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 Act. Yes Act. Yes $14,245,000. investments. 2018. 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. 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. 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. 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. 2019. 2017. Unless expressly noted, the information on our website, including our investor relations website, or any other website is not incorporated by reference in this Form Factors. Over the past decade or more, private equity sponsors have invested heavily in the insurance brokerage and third party claims administration industries, creating new competitors and strengthening existing ones. do or with the level of service provided. other jurisdictions in which we operate. In addition, FATCA requires certain of our subsidiaries, affiliates and other entities to obtain valid FATCA documentation from payees prior to remitting certain payments to such payees. In the event we do not obtain valid FATCA documents, we may be obliged to withhold a portion of such payments. This obligation is shared with our clients who may fail to comply, in whole or in part. In such circumstances, we may incur FATCA compliance costs including withholding taxes, interest and penalties. Recent regulatory developments related to FATCA could also cause short-term increases in our costs related to systems and process updates needed for us to be able to take advantage of such changes. In addition, the impact of Brexit on FATCA reporting for EU placements may further increase our compliance burden and cost of operations and could adversely affect the market for our services as intermediaries, which could adversely affect our results of operations and financial condition. ™ Period October 1 through October 31, 2018 November 1 through November 30, 2018 December 1 through December 31, 2018 Total 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, The average price paid per share is calculated on a settlement basis and does not include commissions. 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. Consolidated Statement of Earnings Data: Commissions Fees Supplemental revenues Contingent revenues Investment income and other Revenue before reimbursements Reimbursements Total revenues Total expenses Earnings before income taxes Provision (benefit) for income taxes Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to controlling interests Per Share Data: Diluted net earnings per share (1) Dividends declared per common share (2) Share Data: Shares outstanding at year end Weighted average number of common shares outstanding Weighted average number of common and common equivalent shares outstanding Consolidated Balance Sheet Data: Total assets Long-term debt less current portion Total stockholders’ equity Return on beginning stockholders’ equity (3) Employee Data: Number of employees - at year end Based on the weighted average number of common and common equivalent shares outstanding during the year. Based on the total dividends declared on a share of common stock outstanding during the entire year. Represents net earnings divided by total stockholders’ equity, as of the beginning of the year. Brokerage Segment Revenues Organic revenues Net earnings Net earnings margin Adjusted EBITDAC Adjusted EBITDAC margin Diluted net earnings per share Risk Management Segment Revenues Organic revenues Net earnings Net earnings margin (before reimbursements) Adjusted EBITDAC Adjusted EBITDAC margin (before reimbursements) Diluted net earnings per share Corporate Segment Diluted net earnings (loss) per share Total Company Diluted net earnings per share 28. Year Ended December 31 Reported GAAP to AdjustedNon-GAAP Reconciliation: Segment Brokerage, as reported Gains on book sales Acquisition integration Workforce & lease termination Acquisition related adjustments Levelized foreign currency translation Brokerage, as adjusted * Risk Management, as reported Workforce & lease termination Acquisition related adjustments Levelized foreign currency translation Risk Management, as adjusted * Corporate, as reported Corporate legal entity restructuring Impact of U.S. tax reform Litigation settlement Home office lease termination/move Corporate, as adjusted * Total Company, as reported Total Company, as adjusted * Total Brokerage & Risk Management, as reported Total Brokerage & Risk Management, as adjusted * For $30.9 million. Year Ended Dec 31, 2018 Brokerage, as reported Gains on book sales Acquisition integration Workforce & lease termination Acquisition related adjustments Brokerage, as adjusted Risk Management, as reported Workforce & lease termination Acquisition related adjustments Risk Management, as adjusted Corporate, as reported Corporate legal entity restructuring Impact of U.S. tax reform Corporate, as adjusted Year Ended Dec 31, 2017 Brokerage, as reported Gains on book sales Acquisition integration Workforce & lease termination Acquisition related adjustments Levelized foreign currency translation Brokerage, as adjusted Risk Management, as reported Workforce & lease termination Acquisition related adjustments Levelized foreign currency translation Risk Management, as adjusted Corporate, as reported Impact of U.S. tax reform Litigation settlement Home office lease termination/move Corporate, as adjusted property/casualty premium rates (a “hard” market). A hard market tends to favorably impact commission revenues. Hard and soft markets may be broad-based or more narrowly focused across individual product lines or geographic areas. As markets market and most businesses continue to stay in standard-line markets. Clients can broadly still obtain coverage, but at reduced levels in some lines of business. 2017. 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. 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. 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. 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. us, nor are we able to reasonably estimate the amount of any potential loss in connection with this lawsuit. Statement of Earnings Commissions Fees Supplemental revenues Contingent revenues Investment income Gains realized on books of business sales Total revenues Compensation Operating Depreciation Amortization Change in estimated acquisition earnout payables Total expenses Earnings before income taxes Provision for income taxes Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to controlling interests Diluted net earnings per share Other Information Change in diluted net earnings per share Growth in revenues Organic change in commissions and fees Compensation expense ratio Operating expense ratio Effective income tax rate Workforce at end of period (includes acquisitions) Identifiable assets at December 31 Net earnings, as reported Provision for income taxes Depreciation Amortization Change in estimated acquisition earnout payables EBITDAC Gains from books of business sales Acquisition integration Acquisition related adjustments Workforce and lease termination related charges Levelized foreign currency translation EBITDAC, as adjusted Net earnings margin, as reported EBITDAC margin, as adjusted Reported revenues Adjusted revenues - see page 28 2018. Base Commissions and Fees Commission and fees, as reported Less commission and fee revenues from acquisitions Less disposed of operations Levelized foreign currency translation Organic base commission and fees Supplemental revenues Supplemental revenues, as reported Less supplemental revenues from acquisitions Levelized foreign currency translation Organic supplemental revenues Contingent revenues Contingent revenues, as reported Less contingent revenues from acquisitions Less disposed of operations Levelized foreign currency translation Organic contingent revenues Total reported commissions, fees, supplemental revenues and contingent revenues Less commission and fee revenues from acquisitions Less disposed of operations Levelized foreign currency translation Total organic commissions, fees supplemental revenues and contingent revenues Acquisition Activity Number of acquisitions closed Estimated annualized revenues acquired (in millions) 2018 Reported supplemental revenues Reported contingent revenues Reported supplemental and contingent revenues 2017 Reported supplemental revenues Reported contingent revenues Reported supplemental and contingent revenues 2016 Reported supplemental revenues Reported contingent revenues Reported supplemental and contingent revenues Compensation expense, as reported Acquisition integration Workforce related charges Acquisition related adjustments Levelized foreign currency translation Compensation expense, as adjusted Reported compensation expense ratios Adjusted compensation expense ratios Reported revenues Adjusted revenues - see page 28 in 2019 compared to 2018 was primarily due to an increase in the average number of employees, salary increases, Operating expense, as reported Acquisition integration Workforce and lease termination related charges Levelized foreign currency translation Operating expense, as adjusted Reported operating expense ratios Adjusted operating expense ratios Reported revenues Adjusted revenues - see page 28 in 2019 compared to 2018 was due primarily to unfavorable foreign currency translation - $1.5 million and increases in meeting and client entertainment expenses - $22.9 million, technology expenses - $17.1 million, business insurance - $13.8 million, costs related to divestitures - $13.0 million, outside consulting fees - $11.8 million, real estate expenses - $10.8 million, marketing expense - $8.2 million, acquisition integration - $7.1 million, professional and banking fees - $5.6 million, lease termination charges - $3.2 million, employee related expense - $2.7 million, office supplies - $2.6 million, outside services expense - $2.0 million, other expense - $0.9 million, change in deferred operating expense - $2.0 million and bad debt expense - $0.3 million, partially offset by a decrease in licenses and fees - $1.7 million. Also contributing to the increase in operating expense in 2019 were increased expenses associated with the acquisitions completed in 2019. in 2019. Capsicum Re. In January 2020, we increased our ownership interest in Capsicum Re from 33% to 100%. Founded in December 2013 through a strategic partnership with Gallagher, Capsicum Re has since grown to become the world’s fifth largest reinsurance broker with offices in the U.K., U.S., Bermuda and South America. Statement of Earnings Fees Investment income Revenues before reimbursements Reimbursements Total revenues Compensation Operating Reimbursements Depreciation Amortization Change in estimated acquisition earnout payables Total expenses Earnings before income taxes Provision for income taxes Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to controlling interests Diluted earnings per share Other information Change in diluted earnings per share Growth in revenues (before reimbursements) Organic change in fees (before reimbursements) Compensation expense ratio (before reimbursements) Operating expense ratio (before reimbursements) Effective income tax rate Workforce at end of period (includes acquisitions) Identifiable assets at December 31 Net earnings, as reported Provision for income taxes Depreciation Amortization Change in estimated acquisition earnout payables Total EBITDAC Workforce and lease termination related charges Levelized foreign currency translation EBITDAC, as adjusted Net earnings margin, before reimbursements, as reported EBITDAC margin, before reimbursements, as adjusted Reported revenues before reimbursements Adjusted revenues - before reimbursements - see page 28 2018. Fees International performance bonus fees Fees as reported Less fees from acquisitions Levelized foreign currency translation Organic fees Compensation expense, as reported Workforce and lease termination related charges Levelized foreign currency translation Compensation expense, as adjusted Reported compensation expense ratios (before reimbursements) Adjusted compensation expense ratios (before reimbursements) Reported revenues (before reimbursements) Adjusted revenues (before reimbursements) - see page 28 in 2019 compared to 2018 was primarily due to increased headcount and increases in salaries ($26.0 million in the aggregate), employee benefits - $3.0 million, severance related costs - $1.6 million, stock compensation expense - $1.1 million and deferred compensation - $0.6 million, partially offset by a favorable foreign currency translation - $5.2 million and a decrease in temporary-staffing expense - $1.1 million. Operating expense, as reported Workforce and lease termination related charges Levelized foreign currency translation Operating expense, as adjusted Reported compensation expense ratios (before reimbursements) Adjusted compensation expense ratios (before reimbursements) Reported revenues (before reimbursements) Adjusted revenues - (before reimbursements) see page 28 in 2019 compared to 2018 was primarily due to increases in outside consulting fees - $5.4 million, technology expenses - $4.1 million, meeting and client entertainment expense - $2.4 million, lease termination related charges - $1.6 million, other expense - $1.1 million, licenses and fees - $0.9 million, real estate expense - $0.7 million, business insurance - $0.6 million, partially offset by decreases in professional and banking fees - $4.6 million, office supplies - $1.2 million, employee expense - $0.2 million and bad debt expense - $0.2 million. 2017. 2018. Statement of Earnings Revenues from consolidated clean coal production plants Royalty income from clean coal licenses Loss from unconsolidated clean coal production plants Other net revenues Total revenues Cost of revenues from consolidated clean coal production plants Compensation Operating Interest Depreciation Total expenses Loss before income taxes Benefit for income taxes Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to controlling interests Diluted net earnings per share Identifiable assets at December 31 EBITDAC Net earnings Benefit for income taxes Interest Depreciation EBITDAC Chem-Mod production of refined coal. due to a reallocation of some additional costs to the brokerage and risk management segments. In June 2019, we reviewed our allocation of corporate costs to our business segments. In conjunction with that review, we made changes to how we allocate certain costs to our business segments reflecting management’s updated view of the costs necessary to support these segments. Change in interest expense related to: Interest on borrowings from our Credit Agreement Interest on the maturity of the Series B notes Interest on the maturity of the Series C notes Interest on the maturity of the Series K notes Interest on the $275.0 million notes funded on June 2, 2016 Interest on the $100.0 million notes funded on December 1, 2016 Interest on the $250.0 million notes funded on June 27, 2017 Interest on the $398.0 million notes funded on August 2 and 4, 2017 Interest on the $500.0 million notes funded on June 13, 2018 Amortization of hedge gains Capitalization of interest costs related to the purchase and development of our new headquarters building and other Net change in interest expense Components of Corporate Segment As Reported Interest and banking costs Clean energy related (1) Acquisition costs Corporate Impact of U.S. tax reform Litigation settlement Home office lease termination/move Reported full year Adjustments Impact of U.S. tax reform Corporate legal entity restructuring Litigation settlement Home office lease termination/move As Adjusted Interest and banking costs Clean energy related (1) Acquisition costs Corporate Impact of U.S. tax reform Litigation settlement Home office lease termination/move Adjusted full year 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. Investments that own 2009 Era Plants 12 Under long-term production contracts 2 Not currently active in negotiations for long-term production contracts Investments that own 2011 Era Plants 19 Under long-term production contracts 1 In early stages of negotiations for long-term production contract Chem-Mod royalty income, net of noncontrolling interests Calendar Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The IRS will not release the factors for Net change in premiums and fees receivable Net change in premiums payable to underwriting enterprises Net cash provided (used) by the above redeployment and relocation of refined coal plants remain as currently anticipated, and if we continue to generate sufficient taxable income to use the tax credits produced by our IRC Section 45 investments, we anticipate that these investments will continue to generate positive net cash flows for the period 2019. fund acquisitions. 2019. Note purchase agreements Credit Agreement Premium Financing Debt Facility Interest on debt Operating lease obligations Less sublease arrangements Outstanding purchase obligations Total contractual obligations Letters of credit Financial guarantees Total commitments estimated future operating results of the acquired entities over a 2019. us. Commissions Fees Supplemental revenues Contingent revenues Investment income Gains on books of business sales Revenues from clean coal activities Other net revenues (losses) Revenues before reimbursements Reimbursements Total revenues Compensation Operating Reimbursements Cost of revenues from clean coal activities Interest Depreciation Amortization Change in estimated acquisition earnout payables Total expenses Earnings before income taxes Benefit for income taxes Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to controlling interests Basic net earnings per share Diluted net earnings per share Dividends declared per common share Net earnings Change in pension liability, net of taxes Foreign currency translation Change in fair value of derivative instruments, net of taxes Comprehensive earnings Comprehensive earnings attributable to noncontrolling interests Comprehensive earnings attributable to controlling interests Cash and cash equivalents Restricted cash Premiums and fees receivable Other current assets Total current assets Fixed assets - net Deferred income taxes Other noncurrent assets Goodwill - net Amortizable intangible assets - net Total assets Premiums payable to underwriting enterprises Accrued compensation and other accrued liabilities Deferred revenue - current Premium financing borrowings Corporate related borrowings - current Total current liabilities Corporate related borrowings - noncurrent Deferred revenue - noncurrent Other noncurrent liabilities Total liabilities Stockholders’ equity: Common stock - authorized 400.0 shares; issued and outstanding 184.0 shares in 2018 Capital in excess of par value Retained earnings Accumulated other comprehensive loss Stockholders’ equity attributable to controlling interests Stockholders’ equity attributable to noncontrolling interests Total stockholders’ equity Total liabilities and stockholders’ equity Cash flows from operating activities: Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Net gain on investments and other Depreciation and amortization Change in estimated acquisition earnout payables Amortization of deferred compensation and restricted stock Stock-based and other noncash compensation expense Payments on acquisition earnouts in excess of original estimates Effect of changes in foreign exchange rate Net change in premium and fees receivable Net change in deferred revenue Net change in premiums payable to underwriting enterprises Net change in other current assets Net change in accrued compensation and other accrued liabilities Net change in income taxes payable Net change in deferred income taxes Net change in other noncurrent assets and liabilities Net cash provided by operating activities Cash flows from investing activities: Capital expenditures Cash paid for acquisitions, net of cash and restricted cash acquired Net proceeds from sales of operations/books of business Net funding of investment transactions Net cash used by investing activities Cash flows from financing activities: Payments on acquisition earnouts Proceeds from issuance of common stock Tax impact from issuance of common stock Repurchases of common stock Payments to noncontrolling interests Dividends paid Net borrowings on premium financing debt facility Borrowings on line of credit facility Repayments on line of credit facility Net borrowings of corporate related long-term debt Debt acquisition costs Settlements on terminated interest rate swaps Net cash provided (used) by financing activities Effect of changes in foreign exchange rates on cash, cash equivalents and restricted cash Net (decrease) increase in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash at beginning of year Cash, cash equivalents and restricted cash at end of year Supplemental disclosures of cash flow information: Interest paid Income taxes paid Capital in Excess of Retained Accumulated Other Comprehensive Noncontrolling Balance at December 31, 2015, as reported Adoption of Topic 606 Balance at December 31, 2015, as restated Net earnings Net purchase of subsidiary shares from noncontrolling interests Dividends paid to noncontrolling interests Net change in pension asset/liability, net of taxes of ($2.9) million Foreign currency translation Change in fair value of derivative instruments, net of taxes of ($3.2) million Compensation expense related to stock option plan grants Tax impact from issuance of common stock Common stock issued in: Nine purchase transactions Stock option plans Employee stock purchase plan Deferred compensation and restricted stock Common stock repurchases Cash dividends declared on common stock Balance at December 31, 2016, as restated Net earnings Net purchase of subsidiary shares from noncontrolling interests Dividends paid to noncontrolling interests Net change in pension asset/liability, net of taxes of $2.8 million Foreign currency translation Change in fair value of derivative instruments, net of taxes of $4.0 million Compensation expense related to stock option plan grants Common stock issued in: Twelve purchase transactions Stock option plans Employee stock purchase plan Deferred compensation and restricted stock Common stock repurchases Cash dividends declared on common stock Balance at December 31, 2017, as restated Balance at December 31, 2017, as restated Reclassification of the income tax effects within accumulated other comprehensive loss related to the Tax Act Net earnings Net purchase of subsidiary shares from noncontrolling interests Dividends paid to noncontrolling interests Net change in pension asset/liability, net of taxes of $6.2 million Foreign currency translation Change in fair value of derivative instruments, net of taxes of ($5.6) million Compensation expense related to stock option plan grants Common stock issued in: Ten purchase transactions Stock option plans Employee stock purchase plan Deferred compensation and restricted stock Common stock repurchases Cash dividends declared on common stock Balance at December 31, 2018 2019 In addition, our share of the net earnings related to partially owned entities that are accounted for using the equity method is included in investment income. 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. 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. 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. 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. 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 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. 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. 2019. Additionally, we reevaluated our indefinite reinvestment assertion during 2018 for certain foreign jurisdictions and determined that our intention to repatriate undistributed earnings from certain jurisdictions has changed. The impact of this change is not material to our consolidated financial statements. Cash and cash equivalents Restricted cash Total cash, cash equivalents and restricted cash statements as we adopt the new standard in first quarter 2020. We do not expect adoption of either standard will have a material impact on our consolidated financial statements. our derivative and hedging activities. performed as we adopt the new guidance in first quarter 2020. Commissions Fees Supplemental revenues Contingent revenues Investment income Gains on books of business sales Revenues from clean coal activities Revenues before reimbursements Reimbursements Total revenues Compensation Operating Reimbursements Cost of revenues from clean coal activities Interest Depreciation Amortization Change in estimated acquisition earnout payables Total expenses Earnings before income taxes Benefit for income taxes Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to controlling interests Basic net earnings per share Diluted net earnings per share Dividends declared per common share Commissions Fees Supplemental revenues Contingent revenues Investment income Gains on books of business sales Revenues from clean coal activities Other net losses Revenues before reimbursements Reimbursements Total revenues Compensation Operating Reimbursements Cost of revenues from clean coal activities Interest Depreciation Amortization Change in estimated acquisition earnout payables Total expenses Earnings before income taxes Benefit for income taxes Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to controlling interests Basic net earnings per share Diluted net earnings per share Dividends declared per common share Net earnings Change in pension liability, net of taxes Foreign currency translation Change in fair value of derivative instruments, net of taxes Comprehensive earnings Comprehensive earnings attributable to noncontrolling interests Comprehensive earnings attributable to controlling interests Net earnings Change in pension liability, net of taxes Foreign currency translation Change in fair value of derivative instruments, net of taxes Comprehensive earnings Comprehensive earnings attributable to noncontrolling interests Comprehensive earnings attributable to controlling interests Assets Premium and fees receivables Other current assets Deferred income taxes Other noncurrent assets Goodwill Liabilities Premiums payable to underwriting enterprises Accrued compensation and other current liabilities Deferred revenue - current/unearned fees Other current liabilities Deferred revenue - noncurrent Other noncurrent liabilities Stockholders’ equity Retained earnings Accumulated other comprehensive loss Stockholders’ equity attributable to controlling interests Stockholders’ equity attributable to noncontrolling interests Cash flows from operating activities Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Net change in premiums and fees receivable Net change in deferred revenue Net change in premiums payable to underwriting enterprises Net change in other current assets Net change in accrued compensation and other current liabilities Net change in deferred income taxes Net change in other noncurrent assets and liabilities Cash flows from operating activities Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Net change in premiums and fees receivable Net change in deferred revenue Net change in premiums payable to underwriting enterprises Net change in other current assets Net change in accrued compensation and other current liabilities Net change in deferred income taxes Net change in other noncurrent assets and liabilities Balance at December 31, 2015, as reported Adoption of Topic 606 Balance at December 31, 2015, as restated Balance at December 31, 2016, as reported Adoption of Topic 606 Balance at December 31, 2016, as restated Balance at December 31, 2017, as reported Adoption of Topic 606 Balance at December 31, 2017, as restated Unbilled receivables Deferred contract costs Deferred revenue Deferred revenue at December 31, 2016 Incremental deferred revenue Revenue recognized during the year ended December 31, 2017 included in deferred revenue at December 31, 2016 Deferred revenue recognized from business acquisitions Deferred revenue at December 31, 2017 Incremental deferred revenue Revenue recognized during the year ended December 31, 2018 included in deferred revenue at December 31, 2017 Deferred revenue recognized from business acquisitions Deferred revenue at December 31, 2018 2019 2020 2021 2022 2023 Thereafter Total Name and Effective Date of Acquisition Market Financial Group, Ltd and Austin Consulting Group, Inc. (MFG) McGregor & Associates (M&A) Pronto Insurance (PI) Reassurance Holdings, Inc. (RHI) Buckman-Mitchell, Inc. (BMI) November 1, 2018 Accompass Inc. (AI) December 1, 2018 42 other acquisitions completed in 2018 Cash Other current assets Fixed assets Noncurrent assets Goodwill Expiration lists Non-compete agreements Trade names Total assets acquired Current liabilities Noncurrent liabilities Total liabilities assumed Total net assets acquired and risk management segments. Total revenues Net earnings attributable to controlling interests Basic earnings per share Diluted earnings per share Premium finance advances and loans Accrued supplemental, direct bill and other receivables Refined coal production related receivables Deferred contract costs Prepaid expenses Total other current assets Office equipment Furniture and fixtures Leasehold improvements Computer equipment Land and buildings - corporate headquarters Software Other Work in process Accumulated depreciation Net fixed assets Intangible Assets Risk At December 31, 2018 United States United Kingdom Canada Australia New Zealand Other foreign Total goodwill - net At December 31, 2017 United States United Kingdom Canada Australia New Zealand Other foreign Total goodwill - net Risk Balance as of January 1, 2017, as reported Adoption of Topic 606 related to 2016 acquisitions Balance as of January 1, 2017, as restated Goodwill acquired during the year Adoption of Topic 606 related to 2017 acquisitions Goodwill adjustments related to appraisals and other acquisition adjustments Foreign currency translation adjustments during the year Balance as of December 31, 2017, as restated Goodwill acquired during the year Goodwill adjustments related to appraisals and other acquisition adjustments Foreign currency translation adjustments during the year Balance as of December 31, 2018 Expiration lists Accumulated amortization - expiration lists Non-compete agreements Accumulated amortization -non-compete agreements Trade names Accumulated amortization - trade names Net amortizable assets 2019 2020 2021 2022 2023 Thereafter Total Note Purchase Agreements: Semi-annual payments of interest, fixed rate of 2.80%, balloon due June 24, 2018 Semi-annual payments of interest, fixed rate of 5.85%, $50 million due November 30, 2018 and November 30, 2019 Semi-annual payments of interest, fixed rate of 3.20%, balloon due June 24, 2019 Semi-annual payments of interest, fixed rate of 3.48%, balloon due June 24, 2020 Semi-annual payments of interest, fixed rate of 3.99%, balloon due July 10, 2020 Semi-annual payments of interest, fixed rate of 5.18%, balloon due February 10, 2021 Semi-annual payments of interest, fixed rate of 3.69%, balloon due June 14, 2022 Semi-annual payments of interest, fixed rate of 5.49%, balloon due February 10, 2023 Semi-annual payments of interest, fixed rate of 4.13%, balloon due June 24, 2023 Quarterly payments of interest, floating rate of 90 day LIBOR plus 1.65%, balloon due August 2, 2023 Semi-annual payments of interest, fixed rate of 4.58%, balloon due February 27, 2024 Quarterly payments of interest, floating rate of 90 day LIBOR plus 1.40%, balloon due June 13, 2024 Semi-annual payments of interest, fixed rate of 4.31%, balloon due June 24, 2025 Semi-annual payments of interest, fixed rate of 4.73%, balloon due February 27, 2026 Semi-annual payments of interest, fixed rate of 4.40%, balloon due June 2, 2026 Semi-annual payments of interest, fixed rate of 4.36%, balloon due June 24, 2026 Semi-annual payments of interest, fixed rate of 4.09%, balloon due June 27, 2027 Semi-annual payments of interest, fixed rate of 4.09%, balloon due August 2, 2027 Semi-annual payments of interest, fixed rate of 4.14%, balloon due August 4, 2027 Semi-annual payments of interest, fixed rate of 3.46%, balloon due December 1, 2027 Semi-annual payments of interest, fixed rate of 4.55%, balloon due June 2, 2028 Semi-annual payments of interest, fixed rate of 4.34%, balloon due June 13, 2028 Semi-annual payments of interest, fixed rate of 4.98%, balloon due February 27, 2029 Semi-annual payments of interest, fixed rate of 4.19%, balloon due June 27, 2029 Semi-annual payments of interest, fixed rate of 4.19%, balloon due August 2, 2029 Semi-annual payments of interest, fixed rate of 4.44%, balloon due June 13, 2030 Semi-annual payments of interest, fixed rate of 4.70%, balloon due June 2, 2031 Semi-annual payments of interest, fixed rate of 4.34%, balloon due June 27, 2032 Semi-annual payments of interest, fixed rate of 4.34%, balloon due August 2, 2032 Semi-annual payments of interest, fixed rate of 4.59%, balloon due June 13, 2033 Semi-annual payments of interest, fixed rate of 4.69%, balloon due June 13, 2038 Total Note Purchase Agreements Credit Agreement: Periodic payments of interest and principal, prime or LIBOR plus up to 1.45%, expires April 8, 2021 Premium Financing Debt Facility - expires May 18, 2020: Periodic payments of interest and principal, Interbank rates plus 1.05% for Facility B; plus 0.55% for Facilities C and D Facility B AUD denominated tranche NZD denominated tranche Facility C and D AUD denominated tranche NZD denominated tranche Total Premium Financing Debt Facility Total corporate and other debt Less unamortized debt acquisition costs on Note Purchase Agreements Net corporate and other debt We used the proceeds of these offerings to repay certain existing indebtedness and fund acquisitions. we maintain. Interest rates on swing loans will be based, at our election, on either the base rate or an alternate rate that may be quoted by the lead lender. The annual facility fee related to the Credit Agreement is 0.15% and 0.30% of the revolving credit commitment, depending on the financial leverage ratio we maintain. In connection with entering into the Credit Agreement, we incurred approximately borrowings. 