Segment

Continuing Operations

Brokerage, as adjusted

Gains on book sales

Workforce & lease termination

Litigation settlement

Adjust earnout payables

Effective income tax rate impact

Brokerage, as reported

Risk Management, as adjusted

GAB Robins integration costs

Workforce & lease termination

Effective income tax rate impact

Risk Management, as reported

Total Brokerage & Risk Management

Corporate

Total Continuing Operations

Discontinued Operations

Total Company

Segment

Continuing Operations

Brokerage, as adjusted

Gains on book sales

Net supplemental commission timing (note 8)

Workforce & lease termination

Litigation settlement

Adjust earnout payables

Brokerage, as reported

Risk Management, as adjusted

GAB Robins integration costs

Litigation settlement

Workforce & lease termination

Risk Management, as reported

Total Brokerage & Risk Management

Corporate

Total Continuing Operations

Discontinued Operations

Total Company

We closed another 18 acquisitions in our Brokerage Segment for total annualized revenues acquired of $95.1 million, of which $38.4 million closed near the end of 2010 giving us a good start in 2011;

In August, we renewed our line of credit for $500.0 million with a 2014 maturity;

In October, we closed a meaningful acquisition in our Risk Management Segment with annualized revenues of $50.0 million. The integration is moving along as planned;

Throughout 2010, we maintained hard fought gains from 2009 by controlling our workforce and operating expenses, yet still continued to invest into building better systems and processes;

For the third year in a row, in November, Gallagher Bassett received Business Insurance’s Readers Choice award as the best P&C Third Party Claims Administrator;

Also in November, Gallagher Benefit Services received Business Insurance’s Readers Choice award as the best Employee Benefits broker and our P&C brokerage received honorable mention;

Business Insurance magazine recognized Gallagher Bassett as the world’s largest P&C Third Party Claims Administrator for the fifth straight year and recognized Risk Placement Services as the largest MGA Manager for the third straight year;

In the fourth quarter, we substantially completed the final wind-down of our legacy investment portfolio;

We successfully operated our clean-coal plants with expected reductions in emissions and earned $7.5 million for the year; and

Last week we announced a $0.33 per share quarterly cash dividend for first quarter 2011, a 3% increase over the prior quarter.

The following provides non-GAAP information that management believes is helpful when comparing certain components of 2010 organic revenues with the same periods in 2009 (in millions):

Commissions and Fees

Commissions as reported

Fees as reported

Less commissions and fees from acquisitions

Levelized foreign currency translation

Organic commissions and fees

Organic change in commissions and fees

Supplemental Commissions

Supplemental commissions as reported

Less supplemental commissions from acquisitions

Timing items, net (note 8)

Organic supplemental commissions

Organic change in supplemental commissions

Contingent Commissions

Contingent commissions as reported

Less contingent commissions from acquisitions

Organic contingent commissions

Organic change in contingent commissions

Combination Calculations

Organic change in commissions and fees and supplemental commissions

Organic change in commissions and fees, supplemental commissions and contingent commissions

The following is a summary of brokerage acquisition activity for 2010 and 2009:

Shares issued for acquisitions and earnouts

Number of acquisitions closed

Annualized revenues acquired (in millions)

Fourth quarter compensation expense ratio shown on page 8 was 1.1 pts lower than the same period in 2009. The ratio was primarily impacted by decreased workforce charges of 0.8 pts and employee benefit costs of 0.7 pts partially offset by increased incentive compensation costs of 0.8 pts.

Fourth quarter operating expense ratio shown on page 8 was 2.5 pts lower than the same period in 2009. The ratio was primarily impacted by decreases in rent and lease termination costs of 0.6 pts, litigation charges of 0.5 pts, bad debt expense of 0.6 pts and office expenses of 0.4 pts.

Fourth quarter 2010 change in estimated acquisition earnout payables includes income of $1.2 million related to net downward adjustments made for two 2009 acquisitions as a result of revised earnout projections.

The following provides non-GAAP information that management believes is helpful when comparing 2010 EBITDAC and 2010 Adjusted EBITDAC to the same periods in 2009 (in millions):

Total EBITDAC - see page 9 for computation

Gains from books of business sales

Net supplemental commission timing (note 8)

Workforce related charges

Lease termination related charges

Litigation settlement

Adjusted EBITDAC

Adjusted EBITDAC change

Adjusted EBITDAC margin

The following provides non-GAAP information that management believes is helpful when comparing 2010 organic fee revenues with the same periods in 2009 (in millions):

Domestic and international fees

International performance bonus fees

Adjusting fees related to international natural disasters

Fees as reported

Less fees from acquisitions

Levelized foreign currency translation

Organic fees

Organic change in fees

Effective October 1, 2010, Gallagher acquired substantially all of the third-party administrator assets and managed care service operations of GAB Robins North America, Inc. (GAB Robins) for cash of $16.0 million, notes payable of $4.0 million and the assumption of certain claims handling run-off liabilities. Gallagher expects this transaction to generate approximately $50.0 million in revenues, annually.

Fourth quarter compensation expense ratio shown on page 8 was 2.2 pts lower than the same period in 2009. The ratio was primarily impacted by decreased workforce charges of 2.8 pts and the impact of reduced headcount of 2.0 pts, partially offset by GAB Robins integration costs of 2.0 pts and increased temporary staff costs of 0.4 pts.

