Arthur J. Gallagher & Co. Quarterly Report for Q2 Ended Jun 30, 2018

Summary

Arthur J. Gallagher & Co. (AJG) reported strong performance for the second quarter and first half of 2018, demonstrating significant growth across its core brokerage and risk management segments. Total revenues increased by approximately 11% and 10% year-over-year for the respective periods, driven by a combination of new business, favorable renewal rate increases, and strategic acquisitions. The company's adjusted EBITDAC for the brokerage segment saw a healthy increase of 13% and 11% for the quarter and half-year, respectively, reflecting effective cost management and operational efficiency. Diluted EPS also showed substantial improvement, growing 55% and 39% year-over-year for the quarter and half-year, respectively, on a reported basis, and 34% and 30% on an adjusted basis for the same periods. The company's strong financial results were supported by a robust acquisition strategy, with significant investments made in acquiring new firms to expand its market reach and service offerings. Despite the integration costs associated with these acquisitions, AJG managed to improve its profitability and operational leverage. The company's clean energy investments continue to be a significant contributor to overall earnings, though the outlook for these segments is subject to evolving regulatory and market conditions. Overall, AJG's Q2 2018 performance indicates a healthy and growing business with effective execution of its growth strategy. The company's ability to drive organic growth while successfully integrating acquisitions positions it well for continued success.

Key Highlights

• 1Total revenues for the six months ended June 30, 2018, increased by 11% to $3.50 billion compared to the prior year's $3.14 billion.
• 2Net earnings attributable to controlling interests for the six months ended June 30, 2018, rose by 30% to $388.6 million from $298.8 million in the same period last year.
• 3Diluted earnings per share for the six months ended June 30, 2018, were $2.10, a 27% increase from $1.65 in the prior year.
• 4The company completed multiple acquisitions during the period, integrating new firms to expand its brokerage and risk management services.
• 5Clean energy investments contributed significantly to earnings, with an anticipated $112 million to $118 million in net earnings for 2018.
• 6The brokerage segment experienced strong organic revenue growth of 5.3% for the first half of 2018.
• 7AJG's effective tax rate decreased significantly due to the U.S. corporate tax rate reduction enacted in late 2017.

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