2019. Net earnings attributable to controlling interests Weighted average number of common shares outstanding Dilutive effect of stock options using the treasury stock method Weighted average number of common and common equivalent shares outstanding Basic net earnings per share Diluted net earnings per share Stock Option Plans 2019. Expected dividend yield Expected risk-free interest rate Volatility Expected life (in years) Year Ended December 31, 2018 Beginning balance Granted Exercised Forfeited or canceled Ending balance Exercisable at end of year Ending unvested and expected to vest Year Ended December 31, 2017 Beginning balance Granted Exercised Forfeited or canceled Ending balance Exercisable at end of year Ending unvested and expected to vest 2019. Range of Exercise Prices 2017. Cash Awards Vesting Period One year Two years Five years Total shares granted 2022. During 2019, we charged $8.9 million to compensation expense related to these awards. We did not recognize any compensation expense during 2018 related to the 2018 provisional award under the Program. Change in pension benefit obligation: Benefit obligation at beginning of year Service cost Interest cost Net actuarial (gain) loss Benefits paid Benefit obligation at end of year Change in plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Contributions by the company Benefits paid Fair value of plan assets at end of year Funded status of the plan (underfunded) Amounts recognized in the consolidated balance sheet consist of: Noncurrent liabilities - accrued benefit liability Accumulated other comprehensive loss - net actuarial loss Net amount included in retained earnings Net periodic pension cost: Service cost Interest cost on benefit obligation Expected return on plan assets Amortization of net loss Net periodic benefit cost Other changes in plan assets and obligations recognized in other comprehensive earnings: Net loss incurred Amortization of net loss Total recognized in other comprehensive loss Total recognized in net periodic pension cost and other comprehensive loss Estimated amortization for the following year: Amortization of net loss Discount rate Weighted average expected long-term rate of return on plan assets Discount rate Weighted average expected long-term rate of return on plan assets 2019 2020 2021 2022 2023 Years 2024 to 2028 Asset Category Equity securities Debt securities Real estate Total Fair Value Hierarchy Level 1 Level 2 Level 3 Total fair value Fair value at January 1 Settlements Unrealized (loss) gains Fair value at December 31 rabbi trust maintained under the plan in 2019, 2018 Chem-Mod LLC Chem-Mod International LLC Clean-coal investments: Controlling interest in 6 limited liability companies that own 14 2009 Era Clean Coal Plants Non-controlling interest in one limited liability companies that owns one 2011 Era Clean Coal Plant Controlling interest in 17 limited liability companies that own 19 2011 Era Clean Coal Plants Other investments Total investments We have investments in limited liability companies that own 34 refined coal production plants which produce refined coal using proprietary technologies owned byChem-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) 2019. Derivatives accounted for as hedges: Interest rate contracts Foreign exchange contracts (3) Total Included within 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. Year Ended December 31, 2018 Cash flow hedges: Interest rate contracts Foreign exchange contracts Total Year Ended December 31, 2017 Cash flow hedges: Interest rate contracts Foreign exchange contracts Total Year Ended December 31, 2016 Cash flow hedges: Interest rate contracts Foreign exchange contracts Total Year Ended December 31, 2018 Cash flow hedges: Interest rate contracts Foreign exchange contracts Total Year Ended December 31, 2017 Cash flow hedges: Interest rate contracts Foreign exchange contracts Total Year Ended December 31, 2016 Cash flow hedges: Interest rate contracts Foreign exchange contracts Total Note purchase agreements Credit Agreement Premium Financing Debt Facility Interest on debt Total debt obligations Operating lease obligations Less sublease arrangements Outstanding purchase obligations Total contractual obligations 2019. 2017. Letters of credit Financial guarantees Total commitments Description, Purpose and Trigger 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 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 Collateral related to claims funds held in a fiduciary capacity by a recent acquisition - expires 2020 Trigger - Claim payments are not made 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 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 The guarantees are collateralized by shares in minority holdings of our Canadian operating companies. We believe the probability of a material loss is remote. us, nor are we able to reasonably estimate the amount of any potential loss in connection with this lawsuit. Direct Assumed Ceded Net Earnings (losses) before income taxes: United States Foreign, principally Australia, Canada, New Zealand and the U.K. Total earnings before income taxes Provision (benefit) for income taxes: Federal: Current Deferred State and local: Current Deferred Foreign: Current Deferred Total benefit for income taxes Federal statutory rate State income taxes - net of Federal benefit Differences related to non U.S. operations Alternative energy, foreign and other tax credits Other permanent differences U.S. repatriation tax Stock-based compensation Changes in unrecognized tax benefits Change in valuation allowance Change in U.S. and U.K. tax rates Other Benefit for income taxes Gross unrecognized tax benefits at January 1 Increases in tax positions for current year Settlements Lapse in statute of limitations Increases in tax positions for prior years Decreases in tax positions for prior years Gross unrecognized tax benefits at December 31 Deferred tax assets: Alternative minimum tax and other credit carryforwards Accrued and unfunded compensation and employee benefits Amortizable intangible assets Compensation expense related to stock options Accrued liabilities Accrued pension liability Investments Net operating loss carryforwards Capital loss carryforwards Deferred rent liability Hedging instruments Other Total deferred tax assets Valuation allowance for deferred tax assets Deferred tax assets Deferred tax liabilities: Nondeductible amortizable intangible assets Investment-related partnerships Depreciable fixed assets Revenue recognition Hedging instruments Other prepaid items Total deferred tax liabilities Net deferred tax assets Balance as of January 1, 2016, as previously reported Adoption of Topic 606 Net change in period Balance as of December 31, 2016, as restated Adoption of Topic 606 Net change in period Balance as of December 31, 2017, as restated Reclassification to retained earnings of income tax effects related to the Tax Act Net change in period Balance as of December 31, 2018 2018 Total revenues Total expenses Earnings before income taxes Net earnings attributable to controlling interests Basic net earnings per share Diluted net earnings per share 2017 Total revenues Total expenses Earnings before income taxes Net earnings attributable to controlling interests Basic net earnings per share Diluted net earnings per share Year Ended December 31, 2018 Revenues: Commissions Fees Supplemental revenues Contingent revenues Investment income Gains on books of business sales Revenue from clean coal activities Other net revenues Revenues before reimbursements Reimbursements Total revenues Compensation Operating Reimbursements Cost of revenues from clean coal activities Interest Depreciation Amortization Change in estimated acquisition earnout payables Total expenses Earnings (loss) before income taxes Provision (benefit) for income taxes Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to controlling interests Net foreign exchange gain Revenues: United States United Kingdom Australia Canada New Zealand Other foreign Total revenues At December 31, 2018 Identifiable assets: United States United Kingdom Australia Canada New Zealand Other foreign Total identifiable assets Goodwill - net Amortizable intangible assets - net Year Ended December 31, 2017, as restated Revenues: Commissions Fees Supplemental revenues Contingent revenues Investment income Gains on books of business sales Revenue from clean coal activities Revenues before reimbursements Reimbursements Total revenues Compensation Operating Reimbursements Cost of revenues from clean coal activities Interest Depreciation Amortization Change in estimated acquisition earnout payables Total expenses Earnings (loss) before income taxes Provision (benefit) for income taxes Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to controlling interests Net foreign exchange loss Revenues: United States United Kingdom Australia Canada New Zealand Other foreign Total revenues At December 31, 2017 Identifiable assets: United States United Kingdom Australia Canada New Zealand Other foreign Total identifiable assets Goodwill - net Amortizable intangible assets - net Year Ended December 31, 2016, as restated Revenues: Commissions Fees Supplemental revenues Contingent revenues Investment income Gains on books of business sales Revenue from clean coal activities Other net losses Revenues before reimbursements Reimbursements Total revenues Compensation Operating Reimbursements Cost of revenues from clean coal activities Interest Depreciation Amortization Change in estimated acquisition earnout payables Total expenses Earnings (loss) before income taxes Provision (benefit) for income taxes Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to controlling interests Net foreign exchange gain Revenues: United States United Kingdom Australia Canada New Zealand Other foreign Total revenues At December 31, 2016 Identifiable assets: United States United Kingdom Australia Canada New Zealand Other foreign Total identifiable assets Goodwill - net Amortizable intangible assets - net 7, 2020 Consolidated Financial Statements: Consolidated Statement of Earnings for each of the three years in the period ended December 31, Consolidated Balance Sheet as of December 31, Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, Consolidated Statement of Stockholders’ Equity for each of the three years in the period ended December 31, Notes to Consolidated Financial Statements. Report of Independent Registered Public Accounting Firm on Financial Statements. Management’s Report on Internal Control Over Financial Reporting. Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting. Consolidated Financial Statement Schedules required to be filed by Item 8 of this Form: Schedule II - Valuation and Qualifying Accounts. Exhibits: 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 Year ended December 31, 2018 Allowance for doubtful accounts Allowance for estimated policy cancellations Valuation allowance for deferred tax assets Accumulated amortization of expiration lists, noncompete agreements and trade names Year ended December 31, 2017 Allowance for doubtful accounts Allowance for estimated policy cancellations Valuation allowance for deferred tax assets Accumulated amortization of expiration lists, noncompete agreements and trade names Year ended December 31, 2016 Allowance for doubtful accounts Allowance for estimated policy cancellations Valuation allowance for deferred tax assets Accumulated amortization of expiration lists, noncompete agreements and trade names Net activity of bad debt write offs and recoveries and acquired businesses. Additions to allowance related to acquired businesses. Elimination of fully amortized expiration lists,2018 2019 ☐.Note:Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.☐.☐.Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K. ☒ Non-accelerated filer ☐ ☒.2018 (the201$10,435,000. 2019 184,060,000.2019 20”��� “believe,” “estimate,” “expect,” “contemplate,” “forecast,” “project,” “intend,” “plan,” “potential,” and other similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “see,” “should,” “will” and “would.” You can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. For example, we may use forward-looking statements when addressing topics such as: market and industry conditions, including competitive and pricing trends; acquisition strategy; the expected impact of acquisitions and dispositions; the development and performance of our services and products; changes in the composition or level of our revenues or earnings; our cost structure and the outcome of cost-saving or restructuring initiatives; future capital expenditures; future debt levels and anticipated actions to be taken in connection with maturing debt; future debt to earnings ratios; the outcome of contingencies; dividend policy; pension obligations; cash flow and liquidity; capital structure and financial losses; future actions by regulators; the outcome of existing regulatory actions, investigations, reviews or litigation; the impact of changes in accounting rules, including the newchanged revenue recognition and lease accounting standards; financial markets; interest rates; foreign exchange rates; matters relating to our operations; income taxes, including the impact of tax reform; and expectations regarding our investments, including our clean energy investments.investments; and integrating recent acquisitions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors.Failure to successfullycost-effectively integrate recently acquired businesses and their operations or fully realize synergies from such acquisitions in the expected time frame;other long-term environmental risks;An economic downturn or unstable economic conditions, whatever the cause,Brexit,as a prolonged shutdownresult of the U.S. government and trade wars;Competitive pressuresinnovation, in each of our businesses;expensive;expensive, the risk that we may not receive timely regulatory approval of desired transactions;transactions, execution risks;risks, integration risks;risks, the risk of post-acquisition deterioration leading to intangible asset impairment charges;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; implement and account for the U.S. Tax Cuts and Jobs Act (which we refer to as the Tax Act); and related regulations;newchanged revenue recognition accounting standard;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;newchanged lease and revenue recognition standards or the Tax Act); the risk of intellectual property claims, utilities switching from coal to natural gas or other renewable energy sources, environmental and product liability claims, environmental compliance costs and the risk of disallowance by the Internal Revenue Service (which we refer to as IRS)(IRS) of previously claimed tax credits;inof Part I, Item 1A of this report. Page No. I.II. Item 1.Business 4-9 Item 1A.Risk Factors 10-22 1B.5. Unresolved Staff Comments22 Item 2.Properties22-23 Item 3.Legal Proceedings23 Item 4.Mine Safety Disclosures2323Part II.Item 5. Item 6.Selected Financial Data 25 7.6. 26-57 Item 7A. 57-58 Item 8. 59-116 Item 9. 117 Item 9A.Controls and Procedures 117 Item 9B.Other Information 117 Item 10. 117 Item 11.Executive Compensation 117 12.11. ManagementandManagement 117 Item 13. 117 Item 14. 118 Item 15. 118-120 Item 16. 120Signatures 121 122 20182019 edition, and one of the world’s largest property/casualty third party claims administrators, according to20182019 edition. We have three reportable segments: brokerage, risk management and corporate, which contributed approximately 61%68%, 14% and 25%18%, respectively, to 20182019 revenues. We generate approximately 70%69% of our revenues from the combined brokerage and risk management segments in the United States (U.S.), with the remaining 30%31% derived internationally, primarily in Australia, Bermuda, Canada, the Caribbean, New Zealand and the United Kingdom (U.K.). All of the revenues of the corporate segment are generated in the U.S.20182019 of approximately $13.6$17.9 billion. Information in this report is as of December 31, 20182019 unless otherwise noted. We were reincorporated as a Delaware corporation in 1972. Our executive offices are located at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050, and our telephone number is(630)investments2022 to our 20182019 consolidated financial statements for unaudited quarterly operating results for 20182019 and 2017.61%68% of our revenues in 2018.2019. We operate our brokerage segment operations through a network of more than 590580 sales and service offices located throughout the U.S. and another 277more than 300 sales and service offices in 3549 countries, but most of which are in Australia, Canada, the Caribbean, New Zealand and the U.K. Most of these offices are fully staffed with sales and service personnel. We also offer client service capabilities in more than 150 countries around the world through a network of correspondent brokers and consultants. (i) (ii) (iii) (iv) head countheadcount for employer sponsored benefit plans. Commissions depend upon a large number of factors, including the type of risk being placed, the particular underwriting enterprise’s demand, the expected loss experience of the particular risk of coverage, and historical benchmarks surrounding the level of effort necessary for us to place and service the insurance contract. Rather than being tied to the amount of premiums, fees are typically based on an expected level of effort to provide our services.20182019 consolidated financial statements. See Note 2 to our 20182019 consolidated financial statements for information with respect to the impacts that a new accounting standard, relating to revenue recognition, had on our financial position and operating results.20182019 consolidated financial statements. See Note 2 to our 20182019 consolidated financial statements for information with respect to the impacts that a new accounting standard, relating to revenue recognition, had on our financial position and operating results.20182019 consolidated financial statements. See Note 2 to our 20182019 consolidated financial statements for information with respect to the impacts that a new accounting standard, relating to revenue recognition, had on our financial position and operating results.84%82% of our brokerage segment revenues in 2018.2019. Our retail brokerage operations place nearly all lines of commercial property/casualty and health and welfare insurance coverage. Significant lines of insurance coverage and consultant capabilities are as follows:Aviation Disability General Liability Products LiabilityCasualty Earthquake 73%67% of our retail brokerage revenues. These specialized teams target areas of business and/or industries in which we have developed a depth of expertise and a large client base. Significant niche/practice groups we serve are as follows:Affinity Equity Advisors Law Firms Real Estate/HospitalityAutomotive Financial Institutions Life Sciences ReligiousAviation Food/Agribusiness Marine RestaurantConstruction Global Risks Not-for-Profit TechnologyEnergy Healthcare Personal 16%18% of our brokerage segment revenues in 2018.2019. Our wholesale brokers assist our retail brokers and othermore than 295approximately 300 offices primarily located across the U.S., Bermuda and through our approved Lloyd’s of London brokerage operation. In certain cases we act as a brokerage wholesaler, and in other cases we act as a managing general agent or managing general underwriter distributing specialized insurance coverages for underwriting enterprises. Managing general agents and managing general underwriters are agents authorized by an underwriting enterprise to manage all or a part of its business in a specific geographic territory. Activities they perform on behalf of the underwriting enterprise may include marketing, underwriting (although we do not assume any underwriting risk), issuing policies, collecting premiums, appointing and supervising other agents, paying claims and negotiating reinsurance.as one of the largest domestic managing general agents/underwriting managers/wholesale brokers/Lloyds coverholders according to20182019 edition.2018.2019. Approximately 64%63% of our risk management segment’s revenues are from workers’ compensation-related claims, 27%28% are from general and commercial auto liability-related claims and 9% are from property-related claims in 2018.9570 offices located throughout the U.S., Australia, Canada, New Zealand and the U.K. Most of these offices are fully staffed with claims adjusters and other service personnel. Our adjusters and service personnel act solely on behalf and under the instruction of our clients.more thanapproximately 90% of our risk management segment’s revenues come from clients not affiliated with our brokerage operations, such as underwriting enterprises and clients of other insurance brokers. Based on revenues, our risk management operation ranked as one of the world’s largest property/casualty third party claims administrators according to20182019 edition.25%18% of our revenues in 2018.2019. The corporate segment reports the financial information related to our debt, clean energy investments, external acquisition-related expenses, other corporate costs and the impact of foreign currency translation. The revenues reported by this segment result almost solely from our consolidated clean energy investments.will expire inexpired as of December 31, 2019 for 14 of our plants and inwill expire on or before December 31, 2021 for the other 20 plants.more than 4345 locations in Australia, 4142 locations in Canada and 3637 locations in New Zealand. In the U.K., we operate as a retail broker from approximately 105135 locations. We also have specialty, wholesale, underwriting and reinsurance intermediary operations in London for clients to access Lloyd’s of London and other international underwriting enterprises, and a program operation offering customized risk management products and services to U.K. public entities.1718 to our 20182019 consolidated financial statements for additional financial information related to the insurance activity of our wholly owned underwriting enterprise subsidiary for 2019, 2018 2017 and 2016.20182019 edition, we were the world’s fourth largest insurance broker based on revenues. The insurance brokerage and consulting business is highly competitive and there are many organizations and individuals throughout the world who actively compete with us in every area of our business.ServicesServices) operate globally or nationally or are strong in a particular region or locality and may have, in that region or locality, an office with revenues as large as or larger than those of our corresponding local office. Our wholesale brokerage and binding operations compete with large wholesalers such as CRC Insurance Services, Inc., RT Specialty, AmWINS Group, Inc., Burns & Wilcox, Ltd. and All Risks Ltd., as well as a vast number of local and regional wholesalers. We also compete with certain underwriting enterprises that offer insurance and risk management products and solutions directly to clients. In addition, for our employee benefit consulting services, we compete with larger firms such as Aon plc, Mercer (a subsidiary of Marsh & McLennan Companies, Inc.); and Willis Towers Watson Public Limited Company;Company,20182019 edition. While many global and regional claims administrators operate within this space, we compete directly with Sedgwick Claims Management Services, Inc., and Broadspire Services, Inc. (a subsidiary of Crawford & Company). Several large underwriting enterprises, such as Chubb Limited, Travelers Companies, Inc. and Liberty Mutual Holding Co, Inc. also maintain their own claims administration units, which can be strong competitors. In addition, we compete with various smaller third party claims administrators on a regional level. We believe that the primary factors determining our competitive position are our ability to deliver better claim outcomes, reputation for outstanding service, cost-efficient service and financial strength.507556 acquisitions from January 1, 2002 through December 31, 2018,2019, most of which were within our brokerage segment. The majority of these acquisitions have been smaller regional or local brokerages, agencies, or employee benefit consulting operations with a middle or small client focus and/or significant expertise in one of our niche/practice groups. The total purchase price for individual acquisitions has typically ranged from $1.0 million to $50.0 million.43 to our 20182019 consolidated financial statements for a summary of our 20182019 acquisitions, the amount and form of the consideration paid and the dates of acquisitions.2018,2019, our largest single client represented approximately 1.0% and our ten largest clients together represented approximately 3.0%2.0% of our combined brokerage and risk management segment revenues.2018,2019, we had approximately 30,40033,300 employees. 1A. 1A. Risk Factors.business; forbusiness. For example, if climate change and environmental risks harm thecertain industries like oil and gas, industry,our clients in our energy nichethose industries could go out of business or have reduced needs for insurance coverage or consulting services. AllTo cite another example, if an increase in consumer preference forreductionsreduction or decline (whether caused by an overall economic decline or declines in particularcertain industries) could adversely impact futureour commission revenues, when the underwriting enterprises perform exposure audits if they lead to subsequent downward premium adjustments. We record the commission income effects of subsequent premium adjustments when the adjustments become known and, as a result, any downturnconsulting revenues or improvement in our results of operations and financial condition may lag a downturn or improvement in the economy.revenues from managing third-party insurance claims. Some of our clients may experience liquidity problems or other financial difficulties in the event of a prolonged deterioration in the economy, which could have an adverse effect on our results of operations and financial condition. If our clients become financially less stable, enter bankruptcy, liquidate their operations or consolidate, our revenues and collectability of receivables could be adversely affected.17%19% of our brokerage segment and approximately 4% of our risk management segment revenues in 2018,2019, expose us to risk in the event of an economic downturn in the U.K. due to Brexit. Such a downturn could adversely affect our U.K. operations through a decline in the insurance coverage and consulting services our clients purchase as they face reductions in their headcount, payroll, properties or the market value of their assets. In aso-called “hard” or“no-deal” Brexit where the U.K. leavesFollowing approval by the European Union without tradeand the U.K. parliaments, the U.K. formally left the European Union on January 31, 2020. The U.K. is now expected to be in an implementation period until December 31, 2020 (any further extension would require U.K. legislation to be changed). During this period, the U.K. will still follow all the European Union’s rules and regulations, will remain in the single market and the customs union, and will permit the free movement of people. There is no formal stated intent by the U.K. or other dealsEuropean Economic Area (EEA) authorities to put in place, with member countries,at the end of the implementation period, an arrangement under which U.K.-based insurance brokers will continue to be able to exercise “passporting rights” to provide services to clients in the EEA. Accordingly, while our EuropeanEEA client base outside theis a small part of our U.K., which operations, our expectation is minimal, wouldthat EEA clients will need to be serviced from operations inby a countrysubsidiary authorized in the European Union.EEA. While we have a plan in place to service thesetransfer those clients from one of our existing offices in Sweden,to a Swedish subsidiary, such a transition could be a distraction to both clients and our management. In addition, under our business model in the U.K. some services will be provided through staff working in a U.K. branch of the subsidiary. There can be no assurance that applicable EU regulations will not change, potentially requiring us to adjust our plans and causing further management distraction and cost. In addition, the uncertainty surrounding Brexit has and may continue to result in substantial volatility in foreign exchange markets, which could cause volatility in our quarterly financial results, and may lead to a sustained weakness in the British pound’s exchange rate against the U.S. dollar. Any significant weakening of the British pound to the U.S. dollar will have an adverse impact on our brokerage and risk management segments’ net earnings as reported in U.S. dollars. Such failures or coverage withdrawals on the part of underwriting enterprises could occur for any number of reasons, including large unexpected payouts related to climate change or other emerging risk areas.and private equity-backed consolidators and newly public insurance brokers (one of which has a partnership tax structure that gives it an advantage in pricing acquisitions) could make it more difficult for us to identify appropriate targets and could make them more expensive. Even if we are able to identify appropriate acquisition targets, we may not have sufficient capital to fund acquisitions, be able to execute transactions on favorable terms or integrate targets in a manner that allows us to realize the benefits we have historically experienced from acquisitions. When regulatory approval of acquisitions is required, our ability to complete acquisitions may be limited by an ongoing regulatory review or other issues with the relevant regulator. Our ability to finance and integrate acquisitions may also decrease if we complete a greater number of large acquisitions than we have historically.WeThree of the firms we compete with three firms in the global risk management and brokerage markets that have revenues significantly larger than ours. In addition, many other smaller firms that operate nationally or that are strong in a particular country, region or locality may have, in that country, region or locality, an office with revenues as large as or larger than those of our corresponding local office. Our third party claims administration operation also faces significant competition from stand-alone firms as well as divisions of larger firms.firms.firms and professional employer organizations.precisely forecast our commission revenues precisely, including whether they will significantly decline. As a result, we may have to adjust our budgets for future acquisitions, capital expenditures, dividend payments, loandebt repayments and other expenditures to account for unexpected changes in revenues, and any decreases in premium rates may adversely affect the results of our operations.domight not automatically increase with premiums as commissions do.newchanged revenue recognition accounting standard, that was effective January 1, 2018, this could lead to the reversal of revenues in future periods that were recognized in prior periods (See Note 2 to our 20182019 consolidated financial statements for more information).2018,2019, we generated approximately 30%31% of our combined brokerage and risk management revenues outside the U.S. The global nature of our business creates operational and economic risks. Adverse geopolitical or economic conditions may temporarily or permanently disrupt our operations outside the U.S. or create difficulties in staffing and managing such operations. For example, we have substantial operations in India that provide important back-office services for other parts of our global organization. To date, the dispute between India and Pakistan involving the Kashmir region, incidents of terrorism in India and general geopolitical uncertainties have not adversely affected our operations in India. However, such factors could potentially affect our operations there in the future. Should our access to these services be disrupted, our business, operating results and financial condition could be adversely affected.SouthLatin American operations (which contributed $32.3$37.4 million in revenue from 1518 locations in 2018)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;may limitin certain circumstances has limited our ability to prohibit employees from competing with us after they are no longer employed with us or recovering damages, in the event they do so, and may makemade it more difficult and expensive to terminate their employment;current U.S. presidential administrationgovernment could further develop in ways that exacerbate the risks described above, or introduce new risks for our international operations. If any of these risks materialize, our results of operations and financial condition could be adversely affected.privacy outside the U.S.)privacy) will impose additional burdens, costs or business restrictions that make our business less profitable;Our revenue is impacted byaccurately;accurately, could impact our revenues;Aattackattacks could result in regulatory scrutiny, legal liability or reputational harm, and