10-QPeriod: Q3 FY2021

Arthur J. Gallagher & Co. Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 29, 2021For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported strong financial performance for the nine months ended September 30, 2021, with total revenues increasing by 17.5% to $6.24 billion compared to the same period in 2020. Net earnings attributable to controlling interests grew by 18% to $797.4 million, leading to a diluted EPS of $3.88. The company continued its active acquisition strategy, completing numerous acquisitions that expanded its brokerage and risk management segments, contributing significantly to revenue growth. The pending acquisition of Willis Towers Watson plc treaty reinsurance brokerage operations, valued at approximately $3.25 billion plus potential additional consideration, is expected to further bolster AJG's market position and was largely financed through a combination of equity and debt offerings completed earlier in the year. The company's financial results were positively impacted by favorable insurance pricing trends, increased client exposure units driven by economic recovery, and strong new business generation. Despite some incremental cost increases related to business resumption, AJG demonstrated effective cost management, maintaining strong margins. The clean energy segment also contributed positively, with earnings from these investments significantly increasing year-over-year. Looking ahead, AJG remains focused on its growth strategy, leveraging its strong financial position and market expertise.

Financial Highlights

46 data points
Beta

Revenue

$2.14B

82.9% Gross Margin

Net Income

$225.10M

10.5% Net Margin

EPS (Diluted)

$1.06

Total Assets

$26.92B

Cash & Equivalents

$2.74B

Free Cash Flow

$521.40M

Financial Statements
Beta
Revenue$2.14B
Cost of Revenue$366.10M
Gross Profit$1.77B
Operating Expenses$1.91B
Interest Expense$60.30M
Net Income$225.10M
EPS (Basic)$1.09
EPS (Diluted)$1.06
Shares Outstanding (Basic)207.00M

Key Highlights

  • 1Total revenues increased by 17.5% to $6.24 billion for the nine months ended September 30, 2021.
  • 2Net earnings attributable to controlling interests rose by 18% to $797.4 million for the same period.
  • 3Diluted Earnings Per Share (EPS) increased to $3.88 from $3.48 in the prior year's comparable period.
  • 4The company continues its aggressive acquisition strategy, with significant cash deployment for acquisitions, including the pending acquisition of Willis Towers Watson plc treaty reinsurance brokerage operations.
  • 5The brokerage segment saw strong performance, with organic revenue growth in commissions and fees of 6.7% for the nine-month period.
  • 6The risk management segment also showed robust growth, with organic fee revenue increasing by 11.9% for the nine-month period.
  • 7Clean energy investments contributed significantly to profitability, with earnings increasing to $85.0 million for the nine-month period.

Frequently Asked Questions

Arthur J. Gallagher & Co.'s total revenues for the nine months ended September 30, 2021, were $6,236.7 million, an increase of 17.5% compared to $5,300.0 million in the same period of 2020.

Net earnings attributable to controlling interests increased by 18% to $797.4 million for the nine months ended September 30, 2021, up from $676.6 million in the prior year. Diluted EPS grew to $3.88 from $3.48 for the same periods.

Arthur J. Gallagher & Co. announced an agreement to acquire the Willis Towers Watson plc treaty reinsurance brokerage operations for an initial gross consideration of $3.25 billion, with potential additional consideration. The transaction is subject to customary regulatory approvals and was expected to close in the fourth quarter of 2021. This acquisition is intended to be financed through existing cash, recent equity and debt offerings, and additional free cash generated.

For the nine months ended September 30, 2021, the brokerage segment reported an organic change in base commission and fee revenues of 6.7%, while the risk management segment reported an organic change in fee revenues of 11.9%. These figures exclude revenues from acquisitions, divested operations, and currency translation effects.

Clean energy investments generated $85.0 million in after-tax earnings for the nine months ended September 30, 2021, a significant increase from $61.9 million in the same period of 2020. The company anticipates these investments to generate between $87.0 million and $95.0 million in adjusted net earnings for the full year 2021.