Arthur J. Gallagher (AJG) Q3 Earnings Beat, Improve Y/Y

Arthur J. Gallagher & Co. AJG reported third-quarter 2019 adjusted net earnings of 80 cents per share, which beat the Zacks Consensus Estimate by 1.27%. Moreover, the bottom line increased 2.6% on a year-over-year basis.

The company’s performance was driven by higher adjusted revenues across Brokerage and Risk Management segments, along with strong margin expansion.

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

Operational Update

Adjusted revenues were nearly $1.8 billion, which increased 0.7% year over year. However, the top line missed the Zacks Consensus Estimate by 5.1%.

Arthur J. Gallagher’s total expenses increased 1.3% year over year to $1.7 billion in the reported quarter. Higher compensation, interest, amortization and depreciation attributed to the increase.

Adjusted earnings before interest, tax, depreciation and amortization and change (EBITDAC) in estimated acquisition earnout payables grew 19.8% from the prior-year quarter.

Segment Results

Brokerage: Revenues of $1.19 billion increased 14% year over year on higher fees, and commission, supplemental and contingent revenues.

Expenses increased 12.3% from the year-ago quarter to $996 million.

Adjusted EBITDAC climbed 18% from a year ago to $324.3 million and margin expanded 68 basis points (bps).

Risk Management: Revenues were up 6.3% year over year to $211.6 million, mainly owing to higher fees.

Expenses increased 4.9% from the prior-year period to $224.6 million.

Adjusted EBITDAC increased 7.7% year over year to $38 million and margin grew 3 bps.

Corporate: Total revenues of $383 million were down 22% year over year due to lower revenues from consolidated clean coal facilities.

EBITDAC was negative $53.2 million compared with a negative $51.4 million in the year- ago quarter.

Financial Update

As of Sep 30, 2019, total assets were $19.1 billion, up 17.3% from 2018-end level.

At the end of the quarter, cash and cash equivalents of $0.5 billion decreased 4.7% from 2018-end level.

As of Sep 30, 2019, shareholders’ equity increased 7.4% from the Dec 31, 2018 level to $4.9 billion.

Acquisition Update

In the quarter, the company closed 14 acquisitions with estimated annualized revenues of about $85.1 million.

Zacks Rank

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.

Other Insurance Releases

Of the insurance industry players that have reported third-quarter results so far, The Progressive Corporation PGR, Global Life GL and RLI Corp. RLI beat the respective Zacks Consensus Estimate for earnings.

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