01—Abstract
Summary
Summary of the 10-K filed February 12, 2018. Cited figures are marked; the original filing is the authoritative source.
Arthur J.
Gallagher & Co. (AJG) reported strong performance for the fiscal year ended December 31, 2017. The company demonstrated consistent revenue growth across its brokerage and risk management segments, driven by both organic growth and strategic acquisitions. The brokerage segment, representing the largest portion of revenue, saw increased commissions and fees, while the risk management segment also showed positive growth.
A significant contributor to the company's revenue was its Corporate segment, largely driven by its clean energy investments which generated substantial income. AJG's financial health appears robust, with significant total revenues and solid net earnings. The company actively manages its capital through share repurchases and dividend payments, indicating confidence in its ongoing financial performance.
Management highlighted a focus on continued expansion through mergers and acquisitions, a strategy that has historically driven growth and is expected to continue. Investors can take comfort in the diversified revenue streams and the company's ability to navigate a competitive insurance market.
02—Key points
Key Highlights
- Strong revenue growth driven by brokerage and risk management segments, with clean energy investments significantly contributing to corporate segment revenue.
- Active acquisition strategy, completing 39 acquisitions in 2017, demonstrating a commitment to expanding market presence and service capabilities.
- Consistent dividend payments, with a quarterly dividend of $0.39 declared in each quarter of 2017, and an increased dividend of $0.41 announced for Q1 2018.
- Solid financial position with $681.2 million in cash and cash equivalents at year-end 2017, and a revolving credit facility of $800 million.
- The company's clean energy investments are estimated to generate substantial after-tax earnings in 2018, providing a significant cash flow source.
- The company's brokerage segment saw organic growth of 4.4% in total commissions, fees, supplemental and contingent revenues.
- Effective management of expenses, with controlled compensation and operating expense ratios across key segments.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 12, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $6.16B$5.68B | +8.4% |
| Cost of Revenue | $1.64B$1.41B | +16.1% |
| Gross Profit | $4.52B$4.27B | +5.9% |
| Operating Expenses | $5.89B$5.35B | +10.1% |
| Interest Expense | $124.10M$109.80M | +13.0% |
| Net Income | $481.30M$396.80M | +21.3% |
| EPS (Basic) | $2.67$2.23 | +19.7% |
| EPS (Diluted) | $2.64$2.22 | +18.9% |
| Shares Outstanding (Basic) | 180.10M177.60M | +1.4% |
05—Questions
Frequently Asked Questions
What is Arthur J. Gallagher & Co.'s primary business?
Arthur J. Gallagher & Co. provides insurance brokerage, consulting, and third-party claims settlement and administration services to domestic and international clients.
How did the company perform financially in 2017?
In 2017, AJG reported strong revenue growth across its segments, driven by organic growth and acquisitions. The company generated significant net earnings and maintained a healthy financial position, supported by its clean energy investments.
What is the company's strategy for future growth?
AJG's primary growth strategy involves continued expansion through mergers and acquisitions, in addition to organic growth initiatives within its core brokerage and risk management operations.
How does the company manage its debt?
AJG utilizes a combination of a multicurrency credit agreement, note purchase agreements, and a premium financing debt facility to manage its debt. The company was in compliance with its financial covenants as of December 31, 2017.
06—Continue