divisions. With the assistance of actuarial specialists, we compared Gallagher’s selection of actuarial methods for risk management revenue to prior periods and those used in the industry.
|
/s/ Ernst & Young LLP
|
Ernst & Young LLP
|
/s/ J. Patrick Gallagher, Jr.
|
|
/s/ Douglas K. Howell
|
||
J. Patrick Gallagher, Jr.
Chairman, President and Chief Executive Officer
|
|
Douglas K. Howell
Chief Financial Officer
|
/s/ Ernst & Young LLP
|
Ernst & Young LLP
|
1. | Consolidated Financial Statements: |
(a) | Consolidated Statement of Earnings for each of the three years in the period ended December 31, 2019. |
(b) | Consolidated Balance Sheet as of December 31, 2019 and 2018. |
(c) | Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 2019. |
(d) | Consolidated Statement of Stockholders’ Equity for each of the three years in the period ended December 31, 2019. |
(e) | Notes to Consolidated Financial Statements. |
(f) | Report of Independent Registered Public Accounting Firm on Financial Statements. |
(g) | Management’s Report on Internal Control Over Financial Reporting. |
(h) | Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting. |
2. | Consolidated Financial Statement Schedules required to be filed by Item 8 of this Form: |
(a) | Schedule II - Valuation and Qualifying Accounts. |
3. | Exhibits: |
3.1
|
||||
3.2
|
||||
4.1
|
||||
*10.11
|
||||
*10.12
|
||||
*10.14.1
|
||||
*10.14.2
|
*10.15
|
||||
*10.16
|
||||
*10.16.1
|
||||
*10.17
|
||||
*10.17.1
|
||||
*10.18
|
||||
10.38
|
||||
10.40
|
||||
*10.42.1
|
||||
*10.42.2
|
||||
*10.42.3
|
||||
*10.42.4
|
||||
*10.42.5
|
||||
*10.43
|
||||
*10.43.1
|
||||
*10.43.2
|
||||
*10.44
|
||||
*10.45
|
*10.47
|
||||
*10.48
|
||||
21.1
|
||||
23.1
|
||||
24.1
|
||||
31.1
|
||||
31.2
|
||||
32.1
|
||||
32.2
|
||||
101.INS
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|||
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document.
|
|||
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
|||
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document.
|
|||
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
|
|||
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.
|
|||
104
|
The cover page from the Company’s Annual Report on Form
10-K
for the year ended December 31, 2019, formatted in Inline XBRL (included as Exhibit 101).
|
* |
Such exhibit is a management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to item 601 of Regulation
S-K.
|
Arthur J. Gallagher & Co.
|
||
|
|
|
By
|
|
/s/ J. Patrick Gallagher, Jr.
|
|
|
J. Patrick Gallagher, Jr.
|
|
|
Chairman, President and Chief Executive Officer
|
*By:
|
|
/
s
/
Walter D. Bay
|
|
|
Walter D. Bay, Attorney-in-Fact
|
|
Balance
at Beginning of Year |
|
|
Amounts
Recorded in Earnings |
|
|
Adjustments
|
|
|
Balance
at End of Year |
|
|||||
|
(In millions)
|
|||||||||||||||
Year ended December 31, 2019
|
|
|
|
|
||||||||||||
Allowance for doubtful accounts
|
$ |
10.0
|
$ |
4.2
|
$ |
(5.5
)
|
(1) | $ |
8.7
|
|||||||
Allowance for estimated policy cancellations
|
7.8
|
0.5
|
—
|
(2) |
8.3
|
|||||||||||
Valuation allowance for deferred tax assets
|
67.4
|
13.1
|
—
|
80.5
|
||||||||||||
Accumulated amortization of expiration lists, noncompete agreements and trade names
|
1,750.4
|
334.0
|
3.1
|
(3) |
2,087.5
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2018
|
|
|
|
|
||||||||||||
Allowance for doubtful accounts
|
$ |
13.5
|
$ |
5.8
|
$ |
(9.3
)
|
(1) | $ |
10.0
|
|||||||
Allowance for estimated policy cancellations
|
7.4
|
(1.2
|
) |
1.6
|
(2) |
7.8
|
||||||||||
Valuation allowance for deferred tax assets
|
79.1
|
(11.7
|
) |
—
|
67.4
|
|||||||||||
Accumulated amortization of expiration lists, noncompete agreements and trade names
|
1,490.7
|
291.3
|
(31.6
)
|
(3) |
1,750.4
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017
|
|
|
|
|
||||||||||||
Allowance for doubtful accounts
|
$ |
12.8
|
$ |
5.4
|
$ |
(4.7
)
|
(1) | $ |
13.5
|
|||||||
Allowance for estimated policy cancellations
|
7.1
|
2.1
|
(1.8
)
|
(2) |
7.4
|
|||||||||||
Valuation allowance for deferred tax assets
|
66.8
|
12.3
|
—
|
79.1
|
||||||||||||
Accumulated amortization of expiration lists, noncompete agreements and trade names
|
1,203.6
|
264.7
|
22.4
|
(3) |
1,490.7
|
(1) | Net activity of bad debt write offs and recoveries and acquired businesses. |
(2) | Additions to allowance related to acquired businesses. |
(3) |
Elimination of fully amortized expiration lists,
non-compete
agreements and trade names, intangible asset/amortization reclassifications and disposal of acquired businesses.
|
Exhibit 4.1
DESCRIPTION OF THE REGISTRANTS SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Arthur J. Gallagher & Co. (the Company) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the Exchange Act): our common stock, par value $1.00 per share (the Common Stock).
DESCRIPTION OF COMMON STOCK
The following summary description sets forth some of the general terms and provisions of the Common Stock. Because this is a summary description, it does not contain all of the information that may be important to you. For a more detailed description of the Common Stock, you should refer to the provisions of our Amended and Restated Certificate of Incorporation (the Certificate of Incorporation) and our Amended and Restated By-Laws (the By-Laws), each of which is an exhibit to the Annual Report on Form 10-K to which this description is an exhibit.
General
Under the Certificate of Incorporation, the Company is authorized to issue up to 400,000,000 shares of Common Stock with par value of $1.00 per share and up to 1,000,000 shares of preferred stock with no par value per share (the Preferred Stock). The shares of Common Stock currently outstanding are fully paid and nonassessable. No shares of Preferred Stock are currently outstanding.
No Preemptive, Redemption or Conversion Rights
The Common Stock is not subject to redemption or retirement, is not subject to sinking fund provisions, does not have any conversion rights and is not subject to call. No holder of our Common Stock has preemptive or other rights to subscribe for additional shares of any class of our stock.
Voting Rights
Each holder of our Common Stock is entitled to one vote for each share of such stock standing in his or her name on the books of the Company. Holders of shares of our Common Stock do not have cumulative voting rights in the election of directors.
Board of Directors
Our Board of Directors is not classified. Our Certificate of Incorporation establishes that the number of directors shall not be less than three nor more than fifteen, with the exact number of directors to be fixed from time to time by, or in the manner provided in, the By-Laws. The By-Laws provide that, within such limits, the number of directors shall be determined by resolution of the Board of Directors.
No Action by Stockholder Consent
The Certificate of Incorporation provides that any action required or permitted to be taken by the stockholders must be taken at a duly called annual or special meeting of the stockholders, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied.
Power to Call Special Stockholder Meeting
Under Delaware law, a special meeting of stockholders may be called by our Board of Directors or by any other person authorized to do so in the Certificate of Incorporation or By-Laws. Pursuant to our By-Laws, special meetings of the stockholders may be called by the Chairman of the Board of Directors or President. In addition, a special meeting of the stockholders shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors.
Dividend Rights
The holders of our Common Stock are entitled to receive such dividends as the Board of Directors may declare from time to time, provided that any and all preferred dividends on our Preferred Stock for the then current quarter have been set aside or paid, and all prior quarterly dividends on our Preferred Stock have been paid in full.
Rights upon Liquidation
Upon our liquidation, the holders of our Common Stock will receive ratably, in proportion to the number of shares held, all of our net assets remaining after the payment of any liquidation preference payable with respect to any Preferred Stock that may then be outstanding.