Fourth quarter operating expense ratio shown on page 8 was 1.7 pts lower than the same period in 2009 primarily due to decreased professional fees of 2.5 pts, due to the litigation settlement, and decreased lease termination costs of 0.6 pts, partially offset by GAB Robins integration costs of 0.6 pts.

The following provides non-GAAP information that management believes is helpful when comparing 2010 EBITDAC and 2010 Adjusted EBITDAC to the same periods in 2009 (in millions):

Total EBITDAC - see page 9 for computation

Workforce related charges

Litigation settlement

Lease termination related charges

GAB Robins integration costs

Adjusted EBITDAC

Adjusted EBITDAC change

Adjusted EBITDAC margin

Interest and banking costs

Clean-energy ventures

Acquisition costs

State sales tax matter

Corporate

Legacy investments

Interest and banking costs

Clean-energy ventures

Acquisition costs

State sales tax matter

Corporate

Legacy investments

Debt, interest and banking – Gallagher has $550.0 million of long-term borrowings outstanding under two private placement agreements, which is due and payable in various amounts in 2014 through 2019. Gallagher also maintains an unsecured line of credit of $500.0 million that expires July 14, 2014. There were no borrowings outstanding under Gallagher’s line of credit facility at December 31, 2010. Gallagher is currently in the process of securing another $125.0 million of long-term debt to fund acquisitions, which we expect to close in mid-February 2011.

Clean-energy ventures – Gallagher owns positions in eight commercial clean-coal operations ($20.4 million of net carrying value at December 31, 2010):

Gallagher owns approximately 25% of six of these operations. During most of the first nine months of 2010, these six operations produced refined coal under temporary regulatory operating permits. As planned, these operations curtailed most production in fourth quarter 2010 to perform testing routines in connection with applying for permanent regulatory operating permits. In January 2011, one of the six operations received its permanent regulatory operating permit. Gallagher cannot predict when the permanent operating permits will be issued for the remaining five operations. If these six operations receive permanent permits and operate at historical levels, they could generate up to $4.0 to $6.0 million of quarterly net earnings through 2019.

In addition, Gallagher owns 90% of the other two operations, which as planned, did not produce refined coal in fourth quarter while Gallagher was seeking operating sites and potential co-investors for these operations. Gallagher is currently in negotiations for these two operations. Although Gallagher expects to have them in production by third or fourth quarter of 2011, Gallagher cannot predict with certainty when the negotiations will be complete, when sites will be secured or when permanent operating permits will be issued. If these two operations are running at planned levels, they could generate up to $3.0 to $5.0 million of quarterly net earnings through 2019.

Acquisition costs – Professional fees and other due diligence costs related to acquisitions.

Corporate – During fourth quarter 2010, Gallagher incurred $2.7 million of costs related to a company-wide award and sales meeting for its production staff and field management, which management views as a one-time event. The remaining amounts in both 2010 and 2009 consist of banking and debt fees, and overhead allocations mostly related to corporate staff compensation.

Legacy investments – During fourth quarter 2010, Gallagher substantially completed the wind-down of its legacy investment portfolio as follows:

The IRS completed its examination of Gallagher’s 2007 and 2008 tax years and Gallagher recognized $29.3 million of net earnings related to income tax positions taken in prior years.

Gallagher recognized an $8.0 million non-cash pretax impairment charge in connection with its biomass pipeline investment, pursuant to ASC Subtopic 323-10. As a result of the charge, the carrying value of Gallagher’s minority interest position was reduced to $0.4 million.

Gallagher donated all of its holdings in a private-equity fund, valued at $5.6 million on the donation date, plus $2.5 million in cash to the Arthur J. Gallagher charitable foundation.

Federal and state tax expense using statutory rates

Recognition of previously unrecognized tax benefits related to the resolution of Federal and state income tax examinations and the expiration of various statutes of limitations

Alternative energy tax credits

Foreign dividends and other permanent items, net of foreign tax credits

Other, net

Provision (benefit) for income taxes as reported

EBITDAC – Gallagher defines this measure as earnings from continuing operations before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables.

EBITDAC margin – Gallagher defines this measure as EBITDAC divided by total revenues.

Adjusted EBITDAC – Gallagher defines this measure as EBITDAC adjusted to exclude gains realized from sales of books of business, supplemental commission timing amounts, workforce related charges, lease termination related charges, litigation settlement amounts and the period-over-period impact of foreign currency translation. The amounts excluded with respect to foreign currency translation are calculated by applying 2010 foreign exchange rates to the same periods in 2009.

Adjusted EBITDAC margin – Gallagher defines this measure as Adjusted EBITDAC divided by total revenues, as adjusted to exclude gains realized from sales of books of business and supplemental commission timing amounts.

Diluted Net Earnings Per Share (As Adjusted) for the Brokerage and Risk Management segments – Gallagher defines this measure as earnings from continuing operations adjusted to exclude the after-tax impact of gains realized from sales of books of business, workforce related charges, lease termination related charges, litigation settlement amounts and the change in estimated acquisition earnout payables, divided by diluted weighted average shares outstanding.

BROKERAGE SEGMENT

Commissions

Fees

Supplemental and contingent commissions (8)

Investment income

Gains realized on books of business sales and other

Revenues