8-KMaterial Agreements

Arthur J. Gallagher & Co. 8-K Report, Material Agreement (Jul 29, 2009)

Filed July 29, 2009For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) filed an 8-K on July 28, 2009, reporting a material amendment to a previously established Assurance of Voluntary Compliance with the Office of the Attorney General of the State of Illinois. This amendment is significant as it permits the Company to accept retail contingent commissions starting October 1, 2009. Furthermore, the agreement includes a standardized disclosure form that AJG will provide to its clients regarding contingent compensation. This development allows AJG to pursue a new revenue stream while also establishing clear communication protocols with its client base regarding these commission structures. Investors should monitor the impact of these new contingent commissions on the company's revenue and profitability going forward.

Key Highlights

  • 1Amendment to Assurance of Voluntary Compliance with Illinois Attorney General.
  • 2Permitted to accept retail contingent commissions effective October 1, 2009.
  • 3Agreement on a standardized disclosure form for contingent compensation to clients.
  • 4This allows for a new revenue model related to retail contingent commissions.
  • 5The disclosure form ensures transparency with clients regarding compensation structures.

Frequently Asked Questions

The main change is the amendment to an existing agreement with the Illinois Attorney General, which now permits Arthur J. Gallagher & Co. to accept retail contingent commissions starting October 1, 2009.

Contingent commissions are payments earned by an insurance broker or agent that are dependent on the performance of the insurance policies they sell, such as profitability or loss ratios, rather than a flat fee.

AJG will be required to provide clients with a standardized disclosure form explaining contingent compensation. This aims to increase transparency about how the company is compensated.

The ability to accept retail contingent commissions opens up a new potential revenue stream for AJG. The actual financial impact will depend on the volume and performance of the policies sold under this commission structure.