Forum Selection Clause
Under our By-Laws, unless the Company selects or consents in writing to the selection of an alternative forum, the sole and exclusive forum for making certain types of claims shall be the Delaware Court of Chancery (or, if the Delaware Court of Chancery does not have jurisdiction, another state court or a federal court located within the State of Delaware). This provision applies to internal corporate claims, including claims in the right of the Company: (A) that are based upon a violation of a duty by a current or former director, officer, employee or stockholder in such capacity, or (B) as to which the General Corporation Law of the State of Delaware confers jurisdiction upon the Delaware Court of Chancery. In addition, under our By-Laws, any current or former stockholder (including any current or former beneficial owner) that files any action the subject matter of which is within the scope of our exclusive forum provision in a court other than the Delaware Court of Chancery (or, if the Delaware Court of Chancery does not have jurisdiction, another state court or a federal court located within the State of Delaware), shall be deemed to have consented to the personal jurisdiction of the Delaware Court of Chancery (or, if the Delaware Court of Chancery does not have jurisdiction, another state court or a federal court located within the State of Delaware) in connection with any action brought in any such court to enforce the forum selection provision.
Preferred Stock
Our Preferred Stock may be issued in one or more series, and for such consideration as our Board of Directors may determine. Our Board of Directors is authorized to determine the voting power of each series of Preferred Stock, which may range from no voting power to a maximum of one vote per share. If our Board of Directors does not explicitly provide the voting power of any series of our Preferred Stock in the resolution or resolutions providing for the issuance of such series, the holders of that series of Preferred Stock have no voting power with respect to any matter. Our Board of Directors is also authorized to fix the designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as provided for in the resolution or resolutions providing for the issuance of such shares of Preferred Stock.
Exhibit 10.18
ARTHUR J. GALLAGHER & CO.
DEFERRED CASH PARTICIPATION PLAN
(amended and restated as of September 11, 2018)
Section 1. Purpose. The purpose of this Deferred Cash Participation Plan (the Plan) is to encourage key employees of Arthur J. Gallagher & Co. (together with its Affiliates, the Company) who contribute significantly to the future business success of the Company to remain employed with the Company, to reward such employees for their contributions and loyalty to the Company and to provide for the continuity of management and leadership of the Company.
In the event that a Participants Annual Account is deemed invested in shares of Common Stock, such shares of Common Stock will either be contributed to the trustee of the Trust (as defined below) by the Company, in which case they will be deemed to have been distributed under either the Arthur J. Gallagher & Co. 2014 Long-Term Incentive Plan, as amended from time to time, or Arthur J. Gallagher & Co. 2017 Long-Term Incentive Plan, as amended from time or time, or any successor plan adopted by the Company and approved by its stockholders (the LTIP), and will count against the limit on the number of shares of Common Stock available for distribution thereunder, or such shares shall have been purchased by the trustee of the Trust on the open market or in privately negotiated transactions, as a result of an irrevocable election by the Participant, and shall not be deemed to have been distributed under the LTIP.
Section 2. Definitions. For purposes of the Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following meanings:
(a) Administrator shall mean the Companys Chief Executive Officer, General Counsel or Chief Human Resources Officer.
(b) Affiliate shall mean any corporation, trade or business which is treated as a single employer with the Company under Sections 414(b) or 414(c) of the Code.
(c) Annual Account shall mean a hypothetical, bookkeeping account established in the name of each Participant and maintained by the Company or its designated agent or third-party administrator to reflect the Participants Annual Discretionary Allocation for a year, as adjusted to reflect all applicable earnings, other adjustments and any prior withdrawals and distributions.
(d) Award Date shall mean the date that an Annual Discretionary Allocation is credited to a Participants Annual Account under Section 4(b).
(e) Annual Discretionary Allocation shall mean the aggregate amount credited by the Company to a Participants Annual Account in respect of a particular year under Section 4(b).
(f) Annual Distribution Form shall mean the written or electronic form required by the Administrator to be executed by a Participant with respect to a distribution election under Section 5 for a given year.
(g) Award Notice shall mean the forms, documents or materials concerning the terms of any Annual Discretionary Allocation.
(h) Change in Control shall have the meaning given to such term under the LTIP.
(i) Code shall mean the Internal Revenue Code of 1986, as it may be amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder.
(j) Common Stock shall mean shares of the Companys common stock, par value $1.00 per share.
(k) Disabled or Disability shall mean that a Participant is: (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company; or (iii) determined to be totally disabled by the Social Security Administration.
(l) ERISA shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder.
(m) Participant shall mean any eligible employee: (i) who is in a classification of employees designated by the Administrator to participate in the Plan or who is otherwise selected by the Administrator to participate in the Plan; (ii) who is credited with an Annual Discretionary Allocation; (iii) who commences participation in the Plan, and (iv) whose participation in the Plan has not terminated.
(n) Section 409A shall mean Section 409A of the Code, and the Treasury Regulations promulgated and other official guidance issued thereunder.
(o) Separation from Service shall mean a separation from service as defined under Section 409A, as determined in accordance with the Companys Policy Regarding Section 409A Compliance.
Section 3. Trust and Trust Funding.
(a) Trust. Subject to the limitations, if any, imposed under applicable law, the Company may establish a trust to fund all or a portion of benefits under the Plan (the Trust). The Trust is intended to be a grantor trust under the Code and the establishment of the Trust or the utilization of the Trust for Plan benefits, as applicable, is not intended to cause any Participant to realize current income on amounts contributed thereto, and the Trust shall be so interpreted. Any such funds will be subject to the claims of all bankruptcy or insolvency creditors of the Company as provided in the Trust agreement. No Participant will have any vested interest or secured or preferred position with respect to such funds or have any claims against the Company hereunder except as a general creditor.
2
(b) Trust Funding. Prior to December 31 of each year, to the extent permissible under Section 409A, the Company may contribute cash or shares of Common Stock to the Trust, in an amount approved by the Administrator (such contribution, the Annual Funding). Alternatively, the Company may contribute cash to the Trust and instruct the trustee to acquire a specified number of shares or a specified value of shares of Common Stock on the open market or in privately negotiated transactions. The Company shall exercise all rights of ownership, including voting control, of the Trust assets prior to distribution under the Plan.
(c) Interrelationship of the Plan and the Trust. The provisions of the Plan shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Company, the Participants and the creditors of the Company to the assets of the Trust.
Section 4. Annual Discretionary Allocations.
(a) Selection. For each year, the Administrator may select from the group of management or highly compensated employees, in its sole discretion, the employees who shall be eligible to receive an Annual Discretionary Allocation in respect of that year. The Administrators selection of an employee to receive an Annual Discretionary Allocation in respect of a particular year will not entitle that employee to receive an Annual Discretionary Allocation for any subsequent year, unless the employee is again selected by the Administrator to receive an Annual Discretionary Allocation for such subsequent year.
(b) Crediting. A Participant may be credited with one or more Annual Discretionary Allocations in respect of any year, expressed as either a flat dollar amount or as a percentage of the Annual Funding, or any combination thereof. A separate Annual Account shall be established and maintained for each year. The Administrator shall have sole discretion to determine in respect of each year and each Participant: (i) whether any Annual Discretionary Allocation shall be made; (ii) the Participant(s) who shall be entitled to such Annual Discretionary Allocation; (iii) the amount of such Annual Discretionary Allocation; (iv) the Award Date(s) upon which any portion of such Annual Discretionary Allocation shall be credited to each Participants Annual Account; (v) the hypothetical investments that shall apply to such Annual Discretionary Allocation; and (vi) any other terms and conditions applicable to such Annual Discretionary Allocation.
(c) Vesting. Unless otherwise set forth in the applicable Award Notice, a Participant shall become vested in his or her Annual Account upon the earliest to occur of the following dates, provided that the Participant remains continuously employed by the Company from the Award Date through each such date (each, a Vesting Date):
(i) (A) for Annual Accounts with an Award Date before March 11, 2015, the April 30 following the 13-month anniversary of the Award Date, and (B) for Annual Accounts with an Award Date on or after March 11, 2015, on the March 31 of the year that includes the five-year anniversary of the Award Date (e.g., for an Annual Account with an Award Date of April 1, 2015, the Vesting Date would be March 31, 2020) or such other Vesting Date as specified by the Administrator at the time the Annual Discretionary Allocation is made;
3
(ii) the date of the Participants death;
(iii) the date of a Separation from Service because of Disability; or
(iv) the date upon which the Company undergoes a Change in Control.
