Canadian Underwriter

Arthur J. Gallagher reports brokerage segment revenues up US$53.5 million in Q2

July 29, 2016   by Canadian Underwriter

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Itasca, Ill.-based Arthur J. Gallagher & Co. (AJG) released its financial results on Thursday, announcing that its brokerage segment revenues were up to US$939.1 million as reported in the second quarter of 2016 from US$885.6 in Q2 2015.

Investment analysisFor the first half of 2016 ending June 30, brokerage revenues were US$1.76 billion, compared to US$1.63 billion in H1 2015.

Net earnings for the segment for the second quarter of 2016 ending June 30 were US$114.9 million, up from US$100.3 million in Q2 2015. For H1 2016, brokerage net earnings were US$180.8 million compared to US$140.9 million in H1 2015.

“During the second quarter and first half of the year, we improved our profitability margin, we posted solid growth in revenue and we grew earnings per share,” said J. Patrick Gallagher, Jr., chairman, president and CEO of AJG in a press release. “We are pleased with our performance year to date and the fundamentals of our business remain strong.”

In its Risk Management segment, AJG reported revenues of US$176.5 million in Q2 2016, down from US$189.4 million in Q2 2015. Net earnings were US$13.9 million for the most recent quarter, down from US$17.1 million in the second quarter of 2015. For the first half of this year, revenues were US$355.8 million, down from US$366.6 million in the first half of 2015. Net earnings for the first six months of 2016 were US$28.9 million compared to US$32 million in the first half of last year.

Regarding acquisitions, AJG reported that it closed 13 acquisitions in the most recent quarter compared to 11 by Q2 2015. For the first half of the year, it closed 21 acquisitions compared to 22 in the first half of 2015. The estimated annualized revenues acquired for the most recent quarter is US$40.4 million (Q2 2015: US$82.3 million) and US$70.4 million for H1 2016 (US$115.9 million for H1 2015).

Organic fees in Q2 2016 were US$176.3 million (Q2 2015: US$182.5) and US$353.6 million for H1 2016 (H1 2015: US$356.3). Second quarter 2016 organic fees were “unfavourably impacted primarily by a delay in the inception of new business, lesser arising domestic claim counts and lower international performance bonus fees,” AJG reported.

Patrick Gallagher, Jr. added in the release that the company’s recent internal survey suggests “P&C pricing is moderating at about the same level as last year across our global footprint. Property continues to experience the largest price reductions, while casualty pricing is flat to down modestly. The survey results point to a stable market with the majority of respondents expecting no significant change in the pricing environment this year.”

AJG is an international insurance brokerage and risk management services firm with operations in 33 countries, including Canada.