Gallagher reports strong quarterly revenue, but drop in net income
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Arthur J. Gallagher & Co. said Friday that first-quarter revenue was up 34.6% to $1.23 billion, but expenses grew 39.5% to $1.20 billion, hurting net income, which dropped 55.6% to $21.9 million.
Compensation expenses grew 23.4% to $575.2 million, and costs associated with Gallagher's investments in limited liability companies that own 34 clean coal production plants jumped 80.1% to $309.3 million.
For its brokerage segment, Gallagher said organic growth was 4.5% in the first quarter while net income rose 11.9% $36.7 million, overcoming losses in other segments for total company net income of $21.9 million.
Revenue in the brokerage segment grew 33.1% to $751.1 million as commissions increased 26.3% to $519.7 million and fees jumped 56.4% to $146.1 million for the quarter compared with the year-ago period.
Expenses for the brokerage unit increased 34.2% to $690.1 million during the first quarter.
Gallagher's 4.5% brokerage organic brokerage growth resulted from 3% growth domestically and 10% internationally, Chief Financial Officer Douglas K. Howell said during the company's earnings call Friday.
“We're seeing some nice, solid numbers around the globe” and “good results out of our London specialty business,” Mr. Howell said.
J. Patrick Gallagher Jr., chairman, president and CEO, said in addition to organic growth, the company remains focused on mergers and acquisitions.
“Our pipeline is very strong, and I see 2015 to be a very good acquisition year,” Mr. Gallagher said on the call.
“We see good bolt-on opportunities in the U.K., Australia, New Zealand, Canada and the U.S.,” he said. “You'll see us bolt on in those places we've created a platform.”
Mr. Gallagher noted that the U.S. brokerage market is “highly fragmented,” with fewer opportunities among larger businesses with more than $25 million in annual revenue.
“We are very happy to have people with $3 million to $5 million in revenue join the company,” Mr. Gallagher said.
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