(d) Earnings. The Administrator shall establish from time to time the hypothetical investment(s) made available under the Plan, which may include investments in Common Stock, from time to time for purposes of valuing Annual Accounts (each, an Investment). At any time, the Administrator may, in its discretion, add one or more additional Investments under the Plan. In addition, the Administrator, in its sole discretion, may discontinue any Investment at any time, and provide for the portions of Participants Annual Accounts designated to the discontinued Investment to be reallocated to another Investment. While a Participants Account does not represent the Participants ownership of, or any ownership interest in, any particular assets, the Participants Annual Accounts shall be adjusted in accordance with the Investment(s), subject to the conditions and procedures set forth herein or established by the Administrator from time to time. Any notional cash earnings generated under an Investment (such as interest and cash dividends and distributions) shall, at the Administrators sole discretion, either be deemed to be reinvested in that Investment or reinvested in one or more other Investment(s) designated by the Administrator. All notional acquisitions and dispositions of Investments under a Participants Annual Accounts shall be deemed to occur at such times as the Administrator shall determine to be administratively feasible in its sole discretion and the Participants Annual Accounts shall be adjusted accordingly. In addition, a Participants Annual Accounts may be adjusted from time to time, in accordance with procedures and practices established by the Administrator, in its sole discretion, to reflect any notional transactional costs and other fees and expenses relating to the deemed investment, disposition or carrying of any Investment for the Participants Annual Accounts.
Section 5. Distributions.
(a) Initial Distribution Elections.
(i) General Rule. To the extent that the Administrator permits a Participant to make a distribution election, not later than the thirtieth (30th) day immediately following the Award Date, or such earlier date specified by the Administrator, a Participant shall make a distribution election by executing an Annual Distribution Form specifying both the Distribution Date and the Payment Form (each, as defined below) for the Annual Discretionary Allocation granted on such Award Date. The Participant may only change such time and form of payment of an Annual Discretionary Allocation in compliance with Section 5(b).
(ii) Distribution Date. Subject to earlier distribution under Section 6, a Participant shall elect to have their Annual Account be paid, or commence to be paid, upon (the Distribution Date):
(A) the six-month anniversary of the date on which such Participant undergoes a Separation from Service with the Company; or
4
(B) a specified year no earlier than the calendar year that includes the Vesting Date.
(iii) Payment Form. Subject to distribution in the form specified by Section 6, a Participant shall elect to have their Annual Account be paid, or commence to be paid, in the form of (the Payment Form):
(A) a lump-sum payment;
(B) five substantially equal annual installment payments commencing on the Distribution Date, and due on the next four anniversaries of the Distribution Date; or
(C) ten substantially equal annual installment payments commencing on the Distribution Date, and due on the next nine anniversaries of the Distribution Date.
(iv) Default Distribution Date and Payment Form. Unless otherwise set forth in the applicable Award Notice, in the event that the Administrator does not permit a Participant to make a distribution election, or an election by the Participant pursuant to the terms of this Section 5 was not permitted under Section 409A, or the Participant fails to make a distribution election within the permissible period under the Plan and Section 409A, then the Participants Annual Discretionary Allocation shall be deemed to have a Distribution Date of the calendar year that includes the Vesting Date and a Payment Form of a lump sum.
(b) Subsequent Distribution Elections. To the extent that the Administrator permits a Participant to make a distribution election and subject to any restrictions that may be imposed by the Administrator, a Participant may change his or her distribution election at any time, and from time to time; provided, however, that:
(i) the election may not take effect until the first anniversary of the date on which such election change is submitted to the Administrator on a form prescribed by the Company or its designated agent or third-party administrator;
(ii) no such election shall be effective if the Participant is previously scheduled to receive distributions under the Plan within one year following the date on which such election change is submitted to the Administrator; and
(iii) such election provides for a Distribution Date that is at least five years later than the previous Distribution Date, in accordance with Section 409A.
(c) Distribution Timing. In the event an Annual Discretionary Allocation is to be distributed in a lump-sum payment, such payment shall be made by the end of the calendar year in which the Distribution Date occurs, or, if later, the 15th day of the third month following the Distribution Date. In the event an Annual Discretionary Allocation is to be distributed in
5
annual installment payments: the first such installment payment shall be made by the end of the calendar year in which the Distribution Date occurs, or, if later, the 15th day of the third month following the Distribution Date; and each subsequent installment payment shall be made annually thereafter. The amount of each installment payment shall be equal to the value of the Participants Annual Account divided by the number of installments remaining to be paid. Under no circumstances will the Participant be permitted to directly or indirectly designate the year of payment. For an Annual Discretionary Allocation with a Distribution Date of the calendar year that includes the Vesting Date, payment shall not be made earlier than the Vesting Date in such calendar year.
Notwithstanding anything to the contrary in Section 5(a) or Section 5(b), any portion of an Annual Account that would be paid following the date that a Participant attains age 75 (the 75th Birthday) shall, subject to compliance with the six-month delay in Section 11, be paid in the form of a lump-sum in the month following the Participants 75th Birthday.
(d) Medium of Payment. Subject to the limitations, if any, imposed under applicable law, the portion of each Annual Account, if any, that is deemed invested in shares of Common Stock shall be distributed in shares of unrestricted Common Stock, which may have been purchased by the trustee of the Trust on the open market or in privately negotiated transactions, and all other distributions under the Plan shall be paid in cash.
(e) Effect of Payment. The full payment of the applicable benefit under the provisions of the Plan shall completely discharge all obligations to a Participant under the Plan.
Section 6. Effects of Certain Events.
(a) Death. In the event a Participant dies before such Participants distribution has begun or has been paid in full, any unpaid portion of such Participants vested Annual Accounts under the Plan shall be paid to the beneficiary designated by the Participant pursuant to Section 19, or if no beneficiary has been designated, to the Participants estate. Such unpaid portion shall be paid in a lump sum by the end of the calendar year in which the Participant died or, if later, the 15th day of the third month following the date of the Participants death. Under no circumstances will the beneficiary be permitted to directly or indirectly designate the year of payment.
(b) Disability. In the event that a Participant becomes Disabled before such Participants distribution has begun or has been paid in full, any unpaid portion of such Participants vested Annual Accounts under the Plan shall be paid to the Participant. Such unpaid portion shall be paid in a lump sum as soon as administratively practicable following the six-month anniversary of the date on which such Participant undergoes a Separation from Service with the Company, but in no event later than 90 days thereafter.
(c) Change in Control. In the event of a Change in Control of the Company before a Participants distribution has begun or has been paid in full, any unpaid portion of a Participants vested Annual Accounts under the Plan shall be paid to the Participant. Such unpaid portion shall be paid in a lump sum as soon as administratively practicable following the occurrence of a Change in Control, but in no event later than 90 days thereafter.
6
Section 7. Forfeitures.
(a) Termination Prior to Vesting Date. In the event a Participants employment with the Company terminates prior to such Participants Vesting Date, then the Participants unvested Annual Accounts under the Plan shall be forfeited.
(b) Violation of Restrictive Covenants. In the event a Participant violates the provisions of Section 8 prior to the Participants Distribution Date or the date(s) any payment are due after a Participants Distribution Date, then the unpaid portion of the Participants Annual Accounts under the Plan shall be forfeited.
Section 8. Restrictive Covenants; Clawback.
(a) If, at any time before ten years after the final payment due to the Participant under the Plan, the Participant, in the sole determination of the management of the Company, engages in any activity in competition with any activity of the Company, or inimical, contrary or harmful to the interests of the Company, including, but not limited to: (1) conduct related to his or her employment for which either criminal or civil penalties against him may be sought, (2) violation of Company policies, including, without limitation, the Companys Global Standards of Business Conduct and Insider Trading Policy, (3) directly or indirectly, soliciting, placing, accepting, aiding, counseling or consulting in the renewal, discontinuance or replacement of any insurance or reinsurance by, or handling self-insurance programs, insurance claims or other insurance administrative functions (insurance services) for, any existing Company account or any actively solicited prospective account of the Company for which the Participant performed any of the foregoing functions during the two-year period immediately preceding such termination or providing any employee benefit brokerage, consulting, or administration services, in the areas of group insurance, defined benefit and defined contribution pension plans, individual life, disability and capital accumulation products, investment advisory services and all other employee benefit areas (benefit services) the Company is involved with, for any existing Company account or any actively solicited prospective account of the Company for which the Participant performed any of the foregoing functions during the two-year period immediately preceding such termination or, if the Participant has not terminated employment, the date of the prohibited activity (the term Company account as used in this Section shall be construed broadly to include all users of insurance services or benefit services including commercial and individual consumers, risk managers, carriers, agents and other insurance intermediaries), (4) the rendering of services for any organization which is competitive with the Company, (5) employing or recruiting any current or former employee of the Company, (6) disclosing or misusing any confidential information or material concerning the Company, or (7) participating in a hostile takeover attempt of the Company, then the Participants Annual Accounts shall be forfeited effective as of the date on which the Participant enters into such activity, unless terminated sooner by operation of another term or condition of the Plan, and any payments made from a Participants Annual Accounts to such Participant from and after the Distribution Date shall be repaid by the Participant to the Company. Such repayment shall include interest measured from the first date the Participant engaged in any of the prohibited activities set forth above at the highest rate allowable under Delaware law.