could adversely affect our business, financial condition and reputation. on may result from circumvention of security systems,breaches,incidents, such as computer viruses or unauthorized parties gaining access to our information technology systems, and similarprivacy incidents, such as loss or inadvertent transmission of data, which to date have not had a material impact on our business.breaches of cybersecurity or data incidents, or media reports of the same, even if untrue, could cause us to experience reputational harm, loss of clients and revenue, loss of proprietary data, regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard clients’ information or financial losses. Such incidents could result in confidential, personal or proprietary information being lost or stolen, used to perpetuate fraud, maliciously made public, surreptitiously modified, or rendered inaccessible for a period of time. During a cyber-attack we might have to take our systems offline, which could interfere with services to our clients or damage our reputation. Such losses may not be insured against or not fully covered through insurance we maintain.We have invested and continue to invest in technology security initiatives, policies and resources and employee training. The cost and operational consequences of implementing, maintaining and enhancing further system protections measures could increase significantly as cybersecurity threats increase. As these threats evolve, cybersecurity incidents will be more difficult to detect, defend against and remediate. Any of the foregoing may have a material adverse effect on our business, financial condition and reputation.Improper disclosure of confidential, personal or proprietary information could result in regulatory scrutiny, legal liability or reputational harm, and could have an adverse effect on our business or operations.We maintain confidential, personal and proprietary information relating to our company, our employees and our clients. This information includes personally identifiable information, protected health information, financial information and intellectual property. If our information systems or infrastructure or those of our third party vendors experience a significant disruption or breach, such information could be compromised. A party that obtains this information may use it to steal funds, for ransom, to facilitate a fraud, or for other illicit purposes. Such a disruption or breach could also result in unauthorized access to our proprietary information, intellectual property and business secrets. Thisharm our reputation, create legal exposure, or subject usincrease significantly as cybersecurity threats increase and as technology changes. As these threats evolve, cybersecurity and data incidents will be more difficult to legal liability. Significant costs are involved with maintaining system safeguards for our technology infrastructure.detect, defend against and remediate. If we are unable to effectively maintain and upgrade our system safeguards, including in connection with the integration of acquisitions, we may incur unexpected costs and certain of our systems may become more vulnerable to unauthorized access.Significant uncertainty exists as privacy and data protection laws may be interpreted and applied differently from country to country and may create inconsistent or conflicting requirements. These laws apply to transfers of information among our affiliates, as well as to transactions we enter into with third party vendors. For example,Significant uncertainty exists as privacy and data protection laws may be interpreted and applied differently from country to country, which may create inconsistent or conflicting requirements. Some of these laws provide rights to individuals to access, correct, and delete their personal information and to obtain copies at the European Union adopted a comprehensive General Data Privacy Regulation (GDPR) in May 2016expense of the business entities that replaced the former EU Data Protection Directive and related country-specific legislation. The GDPR became fully effective in May 2018, and requires companies to satisfy new requirements regarding the handlingprocess their data. Some of personal and sensitive data, including its use, protection and the ability of persons whose data is stored to correct or delete such data about themselves. Failure to comply with GDPR requirements could result inthese laws carry heavy penalties for violations, e.g., fines of up to 4% of worldwide revenue. Complying withrevenue under the enhanced obligations imposed byEuropean Union General Data Protection Regulation (GDPR) and to $7,500 per intentional violation under the California Consumer Privacy Act (CCPA). In the U.S., several states have proposed their own comprehensive data privacy bills similar to the GDPR may result in significant costs to our business and require us to revise certain of our business practices. CCPA. legislators and regulators in the U.S. have enacted and, legislators are proposing new and more robust privacy andcontinuing to enact comprehensive cybersecurity laws and regulations in light of the recent broad-based cyber attacks at a number of companies, including but not limitedlaws. For example, we are subject to the New York State Department of Financial Services Cybersecurity RequirementsRegulation for Financial Services Companies and the California Consumer Privacy Act of 2018.TheseCCPA. India has also proposed sweeping new data protection laws, in some cases including data localization laws that may require that personal data stay within their borders.similar initiatives around the world could increase the costemerging laws is resulting in significant costs of developing, implementing or securing our servers and requireis requiring us to allocate more resources to new privacy compliance processes and to improved technologies, adding to our IT and compliance costs. In addition, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase. The enactment of more restrictive laws, rules, regulations, or future enforcement actions or investigations could impact us through increased costs or restrictions on our business, and noncompliance could result in regulatory penalties and significant legal liability.(which we refer to as SEC)(SEC), the Department of Justice, (which we refer to as DOJ), the IRS, and the Office of Foreign Assets Control (which we refer to as OFAC)and the Federal Trade Commission in the U.S., the Financial Conduct Authority (which we refer to as FCA) in the U.K., the Australian Securities and Investments Commission in Australia and insurance regulators in nearly every jurisdiction in which we operate. Our activities are also subject to a variety of other laws, rules and regulations addressing licensing, data privacy,U.S. trade sanctions administered by OFAC,laws of the U.S., the European Union and the United Nations, and trade sanction laws such as the Iran Threat Reduction and Syria Human Rights Act of 2012. (the Tax Act), which significantly revised the U.S. tax code by, among other things, lowering the corporate income tax rate from 35.0% to 21.0%; limiting the deductibility of interest expense; implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. Some aspects of the Tax Act are still unclear and will continue to be clarified over time. While we have updated estimates of the tax impacts based on guidance released to date or interpretations under such guidance, other guidance could be issued in the future, which could adversely affect our results of operations and financial condition.could, for example, include claims for damages based on allegations that our employees or1617 to our 20182019 consolidated financial statements, we are a defendant in various legal actions incidental to our business, including but not limited to matters related to employment practices, alleged breaches ofChem-Mod LLC is we are defending lawsuitsa lawsuit (along with that various entities associated with our clean energy investments are liable for infringement of a patentpatents held by Nalco Company.Midwest Energy Emissions Corp. and MES Inc. We cannot reasonably predict the outcomes of these or other matters that we may become involved with in the future. An adverse outcome in connection with one or more of these matters could have a material adverse effect on our business, results of operations or financial condition in any given quarterly or annual period, or on an ongoing basis. In addition, regardless of any eventual monetary costs, any such matter could expose us to negative publicity, reputational damage, harm to our client or employee relationships, or diversion of personnel and management resources, which could adversely affect our ability to recruit quality brokers and other significant employees to our business, and otherwise adversely affect our results of operations.newchanged revenue recognition standard and a new standard for leaseslease standards - see Note 2 to our 20182019 consolidated financial statements) could increase costs to the organization and could have an adverse impact on our future financial position and results of operations.concerns regarding coal. political and regulatory concerns.could leadhave led to public pressure to reduce or regulations that discourage the burning of coal, even refined coal treated by technologies such as The Chem-Mod™ Solution. Negative publicity regarding our IRC Section 45 investments or clean coal generally could exacerbate this risk and increase the risk that Congress might limit the availability of the tax credits or fail to extend them. Additionally, regulations could mandate that electric power generating companies purchase a minimum amount of power from energy sources such as wind, hydroelectric, solar, nuclear and geothermal. If utilities burned less coal as a result of any such regulation, our ability to generate tax credits would be reduced.plants.plants.wind generated power from renewable sources, trade protection measures, an economic slowdown or mild weather and a corresponding decline in the use of electricity. If utilities burn less coal or eliminate coal in the production of electricity, the availability of theour ability to generate additional tax credits would also be reduced.Chem-Mod™Chem-Mod™ (orApril 18, 2018, Nalco Company (which we refer to as Nalco)July 17, 2019, Midwest Energy Emissions Corp. and MES Inc. (together, Midwest Energy) filed a patent infringement lawsuitslawsuit in the WesternUnited States District Court for the District of WisconsinDelaware against two unaffiliated power plants that burn refined coal using theus,Chem-Mod™ Solution. These complaints were filed following Nalco’s voluntary dismissal of its action againstChem-Mod LLC and other defendants that was originally filed in the Northern District of Illinois in April 2014, as previously disclosed in our SEC filings. On July 16, 2018, Nalco amended its complaints to name as additional defendants in each case the refined coal limited liability company that sells refined coal to the power plant defendant in each case. The refined coal limited liability companies are licensed byChem-Mod LLC to use theThe Chem-Mod™ Solution to produce refined coal. The complaints allegecomplaint alleges that the named defendants infringe a patent licensedtwo patents held exclusively to Nalcoby Midwest Energy and seekseeks unspecified damages and injunctive relief. Although neither we norChem-Mod LLC is named as a defendantWe dispute the allegations contained in either of these complaints, their defense was tenderedthe complaint and intend toChem-Mod LLC under certain agreements that provide for defense and indemnity, and those tenders were accepted.Chem-Mod LLC is directing the vigorous defense of these lawsuits. defend this matter vigorously. Litigation is inherently uncertain and, accordingly it is not possible for us to predict the ultimate outcome of these matters. If Chem-Mod (orWhile we and our investment and operational partners)believe the probability of a material loss is remote, if plaintiffs prevail on the infringement suit, or defendants cannot defeat or defend this or other such claims or obtain necessary licenses on reasonable terms, that may limit the operations may be precluded from usinguse of The Chem-Mod™ Solution.Co-investor tax credit risks. We haveco-investors in several of the operations currently producing refined coal. If in the future any one of ourco-investors leaves a project, we could have difficulty finding replacements in a timely manner. On June 15, 2017, one™position taken by the IRS has the potential to affect, and the IRS has opened audits of, other partnerships in which theseco-investors are invested. However, the IRS notice does not challenge the validity of the tax credits themselves, or our ability to utilize tax credits. The partnership affected by the June 15, 2017 notice is defendingdefended its position in tax court. However, litigationcourt 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. An adverse ruling would likely make it more difficultproceeding or other IRS audits, and their potential impact on us.usvarious reasons, including operational or environmental problems at the plants or in the boilers, disruptions in the supply or transportation of coal, revocation of theirreach satisfactory arrangementsunforeseen technical or other problems not evident in the short- or medium-term. A serious injury or death of a worker connected with newco-investors and we may also be subjectthe production of refined coal usingclaims against us from theco-investors affected by this IRS notice.material liabilities, jeopardizing our •Operational risks.Chem-Mod’s multi-pollutant reduction technologies (TheChem-ModTM 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 theirChem-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 usingChem-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 usingChem-Mod’s technologies could expose the operations to material liabilities, jeopardizing our investment, and could lead to reputational harm. In the event of any such operational problems, we may not be able to take full advantage of the tax credits. 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 our2018,2019, we had generated a total of $1,168$1,364 million ($1.1681.364 billion) in IRC Section 45 tax credits, of which approximately $370$427.0 million have been used to offset U.S. federal tax liabilities and $798$937.0 million remain unused and available to offset future U.S. federal tax liabilities. Our ability to use tax credits under IRC Section 45 depends upon the operations in which we have invested satisfying certain ongoing conditions set forth in IRC Section 45. These include, among others, the2018,2019, we had exposure with respect to $108.0 million of previously earned tax credits under IRC Section 29. We believe our claim for IRC Section 29 tax credits in 2007 and prior years was in accordance with IRC Section 29 and four private letter rulings previously obtained byIRC SectionChem-Mod™Chem-Mod™Chem-Mod™Chem-Mod™2018,2019, we had total consolidated debt outstanding of approximately $3.6$4.6 billion. The level of debt outstanding each period could adversely affect our financial flexibility. We also bear risk at the time our debt matures. Our ability to make interest and principal payments, to refinance our debt obligations and to fund our acquisition program and planned capital expenditures will depend on our ability to generate cash from operations. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, such as an environment of rising interest rates. A small portion of our private placement debt consists of floating rate notes and interest payments under our senior revolving credit facility are based on a floating rate (in both cases currently based on LIBOR, which willis expected to transition soon to the Secured Overnight Financing Rate), which exposes us to additionalthe risk in an environment of rising interest rates.a changing or unknown rate environment. Our indebtedness will also reduce the ability to use that cash for other purposes, including working capital, dividends to stockholders, acquisitions, capital expenditures, share repurchases, and general corporate purposes. If we cannot service our indebtedness, we may have to take actions such as selling assets, issuing additional equity or reducing or delaying capital expenditures, strategic acquisitions, and investments, any of which could impede the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business. Additionally, we may not be able to effect such actions, if necessary, on commercially reasonable terms, or at all. We may not be able to refinance any of our indebtedness on commercially reasonable terms, or at all.significantmeaningful portion of our revenue and operating profit from operating subsidiaries located outside the U.S. Since the majority of financing obligations as well as dividends to stockholders are paid from the U.S., it is important to be able to access the cash generated by our operating subsidiaries located outside the U.S. in the event we are unable to meet these U.S. based cash requirements.eachany of our segments;Note 16Notes 15 and 17 to our 20182019 consolidated financial statements for information with respect to our lease commitments as of December 31, 2018.NameAge 66 Walter D. Bay 56 Richard C. Cary 56 Joel D. Cavaness 57 Thomas J. Gallagher 60 Douglas K. Howell 57 Scott R. Hudson 57 Christopher E. Mead 51 Susan E. Pietrucha 52 William F. Ziebell 56 We2019,2020, there were approximately 1,000 holders of record of our common stock.2018: 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) 2,499 $ 74.04 — 7,287,019 754 77.86 — 7,287,019 19,916 73.54 — 7,287,019 23,169 $ 73.74 —
Number of
Shares
Purchased (1)
Price Paid
per Share (2)
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (3)
of Shares that May
Yet be Purchased
Under the Plans or
Programs (3) $ $ (1) 20182019 consolidated financial statements in this report for more information regarding the DEPP. The DCPP is an unfunded,2018,2019, 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 20182019 awards under the DCPP. The Supplemental Plan is an unfunded,(2) (3) 20182019 have been derived from our consolidated financial statements. Such data should be read in conjunction with our consolidated financial statements and notes thereto in Item 8 of this annual report. Year Ended December 31, 2018 2017
As Restated* 2016
As Restated* 2015 2014 (In millions, except per share and employee data) $ 2,920.7 $ 2,641.0 $ 2,409.9 $ 2,338.7 $ 2,083.0 1,756.3 1,591.9 1,491.7 1,432.3 1,258.3 189.9 158.0 139.9 125.5 104.0 98.0 99.5 97.9 93.7 84.7 1,827.5 1,622.6 1,409.0 1,402.2 1,096.5 6,792.4 6,113.0 5,548.4 5,392.4 4,626.5 141.6 136.0 132.1 — — 6,934.0 6,249.0 5,680.5 5,392.4 4,626.5 6,454.6 5,889.2 5,346.9 5,098.9 4,335.0 479.4 359.8 333.6 293.5 291.5 (196.5 ) (157.1 ) (96.7 ) (95.6 ) (36.0 ) 675.9 516.9 430.3 389.1 327.5 42.4 35.6 33.5 32.3 24.1 $ 633.5 $ 481.3 $ 396.8 $ 356.8 $ 303.4 3.40 2.64 2.22 2.06 1.97 1.64 1.56 1.52 1.48 1.44 184.0 181.0 178.3 176.9 164.6 182.7 180.1 177.6 172.2 152.9 186.2 182.1 178.4 173.2 154.3 $ 16,334.0 $ 14,909.7 $ 13,528.2 $ 10,910.5 $ 10,010.0 3,098.0 2,698.0 2,150.0 2,075.0 2,125.0 4,569.7 4,299.7 3,775.5 3,688.2 3,305.1 15 % 13 % 11 % 11 % 14 % 30,362 26,783 24,790 23,857 22,375 $ $ $ $ $ ) ) ) ) ) $ $ $ $ $ $ $ $ $ $ % % % % % (1) (2) (3) * See Note 3 –As of January 1, 2018, we adopted ASC 606, Revenues from Contracts with Customers for additional information about the restatements related to Topic 606. We adopted Topic 606 as of January 1, 2018, 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 and 2014 information in the table above. 35 other49 countries and offer client-service capabilities in more than 150 countries globally through a network of correspondent brokers and consultants. In 2018,2019, we expanded, and expect to continue to expand, our international operations through both acquisitions and organic growth. We generate approximately 70%69% of our revenues for the combined brokerage and risk management segments domestically, with the remaining 30%31% derived internationally, primarily in Australia, Bermuda, Canada, the Caribbean, New Zealand and the U.K. (based on 20182019 revenues). We expect that our international revenue as a percentage of our total revenues in 20192020 will be comparable to 2018.2019. We have three reportable segments: brokerage, risk management and corporate, which contributed approximately 61%68%, 14% and 25%18%, respectively, to 20182019 revenues. Our major sources of operating revenues are commissions, fees and supplemental and contingent revenues from brokerage operations and fees from risk management operations. Investment income is generated from invested cash and fiduciary funds, clean energy investments, and interest income from premium financing.Accounting Changes - Impact of New Revenue Recognition Accounting StandardAs a result of adopting a new revenue recognition accounting statement, we restated our consolidated financial statements and related information from amounts previously reported herein for 2017 and 2016. Notes 2 and 3 to our 2018 consolidated financial statements included in this report contains information regarding the impact the new revenue recognition accounting standard had on our financial presentation. We adopted the new standard as of January 1, 2018, using the full retrospective method to restate each prior reporting period presented. The cumulative effect of the adoption was an increase to retained earnings of $125.3 million as of January 1, 2016. While the adoption of the new standard did not have a material impact on the presentation of our consolidated results of operations on an annual basis, there was a material impact on the presentation of our results in certain quarters due to timing changes in the recognition of certain revenue and expenses. As a result, we did experience a different “seasonality” in our quarterly results after adoption of the new standard, with a shift in the timing of revenue recognized from the second, third and fourth quarters to the first quarter.2827 and 29. Year 2018 Year 2017 Change Reported Adjusted Reported Adjusted Reported Adjusted GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAP (In millions, except per share data) $ 4,246.9 $ 4,236.7 $ 3,815.1 $ 3,824.7 11 % 11 % $ 3,960.2 $ 3,749.0 5.6 % $ 573.2 $ 414.7 38 % 13.5 % 10.9 % +263 bpts $ 1,172.4 $ 1,043.0 12 % 27.7 % 27.3 % +40 bpts $ 3.02 $ 3.24 $ 2.23 $ 2.50 35 % 30 % $ 798.3 $ 798.3 $ 737.4 $ 734.7 8 % 9 % $ 786.3 $ 734.2 7.1 % $ 70.4 $ 55.7 26 % 8.8 % 7.6 % +127 bpts $ 138.7 $ 126.1 10 % 17.4 % 17.2 % +21 bpts $ 0.38 $ 0.37 $ 0.31 $ 0.32 23 % 16 % $ — $ (0.16 ) $ 0.10 $ 0.18 $ 3.40 $ 3.45 $ 2.64 $ 3.00 29 % 15 % $ $ $ $ % % $ $ % $ $ % % % $ $ % % % $ $ $ $ % % $ $ $ $ % % $ $ % $ $ % % % $ $ % % % $ $ $ $ % % $ ) $ ) $ $ ) $ $ $ $ % % $ $ $ $ % % $132.7 million in 2018, and 2017, respectively. Our current estimate of the 20192020 annual net after tax earnings, including IRC Section 45 tax credits, which will be produced from all of our clean energy investments in 2019,2020, is $105.0$80.0 million to $115.0$100.0 million. We expect to use the additional cash flow generated by these earnings to continue our mergers and acquisition strategy in our core brokerage and risk management operations.20182019 and 2017.2018. In addition, these tables provide reconciliations to the most comparable GAAP measures for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share. Reconciliations of EBITDAC for the brokerage and risk management segments are provided on pages 35 and 41 of this filing. Revenues Before
Reimbursements Net Earnings EBITDAC Diluted Net
Earnings (Loss)
Per Share 2018 2017 2018 2017 2018 2017 2018 2017 Chg (In millions, except per share data) $ 4,246.9 $ 3,815.1 $ 573.2 $ 414.7 $ 1,126.3 $ 988.8 $ 3.02 $ 2.23 35 % (10.2 ) (3.4 ) (7.9 ) (2.4 ) (10.2 ) (3.4 ) (0.04 ) (0.01 ) — — 2.6 10.5 3.4 14.8 0.01 0.06 — — 29.1 21.9 38.7 30.1 0.16 0.12 — — 16.3 16.7 14.2 9.1 0.09 0.09 — 13.0 — 1.8 — 3.6 — 0.01 4,236.7 3,824.7 613.3 463.2 1,172.4 1,043.0 3.24 2.50 30 % 798.3 737.4 70.4 55.7 134.0 125.7 0.38 0.31 23 % — — 3.5 0.5 4.7 0.9 0.01 — — — (4.3 ) 0.8 — — (0.02 ) 0.01 — (2.7 ) — (0.2 ) — (0.5 ) — — 798.3 734.7 69.6 56.8 138.7 126.1 0.37 0.32 16 % 1,747.2 1,560.5 32.3 46.5 (213.9 ) (213.9 ) — 0.10 — — (22.0 ) — — — (0.12 ) — — — (8.9 ) (1.5 ) — 2.5 (0.04 ) (0.01 ) — — — 8.8 — 11.1 — 0.05 — — — 7.9 — 13.2 — 0.04 1,747.2 1,560.5 1.4 61.7 (213.9 ) (187.1 ) (0.16 ) 0.18 $ 6,792.4 $ 6,113.0 $ 675.9 $ 516.9 $ 1,046.4 $ 900.6 $ 3.40 $ 2.64 29 % $ 6,782.2 $ 6,119.9 $ 684.3 $ 581.7 $ 1,097.2 $ 982.0 $ 3.45 $ 3.00 15 % $ 5,045.2 $ 4,552.5 $ 643.6 $ 470.4 $ 1,260.3 $ 1,114.5 $ 3.40 $ 2.54 34 % $ 5,035.0 $ 4,559.4 $ 682.9 $ 520.0 $ 1,311.1 $ 1,169.1 $ 3.61 $ 2.82 28 %
Reimbursements
Earnings (Loss)
Per Share $ $ $ $ $ $ $ $ % ) ) ) ) ) ) ) ) ) ) ) ) % % ) ) ) ) ) ) ) ) % ) ) ) ) ) ) ) ) ) ) ) ) ) $ $ $ $ $ $ $ $ % $ $ $ $ $ $ $ $ % $ $ $ $ $ $ $ $ % $ $ $ $ $ $ $ $ % * 2018,2019, the pretax impact of the brokerage segment adjustments totals $53.5$10.4 million, with a corresponding adjustment to the provision for income taxes of $13.4$0.9 million relating to these items. The pretax impact of the risk management segment adjustments totals $(1.3)$5.5 million, with a corresponding adjustment to the provision for income taxes of $(0.5)$1.3 million relating to these items. There was noThe pretax impact of the corporate segment adjustments totals $17.9 million, with an adjustment to the benefit for income taxes of $30.9$3.9 million.2017,2018, the pretax impact of the brokerage segment adjustments totals $69.2$51.0 million, with a corresponding adjustment to the provision for income taxes of $20.7$12.9 million relating to these items. The pretax impact of the risk management segment adjustments totals $1.7$(3.2) million, with a corresponding adjustment to the provision for income taxes of $0.6$(1.0) million relating to these items. TheThere was no pretax impact of the corporate segment adjustments, totals $26.8 million, with a correspondingan adjustment to the provisionbenefit for income taxes of $11.6 million relating to these items. Net Earnings Net Earnings Earnings Provision (Loss) (Loss) Diluted Net (Loss) (Benefit) Attributable to Attributable to Earnings Before Income for Income Net Noncontrolling Controlling (Loss) Taxes Taxes Earnings Interests Interests per Share $ 764.2 $ 191.0 $ 573.2 $ 10.7 $ 562.5 $ 3.02 (10.2 ) (2.3 ) (7.9 ) — (7.9 ) (0.04 ) 3.4 0.8 2.6 — 2.6 0.01 38.7 9.6 29.1 — 29.1 0.16 21.6 5.3 16.3 — 16.3 0.09 $ 817.7 $ 204.3 $ 613.3 $ 10.7 $ 602.6 $ 3.24 $ 95.7 $ 25.3 $ 70.4 $ — $ 70.4 $ 0.38 4.7 1.2 3.5 — 3.5 0.01 (6.0 ) (1.7 ) (4.3 ) — (4.3 ) (0.02 ) $ 94.4 $ 24.8 $ 69.6 $ — $ 69.6 $ 0.37 $ (380.5 ) $ (412.8 ) $ 32.3 $ 31.7 $ 0.6 $ — — 22.0 (22.0 ) — (22.0 ) (0.12 ) — 8.9 (8.9 ) — (8.9 ) (0.04 ) $ (380.5 ) $ (381.9 ) $ 1.4 $ 31.7 $ (30.3 ) $ (0.16 ) $ 635.9 $ 221.2 $ 414.7 $ 7.6 $ 407.1 $ 2.23 (3.4 ) (1.0 ) (2.4 ) — (2.4 ) (0.01 ) 14.8 4.3 10.5 — 10.5 0.06 30.1 8.2 21.9 — 21.9 0.12 24.9 8.2 16.7 — 16.7 0.09 2.8 1.0 1.8 — 1.8 0.01 $ 705.1 $ 241.9 $ 463.2 $ 7.6 $ 455.6 $ 2.50 $ 90.1 $ 34.4 $ 55.7 $ — $ 55.7 $ 0.31 0.9 0.4 0.5 — 0.5 — 1.1 0.3 0.8 — 0.8 0.01 (0.3 ) (0.1 ) (0.2 ) — (0.2 ) — $ 91.8 $ 35.0 $ 56.8 $ — $ 56.8 $ 0.32 $ (366.2 ) $ (412.7 ) $ 46.5 $ 28.0 $ 18.5 $ 0.10 2.5 4.0 (1.5 ) — (1.5 ) (0.01 ) 11.1 2.3 8.8 — 8.8 0.05 13.2 5.3 7.9 — 7.9 0.04 $ (339.4 ) $ (401.1 ) $ 61.7 $ 28.0 $ 33.7 $ 0.18
(Loss)
Before Income
Taxes
(Benefit)
for Income
Taxes
Earnings
(Loss)
Attributable to
Noncontrolling
Interests
(Loss)
Attributable to
Controlling
Interests
Earnings
(Loss)
per Share $ $ $ $ $ $ ) ) ) ) ) $ $ $ $ $ $ $ $ $ $ $ $ ) ) ) ) ) $ $ $ $ $ $ $ ) $ ) $ ) $ $ ) $ ) $ ) $ ) $ ) $ $ ) $ ) $ $ $ $ $ $ ) ) ) ) ) ) ) ) ) ) $ $ $ $ $ $ $ $ $ $ $ $ ) ) ) ) ) ) ) ) ) ) $ $ $ $ $ $ $ ) $ ) $ $ $ $ ) ) ) ) ) ) $ ) $ ) $ $ $ ) $ ) The20182019 survey had not been issuedpublished as of the filing date of this report. The first three 20182019 quarterly surveys indicated that U.S. commercial property/casualty rates increased by 1.7%3.5%, 1.5%5.2%, and 1.6%6.2% on average, across all lines, for the first, second and third quarters of 2018,2019, respectively. We expect a similar trend to be noted when the CIAB fourth quarter 20182019 survey report is issued, which would signal a relatively stable market.continued price firming. The CIAB represents the leading domestic and international insurance brokers, who write approximately 85% of the commercial property/casualty premiums in the U.S.2019,2020, we expect modest increases in property/casualty rates and exposures similar togreater than the modest increases observed during 2018.2019. Within our employee benefits and consulting brokerage operations, we believe that employment growth, a tightening labor market and the complexity surrounding the healthcare regulatory environment bode well for the continued demand of our solutions. In addition, our history of strong new business generation, solid retentions and enhanced value-added services for our carrier partners should all result in further organic growth opportunities around the world. Internationally, pricing is increasing the most in the U.K.our London Specialty and Canadian retail property/casualty markets, pricingand is similar to the U.S., pricing is flatpositive in London Specialty,our Australian, New Zealand and we are experiencing an improving market in Australia and New Zealand.UK retail property/casualty markets. Overall, we believe that in a stable to modestly positive rate environment with growing exposure units, our professionals can demonstrate their expertise and high-quality, value-added capabilities by strengthening our clients’ insurance portfolios. Based on our experience, insurance carriers appear to be making rational pricing decisions. In lines and accounts where rate increases or decreases are warranted, the underwriters are pricing accordingly. As carriers reach their profitability targets in lines, rates may start to flatten in those lines. In summary, in this environment, clients can still obtain coverage, businesses continue to stay in standard-line markets and there is adequate capacity in the insurance market.14 plants which were placed in service prior to December 31, 2009 (which we refer to as the 2009 Era Plants) can receivereceived tax credits through 2019 and the 20 plants which were placed in service prior to December 31, 2011 (which we refer to as the 2011 Era Plants) can receive tax credits through 2021.Thirty-one plants All twenty of the 2011 Era Plants are under long-term production contracts with several utilities. We are not in current active negotiations for long-term production contracts for two of the 2009 Era Plants. For one of the 2011 Era Plants, we are in early stages of negotiations for a long-term production contract.Chem-Mod™20192020 annual net after tax earnings, including IRC Section 45 tax credits, which will be produced from all of our clean energy investments in 2019,2020, is $105.0$80.0 million to $115.0$100.0 million.generally accepted accounting principles (which we refer to as GAAP),GAAP, which require management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We believe the following significant accounting policies may involve a higher degree of judgment and complexity. See Note 1 to our 20182019 consolidated financial statements for other significant accounting policies.34 to our 20182019 consolidated financial statements for information with respect to the impacts a new accounting standard, relating to revenue recognition, had on our financial position and operating results.1819 to our 20182019 consolidated financial statements.1819 to our 20182019 consolidated financial statements for a discussion regarding the possibility that our gross unrecognized tax benefits balance may change within the next twelve months.1819 to our 20182019 consolidated financial statements related to changes in our valuation allowances.20182019 consolidated financial statements.43 to our 20182019 consolidated financial statements for additional discussion on our 20182019 business combinations.43 to our 20182019 consolidated financial statements for a discussion of our 20182019 business combinations. We did not have any material dispositions in 2018 2017 and 2016.the first quarter of 2019, we expect to recognizerecognized abetween $0.20 and $0.23of $0.17 of diluted net earnings per share as a result of the sale. for the brokerage and risk management segments,, adjusted revenues, adjusted compensation and operating expenses, adjusted compensation expense ratio, adjusted operating expense ratio and organic revenue measures for each operating segment.revenue. These measures are not in accordance with, or an alternative to, the GAAP information provided in this report. We believe that these presentations provide useful information to management, analysts and investors regarding financial and business trends relating to our results of operations and financial condition.condition because they provide investors with measures that our chief operating decision maker uses when reviewing the company’s performance, and for the other reasons described below. Our industry peers may provide similar supplementalAs disclosed in our most recent Proxy Statement, weWe make determinations regarding certain elements of executive officer incentive compensation, performance share awards and annual cash incentive awards, partly on the basis of measures related to adjusted EBITDAC.Non-GAAP2017 and 20162017 information, presented on the following pages, provides stockholders and other interested persons with useful information regarding certain financial metrics that may assist such persons in analyzing our operating results as they