10-QPeriod: Q3 FY2013

Arthur J. Gallagher & Co. Quarterly Report for Q3 Ended Sep 30, 2013

Filed October 30, 2013For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported a strong third quarter for 2013, demonstrating continued revenue growth and improved profitability across its core segments. Total revenues increased by 12% year-over-year to $835.8 million, driven by robust performance in the Brokerage segment, which saw a 14% rise in total revenues and a 5.5% increase in base organic commission and fee revenues. The Risk Management segment also contributed with a 5% increase in total revenues and an 8.5% rise in organic fees. Net earnings for the quarter grew by 21% to $74.6 million, or $0.57 per diluted share, compared to $61.7 million, or $0.50 per diluted share, in the prior year's third quarter. This improved profitability reflects effective cost management and the positive impact of acquisitions, which are strategically expanding the company's global reach, particularly in the UK with the announced acquisition of Giles Group. The company also highlighted the continued positive contribution from its clean energy investments, which are expected to generate significant earnings for the full year.

Financial Highlights

46 data points
Beta

Revenue

$835.80M

82.4% Gross Margin

Net Income

$74.60M

8.9% Net Margin

EPS (Diluted)

$0.57

Total Assets

$5.97B

Cash & Equivalents

$286.90M

Free Cash Flow

$170.90M

Financial Statements
Beta
Revenue$835.80M
Cost of Revenue$146.90M
Gross Profit$688.90M
Operating Expenses$133.10M
Operating Income-$208.60M
Interest Expense$13.10M
Net Income$74.60M
EPS (Basic)$0.57
EPS (Diluted)$0.57
Shares Outstanding (Basic)129.80M

Key Highlights

  • 1Total revenues increased by 27% to $835.8 million for the three months ended September 30, 2013, compared to $650.4 million in the prior year's period.
  • 2Net earnings increased by 21% to $74.6 million for the three months ended September 30, 2013, compared to $61.7 million in the prior year's period.
  • 3Diluted net earnings per share rose to $0.57 from $0.50 in the comparable prior-year period.
  • 4Brokerage segment revenues grew 14% to $546.3 million, with organic commission and fee revenues up 5.5%.
  • 5Risk Management segment revenues increased 5% to $149.7 million, with organic fees up 8.5%.
  • 6The company announced the agreement to acquire Giles Group of Companies, a significant expansion into the UK market.
  • 7Clean energy investments are projected to contribute $61.0 million to $63.0 million to net earnings for the full year 2013.

Frequently Asked Questions

Arthur J. Gallagher & Co. reported a significant increase in total revenues for the third quarter of 2013, reaching $835.8 million, a 27% increase from $650.4 million in the same period of 2012. This growth was driven by strong performance in both the Brokerage and Risk Management segments.

Net earnings for the third quarter of 2013 increased by 21% to $74.6 million, up from $61.7 million in the third quarter of 2012. Correspondingly, diluted net earnings per share grew to $0.57 from $0.50 in the prior year's period.

The Brokerage segment's revenue growth of 14% to $546.3 million was primarily driven by increased commissions and fees from new business production, renewal rate increases, and revenues from recent acquisitions. Organic commission and fee revenues saw a 5.5% increase.

The company highlighted the completion of the Bollinger, Inc. acquisition and the announcement of an agreement to acquire the Giles Group of Companies in London, UK. These acquisitions are aimed at expanding the company's geographic reach and market presence.