Gallagher: $35M Charge To Settle With Regulators
By Daniel Hays
NU Online News Service, April 26, 11:08 p.m. EDT?A.J. Gallagher & Co. said today it will take a $35 million charge in the first quarter to pay the estimated cost of settlements dealing with its acceptance of controversial contingent commissions from insurers.[@@]
The announcement with the brokerage firm's quarterly results said the charge was its "current best estimate of the amount to resolve the state insurance investigations, which is based on the cost of similar industry settlements, plus an accrual for legal costs."
Brokerage firms have been accused of improperly steering clients to insurers at inflated prices in exchange for contingent commissions, or incentive payments that were often not disclosed.
Several weeks ago Willis brokerage said it had reached an agreement to repay $51 million to clients in a deal with the New York and Minnesota attorney generals offices over contingent fees. It was the lowest amount so far. Marsh and Aon together have paid over $1 billion.
Gallagher, which will say more tomorrow during a conference call, reported a first quarter net earnings loss for the company of $74 million caused by the fee settlement charge and another $131 million to cover a settlement with Headwaters Incorporated over a synthetic coal technology licensing agreement.
The company reported revenues increased to $348.9 million, a $57 million, or 5 percent gain over the previous quarter.
Brokerage operations revenue grew 11 percent reflecting strong acquisition activity, the company said.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.