10-QPeriod: Q3 FY2017

Arthur J. Gallagher & Co. Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 30, 2017For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported a solid third quarter and nine-month period ending September 29, 2017, with revenue growth driven by its Brokerage and Risk Management segments. Net earnings attributable to controlling interests increased year-over-year for both periods, reflecting strong operational performance. The company continued its active acquisition strategy, integrating several new businesses to expand its market presence and service offerings. Financial condition remained robust, supported by healthy operating cash flows and available credit facilities, enabling continued investment in growth initiatives and shareholder returns through dividends. Key operational highlights include consistent organic revenue growth in the Brokerage segment, robust performance in the Risk Management segment driven by new business, and significant contributions from clean energy investments. While facing a moderately declining insurance rate environment, AJG demonstrated resilience through exposure growth, value-added services, and strong client retention. The company's balance sheet shows increased assets and equity, reflecting its growth and profitability. Management expressed confidence in the company's liquidity and financial position to support ongoing operations and strategic objectives.

Financial Highlights

42 data points
Beta

Revenue

$1.59B

Net Income

$111.00M

7.0% Net Margin

EPS (Diluted)

$0.61

Total Assets

$12.81B

Cash & Equivalents

$564.90M

Free Cash Flow

$253.70M

Financial Statements
Beta
Revenue$1.59B
Operating Expenses$1.52B
Interest Expense$31.40M
Net Income$111.00M
EPS (Basic)$0.61
EPS (Diluted)$0.61
Shares Outstanding (Basic)180.50M

Key Highlights

  • 1Total revenues increased by 7% for the nine-month period and 9% for the three-month period ended September 30, 2017, compared to the prior year periods, primarily driven by strong performance in the Brokerage and Risk Management segments.
  • 2Net earnings attributable to controlling interests saw a significant increase, rising by 14% for the nine-month period and 10% for the three-month period.
  • 3The company completed numerous acquisitions during the period, adding to its market reach and service capabilities, with $320.5 million invested in acquisitions for the nine-month period.
  • 4Operating cash flow improved, reaching $459.1 million for the nine-month period ended September 30, 2017, up from $368.9 million in the prior year, demonstrating strong cash generation capabilities.
  • 5Clean energy investments continued to be a significant contributor to earnings, with anticipated net earnings between $123.0 million and $129.0 million for the full year 2017.
  • 6The company maintained a strong liquidity position, with $564.9 million in cash and cash equivalents and significant availability under its credit facilities.
  • 7Dividends declared increased by 3% year-over-year for the nine-month period, reflecting a commitment to returning value to shareholders.

Frequently Asked Questions

For the three-month period ended September 30, 2017, AJG reported total revenues of $1,584.5 million, an increase of 7% compared to $1,482.3 million in the same period of 2016. This growth was primarily driven by increases in commissions and fees across its Brokerage and Risk Management segments.

Net earnings attributable to controlling interests for the three-month period ended September 30, 2017, were $130.4 million, up from $122.8 million in the prior year's third quarter, representing a 6% increase. Diluted earnings per share also increased to $0.71 from $0.69.

AJG continued its active acquisition strategy, completing several acquisitions during the period. For the nine-month period ended September 30, 2017, cash paid for acquisitions, net of cash acquired, was $320.5 million. These acquisitions are aimed at expanding market presence and enhancing service offerings, contributing to revenue growth.

Clean energy investments remain a significant contributor. The company anticipates these investments to generate between $123.0 million and $129.0 million in net earnings for the full year 2017. These earnings are expected to fund the company's M&A strategy in its core brokerage and risk management operations.