10-KPeriod: FY2010

Arthur J. Gallagher & Co. Annual Report, Year Ended Dec 31, 2010

Filed February 7, 2011For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported total revenues of $1,864.2 million for the fiscal year ended December 31, 2010, a 7.8% increase from $1,729.3 million in 2009. This growth was driven primarily by the brokerage segment, which accounted for 72% of total revenues, showing an increase of 5.0% to $1,340.6 million. The risk management segment also saw a modest 2.0% increase in revenue, reaching $462.1 million. The company highlighted its continued acquisition strategy, completing 19 acquisitions in 2010, contributing to revenue growth despite a challenging economic environment that led to organic revenue declines in both the brokerage and risk management segments. Net earnings for 2010 were $174.1 million, or $1.66 per diluted share, an increase from $128.6 million, or $1.28 per diluted share, in 2009. The company managed its expenses effectively, maintaining its Adjusted EBITDAC margin in the brokerage segment at 21.9%. A significant portion of the report details the company's clean-energy investments and the associated risks, particularly those related to IRC Section 45 tax credits, which present both opportunities and uncertainties for future earnings. AJG's financial position remained solid, supported by a strong credit facility and consistent dividend payments.

Financial Highlights

45 data points
Beta

Revenue

$1.86B

96.6% Gross Margin

Net Income

$174.10M

9.3% Net Margin

EPS (Diluted)

$1.66

Total Assets

$3.60B

Cash & Equivalents

$249.80M

Free Cash Flow

$204.40M

Financial Statements
Beta
Revenue$1.86B
Cost of Revenue$64.00M
Gross Profit$1.80B
Operating Expenses$354.60M
Operating Income$163.30M
Interest Expense$34.60M
Net Income$174.10M
EPS (Basic)$1.66
EPS (Diluted)$1.66
Shares Outstanding (Basic)104.80M

Key Highlights

  • 1Total revenues increased by 7.8% to $1,864.2 million in 2010, driven by acquisitions and growth in the brokerage and risk management segments.
  • 2The brokerage segment, AJG's largest revenue contributor (72% of total), grew revenue by 5.0% to $1,340.6 million.
  • 3Net earnings increased by 35.4% to $174.1 million, or $1.66 per diluted share, compared to $128.6 million, or $1.28 per diluted share, in 2009.
  • 4AJG continued its active acquisition strategy, completing 19 acquisitions in 2010, which contributed to revenue growth.
  • 5The company maintained expense discipline, with the Adjusted EBITDAC margin in the brokerage segment holding steady at 21.9%.
  • 6International operations expanded, with foreign revenues increasing to 13% of total revenues from 11% in the prior year.
  • 7The company continues to invest in clean-energy ventures, highlighting both potential benefits from tax credits and associated risks.

Frequently Asked Questions

In fiscal year 2010, Arthur J. Gallagher & Co. reported total revenues of $1,864.2 million, an increase of 7.8% from 2009. Net earnings rose by 35.4% to $174.1 million, or $1.66 per diluted share, reflecting growth driven by its brokerage segment and a disciplined approach to expenses despite an challenging economic environment.

The brokerage segment, representing 72% of total revenues, grew by 5.0% to $1,340.6 million. The risk management segment saw a 2.0% revenue increase to $462.1 million. The corporate segment's revenues were $61.5 million, primarily from clean-energy ventures.

Arthur J. Gallagher & Co. focuses on both organic growth and growth through acquisitions. In 2010, the company completed 19 acquisitions, primarily in its brokerage segment, to expand its geographic presence and service capabilities. It also aims for organic growth through its niche market focus and cross-selling initiatives.

Key risks identified include volatility in insurance premiums due to market cycles, potential adverse impacts from economic downturns, competitive pressures, risks associated with international operations (e.g., currency fluctuations), regulatory changes (including healthcare reform), and uncertainties related to its clean-energy investments and associated tax credits. The company also notes risks related to retaining key personnel and managing employee benefit costs.