Arthur J. Gallagher First Quarter Off 64 Percent

Commenting on Gallagher's $19.3 million after-tax investment write-off, J. Patrick Gallagher said during a conference call: "Of course I was disappointed. We will no longer be doing venture capital deals–we will not be putting in any more money in venture capital deals."

On a brighter note, Gallagher & Co. posted a strong revenue growth, with its brokerage segment revenue increasing 22 percent to $188 million in the 2003 first quarter from $154.7 million one year ago. Its risk-management revenue also rose by 10 percent, to $76.7 million from $70 million.

"In the brokerage segment, our 22 percent revenue growth, we think, is a great start for the year. This is a tribute to the sales and service culture we got in our company. The new business effort has been outstanding. And this is a tough environment for new business," Mr. Gallagher said.

Mark Dwelle, an equity analyst at Baltimore-based Ferris, Baker Watts Inc., agreed that the tumble in the net profit was because of the decision by the company to write off investments it had in venture capital, development-stage enterprises and turn-arounds. Excluding the write-off, the net income would have been just shy of meeting last year's numbers, he said.

But Mr. Dwelle, whose firm today downgraded Gallagher from "Buy" to "Hold", said that in the near term, he sees some pressure from higher employee costs and possibly further pressure from the lack of visibility concerning their alternative investment portfolios.

"But our long-term outlook is still positive. We still regard Gallagher as one of the very best among the brokers," he told National Underwriter.

"Its brokerage segment revenue grew by 22 percent, which was very good. The overall revenue growth was in line with our expectations," Mr. Dwelle said.