develop a future earnings outlook for us. Therevenues and expensesmeasuresrealized from sales of books of business,on divestitures, which are primarily net proceeds received related to sales of books of business and other divestiture transactions.transactions, such as the disposal of a business unit through sale or closure.changechanges in estimated acquisition earnout payables adjustments, impacts of acquisition valuationperiodsperiod in the prior year.For the corporate legal entity restructuring, impact of U.S. tax reform, litigation settlement and home office lease termination/move for the corporate segment, see page 50 for a more detailed description of their nature.ratio and adjusted operating expense, ratio, respectively, each divided by adjusted revenues.and, for the overall business and provide a meaningful way to measure its financial performance on an ongoing basis.realized from sales of books of business,on divestitures, acquisition integration costs, workforce related charges, lease termination related charges, 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) and Adjusted EBITDAC margin is Adjusted EBITDAC divided by total adjusted revenues (defined above). These measures for the brokerage and risk management segments provide a meaningful representation of our operating performance, and are 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.for the Brokerage and Risk Management segmentsAdjusted Net EarningsNetAdjusted net earnings have been adjusted to exclude therealized from sales of books of business,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. Measure) measure) disposed of in each year presented. These revenues are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of our business in both the current and prior year. In addition, organic change in base commission and fee revenues, supplemental revenues and contingent revenues exclude the period-over-period impact of foreign currency translation. For the risk management segment, organic change in fee revenues excludes the first twelve months of fee revenues generated from acquisitions and the fee revenues related to operations disposed of in each year presented. In addition, change in organic growth excludes the period-over-period impact of foreign currency translation to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability, or are due to the limited-time nature of these revenue sources.20192020 and beyond. We have historically viewed organic revenue growth as an important indicator when assessing and evaluating the performance of our brokerage and risk management segments. We also believe that using thisexpenses,expense, EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, adjusted EBITDAC (before acquisitions), diluted net earnings per share (as adjusted) and organic revenue measures.61%68% of our revenue in 2018.2019. Our brokerage segment is primarily comprised of retail and wholesale brokerage operations. Our brokerage segment generates revenues by: (i) (ii) (iii) (iv) head countheadcount for employer sponsored benefit plans. Commissions depend upon a large number of factors, including the type of risk being placed, the particular underwriting enterprise’s demand, the expected loss experience of the particular risk of coverage, and historical benchmarks surrounding the level of effort necessary for us to place and service the insurance contract. Rather than being tied to the amount of premiums, fees are most often based on an expected level of effort to provide our services. In addition, under certain circumstances, both retail brokerage and wholesale brokerage services receive supplemental and contingent revenues. Supplemental revenue is revenue paid by an underwriting enterprise that is above the base commission paid, is determined by the underwriting enterprise and is established annually in advance of the contractual period based on historical performance criteria. Contingent revenue is revenue paid by an underwriting enterprise based on the overall profit and/or volume of the business placed with that underwriting enterprise during a particular calendar year and is determined after the contractual period.20162017 to 2018,2019, our micro-captive operations contributed less than $3.2$2.9 million of net earnings and less than $5.0$4.5 million of EBITDAC to our consolidated results in any one year. Due to the fact that the IRS has not made any allegation against us, or completed all of its audits of our clients, we are not able to reasonably estimate the amount of any potential loss in connection with this investigation.Tribeca.Tribeca, in the Unites States District Court for the District of Arizona. The named plaintiffs are micro-captive clients of Artex or Tribeca and their related entities and owners who had IRC Section 831(b) tax benefits disallowed by the IRS. The complaint attempts to state various causes of action and alleges that the defendants defrauded the plaintiffs by marketing and managing micro-captives with the knowledge that the captives did not constitute20152005 to the present. The complaint does not specify the amount of damages sought by the named plaintiffs or the putative class. TheOn August 5, 2019, the trial court granted the defendants’ responsemotion to compel arbitration and dismissed the class action lawsuit. Plaintiffs are appealing this ruling to the complaint is due on March 8, 2019. The court has not otherwise set a case schedule.United States Court of Appeals for the Ninth Circuit. We will vigorouslycontinue to defend against the lawsuit.lawsuit vigorously. Litigation is inherently uncertain, however, and it is not possible for us to predict the ultimate outcome of this matter and the financial impact to us.2017 and 20162017 (in millions, except per share, percentages and workforce data): 2018 2017 Change 2017 2016 Change $ 2,920.7 $ 2,641.0 $ 279.7 $ 2,641.0 $ 2,409.9 $ 231.1 958.5 855.1 103.4 855.1 794.7 60.4 189.9 158.0 31.9 158.0 139.9 18.1 98.0 99.5 (1.5 ) 99.5 97.9 1.6 69.6 58.1 11.5 58.1 52.6 5.5 10.2 3.4 6.8 3.4 6.6 (3.2 ) 4,246.9 3,815.1 431.8 3,815.1 3,501.6 313.5 2,447.1 2,212.3 234.8 2,212.3 2,040.2 172.1 673.5 614.0 59.5 614.0 598.2 15.8 60.9 61.8 (0.9 ) 61.8 57.2 4.6 286.9 261.8 25.1 261.8 244.7 17.1 14.3 29.3 (15.0 ) 29.3 32.1 (2.8 ) 3,482.7 3,179.2 303.5 3,179.2 2,972.4 206.8 764.2 635.9 128.3 635.9 529.2 106.7 191.0 221.2 (30.2 ) 221.2 186.6 34.6 573.2 414.7 158.5 414.7 342.6 72.1 10.7 7.6 3.1 7.6 6.5 1.1 $ 562.5 $ 407.1 $ 155.4 $ 407.1 $ 336.1 $ 71.0 $ 3.02 $ 2.23 $ 0.79 $ 2.23 $ 1.89 $ 0.34 35 % 19 % 19 % 11 % 9 % 9 % 5 % 4 % 4 % 58 % 58 % 58 % 58 % 16 % 16 % 16 % 17 % 25 % 35 % 35 % 35 % 22,934 20,049 20,049 18,635 $ 13,785.1 $ 12,404.3 $ 12,404.3 $ 11,308.6 $ $ $ $ $ $ ) ) ) ) $ $ $ $ $ $ $ $ $ $ $ $ % % % % % % % % % % % % % % % % % % % % % $ $ $ $ 2017 and 20162017 (in millions): 2018 2017 Change 2017 2016 Change $ 573.2 $ 414.7 38.2 % $ 414.7 $ 342.6 21.0 % 191.0 221.2 221.2 186.6 60.9 61.8 61.8 57.2 286.9 261.8 261.8 244.7 14.3 29.3 29.3 32.1 1,126.3 988.8 13.9 % 988.8 863.2 14.5 % (10.2 ) (3.4 ) (3.4 ) (6.6 ) 3.4 14.8 14.8 45.7 14.2 9.1 9.1 3.7 38.7 30.1 30.1 20.7 — 3.6 — (3.4 ) $ 1,172.4 $ 1,043.0 12.4 % $ 1,039.4 $ 923.3 12.6 % 13.5 % 10.9 % +263 bpts 10.9 % 9.8 % +108 bpts 27.7 % 27.3 % +40 bpts 27.3 % 26.5 % +77 bpts $ 4,246.9 $ 3,815.1 $ 3,815.1 $ 3,501.6 $ 4,236.7 $ 3,824.7 $ 3,811.7 $ 3,485.3 Acquisition integration costs include costs related to our July 2, 2014 acquisition of Noraxis Capital Corporation (which we refer to as Noraxis), our June 16, 2014 acquisition of the Crombie/OAMPS operations (which we refer to as Crombie/OAMPS), our April 1, 2014 acquisition of Oval Group of Companies (which we refer to as Oval), our November 14, 2013 acquisition of the Giles Group of Companies (which we refer to as Giles) and our August 1, 2015 acquisition of William Gallagher Associates Insurance Brokers (which we refer to WGA) that we incurred until we fully assimilated these acquisitions into our operations. These costs related toon-boarding of employees, communication system conversion costs, related performance compensation, redundant workforce, extra lease space, duplicate services and external costs incurred to assimilate the acquired businesses with our IT related systems. The WGA integration costs in 2017 totaled $1.3 million and were primarily related to retention and incentive compensation. The Crombie/OAMPS integration costs in 2017 totaled $1.3 million, and were primarily related to technology costs and incentive compensation. The Giles and Oval integration costs in 2017 totaled $12.2 million and were primarily related to the consolidation of offices in the U.K., technology costs, branding and incentive compensation. The WGA integration costs in 2016 totaled $5.0 million and were primarily related to retention and incentive compensation. The Noraxis integration costs in 2016 totaled $1.9 million and were primarily related to the consolidation of offices, technology costs and incentive compensation. The Crombie/OAMPS integration costs in 2016 totaled $3.2 million, and were primarily related to technology costs and incentive compensation. The Giles and Oval integration costs in 2016 totaled $35.6 million and were primarily related to the consolidation of offices in the U.K., technology costs, branding and incentive compensation. $ $ % $ $ % % % ) ) ) ) ) $ $ % $ $ % % % % % % % % % $ $ $ $ $ $ $ $ The aggregate increase in commissions and fees for 2016 was principally due to revenues associated with acquisitions that were made during 2016 and 2015 ($173.2 million). Commissions and fees in 2016 included new business production of $359.7 million, which was offset by lost business and renewal rate decreases of $362.6 million. Commission revenues increased 11%14% and fee revenues increased 12% in 20182019 compared to 2017,2018, respectively. The organic change in base commission and fee revenues was 6% in 2019 and 5% in 2018 and 4% in 2017.20182019 and 20172018 include the following (in millions): 2018 Organic Revenue 2017 Organic Revenue 2018 2017 Change 2017 2016 Change $ 3,879.2 $ 3,496.1 11.0 % $ 3,496.1 $ 3,204.6 9.1 % (200.4 ) — (169.6 ) — — (18.2 ) — (4.1 ) — 13.3 — (9.3 ) $ 3,678.8 $ 3,491.2 5.4 % $ 3,326.5 $ 3,191.2 4.2 % $ 189.9 $ 158.0 20.2 % $ 158.0 $ 139.9 12.9 % (1.5 ) — (1.6 ) — — 0.8 — (0.9 ) $ 188.4 $ 158.8 18.6 % $ 156.4 $ 139.0 12.5 % $ 98.0 $ 99.5 -1.5 % $ 99.5 $ 97.9 1.6 % (5.0 ) — (5.7 ) — — (0.6 ) — — — 0.1 — (0.2 ) $ 93.0 $ 99.0 -6.1 % $ 93.8 $ 97.7 -4.0 % $ 4,167.1 $ 3,753.6 11.0 % $ 3,753.6 $ 3,442.4 9.0 % (206.9 ) — (176.9 ) — — (18.8 ) — (4.1 ) — 14.2 — (10.4 ) $ 3,960.2 $ 3,749.0 5.6 % $ 3,576.7 $ 3,427.9 4.3 % 2018 2017 2016 44 36 37 $ 317.9 $ 159.0 $ 137.9 $ $ % $ $ % ) ) ) ) ) $ $ % $ $ % $ $ % $ $ % ) ) ) $ $ % $ $ % $ $ % $ $ % ) ) ) ) $ $ % $ $ % $ $ % $ $ % ) ) ) ) ) $ $ % $ $ % $ $ $ 2017 and 2016,2017, we issued 1,908,000, 881,000, 1,041,000 shares and 1,998,0001,041,000 shares, respectively, in connection with273,000 shares and 2,265,000273,000 shares, respectively, to partially offset the impact of the issued shares. 2017 and 20162017 by quarter are as follows (in millions): Q1 Q2 Q3 Q4 Full Year $ 52.0 $ 48.1 $ 43.9 $ 45.9 $ 189.9 34.9 21.8 25.7 15.6 98.0 $ 86.9 $ 69.9 $ 69.6 $ 61.5 $ 287.9 $ 47.3 $ 35.8 $ 36.9 $ 38.0 $ 158.0 35.0 21.3 21.8 21.4 99.5 $ 82.3 $ 57.1 $ 58.7 $ 59.4 $ 257.5 $ 41.8 $ 31.9 $ 34.5 $ 31.7 $ 139.9 31.9 21.7 22.2 22.1 97.9 $ 73.7 $ 53.6 $ 56.7 $ 53.8 $ 237.8 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ realized on books of business salesdivestituresone-time (2) net gains related to divestitures and sales of books of business, which were $75.3 million, $10.2 million and $3.4 million in 2019, 2018 and $6.6 million2017, respectively. During 2019, we recognized a2017 and 2016, respectively.primarily due to increases in interest income from our U.S. operations due to increases in interest income earned on client held funds. Investment income in 2018 increased compared to 2017 primarily due to increases in interest income from our Australia and New Zealand premium financing business, which relates to an increase in the volume of premium financing business written in 2018, and increases in interest income earned on client held funds in the U.SU.S. due to an increase in interest rates. Investment income in 2017 increased compared to 2016 primarily due to increases in interest income from our premium financing business.and 2017 and 2016(in millions): $ $ $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) $ $ $ $ % % % % % % % % $ $ $ $ $ $ $ $ (in millions): 2018 2017 2017 2016 $ 2,447.1 $ 2,212.3 $ 2,212.3 $ 2,040.2 (2.5 ) (7.6 ) (7.6 ) (16.9 ) (32.3 ) (21.4 ) (21.4 ) (17.5 ) (14.2 ) (9.1 ) (9.1 ) (3.7 ) - 8.7 - (11.7 ) $ 2,398.1 $ 2,182.9 $ 2,174.2 $ 1,990.4 57.6 % 58.0 % 58.0 % 58.3 % 56.6 % 57.1 % 57.0 % 57.1 % $ 4,246.9 $ 3,815.1 $ 3,815.1 $ 3,501.6 $ 4,236.7 $ 3,824.7 $ 3,811.7 $ 3,485.3 The increase in compensation expense in 2017 compared to 2016 was primarily due to an increase in the average number of employees, salary increases,one-time compensation payments and increases in incentive compensation linked to our overall operating results $146.3 million in the aggregate, increases in employee benefits expense - $15.8 million, deferred compensation -$6.4 million, severance related costs - $3.9 million and stock compensation expense - $0.9 million, partially offset by decreases in temporary staffing - $1.2 million. The increase in employee headcount in 2017 compared to 2016 primarily relates to the addition of employees associated with the acquisitions that we completed in 2017 and new production hires.and 2017 and 2016(in millions): $ $ $ $ ) ) ) ) ) ) ) ) ) ) $ $ $ $ % % % % % % % % $ $ $ $ $ $ $ $ (in millions): 2018 2017 2017 2016 $ 673.5 $ 614.0 $ 614.0 $ 598.2 (0.9 ) (7.2 ) (7.2 ) (28.8 ) (6.4 ) (8.7 ) (8.7 ) (3.2 ) — 0.7 — 5.4 $ 666.2 $ 598.8 $ 598.1 $ 571.6 15.9 % 16.1 % 16.1 % 17.1 % 15.7 % 15.7 % 15.7 % 16.4 % $ 4,246.9 $ 3,815.1 $ 3,815.1 $ 3,501.6 $ 4,236.7 $ 3,824.7 $ 3,811.7 $ 3,485.3 $2.3$2.6 million, professional and banking fees - $2.2 million, other expense - $1.9 million, business insurance - $1.8 million and premium financing interest expense - $0.5 million, partially offset by favorable foreign currency translation - $2.0 million and decreases in bad debt expense - $3.5 million, outside consulting fees - $3.4 million, lease termination charges - $2.3 million and change in deferred operating expense - $2.2 million. Also contributing to the increase in operating expense in 2018 were increased expenses associated with the acquisitions completed in 2018.operatingdepreciation expense in 20172019 compared to 20162018 was due primarily to unfavorable foreign currency translation - $7.2 million, increases in lease termination charges - $5.5 million, technology expenses - $4.8 million, employee expense - $4.3 million, meetingthe impact of purchases of furniture, equipment and client entertainment expenses - $3.1 million, outside consulting fees - $2.8 million, bad debt expense - $2.7 million, marketing expense - $1.8 million, licensesleasehold improvements related to office expansions and fees - $0.9 million, outside services expense - $0.8 million, professionalmoves, and banking fees - $0.2 million, partiallyexpenditures related to upgrading computer systems being offset by decreasesfixed assets being fully depreciated in other expense - $6.6 million, real estate expenses - $5.2 million, business insurance - $3.7 million, office supplies - $2.4 million and premium financing interest expense - $0.1 million. Also contributing to the increase in operating expense in 2017 were increased expenses associated with the acquisitions completed in 2017.Depreciation -2019. The decrease in depreciation expense in 2018 compared to 2017 was due primarily to the impact of purchases of furniture, equipment and leasehold improvements related to office expansions and moves, and expenditures related to upgrading computer systems being offset by fixed assets being fully depreciated in 2018. The increase in depreciation expense in 2017 compared to 2016 was due primarily to the purchases of furniture, equipment and leasehold improvements related to office expansions and moves, and expenditures related to upgrading computer systems. Also contributing to the increases in depreciation expense in 2018, 2017 and 2016 were2019 was the depreciation expensesexpense associated with acquisitions completed during these years. and 2017 compared to 2016 were due primarily to amortization expense of intangible assets associated with acquisitions completed during these years. Expiration lists,2017 and 2016,2017, we wrote off $0.1 million, $10.6 million $6.2 million and $1.8$6.2 million of amortizable intangible assets related to the brokerage segment acquisitions. and 2017 compared to 2016 was due primarily to adjustments made to the estimated fair value of earnout obligations related to revised projections of future performance. During 2019, 2018 2017 and 2016,2017, we recognized $26.2 million, $17.5 million $19.7 million and $16.9$19.7 million, respectively, of expense related to the accretion of the discount recorded for earnout obligations in connection with our 2019, 2018 2017 and 20162017 acquisitions. During 2019, 2018 2017 and 2016,2017, we recognized $9.3 million of income, $3.2 million of income and $9.6 million and $15.2 million of expense, respectively, related to net adjustments in the estimated fair market values of earnout obligations in connection with revised projections of future performance for 112, 109 106 and 101106 acquisitions, respectively.20152016 to 20182019 acquisitions were measured at fair value as of the acquisition date and are primarily based upon the estimated future operating results of the acquired entities over aand 2016 was 25.0% (25.324.2% (24.7% on a controlling basis), 34.8% (35.2%25.0% (25.3% on a controlling basis) and 35.3% (35.7%34.8% (35.2% on a controlling basis), respectively. In fourth quarter 2017, new tax legislation was enacted in the U.S., which lowered the U.S. corporate tax rate from 35.0% to 21.0% effective January 1, 2018. The impact of the adjustment of our deferred tax asset and liability balances in 2017 to reflect the U.S. rate change on the provision for income taxes in the brokerage segment was immaterial. See the U.S. federal income tax law changes and SEC Staff Accounting Bulletin No. 118 in the Corporate Segment below for an additional discussion of the impact of the U.S. enacted tax legislation, commonly referred to as the Tax Cuts and Jobs Act. We anticipate reporting an effective tax rate of approximately 24.0%23.0% to 26.0%25.0% in our brokerage segment for the foreseeable future.2017 and 20162017 include noncontrolling interest earnings of $17.2 million, $10.7 million $7.6 million and $6.5$7.6 million, respectively, primarily related to our investment in Capsicum Reinsurance Brokers LLP (which we refer to as Capsicum)Capsicum Re). We arewere partners in this venture with Grahame Chilton, the former CEO of our International Brokerage Division (he stepped down from that role effective July 1, 2018). We arePrior to December 31, 2019, we were the controlling partner, participating in 33% of Capsicum’sCapsicum Re’s net operating results and Mr. Chilton ownsowned approximately 50% of Capsicum.2018.2019. Our risk management segment operations provide contract claim settlement, claim administration, loss control services and risk management consulting for commercial, not for profit, captive and public entities, and various other organizations that choose to self-insure property/casualty coverages or choose to use a third-party claims management organization rather than the claim services provided by underwriting enterprises. Revenues for the risk management segment are comprised of fees generally negotiated (i) on a2017 and 20162017 (in millions, except per share, percentages and workforce data): 2018 2017 Change 2017 2016 Change $ 797.8 $ 736.8 $ 61.0 $ 736.8 $ 697.0 $ 39.8 0.5 0.6 (0.1 ) 0.6 1.0 (0.4 ) 798.3 737.4 60.9 737.4 698.0 39.4 141.6 136.0 5.6 136.0 132.1 3.9 939.9 873.4 66.5 873.4 830.1 43.3 489.7 446.9 42.8 446.9 424.4 22.5 174.6 164.8 9.8 164.8 152.7 12.1 141.6 136.0 136.0 132.1 38.7 31.1 7.6 31.1 27.2 3.9 4.3 2.9 1.4 2.9 2.5 0.4 (4.7 ) 1.6 (6.3 ) 1.6 — 1.6 844.2 783.3 60.9 783.3 738.9 44.4 95.7 90.1 5.6 90.1 91.2 (1.1 ) 25.3 34.4 (9.1 ) 34.4 34.5 (0.1 ) 70.4 55.7 14.7 55.7 56.7 (1.0 ) — — — — — — $ 70.4 $ 55.7 $ 14.7 $ 55.7 $ 56.7 $ (1.0 ) $ 0.38 $ 0.31 $ 0.07 $ 0.31 $ 0.32 $ (0.01 ) 23 % (3 %) (3 %) 8 % 6 % 6 % 7 % 4 % 4 % 61 % 61 % 61 % 61 % 22 % 22 % 22 % 22 % 26 % 38 % 38 % 38 % 6,269 5,872 5,872 5,449 $ 748.1 $ 738.6 $ 738.6 $ 670.9 $ $ $ $ $ $ ) ) ) ) ) ) ) ) ) ) $ $ $ ) $ $ $ $ $ $ ) $ $ $ %) % �� % % % % % % % % % % % % % % % % % % % $ $ $ $ EBITDAC and 2017 and 2016 EBITDAC and adjusted EBITAC (in millions): 2018 2017 Change 2017 2016 Change $ 70.4 $ 55.7 26.4 % $ 55.7 $ 56.7 -1.8 % 25.3 34.4 34.4 34.5 38.7 31.1 31.1 27.2 4.3 2.9 2.9 2.5 (4.7 ) 1.6 1.6 — 134.0 125.7 6.6 % 125.7 120.9 3.9 % 4.7 0.9 0.9 2.2 — (0.5 ) — 0.7 $ 138.7 $ 126.1 10.0 % $ 126.6 $ 123.8 2.2 % 8.8 % 7.6 % +127 bpts 7.6 % 8.1 % +57 bpts 17.4 % 17.2 % +21 bpts 17.2 % 17.7 % +53 bpts $ 798.3 $ 737.4 $ 737.4 $ 698.0 $ 798.3 $ 734.7 $ 737.4 $ 700.0 $ $ % $ $ % ) ) ) % % ) ) $ $ % $ $ % % % % % % % % % $ $ $ $ $ $ $ $ The increase in fees for 2017 compared to 2016 was primarily due to new business of $69.5 million and higher international performance bonus fees, which were partially offset by lost business of $30.5 million. Organic change in fee revenues was 4% in 2019 and 7% in 2018 and 4% in 2017.20182019 and 20172018 include the following (in millions): 2018 Organic Revenue 2017 Organic Revenue 2018 2017 Change 2017 2016 Change $ 789.3 $ 732.2 7.8 % $ 732.2 $ 693.4 5.6 % 8.5 4.6 4.6 3.6 797.8 736.8 8.3 % 736.8 697.0 5.7 % (11.5 ) — (11.9 ) — — (2.6 ) — 2.0 $ 786.3 $ 734.2 7.1 % $ 724.9 $ 699.0 3.7 % $ $ % $ $ % % % ) ) ) ) $ $ % $ $ % and 2017 compared to 2016 werewas primarily due to the net increase in new business discussed above. Investment income in 2017 decreased compared to 2016 primarily due to lower levels of invested assets in 2017.and 2017 and 2016(in millions): $ $ $ $ ) ) ) ) ) ) $ $ $ $ % % % % % % % % $ $ $ $ $ $ $ $ (in millions): 2018 2017 2017 2016 $ 489.7 $ 446.9 $ 446.9 $ 424.4 (4.3 ) (0.9 ) (0.9 ) (1.9 ) — (1.7 ) — 1.1 $ 485.4 $ 444.3 $ 446.0 $ 423.6 61.3 % 60.6 % 60.6 % 60.8 % 60.8 % 60.5 % 60.5 % 60.5 % $ 798.3 $ 737.4 $ 737.4 $ 698.0 $ 798.3 $ 734.7 $ 737.4 $ 700.0 The increase in compensation expense in 2017 compared to 2016 was primarily due to increased headcount and increases in salaries ($17.3 million in the aggregate), unfavorable foreign currency translation - $1.1 million, temporary-staffing expense -$2.1 million, deferred compensation - $1.3 million, employee benefits - $1.0 million and stock compensation expense -$0.7 million, partially offset by a decrease in severance related costs - $1.0 million.and 2017 and 2016(in millions): $ $ $ $ ) ) ) ) ) $ $ $ $ % % % % % % % % $ $ $ $ $ $ $ $ (in millions): 2018 2017 2017 2016 $ 174.6 $ 164.8 $ 164.8 $ 152.7 (0.4 ) — — (0.3 ) — (0.5 ) — 0.2 $ 174.2 $ 164.3 $ 164.8 $ 152.6 21.9 % 22.4 % 22.3 % 21.9 % 21.8 % 22.4 % 22.3 % 21.8 % $ 798.3 $ 737.4 $ 737.4 $ 698.0 $ 798.3 $ 734.7 $ 737.4 $ 700.0 -$0.6- $0.6 million, lease termination related charges - $0.4 million and outside services - $0.2 million, partially offset by decreases in other expense - $2.8 million, professional and banking fees - $1.7 million and licenses and fees - $0.4 million and office supplies - $0.1 million.The increase in operating expense in 2017 compared to 2016 was primarily due to increases in outside consulting fees - $3.6 million, other expense - $2.2 million, professional and banking fees - $2.1 million, employee expense - $1.7 million, technology expenses - $0.9 million, meeting and client entertainment expense - $0.8 million, licenses and fees - $0.6 million, business insurance - $0.6 million, office supplies - $0.6 million, outside services - $0.4 million, partially offset by decreases in real estate expenses - $1.0 million, bad debt expense - $0.3 million and lease termination related charges - $0.3 million. and 2017 compared to 2016, which reflects the impact of purchases of furniture, equipment and leasehold improvements related to office expansions and moves and expenditures related to upgrading computer systems.2017 and increased in 2017 compared to 2016. Historically, the risk management segment has2017. In 2019, we made few acquisitions.three acquisitions with annualized revenues of approximately $15.9 million. In 2018, we made four acquisitions with annualized revenues of approximately $21.9 million. In 2017, we made three acquisitions with annualized revenues of approximately $13.3 million. We made no material acquisitions in this segment in 2016. No indicators of impairment were noted in 2019, 2018 2017 or 2016. and 2017 compared to 2016, were due primarily to adjustments made in 2019, 2018 and 2017 to the estimated fair value of an earnout obligation related to revised projections of future performance. During 2019, 2018 and 2017, we recognized $0.8 million, $1.3 million and $0.5 million, respectively, of expense related to the accretion of the discount recorded for earnout obligations in connection with our 2018 and 2017 acquisitions, respectively. During 2019, we recognized $2.4 million of income related to net adjustments in the estimated fair value of earnout obligations related to revised projections of future performance for four acquisitions. During 2018, we recognized $6.0 million of income related to net adjustments in the estimated fair value of earnout obligations related to revised projections of future performance for three acquisitions. During 2017, we recognized $1.1 million of expense related to net adjustments in the estimated fair value of earnout obligations related to revised projections of future performance for two acquisitions.2016 was 26.4%, 38.2% and 37.8%, respectively. In fourth quarter 2017, new tax legislation was enacted in the U.S., which lowered the U.S. corporate tax rate from 35.0% to 21.0% effective January 1, 2018. The impact of the adjustment of our deferred tax asset and liability balances in 2017 to reflect the U.S. rate change on the provision for income taxes in the brokerage segment was immaterial. See the U.S. federal income tax law changes and SEC Staff Accounting Bulletin No. 118 in the Corporate Segment below for an additional discussion of the impact of the U.S. enacted tax legislation commonly referred to as the Tax Cuts and Jobs Act. We anticipate reporting an effective tax rate on adjusted results of approximately 25.0%24.0% to 27.0%26.0% in our risk management segment for the foreseeable future.20182019 consolidated financial statements for a summary of our investments at December 31, 20182019 and 20172018 and a detailed discussion of the nature of these investments. See Note 8 to our 20182019 consolidated financial statements for a summary of our debt at December 31, 20182019 and 2017.2017 and 20162017 (in millions, except per share and percentages): 2018 2017 Change 2017 2016 Change $ 1,694.6 $ 1,515.6 $ 179.0 $ 1,515.6 $ 1,303.8 $ 211.8 54.1 46.4 7.7 46.4 48.1 (1.7 ) (2.4 ) (1.5 ) (0.9 ) (1.5 ) (1.8 ) 0.3 0.9 — 0.9 — (1.3 ) 1.3 1,747.2 1,560.5 186.7 1,560.5 1,348.8 211.7 1,816.0 1,635.9 180.1 1,635.9 1,408.6 227.3 89.5 88.2 1.3 88.2 72.6 15.6 55.6 50.3 5.3 50.3 25.4 24.9 138.4 124.1 14.3 124.1 109.8 14.3 28.2 28.2 — 28.2 19.2 9.0 2,127.7 1,926.7 201.0 1,926.7 1,635.6 291.1 (380.5 ) (366.2 ) (14.3 ) (366.2 ) (286.8 ) (79.4 ) (412.8 ) (412.7 ) (0.1 ) (412.7 ) (317.8 ) (94.9 ) 32.3 46.5 (14.2 ) 46.5 31.0 15.5 31.7 28.0 3.7 28.0 27.0 1.0 $ 0.6 $ 18.5 $ (17.9 ) $ 18.5 $ 4.0 $ 14.5 $ — $ 0.10 $ (0.10 ) $ 0.10 $ 0.02 $ 0.08 $ 1,800.8 $ 1,766.8 $ 1,766.8 $ 1,548.7 $ 32.3 $ 46.5 $ (14.2 ) $ 46.5 $ 31.0 $ 15.5 (412.8 ) (412.7 ) (0.1 ) (412.7 ) (317.8 ) (94.9 ) 138.4 124.1 14.3 124.1 109.8 14.3 28.2 28.2 — 28.2 19.2 9.0 $ (213.9 ) $ (213.9 ) $ — $ (213.9 ) $ (157.8 ) $ (56.1 ) $ $ $ ) $ $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ ) $ $ ) $ $ $ ) $ ) $ $ ) $ $ $ ) $ $ $ $ $ ) $ $ ) $ $ $ ) ) ) ) ) ) ) $ ) $ ) $ $ ) $ ) $ 2017 and 20162017 are due to increased production of clean coal.heldhold a 46.5% controlling interest in The decrease in royalty income in 2017 compared to 2016, was due to reductions in production of refined coal byChem-Mod LLC’s licensees.$2.4 million in 2018, 2017, and 2016, respectively. These expenses are included in the operating expenses discussed below. In 2019,2017 and 20162017 were low because the vast majority of our operations are now consolidated.revenues(losses) gains include the following:In 2016, we recorded $0.8 million of rental income related to our new headquarters facility. We also recognized $0.8 million of equity basis accounting losses related to our legacy investments and we recognized a $1.3 million impairment loss related to clean coal production plants, including engineering costs of $0.7 million incurred for two locations that will not be used.2017 and 20162017 consists of the cost of coal, labor, equipment maintenance, chemicals, supplies, management fees and depreciation incurred by the clean coal production plants to generate the consolidated revenues discussed above. The decreases in cost of revenues in 2019 compared to 2018, were primarily due to decreased production. The increases in cost of revenues in 2018 compared to 2017, and 2017 compared to 2016, were primarily due to increased production.2017 and 2016,2017, respectively, was $77.9 million, $89.5 million and $88.2 million.$72.6 million.The $15.6increase in 2017 compensation expense compared to 2016 was primarilyexternal professional fees and other due to increased staffing, salary increases and incentive compensationdiligence costs related to the implementation2019 acquisitions of $17.4 million, other corporate and clean energy related expenses of $35.8 million, $11.9 million of clean energy related costs as described on pages 47 and 48 (see note 3), corporate related data and branding initiatives of $11.9 million, a new accounting standard for revenue recognition, effortsnet realized loss related to tax reform, efforts related to the new headquartersforeign exchange hedge contacts of $3.3 million and clean-energy performance, and an increase in benefits expense.Operating expense -a net unrealized foreign exchange remeasurement loss of $2.1 million.Operating expense for 2016 includes banking and related fees of $3.2 million, external professional fees and other due diligence costs related to 2016 acquisitions of $3.9 million, other corporate and clean energy related expenses of $5.7 million, $4.8 million for a biennial corporate-wide meeting, corporate related marketing costs of $7.0 million and $0.8 million related to the litigation settlement. and 2017 compared to 2016 was due to the following: 2018 / 2017 2017 / 2016 $ (0.1 ) $ 1.9 (11.2 ) (8.1 ) (0.3 ) (2.7 ) (0.7 ) — — 5.1 — 3.2 5.1 5.3 9.9 6.5 12.2 — (0.6 ) (0.4 ) — 3.5 $ 14.3 $ 14.3 The capitalization of interest costs related $ $ ) ) ) ) ) ) ) $ $ the purchase and development of our new corporate headquarters building that was completed in early 2017.Depreciation -2018. Depreciation expense in 2018 was flat compared to 2017. The increase in depreciation expense in 2017 compared to 2016 primarily relates to the new corporate headquarters that was placed in service in first quarter 2017 and to clean coal plantsre-deployed in 2017 and 2016.2017 and 20162017 primarily include noncontrolling interest earnings of $37.1$29.8 million, $33.1$31.7 million and $32.7$28.0 million, respectively, related to our investment in2017 and 2016,2017, we held a 46.5% controlling interest in(41.0)(14.3)%, (43.7)(41.0)% and (29.0)(43.7)% for 2019, 2018 2017 and 2016,2017, respectively. The tax rates for 2019, 2018 2017 and 20162017 were lower than the statutory rate primarily due to the amount of IRC Section 45 tax credits recognized during the year. There were $196.0 million, $252.9 million $229.7 million and $194.4$229.7 million of Section 45 tax credits generated and recognized in 2019, 2018 2017 and 2016,2017, respectively. Also impacting the benefit for the income taxes line is the adoption of a new accounting pronouncement in 2017, whereby it requires that the income tax effects of awards be recognized in the income statement when the awards vest or are settled, rather than recognizing the tax benefits in excess of compensation costs through stockholders’ equity. The income tax benefit of stock based awards that vested or were settled in the years ended December 31, 2019, 2018 and 2017 was $17.4 million, $15.0 million and $15.1 million, respectively.Cuts and Jobs Act, (which we refer to as the Tax Act), which significantly revises the U.S. tax code by, among other things, lowering the corporate income tax rate from 35.0% to 21.0%, limiting the deductibility of interest expense, implementing a territorial tax system and imposing a repatriation tax on earnings of foreign subsidiaries. See discussion of the various impacts of the Tax Act below.1819 to our consolidated financial statements for a discussion of our assessment of the impact of the Tax Act.20182019 consolidated balance sheet, which we expect to be fully utilized or refunded to us by tax year 2021.yearyears ended December 31, 2019 and 2018.yearyears ended December 31, 2019 and 2018, and we do not currently anticipate any significant long-term impact from the BEAT on our effective income tax rate in future periods.yearyears ended December 31, 2019 and 2018.2017 and 20162017 operating results for the corporate segment (in millions): 2018 2017 2016 Pretax
Loss Income
Tax
Benefit Net
Earnings
(Loss) Pretax
Loss Income
Tax
Benefit Net
Earnings
(Loss) Pretax
