Canadian Underwriter

Commission revenue increases 8.9% for Arthur J. Gallagher

May 6, 2016   by Canadian Underwriter

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Commercial brokerage Arthur J. Gallagher & Co. recently reported an 8.9% increase in commission revenue while net earnings increased 78.4%.

Itasca, Ill.-based Gallagher released April 28 its financial results for the three months ending March 31.

screenshot gallagher financials q1 16webCommissions increased 8.9% year over year, from $519.7 million in Q1 2015 to $566 million in the latest quarter. All figures are in United States dollars.

Adjusted brokerage revenue was $825.5 million in the most recent quarter, up 12% from $732.5 million in Q1 2015. Of that growth, 4.8% was total organic growth.

Gallagher’s adjusted figures were changed “to exclude net gains realized from sales of books of business, acquisition integration costs, claim portfolio transfer ramp up costs, client run-off/bankruptcy impact, workforce related changes, lease termination related charges, acquisition related adjustments and the impact of foreign currency translation.”

Gallagher reported fees of $338.2 million in Q1 2016, up 4.6% from $323.2 million in the same period in 2015.

In 2015, 3% of Arthur J. Gallagher’s revenue was from Canada, the firm reported in February in its annual report. At the time, Gallagher reported it had 35 locations in Canada, where the firm places property, commercial auto, liability, business interruption and cyber, among other commercial insurance lines. Gallagher provides personal insurance to high net worth Canadians.

In 2014, Gallagher completed the purchase of a majority interest in insurance brokerage Noraxis Capital Corp. from Roins Financial Services Ltd., which owns the RSA Canada group of companies. The following year, Gallagher bought Cohen & Lord Insurance Brokers Ltd., an Ottawa-based firm whose markets include commercial realty and condominiums, construction and fleet, as well as personal lines for wealthy individuals. Other Canadian units of Gallagher include the CG&B Group and Stevenson & Hunt.

In its Q1 2016 filing with the United States Securities and Exchange Commission, Gallagher says that during the first three months of this year, it acquired “substantially all of the net assets” of several firms. Acquisitions included Kane’s Insurance Management Operations (KIM) for $30.8 million and White & Company Insurance Inc. (WCI) for $19.3 million. White & Co. is a Santa Monica, Calif. broker that places coverage “for the finance, healthcare, real estate, manufacturing and distribution, aviation and hospitality industries,” Gallagher said in an earlier release.

KIM, whose parent firm is Guernsey-based Kane Holdings Ltd., “provides Insurance-Linked Security and structured transaction administration (ILS) that supports catastrophe bonds, sidecars, collateralized reinsurance and similar structures.”

Gallagher reported total revenues of $1.3 billion in the most recent quarter, up 5.6% from $1.231 billion in Q1 2015.

Net earnings were $57.9 million in Q1 2016, a 78.4% increase from $32.4 million in the first three months of last year.

Gallagher had 21,500 employees as of Dec. 31. In its annual report for 2015, the firm reported it had “completed and integrated 383 acquisitions from January 1, 2002 through December 31, 2015.” Most of those were “smaller regional or local property/casualty retail or wholesale operations with a strong middle-market client focus or significant expertise” in one of Gallagher’s focus market areas.

In addition to its retail brokerage operations, Gallagher operates a risk management segment that provides claim settlement and administration services for organizations that self-insure, and to insurance providers that outsource their P&C claims departments.

Gallagher also has a 46.5% interest in Chem-Mod LLC, whose proudcts are intended  reduce mercury, sulfur dioxide and other emissions at coal-fired power plants.