7
(b) By participating in the Plan, each Participant acknowledges that the Participants engaging in activities and behavior in violation of Section 8(a) above will result in a loss to the Company which cannot reasonably or adequately be compensated in damages in an action at law, that a breach of Section 8(a) will result in irreparable and continuing harm to the Company and that therefore, in addition to and cumulative with any other remedy which the Company may have at law or in equity, the Company shall be entitled to injunctive relief for a breach of Section 8(a) by the Participant. By participating in the Plan each Participant acknowledges and agrees that the requirement in Section 8(a) above that Participant disgorge and pay over to the Company any payments received from the Participants Annual Accounts by such Participant is not a provision for liquidated damages. The Participant agrees to pay any and all costs and expenses, including reasonable attorneys fees, incurred by the Company in enforcing any breach of any covenant in the Plan.
(c) To the extent permitted by Section 409A, by participating in the Plan, each Participant consents to deductions from any amounts the Company owes the Participant from time to time (including amounts owed as wages or other compensation, fringe benefits or vacation pay, as well as any other amounts owed to the Participant by the Company) to the extent of the amounts the Participant owes the Company under Section 8(a) above. Whether or not the Company elects to make any set-off in whole or in part, if the Company does not recover by means of setoff the full amount owed, calculated as set forth above, the Participant agrees to pay immediately the unpaid balance to the Company.
Section 9. Adjustment of Shares. The number of shares of Common Stock allocated to each Participants Annual Accounts shall be appropriately adjusted, in the sole discretion of the Administrator, to reflect any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, and the reinvestment of cash dividends.
Section 10. Amendment or Termination of the Plan.
(a) Plan Amendment. The Company reserves the right to amend the Plan at any time and for any reason, including such amendments as are necessary to comply with the requirements of Section 409A, by action of the Administrator. The Company also reserves the right to suspend the Plan at any time, for any given calendar year or otherwise; provided, however, that in the event of a suspension of the Plan, the Participants Annual Accounts shall remain payable in accordance with the Participants payment elections and the terms of the Plan.
(b) Plan Termination. The Company has no obligation to maintain the Plan for any length of time and may terminate the Plan at any time in a manner that complies with the requirements of Section 409A. The Plan may be terminated, resulting in an acceleration of the time and form of payment under the Plan only as permitted by Treasury Regulation Section 1.409A-3(j)(4)(ix), which generally permits:
(i) Change in Control Event. In the event of a Change in Control of the Company, the Plan may be terminated and liquidated pursuant to irrevocable action taken during the period commencing 30 days before and ending 12 months after the Change in Control, but only if: (A) all arrangements sponsored by the Company that would be aggregated with the
8
Plan pursuant to Treasury Regulation Section 1.409A-1(c) are terminated and liquidated with respect to every participant who experienced such Change in Control; and (B) all amounts payable under such single plan for such participants are paid within 12 months after the irrevocable action is taken.
(ii) Liquidation and Dissolution of the Company. In the event of a complete liquidation and dissolution of the Company, the Company shall terminate the Plan within 12 months of the liquidation and dissolution of the Company and the value of Participants Annual Accounts under the Plan shall be determined as of that date and shall be distributed to the Participants or their beneficiaries; provided, however, that the benefits payable under the Plan are included in the gross income of the Participants or their beneficiaries in the latest of: (A) the calendar year in which the Plan termination occurs; (B) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (C) the first calendar year in which the payment is administratively practicable.
(iii) Discretionary Termination. The Company may, at its sole and absolute discretion, determine to terminate the Plan, provided that: (A) the termination does not occur proximate to a downturn in the financial health of the Company, (B) all arrangements sponsored by the Company that would be aggregated with the Plan pursuant to Treasury Regulation Section 1.409A-1(c) if the same Participant participated in all of the arrangements are terminated; (C) no payments other than the payments that would be payable under the terms of the arrangements if the termination had not occurred are made within 12 months of the termination of the arrangements; (D) all payments are made within 24 months of the termination of the arrangements; and (E) the Company does not adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulation Section 1.409A-1(c) if the same Participant participated in both arrangements, at any time within three years following the date of termination of the arrangements.
(c) Other Permissible Accelerations.
(i) Section 409A Failure. An acceleration of the time of payment under the Plan to a Participant shall be permitted at any time the Plan fails to meet the requirements of Section 409A; provided, however, that the payment made based upon the acceleration for the failure to meet the requirements of Section 409A may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Section 409A.
(ii) Event of Taxation. If, for any reason, all or any portion of a Participants Annual Accounts under the Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Administrator before a Change in Control, or the trustee after a Change in Control, for a distribution of the state, local or foreign taxes owed on that portion of his or her benefit that has become taxable. Upon the grant of such a petition, which grant shall not be unreasonably withheld, the Company shall, to the extent permissible under Section 409A, distribute to the Participant immediately available funds in an amount equal to the state, local and foreign taxes owed on the portion of the Participants Annual Accounts that have become taxable. If the petition is granted, the tax liability distribution shall be made within 90 days of the date that the Participants Annual Accounts under the Plan became taxable. Such a distribution shall affect and reduce the benefits to be paid to the Participant under the Plan.
9
This Section shall be construed and administered in a manner consistent with Section 409A and Treasury Regulation Section 1.409A-3(j)(4) or the corresponding provision in future guidance issued by the Internal Revenue Service or the Treasury.
Section 11. Compliance with Section 409A. It is intended that any amounts payable under the Plan will comply with Section 409A so as not to subject any Participant to the payment of any interest and tax penalty which may be imposed under Section 409A, and the Plan shall be interpreted accordingly; provided, however, that the Company shall not be responsible for any such interest and tax penalties. To the extent permissible under Section 409A, the timing of the payments or benefits hereunder may be modified to so comply with Section 409A. Notwithstanding any Plan provision to the contrary, to the extent any Participant is entitled to receive a payment under the Plan upon such Participants Separation from Service, such payment shall be made on the date that is six months after the date of such Separation from Service.
Section 12. Consent to Transfer Personal Data. By participating in the Plan, a Participant voluntarily acknowledges and consents to the collection, use, processing and transfer of personal data as described in this Section. Participants are not obliged to consent to such collection, use, processing and transfer of personal data. However, failure to provide the consent may affect the Participants ability to participate in the Plan. The Company holds certain personal information about the Participant, that may include his or her name, home address and telephone number, date of birth, social security number or other employee identification number, salary grade, hire data, salary, nationality, job title, any shares of stock held in the Company, or details of all awards under the Plan, for the purpose of managing and administering the Plan (Data). The Company will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of Participants participation in the Plan, and the Company may further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. These recipients may be located throughout the world, including the United States. Each Participant authorizes them to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Participants participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding of shares of stock on the Participants behalf to a broker or other third party with whom the Participant may elect to deposit any shares of stock acquired pursuant to the Plan. A Participant may, at any time, review Data, require any necessary amendments to it or withdraw the consents herein in writing by contacting the Company; however, withdrawing consent may affect the Participants ability to participate in the Plan.
Section 13. Administration. This Plan shall be administered by the Administrator. The Administrator shall, subject to the terms of the Plan, interpret the Plan and the application thereof, establish rules and regulations it deems necessary or desirable for the administration of the Plan and may impose, incidental to the grant of an award, conditions with respect to any award. All such interpretations, rules, regulations and conditions shall be final, binding and conclusive. Subject to applicable law, the Administrator may delegate some or all of its power and authority hereunder as the Administrator deems appropriate. In the event that a Participant
10
in the Plan is or becomes subject to Section 16 of the Securities Exchange Act of 1934, as amended, then all decisions relating to selection for participation in the Plan or decisions concerning the timing or amount of an award to such an officer or other person shall be made by the Compensation Committee of the Board of Directors of the Company. The Administrator and any other executive officer to whom the Administrator delegates any of its power and authority hereunder, shall not be liable for any act, omission, interpretation, construction or determination made in connection with the Plan in good faith, and the Administrator and any other executive officer to whom the Administrator delegates any of its power and authority hereunder shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys fees) arising therefrom to the full extent permitted by law, except as otherwise may be provided in the Companys Certificate of Incorporation and/or By-laws, and under any directors and officers liability insurance that may be in effect from time to time.
Section 14. Non-Transferability of Annual Accounts. No Annual Account shall be transferable other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company. Except to the extent permitted by the preceding sentence, no Annual Account may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any such Account, such Annual Account and all rights thereunder shall immediately become null and void.
