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Arthur J. Gallagher (AJG) Q4 Earnings Beat, Improve Y/Y

Zacks Equity Research

Arthur J. Gallagher & Co. AJG reported fourth-quarter 2019 adjusted net earnings of 58 cents per share, which beat the Zacks Consensus Estimate by 7.4%. Moreover, the bottom line increased 9.4% on a year-over-year basis.
The company’s performance was driven by higher adjusted revenues across Brokerage and Risk Management segments.

Operational Update

Total revenues were $1.7 billion, up 3.9% year over year.

Arthur J. Gallagher’s total expenses inched up 1.4% year over year to $1.6 billion in the reported quarter. Higher compensation, operating expenses and amortization costs induced this escalation.

Adjusted earnings before interest, tax, depreciation and amortization and change (EBITDAC) in estimated acquisition earnout payables surged 38.1% from the prior-year quarter.

Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise

Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise

Arthur J. Gallagher & Co. price-consensus-eps-surprise-chart | Arthur J. Gallagher & Co. Quote

Segmental Results

Brokerage: Revenues of $1.19 billion increased 19% year over year on higher fees, and commission, supplemental and contingent revenues.

Expenses jumped 16.9% from the year-ago quarter.

Adjusted EBITDAC climbed 26.7% from the year-ago level to $266.9 million and margin expanded 150 basis points (bps).

Risk Management: Revenues were up 6.8% year over year to $252.3 million, mainly owing to higher fees.

Expenses rose 9.6% from the prior-year period to $228.6 million.

Adjusted EBITDAC improved 3.6% year over year to $35 million but margin contracted 10 bps.

Corporate: Total revenues of $276.6 million were down 34% year over year due to lower revenues from consolidated clean coal facilities.

EBITDAC was a negative $36.9 million compared with a negative $52.5 million in the year- ago quarter.

Financial Update

As of Dec 31, 2019, total assets were $19.6 billion, up 20.2% from the 2018-end level.

At the end of the quarter, cash and cash equivalents of $0.6 billion dipped 0.4% from the 2018-end level.

As of Dec 31, 2019, shareholders’ equity increased 14.1% to $5.2 billion from the level on Dec 31, 2018.

Acquisition Update

In the quarter, the company closed 11 acquisitions with estimated annualized revenues of about $117 million.

Full-Year Update

For the year, the company’s total revenues increased 3.8% year over year.

In 2019, the company closed a total of 49 buyouts with estimated annualized revenues of $468 million.

Adjusted earnings for the full year were $3.65 per share, up 6.4% year over year.

Zacks Rank and Performance of Other Insurers

Currently, Arthur J. Gallagher carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other players from the insurance industry having reported fourth-quarter earnings so far, the bottom-line results of Brown & Brown, Inc. BRO and RLI Corp. RLI beat estimates while that of Principal Financial PFG matched the same.

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