Gallagher Income Down 44%
By Mark E. Ruquet
NU Online News Service, Oct. 24, 3:09 p.m. EST ??Insurance broker Arthur J. Gallagher & Co., Itasca, Ill., said its third-quarter net income dropped 44 percent over the same period last year due to $28.9 million in investment write-downs.
Gallagher reported that for the third quarter ending Sept. 30 of this year, net income dropped $23.3 million, to $28.9 million from $41.9 million for the same period in 2001. This was despite an increase in revenues of 29 percent, going from $229.6 million for the third quarter of 2001 to $297 million for 2002.
Earnings per share dropped from 47 cents in 2001 to 25 cents for the third quarter of 2002, a drop of 88 percent.
In its first investors conference call today, J. Patrick Gallagher Jr., president and chief executive officer, and other executives explained the $28.9 million write-down, largely due to investment declines in equities and securities.
The firm also said it saw pressures on earnings from the hiring of close to 1,000 new employees, which includes those added through acquisition, to support its growth. The firm said these pressures are temporary and the new hires would eventually add to the firm's growth within the first year to three years of their employment.
Mr. Gallagher said that the firm decided to begin holding regular conference calls to increase transparency and get investors more involved.
"We are not happy to start our conference with a significant write-down," said Mr. Gallagher, adding that growth looks strong for the future and that this financial result does not follow the broker's history.
Mr. Gallagher noted that the current hard market is opening opportunities for the firm to take accounts from regional brokers who are not experienced in the alternative markets, specifically captives, and also to capture business from some larger broker firms.
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