Loss Income
Tax
Benefit Net
Earnings
(Loss) $ (141.9 ) $ 36.9 $ (105.0 ) $ (126.8 ) $ 50.8 $ (76.0 ) $ (112.8 ) $ 45.1 $ (67.7 ) (188.1 ) 306.7 118.6 (161.3 ) 294.0 132.7 (133.2 ) 247.6 114.4 (13.9 ) 1.5 (12.4 ) (11.2 ) 2.9 (8.3 ) (4.6 ) 0.7 (3.9 ) (65.8 ) 70.9 5.1 (68.1 ) 53.4 (14.7 ) (43.0 ) 20.3 (22.7 ) (2.5 ) (3.2 ) (5.7 ) (2.5 ) 4.0 1.5 — — — — — — (11.1 ) 2.3 (8.8 ) (20.2 ) 4.1 (16.1 ) — — — (13.2 ) 5.3 (7.9 ) — — — (412.2 ) 412.8 0.6 (394.2 ) 412.7 18.5 (313.8 ) 317.8 4.0 — (8.9 ) (8.9 ) 2.5 (4.0 ) (1.5 ) — — — — (22.0 ) (22.0 ) — — — — — — — — — 11.1 (2.3 ) 8.8 20.2 (4.1 ) 16.1 — — — 13.2 (5.3 ) 7.9 — — — (141.9 ) 36.9 (105.0 ) (126.8 ) 50.8 (76.0 ) (112.8 ) 45.1 (67.7 ) (188.1 ) 306.7 118.6 (161.3 ) 294.0 132.7 (133.2 ) 247.6 114.4 (13.9 ) 1.5 (12.4 ) (11.2 ) 2.9 (8.3 ) (4.6 ) 0.7 (3.9 ) (65.8 ) 48.9 (16.9 ) (68.1 ) 53.4 (14.7 ) (43.0 ) 20.3 (22.7 ) (2.5 ) (12.1 ) (14.6 ) — — — — — — — — — — — — — — — — — — — — — — — — $ (412.2 ) $ 381.9 $ (30.3 ) $ (367.4 ) $ 401.1 $ 33.7 $ (293.6 ) $ 313.7 $ 20.1
Loss
Tax
Benefit
Earnings
(Loss)
Loss
Tax
Benefit
Earnings
(Loss)
Loss
Tax
Benefit
Earnings
(Loss) $ ) $ $ ) $ ) $ $ ) $ ) $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ ) $ $ ) $ ) $ $ ) $ ) $ $ (1) 20172017.(2) Corporate includes the impact of tax reform and $27.0 millioncorporate legal entity restructuring.(3) Clean Energy Related Adjustments – During third quarter of 2019, we and/or our 46.5% owned affiliate, 2016.a tax court matter, (c) defending a new patent matter, and (d) moving three 2011 Era plants into different locations that could generate moremarketing costs,data and branding initiatives, expenses for systems and consulting related to the implementation of the new revenue recognition accounting and tax reform rules and the impact of foreign currency translation.yearyears ended December 31, 2018 and 2017, we incurred $5.9 million and $8.9 million, respectively, ofyearyears ended December 31, 2019, 2018 and 2017 was $17.4 million, $15.0 million and $15.1 million, respectively, and is included in the table above in the Corporate line. The income tax benefit of stock based awards that vested or were settled in the year ended December 31, 2016 was $6.5 million and is not included in the Income Tax Benefit column above.and $16.1 million in 2017 and 2016, respectively.legislation - legislation—principally the partial taxation of foreign earnings, nondeductible executive compensation and entertainment expenses. Under the SEC Staff Accounting Bulletin No. 118 guidance, in our December 31, 2017 consolidated financial statements, we recognized provisional amounts for deferred income taxes and repatriation tax based on reasonable estimates and interpretations of the new tax legislation. The ultimate impact of the new tax legislation did differ from our estimated amounts as of December 31, 2017, amounts, due to, among other things, changes in interpretations and assumptions we made, or additional regulatory or accounting guidance that was issued with respect to the new tax legislation. In fourth quarter 2018, the IRS issued clarifying guidance related to the new tax legislation which resulted in us recognizing a tax benefit of $8.9 million in the quarter. Any additional taxes associated with the ongoing impact of the tax legislation had a de minimis impact on our cash taxes paid due to tax credits generated from our clean energy investments.plants which were placed in service prior to December 31, 2009 (which we refer to as the 2009 Era Plants) can receivePlants received tax credits through 2019 and the 20 plants which were placed in service prior to December 31, 2011 (which we refer to as the 2011 Era Plants)Plants can receive tax credits through 2021.20182019 (in millions): Our Portion of Estimated Our Book Value At
December 31, 2018 Low Range
2019 After-tax
Earnings High Range
2019 After-tax
Earnings $ 5.1 $ 13.0 $ 15.0 — Not Estimable Not Estimable 43.2 70.0 75.0 0.2 Not Estimable Not Estimable 4.0 22.0 25.0
December 31, 2019
2020
Earnings
2020
Earnings $ $ $ 20192020 low and high ranges of IRS Reference
Price
per Ton IRS Beginning
Phase Out
Price IRS 100%
Phase Out
Price Conclusion $ 54.74 $ 77.78 $ 86.53 No phase out 55.66 78.41 87.16 No phase out 58.49 80.25 89.00 No phase out 58.23 81.69 90.44 No phase out 56.88 81.82 90.57 No phase out 57.64 83.17 91.92 No phase out 53.74 84.38 93.13 No phase out 51.09 85.64 94.39 No phase out 49.68 86.94 95.69 No phase out (1 ) (1 ) (1 ) (1)
Price
per Ton
Phase Out
Price
Phase Out
Price $ $ $ ) ) ) (1) 20192020 until April or May 2019.2020. 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 2019.20182019 consolidated financial statements for more information regarding risks and uncertainties related to these investments.2017 and 2016,2017, we relied on a combination of net cash flows from operations, proceeds from borrowings under our Credit Agreement, proceeds from issuances of senior unsecured notes and issuances of our common stock.$649.62017, respectively. The increase in cash provided by operating activities in 2019 compared to 2018 was due to the following items: decreases in 2019 compared to 2018 of $48.0 million forof payments on acquisition earnouts in excess of original estimates, $45.9 million of income tax payments and $30.0 million discretionary contribution made to our defined benefit plan in 2018. Also contributing to the increase in cash provided by operating activities in 2019 compared to 2018 2017were timing differences between years in the collection of receivables and 2016, respectively.direct bill revenues, and the payment of accrued liabilities. The decrease in cash provided by operating activities in 2018 compared to 2017 was primarily due to the following items: $30.0 million discretionary contribution made to our defined benefit plan in 2018, and increases in 2018 compared to 2017 of $14.3 million of severance related payments, $9.4 million of prepaid marketing costs, and $6.7 million of payments on acquisition earnouts in excess of original estimates. Also contributing to the decrease in cash provided by operating activities in 2018 compared to 2017 were timing differences between years in the collection of receivables related to accrued supplemental, contingent and direct bill revenues, and income taxes. The increase in cash provided by operating activities in 2017 compared to 2016 was primarily due to improved cash flow generated from our core brokerage and risk management operating units.20182019 was unfavorably impacted by timing differences in the receipt and disbursements of client fiduciary balances in 20182019 compared to 2017.2018. The following table summarizes two lines from our consolidated statement of cash flows and provides information that management believes is helpful when comparing changes in client fiduciary related balances for 2019, 2018 2017 and 20162017 (in millions): 2018 2017 2016 $ (783.1 ) $ (47.7 ) $ (777.2 ) 819.7 166.9 770.0 $ 36.6 $ 119.2 $ (7.2 ) In addition, cash provided by operating activities for 2016 were unfavorably impacted by acquisition related integration costs. During second quarter 2015, we entered into compensation-based retention agreements with certain key employees of our international brokerage operations. These retention agreements addedafter-tax charges of $7.3 million and $15.4 million for 2017 and 2016, respectively, to our compensation expense. $ ) $ ) $ ) $ $ $ $826.5 million for 2018, 2017, and 2016, respectively. Net earnings attributable to controlling interests were $668.8 million, $633.5 million and $481.3 million for 2019, 2018 and $396.5 million for 2018, 2017, and 2016, respectively. We believe that EBITDAC items are indicators of trends in liquidity. From a balance sheet perspective, we believe the focus should not be on premium and fees receivable, premiums payable or restricted cash for trends in liquidity. Net cash flows provided by operations will vary substantially from quarter to quarter and year to year because of the variability in the timing of premiums and fees receivable and premiums payable. We believe that in order to consider these items in assessing our trends in liquidity, they should be looked at in a combined manner, because changes in these balances are2017 and 20162017 plan years. Funding requirements are based on the plan being frozen and the aggregate amount of our historical funding. The plan’s actuaries determine contribution rates based on our funding practices and requirements. Funding amounts may be influenced by future asset performance, the level of discount rates and other variables impacting the assets and/or liabilities of the plan. In addition, amounts funded in the future, to the extent not due under regulatory requirements, may be affected by alternative uses of our cash flows, including dividends, acquisitions and common stock repurchases. During 2018 we made a $30.0 million discretionary contribution to the plan in order to minimize the potential impact of having to make required minimum contributions to the plan in future periods. During 20172019 and 20162017 we did not make discretionary contributions to the plan.20182019 consolidated financial statements for additional information required to be disclosed relating to our defined benefit postretirement plans. We are required to recognize an accrued benefit plan liability for our underfunded defined benefit pension and unfunded retiree medical plans (which we refer to together as the Plans). The offsetting adjustment to the liabilities required to be recognized for the Plans is recorded in “Accumulated Other Comprehensive Earnings (Loss),” net of tax, in our consolidated balance sheet. We will recognize subsequent changes in the funded status of the Plans through the income statement and as a component of comprehensive earnings, as appropriate, in the year in which they occur. Numerous items may lead to a change in funded status of the Plans, including actual results differing from prior estimates and assumptions, as well as changes in assumptions to reflect information available at the respective measurement dates.In 2017, the funded status of the Plans was unfavorably impacted by a decrease in the discount rates used in the measurement of the pension liabilities at December 31, 2017, the impact of which was approximately $9.2 million. However, the funded status was favorably impacted by returns on the plan’s assets being higher in 2017 than anticipated by approximately $10.7 million. The net change in the funded status of the Plan in 2017 resulted in a decrease in noncurrent liabilities in 2017 of $1.5 million. While the change in funded status of the Plans had no direct impact on our cash flows from operations in 2019, 2018 2017 and 2016,2017, potential changes in the pension regulatory environment and investment losses in our pension plan have an effect on our capital position and could require us to make significant contributions to our defined benefit pension plan and increase our pension expense in future periods.$217.8 million for 2018, 2017, and 2016, respectively, of which $11.8 million in 2017 $112.1 million in 2016 related to expenditures on our new corporate headquarters building. In addition, 2019 and 2018 capital expenditures include amounts incurred related to investments made in information technology and software development projects. Relating to the development of our new corporate headquarters, we received property tax related credits under aThe net capital expenditures in 2016 primarily related to capitalized costs associated with expenditures on our new corporate headquarters building and the implementation of new accounting and financial reporting systems and several other system initiatives that occurred in 2016. In 2019,2020, we expect total expenditures for capital improvements to be approximately $128.0$146.0 million, part of which is related to expenditures on office moves and expansions and updating computer systems and equipment.$243.4 million2017, respectively. The increased use of cash for acquisitions in 2019 compared to 2018 2017was primarily due to an increase in the number and 2016, respectively.size of acquisitions in 2019 than occurred in 2018. The increased use of cash for acquisitions in 2018 compared to 2017 was primarily due to an increase in the number and size of acquisitions in 2018 than occurred in 2017 and we used less of our common stock to fund acquisitions in 2018. The increased use of cash for acquisitions in 2017 compared to 2016 was primarily due to an increase in the number and size of acquisitions in 2017 than occurred in 2016 and we used less of our common stock to fund acquisitions in 2017. In addition, during 2019, 2018 2017 and 20162017 we issued 1.9 million shares ($166.1 million), 0.8 million shares ($60.8 million), and 1.0 million shares ($59.6 million) and 2.0 million shares ($89.6 million), respectively, of our common stock as payment for a portion of the total consideration paid for acquisitions and earnout payments. We completed 49, 48 39 and 3739 acquisitions in 2019, 2018 2017 and 2016,2017, respectively. Annualized revenues of businesses acquired in 2019, 2018 2017 and 20162017 totaled approximately $468.2 million, $339.8 million $172.3 million and $137.9$172.3 million, respectively. In 2019,2020, we expect to use new debt, our Credit Agreement, cash from operations and our common stock to fund all, or a portion of acquisitions we complete.2017 and 2016,2017, we sold several books of business and recognized$3.4 million and $6.6$3.4 million, respectively. We received cash proceeds of $81.0 million, $14.5 million $3.2 million and $7.8$3.2 million, respectively, related to these transactions.the first quarter 2019, we expect to recognizerecognized abetween $0.20 and $0.23of $0.17 of diluted net earnings per share as a result of the sale.2018,2019, we have made significant investments in clean energy operations capable of producing refined coal that we believe qualifies for tax credits under IRC Section 45. Our current estimate of the 20192020 annual net2019,2020, is $105.0$80.0 million to $115.0$100.0 million. The IRC Section 45 tax credits generate positive cash flow by reducing the amount of federal income taxes we pay, which is offset by the operating expenses of the plants, by any capital expenditures related to the redeployment, and in some cases the relocation of refined coal plants. We anticipate positive net cash flow related to IRC Section 45 activity in 2019.2020. However, there are several variables that can impact net cash flow from clean energy investments in any given year. Therefore, accurately predicting positive or negative cash flow in particular future periods is not possible at this time. Nonetheless, if current ownership interests remain the same, if capital expenditures related to20192020 through at least 2025. While we cannot precisely forecast the cash flow impact in any particular period, we anticipate that the net cash flow impact of these investments will be positive overall. Please see “Clean energy investments” on pages 5048 to 5150 for a more detailed description of these investments and their risks and uncertainties.April 8, 2016,June 7, 2019, we entered into an amendment and restatement to our multicurrency credit agreement dated September 19, 2013April 8, 2016 (which we refer to as the Credit Agreement) with a group of fifteen financial institutions. The amendment and restatement, among other things, extended the expiration date of the Credit Agreement from September 19, 2018 to April 8, 2021 to June 7, 2024 and increased the revolving credit commitment from $600.0$800.0 million to $800.0$1,200.0 million, of which $75.0 million may be used for issuances of standby or commercial letters of credit and up to $75.0 million may be used for the making of swing loans, (as defined in the Credit Agreement). We may from time to time request, subject to certain conditions, an increase in the revolving credit commitment under the Credit Agreement up to a maximum aggregate revolving credit commitment of $1,100.0$1,700.0 million. There were $265.0$520.0 million of borrowings outstanding under the Credit Agreement at December 31, 2018.2019. Due to the outstanding borrowing and letters of credit, $518.0$663.8 million remained available for potential borrowings under the Credit Agreement at December 31, 2018.During 2016, we borrowed an aggregate of $2,740.0 million and repaid $2,657.0 million under our Credit Agreement. Principal uses of the 2019, 2018 2017 and 20162017 borrowings under the Credit Agreement were to fund acquisitions, earnout payments related to acquisitions and general corporate purposes.We have a secured160.0205.0 million and NZ$25.0 million tranches, (ii) Facility C, an AU$25.040.0 million equivalent multi-currency overdraft tranche and (iii) Facility D, a NZ$15.0 million equivalent multi-currency overdraft tranche. There was a three month increase in the AU $160.0AU$160.0 million tranche to AU $190.0AU$190.0 million, which expired on January 31, 2019. The Premium Financing Debt Facility expires May 18, 2020. At December 31, 2018, $154.02019, $170.6 million of borrowings were outstanding under the Premium Financing Debt Facility.2018,2019, we had $3,198.0$3,923.0 million of corporate-related borrowings outstanding under separate note purchase agreements entered into in the period 2009 to 2018, $265.02019, $520.0 million outstanding under our credit facility, $154.0$170.6 million outstanding under our Premium Financing Debt Facility and a cash and cash equivalent balance of $607.2$604.8 million. See Note 8 to our 20182019 consolidated financial statements for a discussion of the terms of the note purchase agreements, the Credit Agreement and the Premium Financing Debt Facility.4.14%3.14% using three-month LIBOR on February 4, 2019.3, 2020. In 2017 and 2018, we entered intoThe notes consist We used the proceeds of the following tranches:$125.0 million of 4.34% senior notes due in 2028 (4.00% after giving effectthese offerings 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.On June 24, 2018 we funded the $50.0 million maturity of our Series K notes,repay certain existing indebtedness and on November 30, 2018 we funded the $50.0 million maturity of our Series C notes.Consistent with past practice, as of December 31, 2018 we hadpre-issuance hedges open for $350.0 million for 2019, $250.0 million for 2020 and $250.0 million for 2021.4.39%3.39% using three-month LIBOR on February 4, 2019.3, 2020. In 2016 and 2017, we entered intoWe completed a $275.0 million, ten year maturity, private placement debt transaction on June 2, 2016, with a weighted average interest rate of 4.47%. In 2016, we entered into apre-issuance interest rate hedging transaction related to the $175.0 million, ten year tranche, of the $275.0 million private placement debt. We realized a cash gain of approximately $1.0 million on the hedging transaction that will be recognized on a pro rata basis as a reduction in our reported interest expense over the ten year life of the debt.On November 30, 2016, we funded the $50.0 million 2016 maturity of our Series C notes.We completed a $100.0 million, eleven year maturity, private placement debt transaction on December 1, 2016, with an interest rate of 3.46%. A portion of the proceeds was used to fund the $50.0 million of private placement debt that matured on November 30, 2016.2018.2018,2019, we declared $303.3$323.9 million in cash dividends on our common stock, or $1.64$1.72 per common share. On December 21, 2018,20, 2019, we paid a fourth quarter dividend of $0.41$0.43 per common share to shareholders of record as of December 7, 2018.6, 2019. On January 30, 2019,29, 2020, we announced a quarterly dividend for first quarter 20192020 of $0.43$0.45 per common share. If the dividend is maintained at $0.43$0.45 per common share throughout 2019,2020, this dividend level would result in an annualized net cash used by financing activities in 20192020 of approximately $316.3$338.4 million (based on the outstanding shares as of December 31, 2018)2019), or an anticipated increase in cash used of approximately $14.5$17.3 million compared to 2018.2019. We can make no assurances regarding the amount of any future dividend payments.2016,2019, we filed a shelf registration statement onForm2018, 9.22019, 7.3 million shares remained available for issuance under this registration statement.During the year ended December 31, 2016, we repurchased 2.3 million shares of our common stock at cost of $101.0 million. Under the provisions of the repurchase plan, we are authorized to repurchase approximately 7.3 million additional shares at December 31, 2018.2019. The plan authorizes the repurchase of our common stock at such times and prices as we may deem advantageous, in transactions on the open market or in privately negotiated transactions. We are under no commitment or obligation to repurchase any particular number of shares, and the plan may be suspended at any time at our discretion. Funding for share repurchases may come from a variety of sources, including cash from operations, short-term or long-term borrowings under our Credit Agreement or other sources.2017 and $45.6 million in 2016.2017. On May 16, 2017, our stockholders approved the 2017 Long-Term Incentive Plan (which we refer to as the LTIP), which replaced our previous stockholder-approved 2014 Long-Term Incentive Plan. All of our officers, employees and14.413.2 million shares (less any shares of restricted stock issued under the LTIP – 3.32.8 million shares of our common stock were available for this purpose as of December 31, 2018)2019) were available for grant under the LTIP at December 31, 2018.2019. Our employee stock purchase plan allows our employees to purchase our common stock at 95% of its fair market value. Proceeds from the issuance of our common stock related to these plans have contributed favorably to net cash provided by financing activities in the years ended December 31, 2019, 2018 2017 and 2016,2017, and we believe this favorable trend will continue in the foreseeable future.1617 to our 20182019 consolidated financial statements for additional discussion of these obligations and commitments. Our future minimum cash payments, including interest, associated with our contractual obligations pursuant to our note purchase agreements and Credit Agreement, operating leases and purchase commitments as of December 31, 20182019 are as follows (in millions): Payments Due by Period Contractual Obligations 2019 2020 2021 2022 2023 Thereafter Total $ 100.0 $ 100.0 $ 75.0 $ 200.0 $ 300.0 $ 2,423.0 $ 3,198.0 265.0 — — — — — 265.0 154.0 — — — — — 154.0 138.0 132.5 127.9 122.5 113.1 444.5 1,078.5 Total debt obligations 657.0 232.5 202.9 322.5 413.1 2,867.5 4,695.5 106.8 92.0 78.8 61.1 44.3 87.4 470.4 (0.8 ) (0.6 ) (0.6 ) (0.3 ) (0.3 ) (1.0 ) (3.6 ) 32.1 14.6 11.3 2.1 — — 60.1 $ 795.1 $ 338.5 $ 292.4 $ 385.4 $ 457.1 $ 2,953.9 $ 5,222.4 $ $ $ $ $ $ $ ) ) ) ) ) ) ) $ $ $ $ $ $ $ 2018,2019, we are unable to make reasonably reliable estimates of the period in which cash settlements may be made with the respective taxing authorities. Therefore, $10.7$11.5 million of unrecognized tax benefits have been excluded from the contractual obligations table above. See Note 1819 to our 20182019 consolidated financial statements for a discussion on income taxes.On December 22, 2018, we signed a definitive agreement to acquire 100% of the equity of Stackhouse Poland Group Limited (which we refer to as Stackhouse Poland) headquartered in Guildford, Surrey, U.K., for approximately $350.0 million of cash consideration. The transaction is subject to regulatory approval and is expected to close in the first quarter of 2019.20182019 consolidated financial statements for a discussion of the terms of the Credit Agreement and note purchase agreements.20182019 are as follows (in millions): Total Amount of Commitment Expiration by Period Amounts Off-Balance Sheet Commitments 2019 2020 2021 2022 2023 Thereafter Committed $ — $ 1.3 $ — $ — $ — $ 17.0 $ 18.3 0.2 0.2 0.2 0.2 0.2 0.6 1.6 $ 0.2 $ 1.5 $ 0.2 $ 0.2 $ 0.2 $ 17.6 $ 19.9 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1617 to our 20182019 consolidated financial statements for a discussion of our funding commitments related to our corporate segment and the507556 companies, all of which were accounted for using the acquisition method for recording business combinations. Substantially all of the purchase agreements related to these acquisitions contain provisions for potential earnout obligations. For all of our acquisitions made in the period from 20132016 to 20182019 that contain potential earnout obligations, such obligations are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration for the respective acquisition. The amounts recorded as earnout payables are primarily based upon$558.1$982.9 million, of which $258.8$565.0 million was recorded in our consolidated balance sheet as of December 31, 2018,2019, based on the estimated fair value of the expected future payments to be made.20182019 and 20172018 that was recourse to us.2018,2019, we had posted two letters of credit totaling $10.2$9.4 million, in the aggregate, related to our self-insurance deductibles, for which we have recorded a liability of $15.8$16.5 million. We have an equity investment in a2018,2019, we had posted seven letters of credit totaling $6.3 million to allow certain of our captive operations to meet minimum statutory surplus requirements plus additional collateral related to premium and claim funds held in a fiduciary capacity, one letter of credit totaling $1.3$0.9 million for collateral related to claim funds held in a fiduciary capacity by a recent acquisition and one letter of credit totaling $0.5 million as a security deposit for a 2015 acquisition’s lease. These letters of credit have never been drawn upon.20182019 that are sensitive to changes in interest rates. The range of changes in interest rates used in the analyses reflects our view of changes that are reasonably possible over a20182019 approximated its carrying value due to its short-term duration. We estimated market risk as the potential decrease in fair value resulting from a hypothetical2018.2018,2019, we had $3,198.0$3,923.0 million of borrowings outstanding under our various note purchase agreements. The aggregate estimated fair value of these borrowings at December 31, 20182019 was $3,194.4$4,254.2 million due to the long-term duration and fixed interest rates associated with these debt obligations. No active or observable market exists for our private placementus based on our current estimated credit rating.2018.2019. A$3,399.2$4,532.3 million, or $201.2$609.3 million more than their current carrying value. A$3,006.2$3,999.6 million, or $191.8$76.6 million lessmore than their current carrying value.2018,2019, we had $265.0$520.0 million of borrowings outstanding under our Credit Agreement and $154.0$170.6 million of borrowings outstanding under our Premium Financing Debt Facility. Market risk is estimated as the potential increase in fair value resulting from a hypothetical2018.2019. Because these are short-term borrowings with variable interest rates, the estimated fair values of these borrowings approximate their carrying value.SouthLatin American operations because we transact business in their local denominated currencies. Foreign currency gains (losses) related to this market risk are recorded in earnings before income taxes as transactions occur. Assuming a hypothetical adverse change of 10% in the average foreign currency exchange rate for 20182019 (a weakening of the U.S. dollar), earnings before income taxes would have increased by approximately $16.8$14.7 million. Assuming a hypothetical favorable change of 10% in the average foreign currency exchange rate for 20182019 (a strengthening of the U.S. dollar), earnings before income taxes would have decreased by approximately $19.5$14.8 million. We are also subject to foreign currency exchange rate risk associated with the translation of local currencies of our foreign subsidiaries into U.S. dollars. We manage the balance sheets of our foreign subsidiaries, where practical, such that foreign liabilities are matched with equal foreign assets, maintaining a “balanced book” which minimizes the effects of currency fluctuations. However, our consolidated financial position is exposed to foreign currency exchange risk related to intra-entity loans between our U.S. based subsidiaries and our2017 and 2016,2017, we had several monthly put/call options in place with an external financial institution that were designed to hedge a significant portion of our future U.K. currency revenues through various future payment dates. In addition, during 2019, 2018 2017 and 2016,2017, we had several monthly put/call options in place with an external financial institution that were designed to hedge a significant portion of our Indian currency disbursements through various future payment dates. Although these hedging strategies were designed to protect us against significant U.K. and Indian currency exchange rate movements, we are still exposed to some foreign currency exchange rate risk for the portion of the payments and currency exchange rate that are unhedged. All of these hedges are accounted for in accordance with ASC Topic 815, “Derivatives and Hedging”, and periodically are tested for effectiveness in accordance with such guidance. In the scenario where such hedge does not pass the effectiveness test, the hedge will be20182019 there has been no such effect on our consolidated financial presentation. The impact of these hedging strategies was not material to our consolidated financial statements for 2019, 2018 2017 and 2016.2017. See Note 1921 to our 20182019 consolidated financial statements for the changes in fair value of these derivative instruments reflected in comprehensive earnings in 2019, 2018 2017 and 2016. Year Ended December 31, 2018 2017
As Restated* 2016
As Restated* $ 2,920.7 $ 2,641.0 $ 2,409.9 1,756.3 1,591.9 1,491.7 189.9 158.0 139.9 98.0 99.5 97.9 70.1 58.7 53.6 10.2 3.4 6.6 1,746.3 1,560.5 1,350.1 0.9 — (1.3 ) 6,792.4 6,113.0 5,548.4 141.6 136.0 132.1 6,934.0 6,249.0 5,680.5 3,026.3 2,747.4 2,537.2 903.7 829.1 776.3 141.6 136.0 132.1 1,816.0 1,635.9 1,408.6 138.4 124.1 109.8 127.8 121.1 103.6 291.2 264.7 247.2 9.6 30.9 32.1 6,454.6 5,889.2 5,346.9 479.4 359.8 333.6 (196.5 ) (157.1 ) (96.7 ) 675.9 516.9 430.3 42.4 35.6 33.5 $ 633.5 $ 481.3 $ 396.8 $ 3.47 $ 2.67 $ 2.23 3.40 2.64 2.22 1.64 1.56 1.52 *See Note 3 – Revenues from Contracts with Customers for additional information about the restatements related to Topic 606. $ $ $ ) ) ) ) $ $ $ $ $ $ Year Ended December 31, 2018 2017
As Restated* 2016
As Restated* $ 675.9 $ 516.9 $ 430.3 (10.3 ) 4.3 (4.4 ) (197.7 ) 180.9 (224.8 ) (15.6 ) 16.0 (4.9 ) 452.3 718.1 196.2 40.4 36.4 37.9 $ 411.9 $ 681.7 $ 158.3 *See Note 3 – Revenues from Contracts with Customers for additional information about the restatements related to Topic 606. $ $ $ ) ) ) ) $ $ $ December 31, 2018 2017
As Restated* $ 607.2 $ 681.2 1,629.6 1,623.8 4,857.5 4,082.8 1,024.4 881.6 8,118.7 7,269.4 436.9 412.2 806.2 851.6 573.6 567.1 4,625.6 4,164.8 1,773.0 1,644.6 $ 16,334.0 $ 14,909.7 $ 5,740.2 $ 4,986.0 1,055.1 947.8 379.3 355.3 154.0 151.1 365.0 290.0 7,693.6 6,730.2 3,091.4 2,691.9 78.4 75.3 900.9 1,112.6 11,764.3 10,610.0
and 181.0 shares in 2017 184.0 181.0 3,541.9 3,388.2 1,558.6 1,221.8 (785.6 ) (555.4 ) 4,498.9 4,235.6 70.8 64.1 4,569.7 4,299.7 $ 16,334.0 $ 14,909.7 *See Note 3 – Revenues from Contracts with Customers for additional information about the restatements related to Topic 606. $ $ $ $ $ $
and 184.0 shares in 2018 ) ) $ $ Year Ended December 31, 2018 2017
As Restated* 2016
As Restated* $ 675.9 $ 516.9 $ 430.3 (8.4 ) (0.1 ) (6.5 ) 419.0 385.8 350.8 9.6 30.9 32.1 41.6 33.5 28.5 13.7 17.3 14.7 (64.6 ) (57.9 ) (22.8 ) (2.9 ) 3.9 (5.3 ) (783.1 ) (47.7 ) (777.2 ) 18.4 0.9 15.1 819.7 166.9 770.0 (134.7 ) (35.3 ) (45.5 ) 44.9 69.6 69.8 (46.0 ) 2.0 (10.8 ) (216.0 ) (219.3 ) (166.1 ) (22.0 ) (13.2 ) (27.5 ) 765.1 854.2 649.6 (124.4 ) (129.2 ) (217.8 ) (784.8 ) (376.1 ) (243.4 ) 14.5 3.2 7.8 (15.6 ) (8.9 ) (31.9 ) (910.3 ) (511.0 ) (485.3 ) (62.1 ) (41.7 ) (45.5 ) 81.9 60.4 45.6 — — 6.5 (11.3 ) (17.7 ) (101.0 ) (54.2 ) (35.0 ) (41.8 ) (301.8 ) (282.7 ) (272.2 ) 32.9 0.6 (12.2 ) 3,075.0 3,643.0 2,740.0 (3,000.0 ) (3,731.0 ) (2,657.0 ) 400.0 348.0 326.0 (1.3 ) — — 2.9 8.3 — 162.0 (47.8 ) (11.6 ) (85.0 ) 72.0 (107.6 ) (68.2 ) 367.4 45.1 2,305.0 1,937.6 1,892.5 $ 2,236.8 $ 2,305.0 $ 1,937.6 $ 139.2 $ 124.8 $ 112.8 68.1 55.8 66.1 *See Note 3 – Revenues from Contracts with Customers for additional information about the restatements related to Topic 606. $ $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ $ $ Common Stock Shares Amount Par Value Earnings Earnings (Loss) Interests Total 176.9 $ 176.9 $ 3,209.4 $ 774.5 $ (522.5 ) $ 49.9 $ 3,688.2 — — — 125.3 — 2.2 127.5 176.9 176.9 3,209.4 899.8 (522.5 ) 52.1 3,815.7 — — — 396.8 — 33.5 430.3 — — — — — 8.3 8.3 — — — — — (34.1 ) (34.1 ) — — — — (4.4 ) — (4.4 ) — — — — (224.8 ) 4.4 (220.4 ) — — — — (4.9 ) — (4.9 ) — — 14.7 — — — 14.7 — — 6.5 — — — 6.5 2.0 2.0 89.6 — — — 91.6 1.1 1.1 28.6 — — — 29.7 0.4 0.4 15.5 — — — 15.9 0.2 0.2 (0.1 ) — — — 0.1 (2.3 ) (2.3 ) (98.7 ) — — — (101.0 ) — — — (272.5 ) — — (272.5 ) 178.3 178.3 3,265.5 1,024.1 (756.6 ) 64.2 3,775.5 — — — 481.3 — 35.6 516.9 — — — — — (2.1 ) (2.1 ) — — — — — (34.4 ) (34.4 ) — — — — 4.3 — 4.3 — — — — 180.9 0.8 181.7 — — — — 16.0 — 16.0 — — 17.3 — — — 17.3 1.0 1.0 59.6 — — — 60.6 1.3 1.3 39.8 — — — 41.1 0.4 0.4 18.9 — — — 19.3 0.3 0.3 4.5 — — — 4.8 (0.3 ) (0.3 ) (17.4 ) — — — (17.7 ) — — — (283.6 ) — — (283.6 ) 181.0 $ 181.0 $ 3,388.2 $ 1,221.8 $ (555.4 ) $ 64.1 $ 4,299.7 *See Note 3 – Revenues from Contracts with Customers for additional information about the restatements related to Topic 606.