Section 15. Withholding. The Company shall have the right to withhold or require payment by each Participant of any foreign, federal, state, local or other taxes or social security liabilities which may be required to be withheld or paid in connection with the vesting or distribution of such Participants Annual Accounts.
Section 16. Restrictions on Shares. Each award made hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of the shares of Common Stock subject to such award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares pursuant to an award granted under the Plan, no shares shall be so delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates evidencing shares of Common Stock delivered pursuant to the Plan bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder.
Section 17. No Right of Participation or Employment. No person shall have any right to participate in the Plan. Neither the Plan nor any award made hereunder shall confer upon any person any right to continued employment by the Company or affect in any manner the right of the Company to terminate the employment of any person at any time without liability hereunder.
11
Section 18. No Rights as Stockholder. No person shall have any right as a stockholder of the Company with respect to any shares of Common Stock or other equity security of the Company which is subject to the Plan unless and until such person becomes a stockholder of record with respect to such shares of Common Stock or equity security.
Section 19. Designation of Beneficiary. If permitted by the Company, a Participant may file with the Company a written designation of one or more persons as such Participants beneficiary or beneficiaries (both primary and contingent) in the event of the Participants death. Each beneficiary designation shall become effective only when filed in writing with the Company during the Participants lifetime on a form prescribed by the Company or its designated agent or third-party administrator. The spouse of a married Participant domiciled in a community property jurisdiction shall join in any designation of a beneficiary other than such spouse. The filing of a new beneficiary designation shall cancel all previously filed beneficiary designations.
Section 20. Governing Law. This Plan and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.
Section 21. Claims Procedure. The claims procedure of the Arthur J. Gallagher & Co. Employees 401(k) Savings and Thrift Plan shall apply to the Plan.
Section 22. Electronic Documents Permitted. Subject to applicable law, distribution election forms and other forms or documents may be in electronic format or made available through means of online enrollment or other electronic transmission.
Section 23. Status of Plan. The Plan is intended to be: (i) a plan that is not qualified within the meaning of Section 401(a) of the Code and (ii) a plan that is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. The Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent. All Annual Accounts and all credits and other adjustments to such Annual Accounts shall be bookkeeping entries only and shall be utilized solely as a device for the measurement and determination of amounts to be paid under the Plan.
Section 24. Sub-plans. Without amending this Plan, the Administrator and/or the Committee may establish one or more sub-plans and grant awards under such sub-plans with terms and conditions different from those specified in this Plan as may in their judgment be necessary or desirable (including, but not limited to, the Vesting Dates, or terms and conditions necessary to comply with provisions of laws in other countries or jurisdictions in which the Company operates or has employees), but consistent with the purposes of this Plan; provided, however, that such terms will comply with the requirements of Section 409A if the Participant is subject to U.S. federal income taxation.
12
Exhibit 21.1
Subsidiaries of Arthur J. Gallagher & Co.
In the following list of subsidiaries of Arthur J. Gallagher & Co., those companies that are indented represent subsidiaries of the corporation under which they are indented. Except for directors qualifying shares, 100% of the voting stock of each of the subsidiaries listed below, other than those indicated by footnote, is owned of record or beneficially by its indicated parent.
Name |
State or Other
Incorporation |
|
Arthur J. Gallagher & Co. |
Delaware | |
AJG Meadows, LLC |
Delaware | |
Gallagher Risk Group LLC |
Delaware | |
Gallagher (Bermuda) Insurance Solutions Ltd. |
Bermuda | |
Fortress Insurance, LLC |
Delaware | |
RIL Administrators (Guernsey) Ltd. |
Guernsey | |
Sentinel Indemnity, LLC |
Delaware | |
Artex Risk Solutions, Inc. |
Anguilla | |
Protected Insurance Company |
Bermuda | |
Arthur J. Gallagher Latin America, LLC |
Illinois | |
JPGAC, LLC |
Delaware | |
Bollinger, Inc. |
New Jersey | |
Bollinger Insurance Services, Inc. |
Delaware | |
Risk Placement Services, Inc. |
Illinois | |
First Premium, Inc. |
Louisiana | |
Premium Finance Corporation |
Wisconsin | |
American Freedom Carriers, Inc. |
Indiana | |
College and University Scholastic Excess Risk Purchasing Group, LLC |
California | |
Consolidated Casualty Specialties, LLC |
Delaware | |
Pronto Holdco, Inc. |
Delaware | |
Pronto Premium Finance, LLC |
Texas | |
Pronto Franchise, LLC |
Texas | |
Pronto Insurance Agency of Laredo, Inc. |
Texas | |
Pronto General Agency Management, LLC |
Texas | |
Pronto General Agency, Ltd |
Texas | |
Pronto Holding Florida, LLC |
Delaware | |
Pronto Florida General Agency, LLC |
Delaware | |
Pronto Florida Claims, LLC |
Delaware | |
Pronto Holding California LLC |
Delaware | |
Premier Insurance Services Inc. |
California | |
Big Savings Insurance Agency, Inc. |
California | |
Pronto California General Agency, LLC |
Delaware | |
Pronto California Agency, LLC |
Delaware | |
AJG Financial Services, LLC |
Delaware | |
Arthur J. Gallagher Service Company, LLC |
Delaware | |
Gallagher Corporate Services, LLC |
Delaware | |
Arthur J. Gallagher & Co. (Illinois) |
Illinois | |
Gallagher Mauritius Holdings |
Mauritius | |
Gallagher Service Center LLP |
India | |
Arthur J. Gallagher (U.S.) LLC |
Delaware | |
Arthur J. Gallagher Brokerage & Risk Management Services, LLC |
Delaware | |
Arthur J. Gallagher Risk Management Services, Inc. |
Illinois | |
AJG Coal, LLC |
Delaware | |
HPF Investments, LLC |
Delaware | |
Gallagher Clean Energy, LLC |
Delaware | |
Gallagher Holdings Bermuda Company Limited |
Bermuda | |
MG Advanced Coal Technologies-1, LLC |
Delaware | |
Advanced Energy Systems, LLC (1) |
Delaware | |
AJG RCF LLC |
Delaware | |
Allied Claims Administration, Inc. (2) |
Georgia | |
Housing Authorities Services Risk Purchasing Group, LLC |
Louisiana | |
AJGRMS of Louisiana, LLC |
Louisiana | |
Gallagher Mississippi Brokerage, LLC |
Mississippi | |
Healthcare Professionals Purchasing Group, LLC |
Delaware | |
Professional Agents Risk Purchasing Group, LLC |
Delaware | |
Protection Plan Association, Inc. |
District of Columbia | |
Insurance Plus Risk Purchasing Group, LLC |
Delaware |
1
Name |
State or Other
Incorporation |
|
Reassurance Holdings, Inc. |
Delaware | |
Velo Holdings Inc. |
Delaware | |
V2V Holdings LLC |
Delaware | |
Carefree Marketing, Inc. |
Illinois | |
Coverdell & Company, Inc. |
Illinois | |
Discount Development Services, L.L.C. |
Illinois | |
Uni-Care, Inc. |
Illinois | |
Memberworks Canada LLC |
Delaware | |
Coverdell Canada Corporation |
Canada | |
Velo ACU LLC |
Delaware | |
FYI Direct, LLC |
Delaware | |
Vertrue LLC |
Delaware | |
Adaptive Marketing LLC |
Delaware | |
FYI Direct Canada Corporation |
Canada | |
Arthur J. Gallagher Risk Management Services (Hawaii), Inc. |
