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Arthur J. Gallagher & Co. Annual Report, Year Ended Dec 31, 1999

Filing Date
Filed March 23, 2000
Period End
December 31, 1999
Security
AJG
In the record · 2016–202610-K1110-Q328-K136

AJG filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 136 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · May ’17May ’17
  2. Material agreement8-K · Jun ’19Jun ’19
  3. Material agreement8-K · Dec ’21Dec ’21
  4. Deal closed8-K · Aug ’25Aug ’25

01—Abstract

Summary

Summary of the 10-K filed March 23, 2000. Cited figures are marked; the original filing is the authoritative source.

Arthur J.

Gallagher & Co. (AJG) reported strong 1999 results in its Form 10-K for fiscal year ended December 31, 1999. Total revenues rose 8% to $605.8 milliona from $559.6 million (restated for pooling acquisitions). Pretax earnings increased 21% to $104.2 million, and net earnings rose 17% to $67.8 million.

Diluted EPS was $1.76b, up 14% from $1.54, after adjusting for the two-for-one stock split paid March 15, 2000. Growth was driven mainly by Risk Management Services, where fee revenue grew 11% and segment pretax earnings rose 43%. Insurance Brokerage commissions grew only 4%, reflecting a soft property/casualty pricing market that management expects to persist through 2000.

The balance sheet remains conservative. Total assets were $884.1 millionc, stockholders' equity was $242.5 million, and the company carried no long-term debt. Short-term borrowings were $15.0 million under $45.0 million of credit lines expiring April 30, 2000, plus an undrawn $20.0 million revolver.

Operating cash flow was $63.7 milliond, and the Board raised the dividend, with the first-quarter 2000 dividend declared at $0.23 per share, up 15%. Management reports no material pending litigation and no major Y2K disruptions.

For investors, the key points are consistent double-digit earnings growth, a risk management segment that is gaining momentum, and a management outlook that expects fee growth from alternative insurance, captive, and self-insurance services to continue, while commission growth stays under pressure from soft pricing. The company also disclosed a pipeline of acquisitions, with five Youngdahl, Rebholz, Towle, Powell and MBR deals effective February 29, 2000 and further candidates in discussion.

02—Key points

Key Highlights

  1. Total revenues of $605.8 million in 1999, up 8% from $559.6 million (restated), with fees up 11% to $234.6 million and commissions up 4% to $342.9 million.
  2. Net earnings of $67.8 million, up 17%; diluted EPS of $1.76, up 14%; pretax margin of about 17% of revenues.
  3. Risk Management Services segment revenue of $188.4 million with pretax earnings of $22.3 million, up 43%, driven by new business and favorable retention.
  4. Insurance Brokerage Services segment revenue of $397.7 million with pretax earnings of $75.4 million, while Financial Services contributed $12.3 million pretax.
  5. No long-term debt; total stockholders' equity of $242.5 million and total assets of $884.1 million at year-end 1999.
  6. Two-for-one stock split paid March 15, 2000; dividends declared rose to $0.80 per share for 1999, and the first-quarter 2000 dividend was raised 15% to $0.23 per share.
  7. Management expects the soft property/casualty pricing market to persist through 2000, pressuring commission growth, while fee growth from risk management and alternative insurance services is expected to continue.

03—Questions

Frequently Asked Questions

  1. How did Gallagher perform financially in 1999?

    Revenues grew 8% to $605.8 million, pretax earnings rose 21% to $104.2 million, and net earnings increased 17% to $67.8 million. Diluted EPS was $1.76, up 14%, adjusted for the two-for-one split. Results for prior years were restated to include six pooling-of-interests acquisitions.

  2. What is driving growth, and which segment matters most?

    Growth came mainly from Risk Management Services, which generated $188.4 million in revenue (mostly fees) and $22.3 million in pretax earnings, up 43%. Insurance Brokerage Services is the largest segment at $397.7 million in revenue, but its commission growth was modest at 4%, reflecting weak property/casualty premium rates.

  3. How strong is the company's balance sheet and liquidity?

    Gallagher has no long-term debt and $242.5 million in stockholders' equity. It had $61.1 million in cash, $15.0 million drawn on $45.0 million of short-term credit lines expiring April 30, 2000, and an undrawn $20.0 million revolver. Operating cash flow was $63.7 million, and capital expenditures were about $16.6 million.

  4. What are the main risks disclosed in the filing?

    Key risks include the soft property/casualty pricing environment, which pressures commission revenue; foreign exchange exposure from UK subsidiaries that incur pound-denominated expenses, with a 10% adverse move estimated to reduce pretax earnings by about $2.9 million; and dependence on acquisitions for growth. The company also holds $17.6 million of pension underfunding and $14.6 million in guarantees and letters of credit.

  5. What is the dividend and share repurchase picture?

    Dividends declared were $0.80 per share for 1999, up from $0.70, and the first-quarter 2000 dividend was raised to $0.23 per share. Gallagher repurchased 762,000 shares in 1999 for $18.4 million and may buy about 1.54 million more shares through June 30, 2000, though it has no obligation to do so.

04—Continue

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