Insurance broker Arthur J. Gallagher reported third-quarter revenues increased 8 percent, putting the effects of last year's contingency fee scandal further behind, but net income was flat.
For the quarter, net income was slightly down by $300,000, from $50.5 million in the comparable period last year to $50.2 million. The slight loss translated into a one cent drop in earnings per share from 52 cents to 51 cents. However, revenues increased $31.3 million, from $389.9 million to $421.2 million.
For the nine months, net income is up 346 percent, primarily due to a one time charge of $131 million related to litigation costs.
Net income for nine months increased from $23.3 million, or 25 cents a share, to $103.9 million, or $1.06 a share. Revenues are up 1 percent, or $11.5 million, from $1.11 billion to $1.12 billion.
Speaking during an analysts call today, J. Patrick Gallagher Jr., president and chief executive officer, said he was "very, very pleased with our results," noting that organic growth increased 9 percent for the nine months and was up 12 percent in the quarter.
He said the key to the Itasca, Ill.-based firm's performance was "keeping what we've got and getting new business."
Both its retail brokerage and risk management services segments showed strong revenue growth, with commission and fees in brokerage up 8 percent, or $21.1 million, to $277.8 million in the quarter, and up 9 percent for the nine months, or $62.6 million, to $757.9 million. Risk management services fees were up 12 percent in the quarter, or $11.1 million, to $104.6 million, and up 9 percent, or $25.6 million, to $299.1 million for the nine months.
When asked about acquisition, Mr. Gallagher said the firm was happier to make a series of small acquisitions than one major one because it was more interested in obtaining talent interested in sticking with the firm than selling out.
He agreed with an observation made yesterday by J. Hyatt Brown, chairman and chief executive officer of Daytona Beach, Fla.-based Brown & Brown, that banks are less inclined to make acquisitions and more and more venture capitalists are getting into the mix.
When asked by an analyst if this concerned him, Mr. Gallagher said it did not.
"They are not long-term players," he said. "People we are trying to get together with are looking at the long term, playing on a higher playing field and having fun in the insurance business, and not worried about flipping the business five years from now."
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