On May 10, 2022, stockholders approved the Arthur J. Gallagher & Co. 2022 Long-Term Incentive Plan (which we refer to as the LTIP). For details on the LTIP, please refer to Note 8 in our Annual Report on Form 10-K for the year ended December 31, 2025.

As of September 30, 2026, 1.5 million shares were available for restricted stock, restricted stock units, and performance unit awards settled with stock.


	Three-month period ended September 30				Nine-month period ended September 30
	2026		2025		2026		2025
Grant date					March 1, 2026		March 1, 2025
Stock options granted	—		—		1.5		0.8
Stock option compensation expense	$	14	$	12	$	49	$	42

Stock option grants vest ratable over three years and expire seven years from the date of grant, or earlier in the event of certain employment terminations. Options granted to executive officers are not subject to forfeiture upon departure after attaining age 62.

Fair value of stock options at the date of grant is estimated using the Black-Scholes model with the following weighted average assumptions:


	Nine-month period ended September 30
	2026		2025
Expected dividend yield	1.2	%	0.8	%
Expected risk-free interest rate	3.6	%	4.1	%
Volatility	22.3	%	25.4	%
Expected life (in years)	5.5		5.5

The weighted average fair value per option for all options granted during the nine-month periods ended September 30, 2026 and 2025, as determined on the grant date using the Black-Scholes option pricing model, was $54.96 and $98.27, respectively.

The following is a summary of our stock option activity and related information for 2026 (in millions, except exercise price and year data):


	Nine-month period ended September 30, 2026
	Shares Under Option	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Beginning balance	6.7	$	177.48
Granted	1.5	228.20
Exercised	(0.9)	108.31
Forfeited or canceled	(0.2)	215.04
Ending balance	7.1	$	195.33	3.66	$	332
Exercisable at end of period	2.7	$	133.96	1.76	$	256
Ending unvested and expected to vest	4.0	$	232.11	4.76	$	74

Options with respect to 8.4 million shares (less any shares of restricted stock issued under the LTIP - see Note 10 to these unaudited consolidated financial statements) were available for grant under the LTIP at September 30, 2026.

The total intrinsic value of options exercised was $106 million and $237 million for the nine-month periods ended September 30, 2026 and 2025, respectively. As of September 30, 2026, we had approximately $158 million of total unrecognized compensation expense related to nonvested options. We expect to recognize that cost over a weighted average period of approximately four years.


					Options Outstanding				Options Exercisable
Range of Exercise Prices					Number Outstanding	Weighted Average Remaining Contractual Term (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$	86.17	—	$	86.17	0.6	0.45	$	86.17	0.6	$	86.17
127.90		—	127.90		1.0	1.46	127.90		0.9	127.90
156.85		—	156.85		0.7	2.34	156.85		0.4	156.85
158.56		—	161.14		0.8	2.46	158.59		0.5	158.58
177.09		—	202.13		0.9	3.46	177.68		0.3	177.74
228.20		—	228.20		1.4	6.42	228.20		—	—
238.88		—	243.54		0.9	4.42	243.54		—	—
337.74		—	347.44		0.8	5.42	337.75		—	—
$	86.17	—	$	347.44	7.1	3.66	$	195.33	2.7	$	133.96