10-KPeriod: FY2009

Arthur J. Gallagher & Co. Annual Report, Year Ended Dec 31, 2009

Filed February 5, 2010For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported total revenues of $1,729.3 million for the fiscal year ended December 31, 2009, an increase of 5.1% from the prior year. The Brokerage segment remains the largest contributor, accounting for 74% of total revenues, with a 7% year-over-year increase in commissions and fees. The company's financial performance was impacted by a soft insurance market, leading to a 3% organic decline in brokerage commissions and fees. Despite this, AJG demonstrated resilience through strategic acquisitions and expense management, including workforce reductions. The company maintained its long-term debt at $550 million, ending the year with total assets of $3,250.3 million and total stockholders' equity of $892.9 million. AJG also continued its commitment to shareholder returns by declaring dividends, though no shares were repurchased during 2009. Key financial highlights include a strong performance in the Risk Management segment despite a slight revenue decrease, and ongoing investments in clean energy ventures. The company's outlook suggests continued growth through organic expansion and strategic acquisitions, navigating the challenging economic environment.

Financial Highlights

44 data points
Beta

Revenue

$1.73B

Net Income

$128.60M

7.4% Net Margin

EPS (Diluted)

$1.28

Total Assets

$3.25B

Cash & Equivalents

$205.90M

Free Cash Flow

$188.00M

Financial Statements
Beta
Revenue$1.73B
Operating Expenses$331.30M
Operating Income$133.10M
Interest Expense$28.50M
Net Income$128.60M
EPS (Basic)$1.28
EPS (Diluted)$1.28
Shares Outstanding (Basic)100.50M

Key Highlights

  • 1Total revenues increased by 5.1% to $1,729.3 million in 2009, driven primarily by the Brokerage segment.
  • 2The Brokerage segment, accounting for 74% of revenues, saw a 7% increase in commissions and fees, though organic growth in these areas declined by 3%.
  • 3The Risk Management segment contributed 26% of revenues, experiencing a 3% decrease in fees, with organic growth in fees declining by 1%.
  • 4The company managed its debt effectively, maintaining $550 million in corporate-related borrowings at year-end.
  • 5Gallagher made no common stock repurchases in 2009, but continued to pay dividends, amounting to $130.4 million.
  • 6The company invested in clean energy and tax-advantaged ventures, with significant capital expenditures in this area.
  • 7Operating expenses, particularly in the Brokerage segment, were managed through workforce reductions and lease terminations, with anticipated cost savings.

Frequently Asked Questions

Arthur J. Gallagher & Co.'s total revenues increased by 5.1% to $1,729.3 million in 2009. The primary driver was the Brokerage segment, which saw a 7% increase in commissions and fees, largely attributable to revenues from acquisitions completed during the year. The Risk Management segment also contributed, though its fees decreased slightly year-over-year.

The company experienced a 3% organic decline in brokerage commissions and fees in 2009 due to a soft insurance market characterized by falling premium rates. Management acknowledged that the recession could adversely affect client demand for insurance services. Despite these challenges, AJG focused on managing expenses, including workforce reductions, and leveraged acquisitions to support revenue growth.

Arthur J. Gallagher & Co. plans to continue growing through a combination of organic growth from existing operations and strategic acquisitions, particularly in its Brokerage and Risk Management segments. The company also anticipates growth from its niche/practice groups and middle-market accounts, along with developing alternative market mechanisms.

As of December 31, 2009, Arthur J. Gallagher & Co. had $550 million in corporate-related borrowings outstanding under its Note Purchase Agreements and no borrowings outstanding under its Credit Agreement. The company had $205.9 million in cash and cash equivalents, indicating sufficient capital to meet its short- and long-term liquidity needs, supported by its ability to generate positive cash flow from operations and access its credit facility.