Excess of
Comprehensive $ $ $ $ ) $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ $ $ $ ) $ $ Common Stock Capital in
Excess of Retained Accumulated Other
Comprehensive Noncontrolling Shares Amount Par Value Earnings Earnings (Loss) Interests Total 181.0 $ 181.0 $ 3,388.2 $ 1,221.8 $ (555.4 ) $ 64.1 $ 4,299.7 — — — 6.6 (6.6 ) — — — — — 633.5 — 42.4 675.9 — — (5.0 ) — — 4.3 (0.7 ) — — — — — (38.0 ) (38.0 ) — — — — (10.3 ) — (10.3 ) — — — — (197.7 ) (2.0 ) (199.7 ) — — — — (15.6 ) — (15.6 ) — — 13.7 — — — 13.7 0.8 0.8 60.8 — — — 61.6 1.6 1.6 57.0 — — — 58.6 0.4 0.4 22.9 — — — 23.3 0.3 0.3 15.5 — — — 15.8 (0.1 ) (0.1 ) (11.2 ) — — — (11.3 ) — — — (303.3 ) — — (303.3 ) 184.0 $ 184.0 $ 3,541.9 $ 1,558.6 $ (785.6 ) $ 70.8 $ 4,569.7 *See Note 3 – Revenues from Contracts with Customers for additional information about the restatements related to Topic 606.
Excess of
Comprehensive $ $ $ $ ) $ $ ) ) ) ) ) ) ) ) ) ) ) $ $ $ $ ) $ $ 2018three3 reportable operating segments. Our brokers, agents and administrators act as intermediaries between underwriting enterprises and our clients. and other corporate costs.the impact of foreign currency translation. Clean energy investments consist of our investments in limited liability companies that own 34 commercial clean coal production facilities producing refined coal usingChem-Mod LLC’s proprietary technologies. We believe these operations produce refined coal that qualifies for tax credits under IRC Section 45. and our investment portfolio, which includes our invested cash and restricted cash we hold on behalf of our clients, as well as clean energy investments.3549 countries and offer client-service capabilities in more than 150 countries globally through a network of correspondent insurance brokers and consultants.2018,2019, management evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date on which the financial statements were issued for potential recognition in our consolidated financial statements and/or disclosure in the notes therein. (i) (ii) (iii) (iv) head countheadcount for employer sponsored benefit plans. Commissions depend upon a large number of factors, including the type of risk being placed, the particular underwriting enterprise’s demand, the expected loss experience of the particular risk of coverage, and historical benchmarks surrounding the level of effort necessary for us to place and service the insurance contract. Rather than being tied to the amount of premiums, fees are most often based on an expected level of effort to provide our services. (i) 3 (ii) (iii) GainsNet gains on books of business salesdivestitures represent2018.$7.8$8.3 million and $7.4$7.8 million at December 31, 20182019 and 2017,2018, respectively, which represents a reserve for future reversals in commission and fee revenues related to the potential cancellation of client insurance policies that were in force as of each year end. The allowance for doubtful accounts was $10.0$8.7 million and $13.5$10.0 million at December 31, 20182019 and 2017,2018, respectively. We establish the allowance for estimated policy cancellations through a charge to revenues and the allowance for doubtful accounts through a charge to operating expenses. Both of these allowances are based on estimates and assumptions using historical data to project future experience. Such estimates and assumptions could change in the future as more information becomes known which could impact the amounts reported and disclosed herein. We periodically review the adequacy of these allowances and make adjustments as necessary.$316.2$388.1 million and $305.5$316.2 million at December 31, 2019 and 2018, and 2017, respectively. Building Fifteen to fortySoftware Three to five yearsRefined fuel plantsTen yearsLeasehold improvements(two(one tothreeone to fivetwoone to2017 and 2016,2017, we wrote off $0.1 million, $10.6 million $6.2 million and $1.8$6.2 million, respectively, of amortizable intangible assets primarily related to prior year acquisitions of our brokerage segment, which is included in amortization expense in the accompanying consolidated statement of earnings. The determinations of impairment indicators and fair value are based on estimates and assumptions related to the amount and timing of future cash flows and future interest rates. Such estimates and assumptions could change in the future as more information becomes known which could impact the amounts reported and disclosed herein.revenue-current,revenue - current, at December 31, 20182019 and 2017,2018, approximate fair value because of the short-term duration of these instruments. See Note 4 20182019 and 20172018 under our debt agreements. See Note 13 to these consolidated financial statements for the fair values related to investments at December 31, 20182019 and 20172018 under our defined benefit pension plan.2018, 6.82019, 6.4 million shares of our common stock was reserved for future issuance under the ESPP.$125.3$3 To facilitate transition,includes aunder ASC Topic 840, including comparative disclosure requirements. We elected the package of practical expedients that entities may elect to apply on adoption. The package of practical expedients relate to thecarry forward historical identification and classification of leases that commenced before the effective dateJanuary 1, 2019 and to notthat commencedcommencing before January 1, 2019. We also elected the effective date.lessee practical expedient, by class of underlying asset (e.g., office space), to not separateguidance also includes a practical expedient permittinglease accounting standard requires us to recognize leaseuseinception of hindsight in evaluating lessee options to extend or terminate a lease orby computing a net present value of the future lease payments.purchaseexpense, and the underlying asset.We have assessed all potential impactsdiscount amount related to lease liabilities is accreted to expense, over the lease term. The amortization of theguidancestandard resulted inhave determined that this guidance will have anlease liabilities of approximately $379.6 million and $420.3 million, respectively, and the reclassification of net rent related assets and liabilities of $38.3 million as of January 1, 2019. The difference between the additional lease assets and lease liabilities, net of the deferred tax impact, was recorded as a decrease to beginning retained earnings of $2.4 million. The adoption of the new standard had a de minimis impact on our consolidated financial statements, including significant new disclosures about our leasing activities. The most significant impact relates to our real estate operating leasesstatement of earnings and the related recognition ofright-of-use assets and lease liabilities in both noncurrent assets and noncurrent liabilities in our consolidated balance sheet. The adoption of this new guidance will not have a materialhad no impact on our consolidated statementsstatement of earnings, cash flows or stockholders’ equity. We plan to adopt this new guidance on January 1, 2019 using the effective date as our date of initial application. On adoption, we will elect the package of practical expedients. We will elect the practical expedient permitting the use of hindsight.flows. See Note 1615 and 17 to these 20182019 consolidated financial statements for details on our current lease arrangements, the amounts of which represent the future undiscounted commitments.Presentation of Net Periodic Pension and Postretirement Benefit CostIn March 2017, the FASB issuedASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The new guidance requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. An entity will apply the new guidance retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the consolidated statement of earnings. The new guidance allows a practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The new guidance was effective in the first quarter of 2018, which we adopted effective January 1, 2018. The adoption of this guidance had no impact on our consolidated net earnings. Due to the adoption of this new guidance, the presentation in our consolidated statement of earnings was changed in 2018 such that the other components of net periodic pension costs related to our defined benefit plan were recorded in operating expense instead of compensation expense as was done in prior years. Prior years were not restated for this change as the impact of this change was not material to our consolidated statement of earnings. See Note 13 to these 2018 consolidated financial statements for details on our net periodic pension benefit cost.Restricted CashIn November 2016, the FASB issuedASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This new accounting guidance addresses the classification and presentation of changes in restricted cash on the statement of cash flows under Topic 230, Statement of Cash Flows. This guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for all entities. The adoption of this new guidance changed the presentation in our consolidated statement of cash flows as we now show the changes in the total of cash, cash equivalents and restricted cash in the statement of cash flows. Previously, the net change in restricted cash was reported as an operating activity and cash paid for acquisitions, net of cash was not presented net of restricted cash. In our 2016 consolidated statement of cash flows, the adoption ofASU 2016-18 resulted in an increase to net cash provided by operating activities of $50.3 million and a decrease to cash paid for acquisitions, net of cash and restricted cash of $15.6 million. These changes resulted in a change of $85.9 million to the effect of changes in foreign exchange rates on cash, cash equivalents and restricted cash.The following is a reconciliation of our December 31 cash, cash equivalents and restricted cash balances as presented in the consolidated statement of cash flows for the years ended December 31, 2018, 2017 and 2016 (in millions): December 31, 2018 2017 2016 $ 607.2 $ 681.2 $ 545.5 1,629.6 1,623.8 1,392.1 $ 2,236.8 $ 2,305.0 $ 1,937.6 2016-13,are still assessing the timing and impact that adoptingdo not expect adoption of this new guidancestandard will have a material impact on our consolidated financial statements.(Topic (TopicThe new guidance is effectiveannual periods beginning after December 15, 2018, including interim periods within those periods. Early adoption was permitted in any interim period or annual year before the effective date. We are currently assessing the impact that adopting this new guidance will have onexcluded component from aconsolidated financial statements, although we do not expectcash flow hedges with forward points existing as of the adoption date. The cumulative-effect related to this change resulted in an adjustment of this guidance$have a material impact.statements; however,statements and we will evaluatedo not expect a significant impact on the impact of this updated guidance on future annual or interim goodwill impairment tests performed.(Subtopic (SubtopicStock CompensationIn May 2017, the FASB issued ASU No.2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting(ASU 2017-09). This accounting guidance provided information about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.ASU 2017-09 was effective for financial statements issued for annual reporting periods beginning after December 15, 2017 and interim periods within those years. The adoption of this new guidance did not have a material impact on our consolidated financial statements as we historically have not made changes to the terms or conditions of an outstanding share-based payment award.In March 2016, the FASB issuedASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting(ASU 2016-09). This accounting guidance required that companies recognize the excess income tax effects of awards in the income statement when the awards vest or are settled, rather than recognizing the tax benefits in excess of compensation costs through stockholders’equity. ASU 2016-09 provides that this requirement be applied prospectively. As it relates to forfeitures, the guidance allows for companies to choose whether to continue to estimate forfeitures or account for forfeitures as they occur. This guidance was effective in first quarter 2017 and has been applied by us. Due to the adoption of this guidance, we recognized the income tax benefit of stock based awards that vested or were settled in the year ended December 31, 2018 and 2017 of $15.0 million and $15.1 million, respectively, in our consolidated statement of earnings. The income tax benefit of stock based awards that vested or were settled in the year ended December 31, 2016 was $6.5 million that was recognized in our consolidated stockholders’ equity. Additionally, our consolidated statement of cash flows now presents excess tax benefits as an operating activity, rather than as a financing activity, applied prospectively. Finally, we elected to continue to estimate forfeitures based on historical data and recognize forfeitures over the vesting period of the award.Revenue from Contracts with CustomersNew Accounting Statement Impact on Consolidated Financial StatementsAs a result of adopting Topic 606, we restated our consolidated financial statements and related information in these notes thereto from amounts previously reported for 2017 and 2016. The primary impacts of the adoption of the new revenue recognition guidance to our segments were as follows.Brokerage segmentRevenue- We previously recognized revenue for certain of our brokerage activities, such as installments on agency bill, direct bill and contingent revenue, over a period of time either due to the transfer of value to our clients or as the remuneration became determinable. Under the new guidance, these revenues are now substantially recognized at a point in time on the effective date of the associated policies when control of the policy transfers to the client. On the other hand, under the new guidance we are now required to defer certain revenues to reflect delivery of services over the contract period. As a result, revenue from certain arrangements are now recognized in earlier periods under the new guidance in comparison to our previous accounting policies, and other revenues are recognized in later periods. The net effect of all of these changes on the timing and amount of revenue recognized is a net decrease in revenue recognized for our 2017 and 2016 annual reporting periods with a shift in the timing of revenue recognized in the interim periods to the first quarter from the other three quarters.The primary reason for the increase in the amount of revenue recognized relates to our employee benefit brokerage business. Historically we recognized this revenue throughout the contract period as underlying client exposure units became certain. Under the new guidance, the full year revenue under each of these contracts is now estimated at the effective date of the underlying policies resulting in acceleration of revenue recognized, with a reassessment at each reporting date. This also causes a shift in the timing of revenue recognized in the interim periods as a majority of these annual contracts are effective in the first quarter. Partially offsetting this interim impact is the recognition of contingent revenues related to our brokerage business as these revenues are now estimated and accrued throughout the year as the underlying business is placed with the underwriting enterprises rather than our historical practice of recognizing the majority of these revenues in the first quarter, because this is typically when we receive cash or the related policy detail or other carrier specific information from the underwriting enterprise.Expense- The assets recognized for the costs to obtain and/or fulfill a contract are amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates. For the majority of our contracts, the renewal period is one year or less and renewal costs are commensurate with the initial contract. As a result, we have applied a practical expedient and recognize the costs of obtaining a contract as an expense when incurred. The net impact of deferring and amortizing the costs to fulfill a contract are not material on an annual basis, but have an impact on the timing of expenses recognized in the interim periods. Previously those costs were expensed as incurred.Risk management segmentRevenue - Under the new guidance, when we have the obligation to adjust claims until closure and are compensated on a per claim basis, we record the full amount of the claim revenue upon notification of the claim and defer certain revenues to reflect delivery of services over the claim handling period. When our obligation is to provide claims services throughout a contract period, we recognize revenue ratably across that contract period. As such, the net impact of the new guidance requires greater initial revenue deferral and recognition over a longer period of time than under our previous accounting policies.Expense - The assets recognized for the costs to obtain and/or to fulfill a contract are amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates. We do not have material costs to obtain or fulfill. The net impact of deferring and amortizing these costs to obtain or to fulfill is not material on our annual or interim reporting period results.Corporate segmentThe timing related to recognition of revenue in our corporate segment remains substantially unchanged. While there is no material impact on our annual after tax earnings, there is a material change to our after tax earnings in the interim quarterly periods, as income tax credits are recognized based on our quarterly consolidated pretax earnings patterns.Impact on 2017 and 2016 Consolidated Financial StatementsThe consolidated statement of earnings line items, which reflect the adoption of the new revenue recognition guidance, are as follows (in millions, except per share data): Year ended December 31, 2017 As Previously
Reported Impact of
Adoption of
Topic 606 As Restated
for Adoption of
Topic 606 $ 2,627.1 $ 13.9 $ 2,641.0 1,636.8 (44.9 ) 1,591.9 163.7 (5.7 ) 158.0 111.8 (12.3 ) 99.5 56.3 2.4 58.7 3.4 — 3.4 1,560.5 — 1,560.5 6,159.6 (46.6 ) 6,113.0 — 136.0 136.0 6,159.6 89.4 6,249.0 2,752.3 (4.9 ) 2,747.4 852.5 (23.4 ) 829.1 — 136.0 136.0 1,635.9 — 1,635.9 124.1 — 124.1 121.1 — 121.1 264.7 — 264.7 30.9 — 30.9 5,781.5 107.7 5,889.2 378.1 (18.3 ) 359.8 (121.1 ) (36.0 ) (157.1 ) 499.2 17.7 516.9 36.1 (0.5 ) 35.6 $ 463.1 $ 18.2 $ 481.3 $ 2.57 $ 0.10 $ 2.67 2.54 0.10 2.64 1.56 — 1.56 Year ended December 31, 2016 As Previously
Reported Impact of
Adoption of
Topic 606 As Restated
for Adoption of
Topic 606 $ 2,439.1 $ (29.2 ) $ 2,409.9 1,492.8 (1.1 ) 1,491.7 147.0 (7.1 ) 139.9 107.2 (9.3 ) 97.9 53.3 0.3 53.6 6.6 — 6.6 1,350.1 — 1,350.1 (1.3 ) — (1.3 ) 5,594.8 (46.4 ) 5,548.4 — 132.1 132.1 5,594.8 85.7 5,680.5 2,538.9 (1.7 ) 2,537.2 797.7 (21.4 ) 776.3 — 132.1 132.1 1,408.6 — 1,408.6 109.8 — 109.8 103.6 — 103.6 247.2 — 247.2 32.1 — 32.1 5,237.9 109.0 5,346.9 356.9 (23.3 ) 333.6 (88.1 ) (8.6 ) (96.7 ) 445.0 (14.7 ) 430.3 30.6 2.9 33.5 $ 414.4 $ (17.6 ) $ 396.8 $ 2.33 $ (0.10 ) $ 2.23 2.32 (0.10 ) 2.22 1.52 — 1.52 Select consolidated statement of comprehensive earnings line items, which reflect the adoption of the new revenue recognition guidance, are as follows (in millions): Year ended December 31, 2017 As Previously
Reported Impact of
Adoption of
Topic 606 As Restated
for Adoption of
Topic 606 $ 499.2 $ 17.7 $ 516.9 4.3 — 4.3 183.4 (2.5 ) 180.9 16.0 — 16.0 702.9 15.2 718.1 37.0 (0.6 ) 36.4 $ 665.9 $ 15.8 $ 681.7 Year ended December 31, 2016 As Previously
Reported Impact of
Adoption of
Topic 606 As Restated
for Adoption of
Topic 606 $ 445.0 $ (14.7 ) $ 430.3 (4.4 ) — (4.4 ) (231.8 ) 7.0 (224.8 ) (4.9 ) — (4.9 ) 203.9 (7.7 ) 196.2 35.1 2.8 37.9 $ 168.8 $ (10.5 ) $ 158.3 Select balance sheet line items, which reflect the adoption of the new revenue recognition guidance are as follows (in millions): December 31, 2017 As Previously
Reported Impact of
Adoption of
Topic 606 As Restated
for Adoption of
Topic 606 $ 2,157.2 $ 1,925.6 $ 4,082.8 708.4 173.2 881.6 905.1 (53.5 ) 851.6 567.0 0.1 567.1 4,197.9 (33.1 ) 4,164.8 3,475.9 1,510.1 4,986.0 864.1 83.7 947.8 74.8 280.5 355.3 56.4 (56.4 ) — — 75.3 75.3 1,128.3 (15.7 ) 1,112.6 1,095.9 125.9 1,221.8 (559.9 ) 4.5 (555.4 ) 4,105.2 130.4 4,235.6 59.7 4.4 64.1 Select consolidated statement of cash flows line items, which reflect the adoption of the new revenue recognition guidance are as follows (in millions): Year ended December 31, 2017 As Previously
Reported Impact of
Adoption of
Topic 606 As Restated
for Adoption
of Topic 606 $ 499.2 $ 17.7 $ 516.9 (220.3 ) 172.6 (47.7 ) — 0.9 0.9 334.3 (167.4 ) 166.9 (48.5 ) 13.2 (35.3 ) 69.3 0.3 69.6 (183.4 ) (35.9 ) (219.3 ) (11.1 ) (2.1 ) (13.2 ) Year ended December 31, 2016 As Previously
Reported Impact of
Adoption of
Topic 606 As Restated
for Adoption
of Topic 606 $ 445.0 $ (14.7 ) $ 430.3 (242.8 ) (534.4 ) (777.2 ) — 15.1 15.1 240.2 529.8 770.0 (55.2 ) 9.7 (45.5 ) 69.1 0.7 69.8 (158.0 ) (8.1 ) (166.1 ) (34.5 ) 7.0 (27.5 ) Select statement of stockholders’ equity items, which reflect the adoption of the new revenue recognition guidance are as follows (in millions): Retained
Earnings Accumulated
Other
Comprehensive
Earnings (Loss) Stockholders’
Equity
Attributable to
Noncontrolling
Interests Total
Stockholders’
Equity $ 774.5 $ (522.5 ) $ 49.9 $ 3,688.2 125.3 — 2.2 127.5 $ 899.8 $ (522.5 ) $ 52.1 $ 3,815.7 $ 916.4 $ (763.6 ) $ 59.2 $ 3,655.8 107.7 7.0 5.0 119.7 $ 1,024.1 $ (756.6 ) $ 64.2 $ 3,775.5 $ 1,095.9 $ (559.9 ) $ 59.7 $ 4,164.9 125.9 4.5 4.4 134.8 $ 1,221.8 $ (555.4 ) $ 64.1 $ 4,299.7 Contract Assets and Liabilities/Contract BalancesInformation about unbilled receivables, contract assets and contract liabilities from contracts with customers is as follows (in millions): December 31,
2018 December 31,
2017, As Restated $ 496.2 $ 415.2 91.6 83.3 457.7 430.6 The unbilled receivables primarily relate to our rights to consideration for work completed but not billed at the reporting date. These are transferred to the receivables when the client is billed. The deferred contract costs represent the costs we incur to fulfill a new or renewal contract with our clients prior to the effective date of the contract. These costs are expensed on the contract effective date. The deferred revenue represents the remaining performance obligations under our contracts.Significant changes in the deferred revenue balances, which include foreign currency translation adjustments, during the period are as follows (in millions): Brokerage Risk
Management Total $ 233.8 $ 170.8 $ 404.6 247.2 135.7 382.9 (227.8 ) (135.0 ) (362.8 ) 5.5 0.4 5.9 258.7 171.9 430.6 244.0 138.1 382.1 (236.5 ) (137.0 ) (373.5 ) 18.5 — 18.5 $ 284.7 $ 173.0 $ 457.7 Remaining Performance ObligationsRemaining performance obligations represent the portion of the contract price for which work has not been performed. As of December 31, 2018, the aggregate amount of the contract price allocated to remaining performance obligations was $457.7 million.The estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period is as follows (in millions): Brokerage Risk
Management Total $ 253.2 $ 96.4 $ 349.6 17.7 28.5 46.2 12.1 15.4 27.5 0.8 9.0 9.8 0.5 5.4 5.9 �� 0.4 18.3 18.7 $ 284.7 $ 173.0 $ 457.7 Deferred Contract CostsWe capitalize costs incurred to fulfill contracts as “deferred contract costs” which are included in other current assets in our consolidated balance sheet. Deferred contract costs were $91.6 million and $83.3 million as of December 31, 2018 and 2017, respectively. Capitalized fulfillment costs are amortized on the contract effective date. The amount of amortization of the deferred contract costs was $309.7 million and $283.7 million for the year ended December 31, 2018, and 2017, respectively.As part of our adoption of the new revenue recognition guidance, we have elected to apply the practical expedient to recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less for our brokerage segment. These costs are included in compensation and operating expenses in our consolidated statement of earnings.4. Business Combinations2018,2019, we acquired substantially all of the net assets of the following firms in exchange for our common stock and/or cash. These acquisitions have been accounted for using the acquisition method for recording business combinations (in millions, except share data): Common
Shares
Issued Common
Share
Value Cash Paid Accrued
Liability Escrow
Deposited Recorded
Earnout
Payable Total
Recorded
Purchase
Price Maximum
Potential
Earnout
Payable (000s)
January 1, 2018 53 $ 3.7 $ 33.9 $ — $ 4.2 $ 2.7 $ 44.5 $ 7.0
March 1, 2018 — — 13.5 — 2.5 5.1 21.1 12.0
June 5, 2018 — — 294.8 — 18.7 — 313.5 —
July 1, 2018 343 24.4 84.4 — 13.3 3.3 125.4 21.5 — — 43.9 — 1.9 3.6 49.4 8.5 — — 29.8 — 2.6 4.4 36.8 11.3 430 26.1 291.9 3.1 28.2 74.9 424.2 141.2 826 $ 54.2 $ 792.2 $ 3.1 $ 71.4 $ 94.0 $ 1,014.9 $ 201.5 On December 22, 2018, we signed a definitive agreement to acquire 100% of the equity of Stackhouse Poland Group Limited (which we refer to as Stackhouse Poland) headquartered in Guildford, Surrey, U.K., for approximately $350.0 million of cash consideration. Stackhouse Poland is a large-scale specialist U.K. insurance broker that generates over £55 million in annualized revenues, has more than 500 employees and operates from a network of 23 offices across the U.K. The transaction is subject to regulatory approval and is expected to close in the first quarter of 2019.
Shares
Issued
Share
Value
Liability
Deposited
Earnout
Payable
Recorded
Purchase
Price
Potential
Earnout
Payable $ $ $ $ $ $ $
Services
Holdings, Ltd. (HIS) $ $ $ $ $ $ $ acquisition.acquisition or on the days when the shares are issued, if purchase consideration is deferred. We record escrow deposits that are returned to us as a result of adjustments to net assets acquired as reductions of goodwill when the escrows are settled. The maximum potential earnout payables disclosed in the foregoing table represent the maximum amount of additional consideration that could be paid pursuant to the terms of the purchase agreement for the applicable acquisition. The amounts recorded as earnout payables, which are primarily based upon the estimated future operating results of the acquired entities over a3.0%4.5% to 15.0%20.0% for our 20182019 acquisitions. We estimated future 9.5%9.0% for our 20182019 acquisitions. Changes in financial projections, market participant assumptions for revenue growth and/or profitability, or the risk-adjusted discount rate, would result in a change in the fair value of recorded earnout obligations.2017 and 2016,2017, we recognized $27.0 million, $18.8 million $20.2 million and $16.9$20.2 million, respectively, of expense in our consolidated statement of earnings related to the accretion of the discount recorded for earnout obligations in connection with our acquisitions. In addition, during 2019, 2018 2017 and 2016,2017, we recognized $11.7 million of income, $9.2 million of income $10.7 million and $15.2$10.7 million of expense, respectively, related to net adjustments in the estimated fair value of the liability for earnout obligations in connection with revised projections of future performance for 116, 112 108 and 101108 acquisitions, respectively. The aggregate amount of maximum earnout obligations related to acquisitions made in 2016 and subsequent years was $982.9 million as of December 31, 2019, of which $565.0 million was recorded in the consolidated balance sheet as of that date based on the estimated fair value of the expected future payments to be made. The aggregate amount of maximum earnout obligations related to acquisitions made in 2015 and subsequent years was $558.1 million as of December 31, 2018, of which $258.8 million was recorded in the consolidated balance sheet as of that date based on the estimated fair value of the expected future payments to be made. The aggregate amount of maximum earnout obligations related to acquisitions made in 2014 and subsequent years was $567.9 million as of December 31, 2017, of which $264.2 million was recorded in the consolidated balance sheet as of that date based on the estimated fair value of the expected future payments to be made.20182019 (in millions): 42 Other MFG M&A PI RHI BMI AI Acquisitions Total $ 0.1 $ — $ 7.2 $ — $ 0.1 $ 0.4 $ 11.8 $ 19.6 3.0 0.5 66.8 18.4 12.4 1.9 103.1 206.1 0.4 1.4 2.6 2.2 0.1 0.1 1.5 8.3 — — 8.3 0.4 — — 17.5 26.2 24.6 5.2 209.4 77.9 18.8 21.4 227.3 584.6 19.6 15.1 56.7 41.9 26.0 17.2 205.3 381.8 — 0.1 0.2 0.5 0.2 1.7 2.6 5.3 0.1 — 58.1 3.2 — — 0.1 61.5 47.8 22.3 409.3 144.5 57.6 42.7 569.2 1,293.4 2.3 0.4 64.2 7.2 8.2 0.8 94.6 177.7 1.0 0.8 31.6 11.9 — 5.1 50.4 100.8 3.3 1.2 95.8 19.1 8.2 5.9 145.0 278.5 $ 44.5 $ 21.1 $ 313.5 $ 125.4 $ 49.4 $ 36.8 $ 424.2 $ 1,014.9 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $584.6$975.7 million, $381.8$841.3 million, $5.3$11.7 million and $61.5$4.0 million, respectively, within the brokerage segment.4.4% and 3.5% to 11.0%12.5% for our 20192018.2019. We estimate the fair value as the present value of the benefits anticipated from ownership of11.5%10.0% to 14.0%12.5% for our 2019(two(one to fifteen years for expiration lists, threeone to fivesix years fortwoone to2017 and 2016,2017, we wrote off $10.6 $6.2$1.8$6.2 million$381.8$841.3 million of expiration lists, $5.3$11.7 million of$61.5$4.0 million of trade names related to the 20182019 acquisitions, $219.3$215.4 million, $4.1$4.7 million and $61.5$0.4 million, respectively, is not expected to be deductible for income tax purposes. Accordingly, we recorded a deferred tax liability of $58.8$43.3 million, and a corresponding amount of goodwill, in 20182019 related to the nondeductible amortizable intangible assets.20182019 include the operations of the acquired entities from their respective acquisition dates. The following is a summary of the unaudited pro forma historical results, as if these entities had been acquired at January 1, 20172018 (in millions, except per share data): Year Ended December 31, 2018 2017 $ 7,125.5 $ 6,572.4 646.1 496.4 3.53 2.74 3.46 2.71 $ $ 2017,2018, nor are they necessarily indicative of future operating results. Annualized revenues of entities acquired in 20182019 totaled approximately $339.8$468.2 million. Total revenues and net earnings recorded in our consolidated statement of earnings for 20182019 related to the 20182019 acquisitions in the aggregate, were $158.0$274.2 million and $6.9$24.8 million, respectively.5.
