Arthur J. Gallagher's (AJG) chief executive says the new federal health-care law is providing excellent opportunity for the brokerage—and other big producers—as smaller benefit brokers struggle with the statute's various compliance issues.

J. Patrick Gallagher, AJG's president and CEO, said during the company's Q1-results conference call on May 2 that the Patient Protection and Affordable Care Act, of which he has been a critic, is so complex that larger brokerages are benefiting from it because they possess the staff and knowledge to navigate clients through the compliance process.

By comparison, most smaller benefit brokers do not have the resources to adequately educate clients in the law's intricacies, he said, driving business toward larger brokers like AJG.

As new clients continue to seek brokers capable of aiding them, “I've never seen such a selling environment. That business is on fire and continues to be,” said Gallagher.

The Itasca, Ill.-based broker reports an 84 percent increase in its first-quarter net profit, beating analysts' earnings-per-share estimates by 1 cent on an adjusted basis. First-quarter net income was $28 million, up $13 million from the same period last year.

Reported revenues rose 22 percent, or more than $99 million, to $547 million.

The firm also registered organic growth of close to 5 percent.

The results were helped by a P&C environment in which prices are continuing to increase but not enough to indicate a true hard market, said Gallagher.

Carriers are asking for rate increases, especially on Workers' Comp and property business—and they are getting it, he added.

“This couldn't be a better environment for us,” he said. “If this environment stays like this for the next few years, it will benefit us.”

Clients, Gallagher noted, are beginning to spend more. “They believe the worst is behind them,” he said, adding that he hopes “hiring can't be too far off.”

In Q1 2012 the firm acquired 12 agencies, bringing in more than $30 million in revenue—compared to only four acquisitions in Q4 2011.

Special Reports /

AJG Exec: Health Care Law Too Complex, But a Boon to Big Brokers

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