AJG Sees Record Results For 3Q

By Mark E. Ruquet

NU Online News Service, Oct. 22, 1:35 p.m.EDT?Arthur J. Gallagher & Co. more than doubled itsnet income for the third quarter compared to last year on strongperformance by its brokerage and risk management servicesdivisions.

The Itasca, Ill.-based insurance broker reported net income rose110 percent for the third quarter ending Sept. 30 compared to lastyear, from $23.3 million to $48.9 million, an increase of $25.6million. Earnings per share rose 27 cents, going from 25 cents ashare to 52 cents. Revenues were up 35 percent, or $88.5 million,going from $256.5 million to $345 million.

In the third quarter, the firm saw its brokerage services netincome rise 26 percent, or $8.5 million, from $33.2 million to$41.7 million. Risk management services rose 87 percent, or $4million, going from $4.6 million to $8.6 million.

In an investors conference call, J. Patrick Gallagher Jr., AJG'spresident and chief executive officer, said the firm's performancehas reached a point "exactly where we thought it would be" throughorganic growth. He added that AJG had done an "excellent job in amoderating market" getting to where it is.

He said while competition is beginning to heat up, carriers arestill exerting discipline in their underwriting and would continueto do so for the foreseeable future. While there will continue tobe increases in some lines of business, Mr. Gallagher said carriersare beginning to reassess some accounts and reprice them downward,but not to a point where they will not make an underwritingprofit.

"What carriers will not do is take $400,000 in premium when therisk should be written for $500,000," he said.

He noted that placing large commercial accounts is verydifficult because not many insurers are willing to take on therisk. He said there are possibly five carriers available to writelarge business accounts.

In response to a question about benefits services, he called thecurrent rate of inflation in health care coverage "appalling,"affecting even AJG. He said it is the biggest issue that needs tobe dealt with nationally after terrorism.

For the nine months, AJG's net income rose 6 percent, or $5.5million, from $91.5 million to $97 million for 2003. Earnings pershare rose 4 cents, from $1 to $1.04. Revenues increased 18percent, or $136 million, from $762.3 million to $898.3million.