2019
2018 $ $ $ $ $ ) ) ) ) ) ) $ $ $ $ $ $ $ $ $ 5. Other Current Assets December 31, 2018 2017 $ 316.2 $ 305.5 348.2 244.5 160.2 156.8 91.6 83.3 108.2 91.5 $ 1,024.4 $ 881.6 $ $ $ $ December 31, 2018 2017 $ 30.0 $ 28.6 116.9 112.3 132.1 124.2 145.1 147.9 144.3 143.6 346.0 291.9 12.4 12.0 14.9 20.1 941.7 880.6 (504.8 ) (468.4 ) $ 436.9 $ 412.2 $ $ ) ) $ $ 20182019 and 2017.2018.7. 20182019 and 20172018 allocated by domestic and foreign operations is as follows (in millions): Brokerage Management Corporate Total $ 2,715.3 $ 29.6 $ — $ 2,744.9 753.7 9.2 — 762.9 378.6 — — 378.6 406.3 0.3 — 406.6 209.6 10.2 — 219.8 110.1 — 2.7 112.8 $ 4,573.6 $ 49.3 $ 2.7 $ 4,625.6 $ 2,280.9 $ 25.8 $ — $ 2,306.7 738.5 7.2 — 745.7 374.0 — — 374.0 416.6 — — 416.6 209.3 9.6 — 218.9 99.9 — 3.0 102.9 $ 4,119.2 $ 42.6 $ 3.0 $ 4,164.8 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 20182019 and 20172018 are as follows (in millions): Brokerage Management Corporate Total $ 3,736.9 $ 28.1 $ 2.8 $ 3,767.8 (14.6 ) — — (14.6 ) 3,722.3 28.1 2.8 3,753.2 290.4 14.1 — 304.5 (18.5 ) — — (18.5 ) 14.7 — — 14.7 110.3 0.4 0.2 110.9 4,119.2 42.6 3.0 4,164.8 574.7 9.9 — 584.6 2.2 (2.3 ) — (0.1 ) (122.5 ) (0.9 ) (0.3 ) (123.7 ) $ 4,573.6 $ 49.3 $ 2.7 $ 4,625.6 $ $ $ $ ) ) ) ) ) ) ) ) ) ) $ $ $ $ December 31, 2018 2017 $ 3,379.4 $ 3,055.9 (1,676.8 ) (1,422.1 ) 1,702.6 1,633.8 58.0 53.5 (48.5 ) (46.1 ) 9.5 7.4 86.0 25.9 (25.1 ) (22.5 ) 60.9 3.4 $ 1,773.0 $ 1,644.6 $ $ ) ) ) ) ) ) $ $ $ 287.2 270.7 247.3 222.2 198.2 547.4 $ 1,773.0 $ $ December 31, 2018 2017 $ — $ 50.0 50.0 100.0 50.0 50.0 50.0 50.0 50.0 50.0 75.0 75.0 200.0 200.0 50.0 50.0 200.0 200.0 50.0 50.0 325.0 325.0 50.0 — 200.0 200.0 175.0 175.0 175.0 175.0 150.0 150.0 125.0 125.0 125.0 125.0 98.0 98.0 100.0 100.0 75.0 75.0 125.0 — 100.0 100.0 50.0 50.0 50.0 50.0 125.0 — 25.0 25.0 75.0 75.0 75.0 75.0 125.0 — 75.0 — 3,198.0 2,798.0 265.0 190.0 133.9 116.4 10.1 5.7 — 18.5 10.0 10.5 154.0 151.1 3,617.0 3,139.1 (6.6 ) (6.1 ) $ 3,610.4 $ 3,133.0 $ $ ) ) $ $ 2017, we announced that we planned to close offerings of $648.0 million aggregate principal amount of private placement senior unsecured notes (both fixed and floating rate). We funded $250.0 million on June 27, 2017, $300.0 million on August 2, 2017 and $98.0 million on August 4, 2017, which was used in part to repay our $300.0 million August 3, 2017 Series B debt maturity. The weighted average maturity of the $598.0 million of senior fixed rate notes is 11.6 years and their weighted average interest rate is 4.04% after giving effect to hedging gains. The interest rate on the $50.0 million of floating rate notes would be 4.39% using three-month LIBOR on February 4, 2019. In 2016 and 2017, we entered intopre-issuance interest rate hedging transactions related to the $300.0 million August 3, 2017 maturity private placement. We realized a cash gain of approximately $8.3 million on the hedging transaction that will be recognized on a pro rata basis as a reduction in our reported interest expense over the life of the debt.On June 13, 4.14%3.14% using three-month LIBOR on February 4, 2019. 3, 2020.$50.0 million of floating rate notes due in 2024, at an interest rate of 1.40% plus three-month LIBOR, calculated quarterly.• $50.0 million of floating rate notes due in 2018.2019. The note purchase agreements also provide customary events of default, generally with corresponding grace periods, including, without limitation, payment defaults with respect to the notes, covenant defaults, cross-defaults to other agreements evidencing our or our subsidiaries’ indebtedness, certain judgments against us or our subsidiaries and events of bankruptcy involving us or our material subsidiaries.April 8, 2016,June 7, 2019, we entered into an amendment and restatement to our multicurrency credit agreement dated September 19, 2013,April 8, 2016, (which we refer to as the Credit Agreement) with a group of fifteen15 financial institutions. The amendment and restatement, among other things, extended the expiration date of the Credit Agreement from September 19, 2018 to April 8, 2021 to June 7, 2024 and increased the revolving credit commitment from $600.0$800.0 million to $800.0$1,200.0 million, of which up to $75.0 million may be used for issuances of standby or commercial letters of credit and up to $75.0 million may be used for the making of swing loans (as defined in the Credit Agreement). We may from time to time request, subject to certain conditions, an increase in the revolving credit commitment under the Credit Agreement up to a maximum aggregate revolving credit commitment of $1,100.0$1,700.0 million.$2.0$2.5 million of debt acquisition costs that were capitalized and will be amortized on a pro rata basis over the term of the Credit Agreement.2018.2019. The Credit Agreement also includes customary provisions for transactions of this type, including events of default, with corresponding grace periods and2018, $17.02019, $16.2 million of letters of credit (for which we had $15.8$16.5 million of liabilities recorded at December 31, 2018)2019) were outstanding under the Credit Agreement. See Note 1617 to these consolidated financial statements for a discussion of the letters of credit. There were $265.0$520.0 million of borrowings outstanding under the Credit Agreement at December 31, 2018.2019. Accordingly, at December 31, 2018, $518.02019, $663.8 million remained available for potential borrowings, of which $58.0 million was available for additional letters of credit.May 18, 2017August 15, 2019, we entered into aan amendment to our Syndicated Facility Agreement, revolving loan facility160.0205.0 million and NZ$25.0 million tranches, (ii) Facility C is an AU$25.040.0 million equivalent multi-currency overdraft tranche and (iii) Facility D is a NZ$15.0 million equivalent multi-currency overdraft tranche. There was a three month increase in the AU $160.0AU$160.0 million tranche to AU $190.0AU$190.0 million, which expired January 31, 2019. The Premium Financing Debt Facility expires May 18, 2020.1.05%.1.10% and 1.15% for the AU$ and NZ$ tranches, respectively. The interest rates on Facilities C and D are 30 day Interbank rates, plus a margin of 0.55%.0.575% and 0.600% for the AU$ and NZ$ tranches, respectively. The annual fee for Facility B is 0.4725% of0.495% and 0.5175% for the undrawn commitments for the twoAU$ and NZ$ tranches, of the facility.respectively. The annual fee for FacilitiesFacility C is 0.525% and for Facility D is 0.50%0.55% of the total commitments of the facilities.2018.2019. The Premium Financing Debt Facility also includes customary provisions for transactions of this type, including events of default, with corresponding grace periods and cross-defaults to other agreements evidencing our indebtedness. Facilities B, C and D are secured by the premium finance receivables of the Australian and New Zealand premium finance subsidiaries.2018,2019, AU$190.0205.0 million and 0 NZ$15.0 million of borrowings were outstanding under Facility B, there were noAU$27.1 million of borrowings outstanding under Facility C and NZ$14.914.7 million of borrowings were outstanding under Facility D. Accordingly, as of December 31, 2018, zero2019, 0 AU$ and NZ$10.025.0 million remained available for potential borrowing under Facility B, and AU$25.012.9 million and NZ$0.10.3 million under Facilities C and D, respectively.1617 to these 20182019 consolidated financial statements for additional discussion on our contractual obligations and commitments as of December 31, 2018.$3,198.0$3,923.0 million in debt under the note purchase agreements at December 31, 20182019 was $3,194.4$4,254.2 million due to the long-term duration and fixed interest rates associated with these debt obligations. No active or observable market exists for our private long-term debt. Therefore, the estimated fair value of this debt is based on discounted future cash flows, which is a Level 3 fair value measurement, using current interest rates available for debt with similar terms and remaining maturities. The estimated fair value of this debt is based on the income valuation approach, which is a valuation technique that converts future amounts (for example, cash flows or income and expenses) to a single current (that is, discounted) amount. The fair value measurement is determined on the basis of the value indicated by current market expectations about those future amounts. Because our debt issuances generate a measurable income stream for each lender, the income approach was deemed to be an appropriate methodology for valuing the private placement long-term debt. The methodology used calculated the original deal spread at the time of each debt issuance, which was equal to the difference between the yield of each issuance (the coupon rate) and the equivalent benchmark treasury yield at that time. The market spread as of the valuation date was calculated, which is equal to the difference between an index for investment grade insurers and the equivalent benchmark treasury yield today. An implied premium or discount to the par value of each debt issuance based on the difference between the origination deal spread and market as of the valuation date was then calculated. The index we relied on to represent investment graded insurers was the Bloomberg Valuation Services (BVAL) U.S. Insurers BBB index. This index is comprised primarily of insurance brokerage firms and was representative of the industry in which we operate. For the purposes of our analysis, the average BBB rate was assumed to be the appropriate borrowing rate for us based on our current estimated credit rating.us. The estimated fair value of the $265.0$520.0 million of borrowings outstanding under our Credit Agreement approximate their carrying value due to their short-term duration and variable interest rates. The estimated fair value of the $154.0$170.6 million of borrowings outstanding under our Premium Financing Debt Facility approximates their carrying value due to their short-term duration and variable interest rates. Year Ended December 31, 2018 2017 2016 $ 633.5 $ 481.3 $ 396.8 182.7 180.1 177.6 3.5 2.0 0.8 186.2 182.1 178.4 $ 3.47 $ 2.67 $ 2.23 $ 3.40 $ 2.64 $ 2.22 Options to purchase $ $ $ $ $ $ $ $ $ and 5.9 million shares of our common stock were outstanding at December 31, 2019, 2018 2017 and 2016,2017, respectively, but were not includedexcluded in the computation of the dilutive effect of stock optionsstock-based awards for the year then ended. These stock optionsstock-based awards were excluded from the computation because the options’ exercise prices on these stock-based awards were greater than the average market price of our common shares during the respective period, and therefore, would be anti-dilutive to earnings per share under the treasury stock method.10. 3.32.8 million as of December 31, 2018.On March 17, 2016, the compensation committee granted 2,576,000 options to our officersThe 2019, 2018 and key employees that become exercisable at the rate of 34%, 33% and 33% on the anniversary date of the grant in 2019, 2020 and 2021,respectively. The 2018, 2017 and 2016 options expire seven years from the date of grant, or earlier in the event of certain terminations of employment. For certain of our executive officers age2017 and 20162017 are no longer subject to forfeiture upon such officers’ departure from the company after two years from the date of grant.2017 and 2016,2017, we recognized $14.0 million, $13.7 million $17.3 million and $14.7$17.3 million, respectively, of compensation expense related to our stock option grants.2017 and 2016,2017, the estimated fair values of the stock option grants are amortized to expense over the options’ vesting period. We estimated the fair value of stock options at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: Year Ended December 31, 2018 2017 2016 2.3 % 2.8 % 3.0 % 2.7 % 2.3 % 1.6 % 15.1 % 27.2 % 27.7 % 5.5 5.0 5.5 % % % % % % % % % Because our employee and director stock options have characteristics significantly different from those of traded options, and because changes in the selective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our employee andnon-employee director stock options. The weighted average fair value per option for all options granted during 2019, 2018 2017 and 2016,2017, as determined on the grant date using the Black-Scholes option pricing model, was $10.71, $9.27 and $11.42, and $8.45, respectively.20182019 and 20172018 (in millions, except exercise price and year data): Shares
Under
Option Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term (in
years) Aggregate
Intrinsic
Value 9.5 $ 45.27 1.3 70.74 (1.6 ) 37.85 (0.4 ) 49.23 8.8 $ 50.16 3.86 $ 206.8 2.1 $ 42.84 1.83 $ 64.4 6.5 $ 52.14 4.46 $ 140.3 9.5 $ 41.45 1.7 56.87 (1.3 ) 33.11 (0.4 ) 44.48 9.5 $ 45.27 3.99 $ 171.5 2.1 $ 37.81 1.75 $ 52.7 7.2 $ 47.30 4.64 $ 115.8
years) $ ) ) $ $ $ $ $ $ $ ) ) $ $ $ $ $ $ 14.413.2 million shares (less any shares of restricted stock issued under the LTIP - see Note 12 to these consolidated financial statements) were available for grant under the LTIP at December 31, 2018.2017 and 20162017 amounted to $77.9 million, $54.2 million $33.7 million and $19.3$33.7 million, respectively. As of December 31, 2018,2019, we had approximately $30.8$28.2 million of total unrecognized compensation costexpense related to nonvested options. We expect to recognize that cost over a weighted average period of approximately four years.20182019 is summarized as follows (in millions, except exercise price and year data): Options Outstanding Options Exercisable Number
Outstanding Weighted
Average
Remaining
Contractual
Term (in
years) Weighted
Average
Exercise
Price Number
Exercisable Weighted
Average
Exercise
Price $ 35.71 - $ 39.17 0.9 0.92 $ 38.20 0.9 $ 38.20 43.71 - 43.71 2.3 4.21 43.71 — — 46.17 - 46.87 2.8 2.75 46.48 1.1 46.61 47.92 - 63.60 1.6 5.20 56.81 — — 70.74 - 70.74 1.2 6.21 70.74 0.1 70.74 $ 35.71 - $ 70.74 8.8 3.86 $ 50.16 2.1 $ 42.84
years) $ $ $ $ the second quarter of 2016,addition, we madeannually make awards undersub-plans of the DEPP for certain production staff, which generally provide for vesting and/or distributions no sooner than five years from the date of awards, although certain awards vest and/or distribute after earlier of fifteen years or the participant reaching65.652017 and 2016,2017, the compensation committee approved $10.1 million, $11.5 million $14.0 million and $10.1$14.0 million, respectively, of awards in the aggregate to certain key executives under the DEPP that were contributed to the rabbi trust in the first quarters of 2019, 2018 2017 and 2016.2017. We contributed cash to the rabbi trust and instructed the trustee to acquire a specified number of shares of our common stock on the open market to fund these 2019, 2018 2017 and 20162017 awards. During 2019, 2018 2017 and 2016,2017, we charged $9.8 million, $9.1 million $9.6 million and $7.5$9.6 million, respectively, to compensation expense related to these awards.2017 and 2016,2017, the compensation committee approved $2.6 million, $0.9 million $4.0 million and $13.6$4.0 million, respectively, of awards under theand second quarter 2016, respectively. During 2019, 2018 2017 and 2016,2017, we charged $2.4 million, $2.2 million $1.9 million and $1.3$1.9 million, respectively, to compensation expense related to these awards. There were nowas $0.5 million of distributions from the2017 and 2016.20182019 and 2017,2018, we recorded $64.5 million (related to 2.9 million shares) and $57.6 million (related to 2.7 million shares) and $54.7 million (related to 2.6 million shares), respectively, of unearned deferred compensation as a reduction of capital in excess of par value in the accompanying consolidated balance sheet. The total intrinsic value of our unvested equity based awards under the plan at December 31, 2019 and 2018 and 2017 was $199.8$276.3 million and $166.0$199.8 million, respectively. During 2019, 2018 2017 and 2016,2017, cash and equity awards with an aggregate fair value of $3.1 million, $6.4 million $8.4 million and $7.6$8.4 million, respectively, were vested and distributed to executives under the DEPP.2017 and 2016,2017, the compensation committee approved $2.4 million, $5.6 million $5.1 million and $3.1$5.1 million, respectively, of awards in the aggregate to certain key executives under the DCPP that were contributed to the rabbi trust in second quarter 2019, 2018 and 2017, respectively. In2016, respectively.$1.62017 and 20162017 we charged $5.2 million, $3.0 million $2.5 million and $1.5$2.5 million to compensation expense related to these awards. There was $2.5 million and $3.6 million of distributions from the DCPP during 2018.2019 and 2018, respectively. There were no distributions from the DCPP during 20172017.2016.12.Restricted Stock, Performance Share and Cash Awards2018, 3.32019, 2.8 million shares were available for grant under the LTIP for such awards.2017 and 2016,2017, we granted 414,700, 439,100 476,350 and 479,167476,350 restricted stock units, respectively, to employees under the LTIP and 2014 LTIP, with an aggregate fair value of $31.8 million, $28.7 million $26.8 million and $20.4$26.8 million, respectively, at the date of grant.2017 and 20162017 restricted stock units vest as follows: 399,900 units granted in first quarter 2019, 420,200 units granted in first quarter 2018 and 477,500 units granted in first quarter 2017 and 466,600 units granted in first quarter 2016, vest in full based on continued employment through and March 17, 2021,2017 and 20162017 restricted stock unit awards generally vest in full based on continued employment through the vesting period on the anniversary date of the grant. For certain of our executive officers age 55 or older, restricted stock units awarded in 2019, 2018 2017 and 20162017 are not subject to forfeiture upon such officers’ departure from the company after2017 and 20162017 restricted stock unit awards are as follows (in actual shares): Restricted Stock Units Granted 2018 2017 2016 18,900 21,600 27,417 12,700 12,750 — 407,500 442,000 451,750 439,100 476,350 479,167 2017 and 2016,2017, we charged $29.8 million, $27.2 million $19.6 million and $18.2$19.6 million, respectively, to compensation expense related to restricted stock awards granted in 2008 through 2018.2019. The total intrinsic value of unvested restricted stock at December 31, 2019 and 2018 and 2017 was $140.8$215.1 million and $109.3$140.8 million, respectively. During 20182019 and 2017,2018, equity awards (including accrued dividends) with an aggregate fair value of $23.6$2.1 million and $23.3$23.6 million were vested and distributed to employees under this plan. and March 17, 2016, pursuant to the LTIP and 2014 LTIP, the compensation committee approved 73,600, 78,200 86,250 and 72,900,86,250, respectively of provisional performance unit awards, with an aggregate fair value of $5.8 million, $5.3 million $4.9 million and $3.2$4.9 million, respectively, for future grants to our officers and key employees. Each performance unit award was equivalent to the value of2018, 2017 and 20162019 provisional awardsaward will fully vest based on continuous employment through March 15, 2021, March 16, 2020 and March 17, 2019, respectively, andJanuary 1, 2022. The ultimate award value will be settled in sharesequal to the trailing twelve-month price of our common stock on aone-for-one basisDecember 31, 2021, multiplied by the number of units subject to the award, but limited to between2021,2022. If an eligible employee leaves us prior to the vesting date, the entire award will be forfeited. We did not recognize any compensation expense during the year ended December 31, 2019 related to the 2019 provisional award under the Program. Based on company performance for 2019, we expect to grant 201,000 units under the Program in first quarter 2020 and 2019, respectively. In 2016, these awards were subject to aone-year performance period based on our financial performance and atwo-year vesting period. The 2018 and 2017 awards are subject to a three-year performance period that beginswill fully vest on January 1, 2018 and 2017, respectively, and vest on the three-year anniversary of the date of grant (March 15, 2021 and March 16, 2020). For the 2018 and 2017 awards, at the discretion of the compensation committee and determined based on our performance, the eligible officer will be granted a percentage of the provisional performance unit award based on a new performance measure, growth in adjusted EBITDAC per share. Granted units for the 2018 and 2017 provisional awards will fully vest based on continuous employment through March 16, 2021 and 2020, respectively, and will be settled in shares of our common stock on aone-for-one basis as soon as practicable thereafter. For certain of our executive officers age 55 or older, awards granted in 2018, 2017 and 2016 are no longer subject to forfeiture upon such officers’ departure from the company after two years from the date of grant. During 2018 and 2017, equity awards (including accrued dividends) with an aggregate fair value of $3.7 million and $3.3 million was vested and distributed to employees under this plan.Cash Awardsour Performance Unitthe Program, (which we refer to as the Program), the compensation committee approved provisional cash awards of $15.0 million in the aggregate for future grants to our officers and key employees that are denominated in units (219,000 units in the aggregate), each of which was equivalent to the value of one share of our common stock on the date the provisional award was approved. The Program consistsTerms of aone-year performance period based on our financial performance and atwo-year vesting period. At the discretion of the compensation committee and determined based on our performance, the eligible officer or key employee will be granted a percentage of the provisional cash award units that equates to the EBITDAC (in 2018) or EBITAC (prior to 2018) growth achieved (as defined in the Program). At the end of the performance period, eligible participants will be granted a number of units based on achievement of the performance goal and subject to approval by the compensation committee. Granted units for the 2018 provisional award will fully vest based on continuous employment through January 1, 2021. The ultimate award value will be equalwere similar to the trailing twelve-month price of our common stock on December 31, 2020, multiplied by the number of units subject to the award, but limited to between 0.5 and 1.5 times the original valueterms of the units determined as of the grant date. The fair value of the awarded units will be paid out in cash as soon as practicable in 2021. If an eligible employee leaves us prior to the vesting date, the entire award will be forfeited. We did not recognize any compensation expense during the year ended December 31, 2018 related to the 20182019 provisional award under the Program.awards. Based on companyour performance for 2018, we expect to grantgranted 190,000 units under the Program in first quarter 2019 that will fully vest on January 1, 2021.awards.awards, respectively. We did not recognize any compensation expense during 2017 related to the 2017 provisional award under the Program. We did not recognize any compensation expense during 2016 related to the 2016 provisional award under the Program.(315,000 (and 2016, we charged $9.3 million and $6.6 million to compensation expense related to these awards. During 2016, cash awards related to the 2013 provisional awards with an aggregate fair value of $11.2 million (246,000 units in the aggregate) were vested and distributed to employees under the Program.20182019 and 2017.2018. In the table below, the service cost component represents plan administration costs that are incurred directly by the plan. A reconciliation of the beginning and ending balances of the pension benefit obligation and fair value of plan assets and the funded status of the plan is as follows (in millions): Year Ended December 31, 2018 2017 $ 271.4 $ 261.3 0.8 1.7 9.3 10.0 (14.3 ) 11.5 (14.0 ) (13.1 ) $ 253.2 $ 271.4 $ 219.4 $ 207.8 (15.4 ) 24.7 30.0 — (14.0 ) (13.1 ) $ 220.0 $ 219.4 $ (33.2 ) $ (52.0 ) $ (33.2 ) $ (52.0 ) 76.0 63.7 $ 42.8 $ 11.7 $ $ ) ) ) $ $ $ $ ) ) ) $ $ $ ) $ ) $ ) $ ) $ $ Year Ended December 31, 2018 2017 2016 $ 0.8 $ 1.7 $ 1.5 9.3 10.0 10.8 (16.0 ) (14.0 ) (14.6 ) 4.9 5.0 5.3 (1.0 ) 2.7 3.0 17.2 0.8 1.4 (4.9 ) (5.0 ) (5.3 ) 12.3 (4.2 ) (3.9 ) $ 11.3 $ (1.5 ) $ (0.9 ) $ 7.2 $ 5.0 $ 5.5 $ $ $ ) ) ) ) ) ) ) ) ) $ ) $ $ ) $ $ $ December 31, 2018 2017 4.00 % 3.50 % 7.00 % 7.00 % % % % % Year Ended December 31, 2018 2017 2016 3.50 % 4.00 % 4.25 % 7.00 % 7.00 % 7.25 % % % % % �� % % $ 15.8 16.1 16.3 16.5 16.6 82.8 $ December 31, 2018 2017 57.0 % 61.0 % 36.0 % 32.0 % 7.0 % 7.0 % 100.0 % 100.0 % % % % % % % % % 20182019 and 2017.2018. The return assumptions used in the valuation were based on data provided by the plan’s external investment advisors. December 31, 2018 2017 $ — $ — 125.1 107.5 94.9 111.9 $ 220.0 $ 219.4 $ $ $ $ Year Ended December 31, 2018 2017 $ 111.9 $ 99.7 (9.6 ) — (7.4 ) 12.2 $ 94.9 $ 111.9 $ $ (9.6 ) (7.4 ) $ $ not0t required under the IRC to make any minimum contributions to the plan for each of the 2019, 2018 2017 and 20162017 plan years. This level of required funding is based on the plan being frozen and the aggregate amount of our historical funding. During 2018 we made a $30.0 million discretionary contribution to the plan. During 20172019 and 20162017 we did not0t make discretionary contributions to the plan.five-yearfive-year graduated vesting schedule. We expensed (net of plan forfeitures) $59.4 million, $53.9 million $51.6 million and $47.7$51.6 million related to the plan in 2019, 2018 and 2017, and 2016, respectively.$6.4 million and $5.8$6.4 million related to contributions made to a2017 and 2016,2017, respectively. The fair value of the assets in the plan’s rabbi trust at December 31, 20182019 and 2017,2018, including employee contributions and investment earnings, was $355.0$452.9 million and $329.0$355.0 million, respectively, and has been included in other noncurrent assets and the corresponding liability has been included in other noncurrent liabilities in the accompanying consolidated balance sheet.$30.6 million in 2018, 2017, and 2016, respectively.and 2017 were $2.0$1.7 million and $2.5$2.0 million, respectively. The net periodic postretirement benefit (income) cost of the plan amounted to ($0.30.4 million), ($0.3 million) and ($0.3 million) in 2019, 2018 and 2017, and 2016, respectively.andincluded in other noncurrent assets in the related funding commitmentsconsolidated balance sheet (in millions): December 31, 2018 December 31, Funding 2017 Assets Commitments Assets $ 4.0 $ — $ 4.0 2.0 — 2.0 5.1 — 10.2 0.4 — 0.6 43.0 — 58.5 5.0 — 3.8 $ 59.5 $ — $ 79.1 $ $ $ $ 2018,2019, we held a 46.5% controlling interest in LLC.Chem-ModAt December 31, 2017,For 2019, total assetsrevenues and total liabilities of this VIE included in our consolidated balance sheetexpenses were $11.1$81.9 million and $0.7$17.5 million, respectively. For 2018, total revenues and expenses were $73.7 million and $4.1 million, respectively. For 2017, total revenues and expenses were $64.4 million and $2.3 million, respectively. We are under no obligation to fundChem-Mod’s operations in the future.2018,2019, we held a 31.5% noncontrolling ownership interest in2018,2019, we held a noncontrolling 12% interest in We have an option to acquire an additional 15% interest inC-Quest’s global entities for $7.5 million at any time on or prior to February 15, 2019.arewere 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 2021.2018:2019:Thirty-oneFor two of the 2009 Era Plants, we are not in current active negotiations for long-term production contracts. For one of the 2011 Era Plants, we are in early stages of negotiations for a long-term production contract.one1 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. beneficiary2018,2019, total assets and total liabilities of this VIE were $31.4$31.1 million and $30.0 million, respectively. For 2018,2019, total revenues and expenses of this VIE were $90.1$64.9 million and $110.2$79.8 million, respectively.2018,2019, we owned afour4 venture capital funds totaling $5.0$4.5 million and eight8 certifiedzero0 carrying value. The2018,2019, total assets and total liabilities of these VIEs were approximately $15.0$5.3 million and zero,$0.4 million, respectively.
