Insurance broker Arthur J. Gallagher says its second-quarter net income jumped 30 percent on the combination of new business and strong retention.

“We are firing on all cylinders,” said Chairman, President and CEO J. Patrick Gallagher, referring to the firm's organic growth, mergers and acquisitions, productivity, margin improvement and culture.

AJG Q2 net income was up $22 million to $94 million on revenues of $780 million. Revenues for the quarter increased 20 percent. For the first six months of this year, net income is up 34 percent to $134 million. Revenues during the period increased 21 percent to $257 million.

Gallagher told financial analysts during a conference call today that less than 1 percent of the 6 percent in organic growth it has shown for the quarter from the brokerage segment was due to rate increases from commissions and fees. The rest was new business and improved retention of existing business.

“As long as rate is in our favor, we will see strong organic growth,” said Gallagher.

On renewals, he says 55 percent of the firm's clients experienced rate increases and 22 percent of the renewals were flat, while 22 percent experienced slight decreases.

Adding to the firm's strong performance, Gallagher noted that through June it has acquired nine agencies for a total of $41 million in annualized revenue. He said the acquisition pipeline remains strong and the first half of the year is typically the slowest.

Discussing rate increases in some specific lines, Gallagher said Workers' Compensation remains “troubled” and carriers need to seek greater rate. He added that rates rose for 95 percent of its clients as of July 1 compared to the prior year. For Casualty, other than Workers' Comp, 60 percent of clients experienced rate increases, 30 percent were flat and less than 10 percent had any decrease in rate.

Attempting to provide perspective on rate momentum for the rest of the year, Gallagher said that as of July 1 renewals, 60 percent of Property clients experienced increases comparable to earlier this year; 15 percent received additional increases; and 25 percent were slightly down.

On Workers Comp, 40 percent saw additional increases; 50 percent were comparable to the previous year; and 10 percent saw slight decreases—“but Workers' Comp is showing increases across the board,” he added.

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