10-KPeriod: FY2015

Arthur J. Gallagher & Co. Annual Report, Year Ended Dec 31, 2015

Filed February 10, 2016For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported strong revenue growth in its 2015 10-K filing, with total revenues reaching $5.39 billion, a 17% increase driven by acquisitions and organic growth across its brokerage and risk management segments. The brokerage segment remains the largest contributor, accounting for 62% of revenues, while the risk management segment showed robust organic growth. A significant portion of the company's revenue (25%) is attributed to its 'Corporate' segment, largely from clean energy investments, which generated substantial net after-tax earnings. The company demonstrated effective acquisition integration, completing 44 acquisitions in 2015. While AJG navigates a competitive market with pressure on commission rates, it maintains a diversified revenue base and a strategy focused on expanding its global reach and niche market expertise.

Financial Highlights

44 data points
Beta

Revenue

$5.39B

Net Income

$356.80M

6.6% Net Margin

EPS (Diluted)

$2.06

Total Assets

$10.91B

Cash & Equivalents

$480.40M

Free Cash Flow

$587.10M

Financial Statements
Beta
Revenue$5.39B
Operating Expenses$5.10B
Interest Expense$103.00M
Net Income$356.80M
EPS (Basic)$2.07
EPS (Diluted)$2.06
Shares Outstanding (Basic)172.20M

Key Highlights

  • 1Total revenues increased by 17% to $5.39 billion in 2015, driven by both acquisitions and organic growth.
  • 2The brokerage segment, representing 62% of revenues, saw a 15% increase in total revenues, with a 3.3% organic growth in commissions and fees.
  • 3The risk management segment experienced 7% revenue growth, with a strong 11.3% organic growth in fees.
  • 4Corporate segment revenues grew 28% to $1.34 billion, largely due to clean energy investments which contributed significantly to net earnings.
  • 5AJG completed 44 acquisitions in 2015, with annualized revenues of $230.8 million, demonstrating a consistent M&A strategy.
  • 6The company's financial position remained solid with total assets of $10.91 billion and total stockholders' equity of $3.69 billion.
  • 7Despite a soft insurance market with declining premium rates, AJG managed its expenses effectively and focused on value-added services to drive growth.

Frequently Asked Questions

Revenue growth in 2015 was primarily driven by a combination of acquisitions and organic growth across the company's brokerage and risk management segments. Acquisitions contributed significantly, with 44 deals completed during the year, adding substantial annualized revenues. Organic growth was also a key factor, particularly in the risk management segment and in commissions and fees within the brokerage segment.

The corporate segment, which includes clean energy investments, significantly contributed to AJG's overall revenue and profitability. These investments generated substantial net after-tax earnings, with an anticipated range of $110 million to $124 million in net earnings for 2016. This segment's performance highlights a diversification strategy beyond traditional insurance brokerage and risk management services.

The company identified several key risks, including potential adverse effects from economic downturns, volatility in the insurance industry, significant competitive pressures, challenges in integrating acquisitions, and risks associated with growing international operations. Regulatory, legal, and accounting risks, such as data privacy and compliance with anti-corruption laws, were also highlighted.

AJG maintained a robust capital structure with total debt of approximately $2.5 billion at the end of 2015. The company managed its liquidity through operating cash flows and borrowings under its credit agreement. It also had significant availability for future borrowings and was compliant with its debt covenants. The company planned to raise additional debt in 2016 to support its ongoing strategies.