Hawaii | |
Arthur J. Gallagher Risk Management Services of Utah, Inc. |
Utah | |
Arthur J. Gallagher & Co. Insurance Brokers of California, Inc. |
California | |
Charity First Insurance Services, Inc. |
California | |
Arthur J. Gallagher Real Estate Risk Purchasing Group, LLC |
California | |
Arthur J. Gallagher School Risk Purchasing Group, LLC |
California | |
Arthur J. Gallagher Financial Services Professionals Risk Purchasing Group, LLC |
California | |
Nonprofit Insurance Risk Purchasing Group, LLC |
California | |
Gallagher Community Clinic RPG, LLC |
California | |
Artex Risk Solutions, Inc. |
Delaware | |
Copper Mountain Assurance, Inc. |
Utah | |
CMA Solutions, LLC |
Utah | |
Artex Insurance (Tennessee) PCCIC, Inc. |
Tennessee | |
Bluewater Incorporated Cell Insurance Company |
Tennessee | |
Horseshoe Insurance Services Holdings US, Inc. |
Delaware | |
Gallagher Benefit Services, Inc. |
Delaware | |
GBS Retirement Services, Inc. |
New York | |
GBS Insurance and Financial Services, Inc. |
Delaware | |
GBS Administrators, Inc. |
Washington | |
Gallagher Fiduciary Advisors, LLC |
Delaware | |
GBS Specialty Markets, LLC |
Delaware | |
Gallagher Investment Advisors, LLC |
Delaware | |
EHE Holdings, LLC |
Michigan | |
The EHE Group, LLC |
Michigan | |
The EHE Insurance Agency, LLC |
Michigan | |
AHC Digital LLC |
Minnesota | |
Gallagher Bassett Services, Inc., |
Delaware | |
Gallagher Bassett Aires, Inc. |
Illinois | |
MedInsights, Inc. |
Delaware | |
Gallagher Bassett International Ltd. |
England | |
Gallagher Bassett Insurance Services, Ltd. |
England | |
Countrywide Accident Assistance Limited |
England | |
Strata Solicitors Ltd |
England | |
HMG-PCMS Limited |
England | |
Gallagher Bassett Canada Inc. |
Canada | |
Gallagher Bassett Services Pty Ltd. |
Australia | |
Gallagher Bassett Services Workers Compensation Victoria Pty Ltd. |
Australia | |
Gallagher Bassett NZ Pty Ltd. |
New Zealand | |
PT IBS Insurance Broking Service (3) |
Indonesia | |
Arthur J. Gallagher (Bermuda) Holding Partnership (4) |
Bermuda | |
Muf Investments S.a.r.l. (5) |
Luxembourg | |
Arthur J. Gallagher Chile Corredores de Reaseguros, S.A. (6) |
Chile | |
AJG Holding (Chile) SpA. (7) |
Chile | |
Arthur J. Gallagher Corredores de Seguros S.A. (8) |
Chile | |
Arthur J Gallagher (Norway) Holdings AS |
Norway | |
Bergvall Marine A.S. |
Norway | |
Gallagher Colombia (UK) Limited (9) |
England | |
Gallagher RE Colombia Ltda Corredores de Reaseguros SA |
Colombia | |
Gallagher Consulting Ltda |
Colombia | |
Arthur J. Gallagher Corredores de Seguros S.A. (10) |
Colombia | |
Arthur J. Gallagher Peru Corredores de Reaseguros, S.A. (11) |
Peru | |
Arthur J. Gallagher Peru Corredores de Seguros S.A. (12) |
Peru | |
Arthur J. Gallagher Asesoria S.A.C. |
Peru |
2
Name |
State or Other
Incorporation |
|
Pastel Holdings Pty Limited |
Australia | |
GBS (Australia) Holdings Pty Ltd |
Australia | |
Gallagher Benefit Services Pty Ltd |
Australia | |
Complete Financial Balance Pty Ltd |
Australia | |
Finergy Solutions Pty Ltd |
Australia | |
Avantek Pty Ltd |
Australia | |
Personal Advice Services Pty Ltd |
Australia | |
Super Advice Corporate Services Pty Ltd |
Australia | |
Arthur J. Gallagher (Life Solutions) Ltd |
Australia | |
Bellisle Pty Ltd |
Australia | |
Fortress Financial Solutions Pty Ltd |
Australia | |
Blueleaf Consulting Pty Ltd. |
Australia | |
Pastel Purchaser Pty Limited |
Australia | |
Elantis Premium Funding Limited |
Australia | |
OAMPS Limited |
Australia | |
Gallagher Risk Placements Pty Ltd |
Australia | |
Arthur J. Gallagher & Co. (AUS) Ltd |
Australia | |
Strathern Integration Holdco Pty Ltd |
Australia | |
Kingspark Enterprises Pty Ltd |
Australia | |
Instrat Integration Holdco Pty Ltd |
Australia | |
Instrat Insurance Brokers Pty Ltd |
Australia | |
Insure Pty Ltd |
Australia | |
Strathern Insurance Group Pty Ltd |
Australia | |
Strathern Unit Trust |
Australia | |
Strathearn Insurance Brokers (Qld) Trading Trust |
Australia | |
Secure Enterprises Pty Ltd |
Australia | |
Parkstar Enterprises Pty Ltd |
Australia | |
OAMPS Gault Armstrong Pty Ltd |
Australia | |
Gault Armstrong Kemble Pty Ltd |
Australia | |
Gault Armstrong SARL |
New Caledonia | |
Milne Alexander Pty Ltd |
Australia | |
MA Underwriting Pty Ltd |
Australia | |
I-Protect Underwriting Pty Ltd |
Australia | |
Arthur J. Gallagher Australasia Holdings Pty Ltd. |
Australia | |
Pen Underwriting Group Pty. Ltd. |
Australia | |
Arthur J. Gallagher (Aus) Pty Ltd |
Australia | |
InsSync Group Pty Ltd |
Australia | |
Pen Underwriting Pty Ltd |
Australia | |
Pastel Holding (NZ) Company |
New Zealand | |
Pastel Purchaser (NZ) Limited |
New Zealand | |
Mike Henry Insurance Brokers Limited |
New Zealand | |
Mike Henry Insurance Funding Limited |
New Zealand | |
Arthur J. Gallagher Broking (NZ) Limited |
New Zealand | |
Elantis Premium Funding (NZ) Limited |
New Zealand | |
Crombie Lockwood (NZ) Limited |
New Zealand | |
Fraser MacAndrew Ryan Limited |
New Zealand | |
Monument Premium Funding Limited |
New Zealand | |
Monument Insurance (NZ) Limited |
New Zealand | |
Offshore Market Placements Limited |
New Zealand | |
PhilPacific Insurance Brokers and Managers, Inc. (13) |
Philippines | |
Gallagher International Holdings (US) Inc. |
Delaware | |
GGB Finance 4 Limited |
England | |
Gallagher International Cash Management s.r.l. |
Barbados | |
Arthur J. Gallagher (Singapore) Pte Ltd |
Singapore | |
IBS Reinsurance Singapore Pte Ltd |
Singapore | |
Hesse & Partner, AG (14) |
Switzerland | |
Verbag AG. |
Switzerland | |
Hesse Consulting Gmbh (14) |
Switzerland | |
Nordic Försäkring & Riskhantering AB |
Sweden | |
Brim AB |
Sweden | |
SMERI AB |
Sweden | |
Proinova AB |
Sweden | |
Proinova Agency AB |
Sweden | |
Gallagher Canada Acquisition Corporation |
Canada | |
AJG North America ULC |
Canada | |
Gallagher Energy Risk Services Inc. |
Canada | |
Arthur J. Gallagher Group Quebec ULC |
Canada |
3
Name |
State or Other
Incorporation |
|
Arthur J. Gallagher Canada Limited (15) |
Canada | |
Cintran Claims Canada Limited |
Canada | |
Pen Underwriting Canada Limited |
Canada | |
GPL Assurance Inc. |
Canada | |
Palmer Atlantic Insurance Ltd |
Canada | |
Palmer Atlantic Risk Services Ltd. |
Canada | |
Jones Brown Group Inc. |
Canada | |
Jones Brown Inc. (16) |
Canada | |
Jones Brown Insurance Solutions Inc. |
Canada | |
Pearson Dunn Insurance Inc. |
Canada | |
Game Day Insurance Inc. |
Canada | |
Gallagher Benefit Services (Canada) Group Inc. |
Canada | |
Keyser Benefits Corp. |
Canada | |
2235158 Alberta Limited |
Canada | |
CJM Solutions Inc. |
Canada | |
Sinclair Billard and Weld Limited |
Canada | |
EHS Holdings Limited |
Canada | |
Tyloma Holdings Limited |
Canada | |
Gallagher Benefit Services (Holdings) Limited |
England | |
Gallagher Benefit Services Management Company Limited |
England | |
Gallagher Risk & Reward Limited |
England | |
Gallagher Communications Limited |
England | |
Orb Financial Services Limited |
England | |
Argentis Financial Group Limited |
England | |
Kingston Smith Financial Advisors (17) |
England | |
Argentis Financial Management Limited |
England | |
Gatehouse Consulting Limited |
England | |
Total Rewards Group (Holdings) Limited |
England | |
Reward Management Limited |
England | |
Anthony Hodges Consulting Limited |
England | |
Learn About Money Limited |
England | |
AIX Limited |
England | |
Gallagher Caribbean Group Limited |
St. Lucia | |
Mecacem Insurance SPC Ltd |
Cayman Islands | |
Gallagher Insurance Brokers (Barbados) Limited |
Barbados | |
Gallagher Insurance Brokers Jamaica Limited |
Jamaica | |
Gallagher Insurance Brokers (St. Lucia) Limited |
St. Lucia | |
Gallagher Insurance Brokers (St. Vincent) Limited |
