Arthur J. Gallagher & Co. AJG reported second-quarter 2018 adjusted net earnings of 62 cents per share, which came in line with the Zacks Consensus Estimate. The bottom line improved 29.2% on a year-over-year basis.
Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise
Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise | Arthur J. Gallagher & Co. Quote
The company’s performance was driven by solid organic growth, double-digit revenue improvement from the tuck-in mergers and acquisitions and a strong margin expansion. The company also witnessed a sturdy performance across all segments.
Net income surged 58.9% year over year to 62 cents per share.
Operational Update
Total revenues were $1.6 billion, up 11.7% year over year. This upside was driven by higher total revenues in the Brokerage, Risk Management as well as Corporate segments. Moreover, the top line surpassed the Zacks Consensus Estimate by 2.8%.
Total commissions and fees earned increased nearly 10.5% year over year to $1.1 billion in the quarter under review.
Arthur J. Gallagher’s total expense increased 8.5% year over year to $1.6 billion in the reported quarter. Expenses escalated primarily due to a rise in compensation costs, operating costs, reimbursements, interest expenses, cost of revenues from clean coal activities, interest plus higher depreciation as well as amortization expenses.
Earnings before interest, tax, depreciation and amortization and change in estimated acquisition earnout payables (EBITDAC) rose 26.7% to $235.7 million.
Segment Results
Brokerage: Adjusted revenues of $994 million grew 9.7% year over year on higher fees, commissions, supplemental as well as contingent revenues plus investment income and gains realized on books of business sales. Total expense shot up nearly 7.6% year over year to $829.5 million.
Adjusted EBITDAC rose 13.2% to $254.3 million.
Risk Management: Adjusted revenues were up 11.1% year over year to $201.9 million, mainly owing to higher fees. Total expenses were higher by 8.7% year over year to $213.3 million.
Adjusted EBITDAC climbed 20.5% year over year to $35.8 million.
Corporate: Total revenues came in at $423 million, up 12.3% year over year. Total expenses increased 9.8% year over year to $510.4 million.
EBITDAC was at a loss of $50.1 million, wider than the loss of $45.3 million in the prior-year quarter.
Financial Update
As of Jun 30, 2018, total assets were $16.2 billion, up 8.9% from the level at year-end 2017.
Cash and cash equivalents at the quarter-end declined 4.3% from the 2017-end level to $652.2 million.
Shareholders’ equity increased nearly 5% from the 2017-end level to $4.5 billion as of Jun 30, 2018.
Acquisition Update
In the second quarter, the company closed 12 acquisitions with annualized revenues of about $145.2 million.
Zacks Rank
Currently, Arthur J. Gallagher carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Among other players from the insurance industry having reported second-quarter earnings so far, the bottom line of The Progressive Corporation PGR, MGIC Investment Corporation MTG and RLI Corp. RLI beat the respective Zacks Consensus Estimate.
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