10-QPeriod: Q2 FY2009

Arthur J. Gallagher & Co. Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 30, 2009For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported a solid second quarter in 2009, demonstrating resilience amidst a challenging economic environment. Total revenues increased by 6% year-over-year to $453.6 million, driven by strong performance in the Brokerage segment, which saw a 9% increase in commissions and fees. Net earnings rose to $43.8 million, or $0.44 per diluted share, compared to $40.8 million, or $0.44 per diluted share in the prior year's quarter. The company continues to execute its growth strategy through strategic acquisitions, as evidenced by the inclusion of several new entities contributing to revenue growth. Despite a decline in organic commission and fee revenues in the Brokerage segment (-1.2% for the quarter), the company's overall financial health remained robust. The Risk Management segment also showed steady performance, with a slight 2% decrease in fees, but managed to grow earnings. Management's focus on expense control is evident, with operating expenses in the Brokerage segment decreasing by 9% year-over-year. The company's liquidity position is supported by cash flow from operations and available credit facilities, allowing it to continue investing in growth initiatives.

Financial Highlights

23 data points
Beta

Revenue

$453.60M

Net Income

$43.80M

9.7% Net Margin

EPS (Diluted)

$0.44

Cash & Equivalents

$226.10M

Free Cash Flow

$64.10M

Financial Statements
Beta
Revenue$453.60M
Operating Expenses$79.10M
Operating Income$72.10M
Interest Expense$7.00M
Net Income$43.80M
EPS (Basic)$0.44
EPS (Diluted)$0.44

Key Highlights

  • 1Total revenues increased 6% year-over-year to $453.6 million for Q2 2009.
  • 2Net earnings grew to $43.8 million, or $0.44 per diluted share, for Q2 2009.
  • 3Brokerage segment revenues rose 9% to $340.1 million, primarily driven by acquisitions.
  • 4Organic commission and fee revenues in the Brokerage segment saw a slight decline of 1.2% for the quarter.
  • 5Risk Management segment revenues decreased 2% to $113.3 million, but segment earnings increased 7%.
  • 6The company has actively managed expenses, with Brokerage segment operating expenses down 9% year-over-year.
  • 7Liquidity remains strong, supported by operating cash flows and a $450 million credit facility.

Frequently Asked Questions

Arthur J. Gallagher & Co. reported a 6% increase in total revenues for the second quarter of 2009, reaching $453.6 million, up from $428.9 million in the same period of 2008. This growth was primarily driven by the Brokerage segment, which saw a 9% rise in commissions and fees, largely due to revenues from recent acquisitions.

Net earnings for the second quarter of 2009 increased to $43.8 million, compared to $40.8 million in the second quarter of 2008. Diluted earnings per share remained stable at $0.44 for both periods, reflecting a slight increase in outstanding shares.

The company demonstrated effective expense management. For instance, in the Brokerage segment, operating expenses decreased by 9% year-over-year in the second quarter of 2009, and compensation expenses, while increasing overall due to acquisitions, showed improved efficiency ratios in some areas. The company also benefited from a reduction in certain operating expenses within the Risk Management segment.

The Brokerage segment continues to be the primary revenue driver, with growth supported by acquisitions. However, organic growth in commissions and fees experienced a slight decline of 1.2% in the second quarter, reflecting broader market conditions. The Risk Management segment, while seeing a small decrease in revenue, managed to grow its earnings and showed positive organic growth in fees, indicating operational stability. The company expects continued acquisition-driven growth in the Brokerage segment.