St. Vincent | |
Gallagher Insurance Brokers (St. Kitts & Nevis) Limited |
St. Kitts and Nevis | |
CGM Gallagher Insruance Brokers (Trinidad & Tobago) Limited |
Trinidad and Tobago | |
Artex Risk Solutions (International) Ltd |
Guernsey | |
Artex Holdings (Gibraltar) Limited |
Gibraltar | |
Artex Corporate Services Limited |
Gibraltar | |
Artex Risk Solutions (Gibraltar) Limited |
Gibraltar | |
Artex Risk Solutions (Guernsey) Limited |
Guernsey | |
Artex Insurance ICC Limited |
Guernsey | |
Artex Insurance (Guernsey) PCC Limited |
Guernsey | |
Harlequin Insurance PCC Limited |
Guernsey | |
Mannequin Insurance PCC Limited |
Guernsey | |
Artex Holdings (Malta) Limited |
Malta | |
Artex Insurance Brokers (Malta) PCC Limited |
Malta | |
Osprey Insurance Brokers Limited |
Malta | |
Artex Risk Solutions (Malta) Limited |
Malta | |
Artex Corporate Services (Malta) Limited |
Malta | |
Artex Risk Solutions (UK) Limited |
England | |
Artex Risk Solutions (Singapore) Pte Ltd |
Singapore | |
Heritage Insurance Brokers (CI) Limited |
Guernsey | |
Hexagon Insurance PCC Limited |
Guernsey | |
Septagon Insurance PCC Limited |
Guernsey | |
Axe Insurance PCC Limited |
Guernsey | |
Hexagon ICC Limited |
Guernsey |
4
Name |
State or Other
Incorporation |
|
Horseshoe Insurance Services Holdings Ltd |
Bermuda | |
Horseshoe Management Ltd. |
Bermuda | |
Horseshoe Insurance Advisory Ltd. |
Bermuda | |
Horseshoe Re Limited |
Bermuda | |
Horseshoe Services (Cayman) Ltd |
Cayman Islands | |
PEN Insurance Management Advisors Ltd |
Bermuda | |
Horseshoe Services (Pty) Ltd |
Sri Lanka | |
Horseshoe Management (Ireland) Ltd |
Ireland | |
Horseshoe ILS Services UK Ltd |
England | |
Horseshoe Corporate Services Ltd |
Bermuda | |
Horseshoe Management (Gibraltar) Limited |
Gibraltar | |
Convergence Risk Services Ltd |
Bermuda | |
Horseshoe Fund Services Ltd |
Bermuda | |
Horseshoe Fund Services (Cayman) Ltd |
Cayman Islands | |
Greenseed Alternative Mangaers Platform Ltd |
Bermuda | |
Horseshoe Insurance Services Holdings US, Inc. |
Delaware | |
Horseshoe Fund Services USA, Inc. |
Delaware | |
Horseshoe Insurance Advisors US, LLC |
Delaware | |
Horseshoe PCC Limited |
England | |
ILS Fund Services Ltd. |
Bermuda | |
Arthur J. Gallagher & Co. (Bermuda) Limited |
Bermuda | |
Arthur J. Gallagher Management (Bermuda) Limited |
Bermuda | |
Artex Risk Solutions (Cayman) Limited |
Cayman Islands | |
Atrex Insurance (Cayman) SPC Limited |
Cayman Islands | |
SEG Insurance Ltd (18) |
Bermuda | |
Artex Intermediaries, Ltd |
Bermuda | |
Artex Risk Solutions (Bermuda) Ltd |
Bermuda | |
Artex (SAC) Limited |
Bermuda | |
Arthur J. Gallagher Holdings (UK) Limited |
England | |
GGB Finance 3 Limited |
England | |
Gallagher Holdings (UK) Limited |
England | |
GGB Finance 1 Limited |
England | |
GGB Finance 2 Limited |
England | |
Arthur J. Gallagher Services (UK) Ltd |
England | |
Arthur J. Gallagher (UK) Limited |
England | |
Risk Management Partners Limited |
England | |
Alesco Risk Management Services Limited |
England | |
Pen Underwriting Limited |
England | |
Contego Underwriting Limited |
England | |
Zenor Limited |
England | |
Risk Services (NW) Limited |
England | |
Portmore Insurance Brokers Limited |
England | |
Portmore Insurance Brokers (Wilshire) Limited |
England | |
Pavey Group Holdings (UK) Limited |
England | |
Pavey Group Holdings Limited |
England | |
Pavey Group Limited |
England | |
Purple Bridge Group Limited (19) |
England | |
Just Landlords Insurance Services Ltd |
England | |
Vasek Insurance Services Limited |
England | |
Unoccupied Direct Limited |
England | |
Purple Bridge Investments Limited |
England | |
Purple Bridge Publishing Limited |
England | |
Purple Bridge Finance Limited |
England | |
Purple Bridge Claims Management Limited |
England | |
Purple Bridge Online Services Limited |
England | |
Insure My Villa Limited |
England |
5
Name |
State or Other
Incorporation |
|
Capsicum Reinsurance Brokers LLP (20) |
England | |
Capsicum Reinsurance Brokers No. 1 LLP (21) |
England | |
Capsicum Reinsurance Brokers No. 2 LLP (21) |
England | |
YOA Capsicum Reinsurance Broker Limited (22) |
Guernsey | |
Capsicum Reinsurance Brokers No. 3 LLP (21) |
England | |
Capsicum Reinsurance Brokers Bermuda Limited |
Bermuda | |
Capsicum Reinsurance Brokers No. 4 LLP (21) |
England | |
Capsicum Reinsurance Brokers No. 5 LLP (21) |
England | |
Capsicum Reinsurance Brokers No. 6 LLP (21) |
England | |
Capsicum Reinsurance Brokers No. 7 LLP (21) |
England | |
Capsicum Re Latin America Corretora De Resseguros Ltda |
Brazil | |
Capsicum Reinsurance Brokers Miami, Inc. |
Delaware | |
Capsicum CRLA LLP |
Brazil | |
Capsicum Re Brasil Participacoes Ltda |
Brazil | |
Capsicum Reinsurance Brokers No. 9 LLP (21) |
England | |
Capsicum Reinsurance Brokers No. 10 LLP (21) |
England | |
Capsicum Reinsurance Brokers No. 11 LLP (21) |
England | |
Alize Limited |
Bermuda | |
RGA Underwriting Limited |
England | |
RGA Referencing Limited |
England | |
Rentguard Limited |
England | |
Home & Travel Limited |
England | |
Stackhouse Poland Group Limited |
England | |
Stackhouse Poland Midco Limited |
England | |
Stackhouse Poland Bidco Limited |
England | |
Stackhouse Poland Holdings Limited |
England | |
Stackouse Poland Limited |
England | |
Inspire Underwriting Limited |
England | |
RSM Insurance Services Limited (23) |
England | |
Foley Healthcare Limited |
England | |
Honour Point Limited |
England | |
HR Owen Insurance Services Limited (24) |
England | |
Lucas Fettes Limited |
England | |
Ptarmigan Underwriting UK Limited (25) |
England | |
Ptarmigan Underwriting Agency Limited (26) |
England | |
Lucas Fettes and Partners Limited |
England | |
Protek Group Limited (27) |
England | |
Antrobus Investments Limited |
England | |
Insurance Acquisitions Holdings Limited |
England | |
Quantum Underwriting Solutions Limited |
England | |
Title Investments Limited |
England | |
Title & Covenant Brokers Ltd. |
England | |
Risk Solutions Group Limited |
England | |
Property Insurance Initatives Limited |
England | |
Coleman Group Holdings Limited |
England | |
Coleman Holdings Limited |
England | |
HLG Holdings Limited |
England | |
Friary Intermediate Limited |
England | |
Acumus Interco Limited |
England | |
Acumus Holdings Limited |
England | |
Arthur J. Gallagher Housing Limited (28) |
England | |
Heath Lambert Limited |
England | |
Gallagher Benefits Consulting Limited |
England | |
Heath Lambert Overseas Limited |
England | |
Fenchurch Faris Limited (29) |
Jordan | |
Fenchurch Faris Limited (30) |
Saudi Arabia | |
Gallagher Holdings Three (UK) Limited |
England | |
Insurance Dialogue Limited |
England | |
Blenheim Park Ltd |
England | |
Blenheim Park Services Limited |
England | |
Property and Commercial Limited |
England | |
Belmont Insurance Holdings Limited |
England | |
Belmont International Limited |
England |
6
Name |
State or Other
Incorporation |
|
Rio 587 Limited |
England | |
Rio 588 Limited |
England | |
Quillco 226 Limited |
Scotland | |
Quillco 227 Limited |
Scotland | |
Ink Underwriting Agencies Limited |
England | |
Giles Holdings Limited |
Scotland | |
RA Rossborough (Insurance Brokers) Ltd |
Jersey | |
Rossborough Insurance Services, Ltd. (Jersey) |
Jersey | |
Rossborough Insurance (IOM) Ltd. |
Isle of Man | |
Rossborough Healthcare International Ltd |
Guernsey | |
RA Rossborough (Guernsey) Ltd. |
Guernsey | |
Arthur J. Gallagher Insurance Brokers Limited (31) |
Scotland | |
Igloo Insurance PCC Limited |
Guernsey | |
Gallagher Holdings Four (UK) Limited |
England | |
OAMPS (UK) Limited |
England | |
OAMPS Special Risks Ltd |
England | |
Evolution Underwriting Group Limited |
England | |
Evolution Underwriting Limited |
