North America Insurance - Brokers: Updating Estimates Ahead of 2Q

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North America Insurance - Brokers: Updating Estimates Ahead of 2Q

North America Insurance - Brokers

25 June 2026 Citi Research

Arthur J. Gallagher & Co. is a US-based insurance intermediary and service

provider with operations in the US and international markets. The company

operates as a retail, wholesale, and reinsurance broker as well as a claims

management provider for workers’ compensation and general and

commercial auto liability-related claims.

Investment strategy

We rate AJG shares Buy. Gallagher has built an enviable track record of

organic growth and continues to perform relatively well in this challenging

environment. Given multiple compression over the past 12 months, we

believe the risk-reward is now favorable and that AJG stock should be well

positioned to rebound as cyclical pressures should abate in the coming

quarters.

Valuation

Our target price of $250 implies multiples of 18X and 13X F12M EPS and

EV/F12M EBITDA, respectively, and represents a modest discount to our

estimate of intrinsic value. We value the company by discounting cash flows

assuming a cost of equity of 9.0% and terminal growth rate of ~3% (vs. the 8–

9% and 3.5–4.5% implied by industry multiples over the past 20 years). The

company has traded at 22X and 13X F12M EPS and EV/F12M EBITDA versus

~22X and ~15X, respectively, for the industry over the past 10 years.

Risks

Downside risks to our price target include: Economic weakness could hinder

revenues through lower exposures; insurance rate decreases could hinder

growth and operating leverage; lower interest rates could pressure investment

yields, while higher rates could raise borrowing cost; lower insurance industry

profitability could benefit commissions whether through profit- or volume-