NU Online News Service, May 2, 11:57 a.m. EDT

Arthur J. Gallagher's chief executive says as bad as the new health-care law is, it is providing opportunities for the brokerage as smaller benefit brokers are unable to keep up with compliance issues.

J. Patrick Gallagher, chairman, president and chief executive officer of AJG, said on a first-quarter-results conference call today that he does not care whether the Supreme Court throws the Patient Protection and Affordable Care Act out or not because the demand for professional services capable of dealing with the new law is growing.

Smaller benefit brokers, he notes, do not have the resources to deal with new compliance issues, driving business toward larger brokers like AJG.

“I've never seen such a selling environment,” says Gallagher, as new clients seek brokers capable of dealing with the new law. “That business is on fire and continues to be.”

Regarding financial results, the Itasca, Ill.-based broker reports an 84-percent increase in its first-quarter-net profit, beating analysts' earnings-per-share estimates by 1 cent on an adjusted basis.

First-quarter net income was $28 million, up $13 million from the same period last year.

Reported revenues rose 22 percent, or more than $99 million, to $547 million.

The firm also registered organic growth of close to 5 percent.

The results were helped by a P&C environment where prices are continuing to increase, but not dramatically as seen in a hard market, according to Gallagher

“By and large, we are not seeing decreases,” he says.

Carriers are asking for rate increases, especially on workers compensation and property business, and they are getting it, he says. However, some select lines remain competitive, he notes.

“This couldn't be a better environment for us,” he says. “If this environment stays like this for the next few years it will benefit us.”

Clients' attitudes are also improving as they are beginning to spend more.

“They believe the worst is behind them,” says Gallagher, adding that he hopes “hiring can't be too far off.”

As further sign of improvement, Gallagher notes that in the first quarter the firm acquired 12 agencies, bringing in more than $30 million in revenue, compared to only four acquisitions for the fourth quarter of last year.

The risk-management-services segment, Gallagher Basset, saw its revenues increase by 8 percent with organic growth of 7 percent.

Gallagher says business in the wholesale markets is also growing as standard-lines carriers back off of risks traditionally handled by wholesalers.

Special Reports /

AJG Exec Says Bad Health Care Law Presents Good Opportunity

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