England | |
Evolution Risk Services Limited |
England | |
Evolution Technology Services Limited |
England | |
Oval Limited |
England | |
Oval Healthcare Limited |
England | |
Oval Management Services Limited |
England | |
Oval Insurance Broking Limited |
England |
Notes
(1) |
15% of the Membership Interests of this subsidiary is owned by an unrelated third party. |
(2) |
50% owned by an unrelated third party. |
(3) |
60% owned by third party. |
(4) |
Gallagher International Holdings (US) Inc. is a 98% partner in the Bermuda Partnership. |
(5) |
Holds 21.27% ownership interest in Casanueva Perez S.A.P. de C.V. (Grupo CP). |
(6) |
23.17% owned by management. |
(7) |
18.42% owned by management. |
(8) |
8.06% owned by management. |
(9) |
40.96% owned by management. |
(10) |
5.03% owned by management. |
(11) |
11% owned by management. |
(12) |
25% owned by management. |
(13) |
33.34% owned by Arthur J. Gallagher (Bermuda) Holdings Partnership; remainder owned by management. |
(14) |
35% owned by management. |
(15) |
6.4% owned by local management. |
(16) |
48.54% owned by Arthur J. Gallagher Canada Limited. |
(17) |
50% owned by Argentis Financial Group Ltd. |
(18) |
76% of the Common Stock of this subsidiary is owned by two third parties. |
(19) |
30% owned by management. |
(20) |
67% owned by management. |
(21) |
40% owned by management. |
(22) |
50% owned by management. |
(23) |
33% owned by Stackhouse Poland Holdings Limited and 67% owned by unrelated third party. |
(24) |
35% owned by Stackhouse Poland Holdings Limited, 60 % owned by unrelated third party and 5% owned by management. |
(25) |
67% owned by Lucas Fettes Limited and 33% owned by management. |
(26) |
60% owned by Lucas Fettes Limited and 40% owned by management. |
(27) |
33% owned by Lucas Fettes Limited. 67% owned by management. |
(28) |
22.5% owned by Friary Intermediate Ltd. |
(29) |
90% owned by unrelated party |
(30) |
14% owned by Heath Lambert Overseas Limited, 40% by direct parent and 46% by unrelated party. |
(31) |
51% owned by Rio 588 Ltd. and 49% owned by Giles Holding. |
7
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements (Form S-8, No. 333-87320 and Form S-8, No. 333-106535) pertaining to the Arthur J. Gallagher & Co. 1988 Nonqualified and Non-Employee Directors Stock Option Plans, in the Registration Statement (Form S-8, No. 333-106539) pertaining to the Arthur J. Gallagher & Co. Restricted Stock Plan, in the Registration Statement (Form S-8, No. 333-174497) pertaining to the Arthur J. Gallagher & Co. 2011 Long-Term Incentive Plan, in the Registration Statement (Form S-8, No. 333-197898) pertaining to the Arthur J. Gallagher & Co. 2014 Long-Term Incentive Plan, Deferred Equity Participation Plan, Deferred Cash Participation Plan and Supplemental Savings and Thrift Plan, in the Registration Statement (Form S-8, No. 333-204976) pertaining to the Arthur J. Gallagher & Co. Employee Stock Purchase Plan, in the Registration Statement (Form S-8, No. 333-221274) pertaining to the Arthur J. Gallagher & Co. 2017 Long-Term Incentive Plan, Deferred Equity Participation Plan, Deferred Cash Participation Plan and Supplemental Savings and Thrift Plan, and in the Registration Statements (Form S-3, No. 333-214616, Form S-4, No. 333-203203 and Form S-4, No. 333-214617), of Arthur J. Gallagher & Co., and in the related Prospectuses, of our reports dated February 7, 2020, with respect the consolidated financial statements and schedule of Arthur J. Gallagher & Co., and the effectiveness of internal control over financial reporting of Arthur J. Gallagher & Co., included in this Annual Report (Form 10-K) for the year ended December 31, 2019.
/s/ Ernst & Young LLP |
Ernst & Young LLP |
Chicago, Illinois
February 7, 2020
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned being a director of Arthur J. Gallagher & Co., a Delaware corporation (the Company), does hereby constitute and appoint WALTER D. BAY and DOUGLAS K. HOWELL, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys, to execute, file and deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto, relating to the annual report on Form 10-K for the year ended December 31, 2019, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name in the name and on behalf of the Company or as a director of the Company, as indicated below opposite his or her signature, to the annual report on Form 10-K for the year ended December 31, 2019 or any amendment or papers supplemental thereto; and each of the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have subscribed these presents this 7h day of February, 2020.
Signature |
Title |
|||||
/S/ SHERRY S. BARRAT |
||||||
Sherry S. Barrat | Director | |||||
/S/ WILLIAM L. BAX |
||||||
William L. Bax | Director | |||||
/S/ D. JOHN COLDMAN |
||||||
D. John Coldman | Director | |||||
/S/ FRANK E. ENGLISH, JR. |
||||||
Frank E. English, Jr. | Director | |||||
/S/ DAVID S. JOHNSON |
||||||
David S. Johnson | Director | |||||
/S/ KAY W. MC CURDY |
||||||
Kay W. McCurdy | Director | |||||
/S/ RALPH J. NICOLETTI |
||||||
Ralph J. Nicoletti | Director | |||||
/S/ NORMAN L. ROSENTHAL |
||||||
Norman L. Rosenthal | Director |
Exhibit 31.1
Rule 13a-14(a) Certification of Chief Executive Officer
Certification
I, J. Patrick Gallagher, Jr., certify that:
1. |
I have reviewed this annual report on Form 10-K of Arthur J. Gallagher & Co.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a.) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b.) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c.) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d.) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a.) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b.) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: February 7, 2020
/s/ J. Patrick Gallagher, Jr. |
J. Patrick Gallagher, Jr. Chairman, President and Chief Executive Officer (principal executive officer) |
Exhibit 31.2
Rule 13a-14(a) Certification of Chief Financial Officer
Certification
I, Douglas K. Howell, certify that:
1. |
I have reviewed this annual report on Form 10-K of Arthur J. Gallagher & Co.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a.) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b.) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c.) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d.) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a.) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b.) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: February 7, 2020
/s/ Douglas K. Howell |
Douglas K. Howell Vice President Chief Financial Officer (principal financial officer) |
Exhibit 32.1
Section 1350 Certification of Chief Executive Officer
I, J. Patrick Gallagher, Jr., the chief executive officer of Arthur J. Gallagher & Co., certify that (i) the Annual Report on Form 10-K of Arthur J. Gallagher & Co. for the twelve month period ended December 31, 2019 (the Form 10-K) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Arthur J. Gallagher & Co. and its subsidiaries.
Date: February 7, 2020
/s/ J. Patrick Gallagher, Jr. |
J. Patrick Gallagher, Jr. Chairman, President and Chief Executive Officer (principal executive officer) |
Exhibit 32.2
Section 1350 Certification of Chief Financial Officer
I, Douglas K. Howell, the chief financial officer of Arthur J. Gallagher & Co., certify that (i) the Annual Report on Form 10-K of Arthur J. Gallagher & Co. for the twelve month period ended December 31, 2019 (the Form 10-K) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Arthur J. Gallagher & Co. and its subsidiaries.
Date: February 7, 2020
/s/ Douglas K. Howell |
Douglas K. Howell Vice President Chief Financial Officer (principal financial officer) |