Arthur J. Gallagher's 2013 third-quarter net earnings increasedto $74.6 million compared to $61.7 million a year ago as a $185.4million jump in revenues more than offset a $176.2 million increasein expenses.

Total revenues for the quarter were $835.8 million.Brokerage-segment revenues increased from $479.7 million in 2012'sthird quarter to $546.3 million, while risk-management segmentrevenues were up slightly to $149.7 million compared to $142.2million a year ago.

Net earnings for the brokerage segment increased to $61.2million in 2013's third quarter compared to $49.6 million a yearago, while net earnings were unchanged at $11.1 million for therisk-management segment.

Chairman, President and CEO J. Patrick Gallagher, Jr. says in astatement, “We had another strong quarter of organic growth andmargin expansion across our global operations. In the thirdquarter, our combined brokerage and risk-management segments posted13 percent growth in adjusted total revenues, 6.2 percent organicgrowth in commission and fee revenues, 17 percent growth inadjusted EBITDAC and adjusted EBITDAC margin improved by 96 basispoints.”

Gallagher also spoke of a new era in how carriers approachrates, stating, “We are encouraged about the state of the rateenvironment. Our recent discussions with carriers confirm that theyhave deep insight into their loss costs and understand what linesof business need rate. We believe we are in a new era of proactiveand rational rate-setting by carriers, which bodes well for thebrokerage industry. This is an excellent rate environment becauseit allows our professionals to successfully bring creativeinsurance and risk management solutions to our clients andprospects.”

In a conference call discussing the results, Gallagher expandedon his thoughts about the rate environment, noting that he spokeearlier this month with management teams of carriers AJG doesbusiness with and “came away very encouraged” that “sensibleunderwriting” will continue. He said the carriers are very aware ofwhere they are and where they are not making money, and have adetatiled understanding of their loss cost inflation numbers. “Inthis investment environment,” he said, “they have to make money bysuccessfully underwriting accounts.”

He said catastrophe-exposed property risks are seeing some raterelief due to the lack of cat events, but added that most otherlines are seeing single percentage point rate increases, which hedescribed as an “orderly market.” The single-digit increases,Gallagher noted, are more acceptable for customers than sharpincreases of 50-100 percent.

Gallagher also discussed changes in the employee-benefits spaceas a result of implementation of the Affordable Care Act, statingthat when it comes to helping customers understand the new law andthe ins and outs of private and public exchanges, AJG's expertisecreates growth opportunities. He said when AJG competes on anaccount, 85 percent of the time it is with a smaller agency. “Andguess what, they don't have a clue,” he said, noting that they“don't know which way the exchanges are going and clients arebeginning to ask those questions.”

He said AJG will have “tremendous new business opportunities”once employers really get serious about the Affordable Care Act,and indicated that employee benefits will likely become a biggerpart of AJG's M&A program. “We're big believers that clientsare going to need our help more today than they ever have, becausethis Affordable Care Act is complicated,” he said.