10-QPeriod: Q3 FY2022

Arthur J. Gallagher & Co. Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 2, 2022For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported strong financial results for the nine months ended September 30, 2022, demonstrating robust growth and profitability. Total revenues increased to $6.52 billion, up 4.6% year-over-year, driven by significant contributions from both the brokerage and risk management segments. Net earnings attributable to controlling interests reached $978.7 million, a substantial increase from $797.4 million in the prior year period. Diluted earnings per share also saw a healthy rise to $4.57 from $3.88. The company's strategic acquisitions, particularly the Willis Towers Watson plc treaty reinsurance brokerage operations, continue to integrate well and contribute to top-line growth. Organic revenue growth remained strong, indicating the underlying health of the core business operations. AJG's financial strength is further supported by a solid balance sheet and consistent cash flow generation, enabling continued investment in growth initiatives and shareholder returns.

Financial Highlights

44 data points
Beta

Revenue

$2.04B

100.0% Gross Margin

Net Income

$256.30M

12.5% Net Margin

EPS (Diluted)

$1.19

Total Assets

$38.52B

Cash & Equivalents

$810.60M

Free Cash Flow

$641.70M

Financial Statements
Beta
Revenue$2.04B
Cost of Revenue$0
Gross Profit$2.04B
Operating Expenses$1.73B
Interest Expense$64.40M
Net Income$256.30M
EPS (Basic)$1.21
EPS (Diluted)$1.19
Shares Outstanding (Basic)210.70M

Key Highlights

  • 1Total revenues increased by 4.6% to $6.52 billion for the nine months ended September 30, 2022, compared to $6.24 billion in the prior year period.
  • 2Net earnings attributable to controlling interests grew to $978.7 million, up from $797.4 million in the same period last year, representing a 22.7% increase.
  • 3Diluted earnings per share (EPS) rose to $4.57 for the first nine months of 2022, compared to $3.88 in the prior year period, an 18% increase.
  • 4The brokerage segment remains the primary revenue driver, with total revenues of $5.60 billion for the nine-month period, up 24.4% year-over-year.
  • 5Organic revenue growth in the brokerage segment was 9.3%, demonstrating the strength of core operations.
  • 6Cash flow from operating activities significantly increased to $1.93 billion for the nine-month period, up from $1.21 billion in the prior year.
  • 7The company continues to actively pursue strategic acquisitions, with 19 acquisitions completed in the nine months ended September 30, 2022.

Frequently Asked Questions

For the three months ended September 30, 2022, total revenues were $2.04 billion, a decrease of 4.4% compared to $2.14 billion in the same period of 2021. However, for the nine months ended September 30, 2022, total revenues increased by 4.6% to $6.52 billion from $6.24 billion in the prior year period.

Net earnings attributable to controlling interests for the three months ended September 30, 2022, were $255.8 million ($1.19 per diluted share), compared to $225.1 million ($1.06 per diluted share) in the prior year period. For the nine months ended September 30, 2022, net earnings attributable to controlling interests increased to $978.7 million ($4.57 per diluted share) from $797.4 million ($3.88 per diluted share) in the same period of 2021.

The company completed 19 acquisitions during the nine-month period ended September 30, 2022, contributing to revenue growth, particularly in the brokerage segment. The acquisition of Willis Towers Watson plc's treaty reinsurance brokerage operations, completed in December 2021, is also a significant contributor to growth. These acquisitions are a key part of the company's strategy for expansion and market penetration.

The company expressed optimism regarding future performance, citing continued strong customer retention, new business generation, and increasing renewal premiums in its property/casualty brokerage operations. They also anticipate that increasing insurable values due to inflation and a tight labor market will contribute to continued organic growth opportunities. Management believes they have sufficient capital and access to capital to meet future cash flow needs.