December 31, 2019 $ ) $ $ $ $ $ % $ ) $ 2018.derivativederivatives designated as hedging instruments are as follows at December 31, 20182019 and 20172018 (in millions): Notional Amount Derivatives Assets (1) Derivative Liabilities (2) 2018 2017 2018 2017 2018 2017 $ 850.0 $ 200.0 $ 3.0 $ 2.2 $ 13.0 $ — 51.4 18.7 6.6 8.1 12.8 2.9 $ 901.4 $ 218.7 $ 9.6 $ 10.3 $ 25.8 $ 2.9
Amount
Value $ $ $ $ $ $ $ $ $ $ $ $ (1) other current assets $3.9 million and $7.7 millionforeign exchange contracts at December 31, 20182019 were $342.0 million of call options offset with $342.0 million of put options, and 2017, respectively and othernon-current assets $5.7$12.1 million and $2.7of buy forwards offset with $43.8 million at December 31, 2018 and 2017, respectively.(2)Included within other current liabilities $17.9 million and $1.6 million at December 31, 2018 and 2017, respectively and othernon-current liabilities $7.9 million and $1.3 million at December 31, 2018 and 2017, respectively.(3) Included within foreign exchange contracts at December 31, 2017 were $141.0 million of call options offset with $141.0 million of put options and $13.3 million of buy forwards offset with $31.0 million of sell forwards.amountseffect of derivative gains (losses) recognized incash flow hedge accounting on accumulated other comprehensive loss were as follows (in millions): Commission Compensation Operating Interest Revenue Expense Expense Expense Total $ — $ — $ — $ (9.3 ) $ (9.3 ) (3.1 ) (1.9 ) (1.4 ) — (6.4 ) $ (3.1 ) $ (1.9 ) $ (1.4 ) $ (9.3 ) $ (15.7 ) $ — $ — $ — $ (0.9 ) $ (0.9 ) 10.4 3.2 2.3 — 15.9 $ 10.4 $ 3.2 $ 2.3 $ (0.9 ) $ 15.0 $ — $ — $ — $ 12.4 $ 12.4 (24.0 ) 0.1 — — (23.9 ) $ (24.0 ) $ 0.1 $ — $ 12.4 $ (11.5 ) The amounts of derivative gains (losses) reclassified from accumulated other comprehensive loss into income (effective portion) were as follows (in millions): Commission Compensation Operating Interest Revenue Expense Expense Expense Total $ — $ — $ — $ 1.1 $ 1.1 2.3 1.3 1.0 — 4.6 $ 2.3 $ 1.3 $ 1.0 $ 1.1 $ 5.7 $ — $ — $ — $ 0.4 $ 0.4 (8.7 ) 1.8 1.3 — (5.6 ) $ (8.7 ) $ 1.8 $ 1.3 $ 0.4 $ (5.2 ) $ — $ — $ — $ 0.1 $ 0.1 (9.1 ) 0.5 0.3 — (8.3 ) $ (9.1 ) $ 0.5 $ 0.3 $ 0.1 $ (8.2 )
Other
Comprehensive
Loss (1)
Gain (Loss)
Reclassified
from
Accumulated
Other
Comprehensive
Loss into
Earnings
Gain (Loss)
Recognized
in Earnings
Related to
Amount
Excluded
from
Effectiveness
Testing $ ) $ ) $ ) ) ) ) $ ) $ ) $ $ ) $ $ ) $ ) $ $ (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. $3.5$1.8 million of pretax lossincome currently included within accumulated other comprehensive loss will be reclassified into earnings in the next twelve months. The amount of gain (loss) recognized in earnings on the ineffective portion of derivatives for 2018, 2017 and 2016 was $(0.6) million, $(0.2) million and $1.6 million, respectively.16. Commitments, Contingencies andOff-Balance Sheet Arrangements20182019 were as follows (in millions): Payments Due by Period Contractual Obligations 2019 2020 2021 2022 2023 Thereafter Total $ 100.0 $ 100.0 $ 75.0 $ 200.0 $ 300.0 $ 2,423.0 $ 3,198.0 265.0 — — — — — 265.0 154.0 — — — — — 154.0 138.0 132.5 127.9 122.5 113.1 444.5 1,078.5 657.0 232.5 202.9 322.5 413.1 2,867.5 4,695.5 106.8 92.0 78.8 61.1 44.3 87.4 470.4 (0.8 ) (0.6 ) (0.6 ) (0.3 ) (0.3 ) (1.0 ) (3.6 ) 32.1 14.6 11.3 2.1 — — 60.1 $ 795.1 $ 338.5 $ 292.4 $ 385.4 $ 457.1 $ 2,953.9 $ 5,222.4 $ $ $ $ $ $ $ ) ) ) ) ) ) ) $ $ $ $ $ $ $ On December 22, 2018, we signed a definitive agreement to acquire 100% of the equity of Stackhouse Poland headquartered in Guildford, Surrey, U.K., for approximately $350.0 million of cash consideration. The transaction is subject to regulatory approval and is expected to close in the first quarter of 2019.$11.8$18.1 million of EDGE credits from inception through December 31, 2018.2017 and $134.2 million in 2016.2018.2019. These obligations represent agreements to purchase goods or services that were executed in the normal course of business.20182019 were as follows (in millions): Total Amount of Commitment Expiration by Period Amounts Off-Balance Sheet Commitments 2019 2020 2021 2022 2023 Thereafter Committed $ — $ 1.3 $ — $ — $ — $ 17.0 $ 18.3 0.2 0.2 0.2 0.2 0.2 0.6 1.6 $ 0.2 $ 1.5 $ 0.2 $ 0.2 $ 0.2 $ 17.6 $ 19.9 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 507556 companies, all of which were accounted for using the acquisition method for recording business combinations. Substantially all of the purchase agreements related to these acquisitions contain provisions for potential earnout obligations. For all of our acquisitions made in the period from 20132016 to 20182019 that contain potential earnout obligations, such obligations are measured at fair value as of the acquisition date and are included on that basis in the recorded purchase price consideration for the respective acquisition. The amounts recorded as earnout payables are primarily based upon estimated future potential operating results of the acquired entities over a$558.1$982.9 million, of which $258.8$565.0 million was recorded in our consolidated balance sheet as of December 31, 20182019 based on the estimated fair value of the expected future payments to be made.20182019 and 20172018 that was recourse to us.2018,2019, we had posted two2 letters of credit totaling $10.2$9.4 million in the aggregate, related to our self-insurance deductibles, for which we had a recorded liability of $15.8$16.5 million. We have an equity investment in a2018,2019, we had posted seven7 letters of credit totaling $6.3 million to allow certain of our captive operations to meet minimum statutory surplus requirements plus additional collateral related to premium and claim funds held in a fiduciary capacity, one1 letter of credit totaling $1.3$0.9 million for collateral related to claim funds held in a fiduciary capacity by a recent acquisition, and one1 letter of credit totaling $0.5 million as a security deposit for a 2015 acquisition’s lease. These letters of credit have never been drawn upon.20182019 were as follows (all dollar amounts in table are in millions): Compensation Maximum Liability Collateral to Us Exposure Recorded None None $ 10.2 $ 15.8 None Reimbursement
of LOC fees
6.3 — None None 1.3 — None None 0.5 — (1) None 1.6 — $ 19.9 $ 15.8 $ $ $ $ (1) April 18, 2018, Nalco CompanyJuly 17, 2019, Midwest Energy Emissions Corp. and MES Inc. (which we refer to together as Nalco)Midwest Energy) filed a patent infringement lawsuitslawsuit in the WesternUnited States District Court for the District of WisconsinDelaware against two unaffiliated power plants that burn refined coal using theus,TM Solution. These complaints were filed following Nalco’s voluntary dismissal of its action againstChem-Moddefendants that was originally filed in the Northern District of Illinois in April 2014, as previously disclosed in our SEC filings. On July 16, 2018, Nalco amended its complaints to name as an additional defendant in each case the refined coal limited liability company that sells refined coal to the power plant defendant in each case.related and unrelated parties. The refined coal limited liability companies are licensed byChem-Mod LLC to use theChem-ModTMsolution to produce and refined coal. The complaints allegecomplaint alleges that the named defendants infringed a patent licensedinfringe two patents held exclusively to Nalcoby Midwest Energy and seekseeks unspecified damages and injunctive relief. Although neither we norChem-Mod LLC is named as a defendantWe dispute the allegations contained in either of the complaints, their defense was tenderedcomplaint and intend toChem-Mod LLC under certain agreements that provide for defense and indemnity, and those tenders were accepted.Chem-Mod LLC is directing the vigorous defense of these lawsuits. defend this matter vigorously. Litigation is inherently uncertain however, and it is not possible for us to predict the ultimate outcome of these mattersthis matter and the financial impact to us.From 2016In the period from 2017 to 2018,2019, our micro-captive operations contributed less than $3.2$$5.0$Tribeca.Tribeca, in the United States District Court for the District of Arizona. The named plaintiffs are micro-captive clients of Artex or Tribeca and their related entities and owners who had IRS Section 831(b) tax benefits disallowed by the IRS. The complaint attempts to state various causes of action and alleges that the defendants defrauded the plaintiffs by marketing and managing micro-captives with the knowledge that the captives did not constitute20152005 to the present. The complaint does not specify the amount of damages sought by the named plaintiffs or the putative class. TheOn August 5, 2019, the trial court granted the defendants’ responsemotion to compel arbitration and dismissed the class action lawsuit. Plaintiffs are appealing this ruling to the complaint is due on March 8, 2019. The court has not otherwise set a case schedule.United States Court of Appeals for the Ninth Circuit. We will vigorouslycontinue to defend against the lawsuit.lawsuit vigorously. Litigation is inherently uncertain, however, and it is not possible for us to predict the ultimate outcome of this matter and the financial impact to us.20182019 consolidated balance sheet is above the lower end of the most recently determined actuarial range by $0.7$2.4 million and below the upper end of the actuarial range by $7.9$4.2 million. We can make no assurances that the historical claim data used to project the current reserve levels will be indicative of future claim activity. Thus, the E&O reserve level and corresponding actuarial range could change in the future as more information becomes known, which could materially impact the amounts reported and disclosed herein.2018,2019, we had exposure on $108.0 million of previously earned tax credits. Under the Tax Act, we expect that these previously earned tax credits will be refunded for tax years beginning 2018 and ending in 2021, according to a specific formula. In 2004, 2007 and 2009, the IRS examined several of these investments and all examinations were closed without any changes being proposed by the IRS. However, any future adverse tax audits, administrative rulings or judicial decisions could disallow previously claimed tax credits.20182019 consolidated balance sheet related to this exposure.17.2017 and 20162017 related to the wholly-owned underwriting enterprise subsidiary discussed above are as follows (in millions): 2018 2017 2016 Written Earned Written Earned Written Earned $ 57.6 $ 53.2 $ 60.7 $ 60.4 $ 71.8 $ 69.6 4.7 4.6 5.0 4.5 5.2 4.9 (62.3 ) (57.8 ) (65.7 ) (64.9 ) (77.0 ) (74.5 ) $ — $ — $ — $ — $ — $ — $ $ $ $ $ $ ) ) ) ) ) ) $ $ $ $ $ $ 20182019 and 2017,2018, our underwriting enterprise subsidiary had reinsurance recoverables of $68.5$45.7 million and $59.8$68.5 million, respectively, related to liabilities established for ceded unearned premium reserves and loss and loss adjustment expense reserves. These reinsurance recoverables relate to direct and assumed business that has been fully ceded to our reinsurers or captives and have been included in premiums and fees receivables in the accompanying consolidated balance sheet.18.$65.8 $$64.2and $2017 and $110.7 million in 2016.2017. Significant components of earnings before income taxes and the provision for income taxes are as follows (in millions): Year Ended December 31, 2018 2017 2016 $ 337.6 $ 274.1 $ 335.7 141.8 85.7 (2.1 ) $ 479.4 $ 359.8 $ 333.6 $ — $ 7.1 $ 40.2 (214.0 ) (183.5 ) (146.7 ) (214.0 ) (176.4 ) (106.5 ) 15.4 11.6 7.2 (29.0 ) (3.9 ) (0.3 ) (13.6 ) 7.7 6.9 60.7 25.9 20.7 (29.6 ) (14.3 ) (17.8 ) 31.1 11.6 2.9 $ (196.5 ) $ (157.1 ) $ (96.7 ) $ $ $ $ $ $ $ $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) $ ) $ ) $ ) Year Ended December 31, 2018 2017 2016 Amount % of
Pretax
Earnings Amount % of
Pretax
Earnings Amount % of
Pretax
Earnings $ 100.7 21.0 $ 126.0 35.0 $ 116.7 35.0 8.5 1.8 5.0 1.4 4.5 1.3 (14.8 ) (3.1 ) (46.9 ) (13.0 ) (33.1 ) (9.9 ) (252.9 ) (52.8 ) (230.1 ) (64.0 ) (194.4 ) (58.2 ) 0.9 0.2 (10.6 ) (2.9 ) (4.8 ) (1.4 ) (1.8 ) (0.4 ) 36.8 10.2 — — (15.0 ) (3.1 ) (15.1 ) (4.2 ) — — (0.2 ) — (0.9 ) (0.3 ) 2.2 0.7 (22.0 ) (4.6 ) 12.3 3.4 14.0 4.2 — — (33.2 ) (9.2 ) (1.5 ) (0.4 ) 0.1 — (0.4 ) (0.1 ) (0.3 ) (0.1 ) $ (196.5 ) (41.0 ) $ (157.1 ) (43.7 ) $ (96.7 ) (29.0 )
Pretax
Earnings
Pretax
Earnings
Pretax
Earnings $ $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ ) ) $ ) ) $ ) ) December 31, 2018 2017 $ 10.9 $ 14.5 1.7 1.6 — (1.8 ) (1.4 ) (0.7 ) 0.4 0.6 (0.9 ) (3.3 ) $ 10.7 $ 10.9 $ $ ) ) ) ) ) $ $ $8.8$$9.0 $20182019 and 2017,2018, respectively. We accrue interest and penalties related to unrecognized tax benefits in our provision for income taxes. At December 31, 20182019 and 2017,2018, we had accrued interest and penalties related to unrecognized tax benefits of $2.9$$2.9$2018,2019, our corporate returns had been examined by the IRS through calendar year 2010. The IRS is currently conducting various examinations of calendar years2012.2012 December 31, 2018 2017 $ 856.9 $ 683.3 158.8 141.2 48.8 45.8 12.2 13.4 63.8 64.8 11.5 16.8 1.5 1.1 36.8 30.5 12.2 12.9 4.2 4.8 1.9 — 3.4 5.4 1,212.0 1,020.0 (67.4 ) (79.1 ) 1,144.6 940.9 297.6 273.8 13.6 17.6 25.4 26.5 98.1 80.6 — 3.8 10.6 10.3 445.3 412.6 $ 699.3 $ 528.3 $ $ ) ) $ $ and 2017, $106.9 $$323.3 $$48.5$beginning in 2019 and ending in 2021,2020, according to a specific formula, general business tax credits of $799.1$in i excess foreign tax credits of $1.9 million will be carried back for utilization in 2017, $7.4$ 2023.state net operating loss carryforwards that may not be utilized in the future.($631.0of $$651.0$20182019 and 2017,2018, respectively, of foreign subsidiaries which are considered permanently invested outside of the U.S. The amount of unrecognized deferred tax liability on these undistributed earnings is not expected to be material at December 31, 20182019 and 2017.2018. There are only select jurisdictions for which the company regards the undistributed earnings as no longer permanently reinvested. We have recognized the deferred tax liability associated with these undistributed earnings during 2018,2019, however, such liability was also not material. For U.S. federal income tax purposes, we now recognize current income tax expense on undistributed earnings of foreign subsidiaries in accordance with the provisions of the Tax Cuts and Jobs (which we refer to as the Tax Act)SEC Staff Accounting Bulletin No. Income Tax Accounting Implications of the Tax Cuts and Jobs Act (which we refer to as SAB 118) describes three scenarios associated with a company’s status of accounting for income tax reform. Under the SAB 118 guidance, we made reasonable estimates for certain effects of tax reform in our 2017 consolidated financial statements. We recognized provisional amounts for our deferred income taxes and repatriation tax based on reasonable estimates. As of the date of this Annual Report onForm 10-K, we haveWe finalized our estimates under SAB 118. Finalization of the previous estimates under SAB 118 have beenwhich were recorded as discrete items in 2018. We have completed our analysis with respect to the income tax implications of the Tax Act, which has beenwas reflected in our 2018 consolidated financial statements.$1.0$$2.9$ 10%$40.0$$2.9 $ have also completed our analysis of the broader tax effects of the Tax Act which iswere reflected in our 2018 consolidated financial statements.19. $ $ $ $ $ $ $ $ $ Pension
Liability Foreign
Currency
Translation Fair Value
of Derivative
Instruments Accumulated
Comprehensive
Earnings (Loss) $ (42.9 ) $ (477.4 ) $ (2.2 ) $ (522.5 ) — 7.0 — 7.0 (4.4 ) (231.8 ) (4.9 ) (241.1 ) (47.3 ) (702.2 ) (7.1 ) (756.6 ) — (2.5 ) — (2.5 ) 4.3 183.4 16.0 203.7 (43.0 ) (521.3 ) 8.9 (555.4 ) (7.9 ) — 1.3 (6.6 ) (10.3 ) (197.7 ) (15.6 ) (223.6 ) $ (61.2 ) $ (719.0 ) $ (5.4 ) $ (785.6 )
Liability
Currency
Translation
of Derivative
Instruments
Comprehensive
Earnings (Loss) $ ) $ ) $ ) $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ ) $ ) $ ) $ ) 2017 and 20162017 primarily relates to the net impact of changes in the value of the local currencies relative to the U.S. dollar for our operations in Australia, Canada, the Caribbean, India, New Zealand and the U.K.and 2016,$7.0 million, $4.9 million $5.0 million and $5.3$5.0 million, respectively, of expense related to the pension liability was reclassified from accumulated other comprehensive earnings (loss)loss to compensation expense in the statement of earnings. During 2019, 2018 and 2017, and 2016,$5.2 million of expense, $5.7 million of income $5.2 million of expense and $8.2$5.2 million of expense, respectively, related to the fair value of derivative investments, was reclassified from accumulated other comprehensive earnings (loss)loss to the statement of earnings. During 2019, 2018 2017 and 2016, no 2017,earnings (loss)loss to the statement of earnings.20.20182019 and 20172018 were as follows (in millions, except per share data): 1st 2nd 3rd 4th $ 1,837.7 $ 1,660.4 $ 1,778.5 $ 1,657.4 1,595.4 1,556.8 1,688.2 1,614.2 $ 242.3 $ 103.6 $ 90.3 $ 43.2 $ 273.7 $ 114.9 $ 127.6 $ 117.3 $ 1.51 $ 0.63 $ 0.70 $ 0.64 $ 1.48 $ 0.62 $ 0.68 $ 0.63 $ 1,646.4 $ 1,489.5 $ 1,593.7 $ 1,519.4 1,446.8 1,435.4 1,516.8 1,490.2 $ 199.6 $ 54.1 $ 76.9 $ 29.2 $ 228.8 $ 70.0 $ 111.0 $ 71.5 $ 1.28 $ 0.39 $ 0.61 $ 0.39 $ 1.27 $ 0.39 $ 0.61 $ 0.39 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 21. three 2017 and 20162017 is as follows (in millions): Brokerage Risk
Management Corporate Total $ 2,920.7 $ — $ — $ 2,920.7 958.5 797.8 — 1,756.3 189.9 — — 189.9 98.0 — — 98.0 69.6 0.5 — 70.1 10.2 — — 10.2 — — 1,746.3 1,746.3 — — 0.9 0.9 4,246.9 798.3 1,747.2 6,792.4 — 141.6 — 141.6 4,246.9 939.9 1,747.2 6,934.0 2,447.1 489.7 89.5 3,026.3 673.5 174.6 55.6 903.7 — 141.6 — 141.6 — — 1,816.0 1,816.0 — — 138.4 138.4 60.9 38.7 28.2 127.8 286.9 4.3 — 291.2 14.3 (4.7 ) — 9.6 3,482.7 844.2 2,127.7 6,454.6 764.2 95.7 (380.5 ) 479.4 191.0 25.3 (412.8 ) (196.5 ) 573.2 70.4 32.3 675.9 10.7 — 31.7 42.4 $ 562.5 $ 70.4 $ 0.6 $ 633.5 $ — $ — $ 2.9 $ 2.9 $ 2,840.9 $ 789.7 $ 1,747.2 $ 5,377.8 738.5 35.4 — 773.9 195.9 94.7 — 290.6 181.1 4.3 — 185.4 141.7 15.8 — 157.5 148.8 — — 148.8 $ 4,246.9 $ 939.9 $ 1,747.2 $ 6,934.0 $ 6,865.4 $ 571.4 $ 1,800.8 $ 9,237.6 3,758.5 103.8 — 3,862.3 1,096.1 47.2 — 1,143.3 783.1 4.4 — 787.5 688.5 21.3 — 709.8 593.5 — — 593.5 $ 13,785.1 $ 748.1 $ 1,800.8 $ 16,334.0 $ 4,573.7 $ 49.2 $ 2.7 $ 4,625.6 1,753.7 19.3 — 1,773.0 Brokerage Risk
Management Corporate Total $ 2,641.0 $ — $ — $ 2,641.0 855.1 736.8 — 1,591.9 158.0 — — 158.0 99.5 — — 99.5 58.1 0.6 — 58.7 3.4 — — 3.4 — — 1,560.5 1,560.5 3,815.1 737.4 1,560.5 6,113.0 — 136.0 — 136.0 3,815.1 873.4 1,560.5 6,249.0 2,212.3 446.9 88.2 2,747.4 614.0 164.8 50.3 829.1 — 136.0 — 136.0 — — 1,635.9 1,635.9 — — 124.1 124.1 61.8 31.1 28.2 121.1 261.8 2.9 — 264.7 29.3 1.6 — 30.9 3,179.2 783.3 1,926.7 5,889.2 635.9 90.1 (366.2 ) 359.8 221.2 34.4 (412.7 ) (157.1 ) 414.7 55.7 46.5 516.9 7.6 — 28.0 35.6 $ 407.1 $ 55.7 $ 18.5 $ 481.3 $ (2.0 ) $ (0.1 ) $ (1.8 ) $ (3.9 ) $ 2,533.7 $ 745.1 $ 1,560.5 $ 4,839.3 679.3 30.6 — 709.9 191.1 78.2 — 269.3 149.4 4.2 — 153.6 134.4 15.3 — 149.7 127.2 — — 127.2 $ 3,815.1 $ 873.4 $ 1,560.5 $ 6,249.0 $ 5,890.5 $ 572.9 $ 1,766.8 $ 8,230.2 3,496.2 91.3 — 3,587.5 1,102.9 48.9 — 1,151.8 743.3 6.8 — 750.1 709.9 18.7 — 728.6 461.5 — — 461.5 $ 12,404.3 $ 738.6 $ 1,766.8 $ 14,909.7 $ 4,119.2 $ 42.6 $ 3.0 $ 4,164.8 1,630.6 14.0 — 1,644.6 Brokerage Risk
Management Corporate Total $ 2,409.9 $ — $ — $ 2,409.9 794.7 697.0 — 1,491.7 139.9 — — 139.9 97.9 — — 97.9 52.6 1.0 — 53.6 6.6 — — 6.6 — — 1,350.1 1,350.1 — — (1.3 ) (1.3 ) 3,501.6 698.0 1,348.8 5,548.4 — 132.1 — 132.1 3,501.6 830.1 1,348.8 5,680.5 2,040.2 424.4 72.6 2,537.2 598.2 152.7 25.4 776.3 — 132.1 — 132.1 — — 1,408.6 1,408.6 — — 109.8 109.8 57.2 27.2 19.2 103.6 244.7 2.5 — 247.2 32.1 — — 32.1 2,972.4 738.9 1,635.6 5,346.9 529.2 91.2 (286.8 ) 333.6 186.6 34.5 (317.8 ) (96.7 ) 342.6 56.7 31.0 430.3 6.5 — 27.0 33.5 $ 336.1 $ 56.7 $ 4.0 $ 396.8 $ 5.2 $ — $ 0.1 $ 5.3 $ 2,319.3 $ 721.1 $ 1,348.8 $ 4,389.2 661.5 26.8 — 688.3 170.0 73.0 — 243.0 132.4 4.1 — 136.5 120.4 5.1 — 125.5 98.0 — — 98.0 $ 3,501.6 $ 830.1 $ 1,348.8 $ 5,680.5 $ 5,545.1 $ 545.0 $ 1,548.7 $ 7,638.8 3,172.9 61.8 — 3,234.7 931.8 56.9 — 988.7 584.2 2.8 — 587.0 672.0 4.4 — 676.4 402.6 — — 402.6 $ 11,308.6 $ 670.9 $ 1,548.7 $ 13,528.2 $ 3,722.3 $ 28.1 $ 2.8 $ 3,753.2 1,613.6 13.7 — 1,627.3
Management $ $ $ $ ) ) ) ) ) ) ) $ $ $ ) $ $ ) $ ) $ ) $ ) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
Management $ $ $ $ ) ) ) ) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
Management $ $ $ $ ) ) ) $ $ $ $ $ ) $ ) $ ) $ ) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 20182019 and 2017,2018, and the related consolidated statements of earnings, comprehensive earnings, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018,2019, and the related notes and the financial statement schedule listed in the Index at Item 15(2)(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Gallagher at December 31, 20182019 and 2017,2018, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2019, in conformity with U.S. generally accepted accounting principles.2018,2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 8, 20197, 2020 expressed an unqualified opinion thereon.Adoption of New Accounting StandardsAs discussed in Note 2 to the consolidated financial statements, on January 1, 2018, Gallagher adopted Accounting Standards Update (ASU)No. 2014-09,Revenue from Contracts with Customers, on a retrospective basis resulting in revision of the December 31, 2017 consolidated balance sheet, and the related consolidated statements of earnings, comprehensive earnings, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2017.Gallagher��sGallagher’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Gallagher in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.8, 2019FrameworkissuedFramework2126 of the 4849 entities acquired in 2018,2019, which are included in our 20182019 consolidated financial statements. Collectively, these acquired entities constituted approximately 0.6%0.8% of total assets as of December 31, 2018,2019, approximately 0.2%1.9% of total revenues, and approximately 0.1%3.6% of net earnings for the year then ended.2018.2019. In addition, the effectiveness of our internal control over financial reporting as of December 31, 2018,2019, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their attestation report which is included herein.8, 20197, 2020 theBoardthe2018,2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Gallagher maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2019, based on the COSO criteria.2126 of the 4849 entities acquired in 2018,2019, which are included in the 20182019 consolidated financial statements of Gallagher and constituted approximately 0.6%0.8% of total assets as of December 31, 2018,2019, approximately 0.2%1.9% of total revenues, and approximately 0.1%3.6% of net earnings for the year then ended. Our audit of internal control over financial reporting of Gallagher also did not include an evaluation of the internal control over financial reporting of these acquired entities20182019 and 2017,2018, and the related consolidated statements of earnings, comprehensive earnings, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018,2019, and the related notes and the financial statement schedule listed in the Index at Item 15(2)(a) (collectively referred to as the “consolidated financial statements”) of Gallagher and our report dated February 8, 20197, 2020 expressed an unqualified opinion thereon.2018.2019. Our independent registered public accounting firm also attested to, and reported on, the effectiveness of internal control over financial reporting. Management’s report and the independent registered public accounting firm’s attestation report are included in Item 8, “Financial Statements and Supplementary Data,” under the captions entitled “Management’s Report on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting.”20192020 Proxy Statement will include the information required by this item under the headings “Election of Directors,” “Security Ownership by Certain Beneficial Owners and Management – Section 16 (a) Beneficial Ownership Reporting Compliance,” “Other Board Matters,” “Board Committees” and, “Board Committees,if necessary, “Delinquent Section 16(a) Reports,” which we incorporate herein by reference.1. (a) 2018. (b) 20182019 and 2017. (c) 2018. (d) 2018. (e) (f) (g) (h) 2. (a) 3. 3.1 3.2 *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 XBRL Instance Document.101.SCH 101.CAL 101.LAB 101.PRE 101.DEF * 872019.2020.ARTHUR J. GALLAGHER & CO.By /S/PATRICK GALLAGHER, JR.Gallagher & Co. 8720192020 by the following persons on behalf of the Registrant in the capacities indicated.Name Titles/ PATRICK GALLAGHER, JR. s/ DOUGLAS K. HOWELL s/ RICHARD C. CARY SHERRY S. BARRAT WILLIAM L. BAX JOHN COLDMAN FRANK E. ENGLISH, JR. *ELBERT O. HANDElbert O. Hand DirectorDAVID S. JOHNSON KAY W. MC CURDY RALPH J. NICOLETTI NORMAN L. ROSENTHAL *By: s/ WALTERBAYBay Balance
at
Beginning
of Year Amounts
Recorded
in
Earnings Adjustments Balance
at End
of Year (In millions) $ 13.5 $ 5.8 $ (9.3 ) (1) $ 10.0 7.4 (1.2 ) 1.6 (2) 7.8 79.1 (11.7 ) — 67.4 1,490.7 291.3 (31.6 ) (3) 1,750.4 $ 12.8 $ 5.4 $ (4.7 ) (1) $ 13.5 7.1 2.1 (1.8 ) (2) 7.4 66.8 12.3 — 79.1 1,203.6 264.7 22.4 (3) 1,490.7 $ 13.3 $ 4.9 $ (5.4 ) (1) $ 12.8 7.4 0.2 (0.5 ) (2) 7.1 52.8 14.0 — 66.8 983.9 247.2 (27.5 ) (3) 1,203.6
at
Beginning
of Year
Recorded
in
Earnings
at End
of Year $ $ $ (1) $ (2) 3.1 (3) $ $ $ (1) $ ) 1.6 (2) ) (3) $ $ $ (1) $ (2) 22.4 (3) (1) (2) (3) 122