ARTHUR J. GALLAGHER & CO. ITASCA, IL, July 28, 2016 - Arthur J. Gallagher & Co. (NYSE: AJG) today reported its financial results for the quarter ended June 30, 2016. Management will host a webcast conference call to discuss these results on Friday, July 29, 2016 at 9:00 a.m. ET/8:00 a.m. CT. To listen to the call, and for printer-friendly formats of this release and the "Supplemental Quarterly Data" and "CFO Commentary," which may also be referenced during the call, please visit ajg.com/IR. These documents contain both
GAAP and non-GAAP measures.
Investors and other users of this information should read carefully the section entitled
"Information Regarding Non-GAAP Measures" beginning on page 9.
Summary of Financial Results - Second Quarter Reconciliations of non-GAAP measures begin on page 2(Dollars in millions, except per share data)
2nd Q 2016 2nd Q 2015 Change Reported Adjusted Reported Adjusted Reported AdjustedBr okerage Segment
GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAPRevenues | $ 939.1 | $ 937.7 | $ 885.6 | $ 866.7 | 6% | 8% |
Organic revenues Net earnings | $ 114.9 | $ 872.4 | $ 100.3 | $ 853.5 | 15% | 2.2% |
Net earnings margin Adjus ted EBITDAC | 12.2% | $ 284.5 | 11.3% | $ 258.0 | +91 bpts | 10% |
Adjus ted EBITDAC margin | 30.3% | 29.8% | +57 bpts | |||
Diluted net earnings per share | $ 0.64 | $ 0.75 | $ 0.58 | $ 0.70 | 10% | 7% |
Risk Mana ge ment Segment
Revenues | $ 176.5 | $ 176.5 | $ 189.4 | $ 187.4 | -7% | -6% |
Organic revenues Net earnings | $ 13.9 | $ 174.8 | $ 17.1 | $ 180.3 | -19% | -3.1% |
Net earnings margin Adjus ted EBITDAC | 7.9% | $ 30.1 | 9.0% | $ 32.6 | -115 bpts | -8% |
Adjus ted EBITDAC margin | 17.1% | 17.4% | -35 bpts | |||
Diluted net earnings per share | $ 0.08 | $ 0.08 | $ 0.10 | $ 0.10 | -20% | -20% |
Corporate Segment
Diluted net earnings per share
Total Company
$ 0.12 $
0.14 $
0.13 $
0.13 -8% 8%
Diluted net earnings per share Diluted weighted average shares | $ 0.84 | $ 0.97 | $ 0.81 | $ 0.93 | 4% | 4% |
outstanding (in millions) | 178.3 | 171.7 |
"During the second quarter and first half of the year we improved our profitability margin, we posted solid growth in revenue
and we grew earnings per share.
We are pleased with our performance year to date and the fundamentals of our business
remain strong," said J. Patrick Gallagher, Jr., Chairman, President and CEO. "Our recent internal survey suggests P&C pricing is moderating at about the same level as last year across our global footprint. Property continues to experience the largest
price reductions, while casualty pricing is flat to down modestly. The survey results point to a stable market with the majorit of respondents expecting no significant change in the pricing environment this year. This is a good environment for our skilled production team."
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Summary of Financial Results - Six Months Ended June 30, 2016 Reconciliations of non-GAAP measures begin on page 3(Dollars in millions, except per share data)
6 Months 2016 6 Months 2015 Change Reported Adjusted Reported Adjusted Reported AdjustedBrokerage Segment GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
Revenues | $ 1,764.6 | $ 1,761.0 | $ 1,636.7 | $ 1,599.2 | 8% | 10% |
Organic revenues Net earnings | $ 180.8 | $ 1,629.7 | $ 140.9 | $ 1,573.0 | 28% | 3.6% |
Net earnings margin Adjusted EBITDAC | 10.3% | $ 475.7 | 8.6% | $ 422.3 | +169 bpts | 13% |
Adjusted EBITDAC margin | 27.0% | 26.4% | +60 bpts | |||
Diluted net earnings per share | $ 0.99 | $ 1.15 | $ 0.80 | $ 1.06 | 24% | 8% |
Risk Management Segment
Revenues | $ 355.8 | $ 355.8 | $ 366.6 | $ 362.1 | -3% | -2% |
Organic revenues Net earnings | $ 28.9 | $ 352.2 | $ 32.0 | $ 349.8 | -10% | 0.7% |
Net earnings margin Adjusted EBITDAC | 8.1% | $ 61.6 | 8.7% | $ 61.5 | -61 bpts | 0% |
Adjusted EBITDAC margin | 17.3% | 17.0% | +33 bpts | |||
Diluted net earnings per share | $ 0.16 | $ 0.17 | $ 0.19 | $ 0.18 | -16% | -6% |
Corporate Segment
Diluted net earnings (loss) per share
Total Company
$ (0.05) $
(0.01) $
(0.04) $
(0.04)
25% -75%
Diluted net earnings per share Diluted weighted average shares | $ 1.10 | $ 1.31 | $ 0.95 | $ 1.20 | 16% | 9% |
outstanding (in millions) | 178.0 | 169.3 |
(in millions) (in millions)
(in millions)
Brokerage, as reported | $ 939.1 | $ 885.6 | $ 114.9 | $ 100.3 | $ 267.7 | $ 234.0 | $ 0.64 | $ 0.58 |
Gains on book sales | (1.4) | (3.5) | (1.0) | (2.5) | (1.4) | (3.5) | - | (0.01) |
Acquisition integration | - | - | 8.4 | 16.1 | 11.9 | 22.4 | 0.05 | 0.09 |
Workforce & lease termination | - | - | 3.2 | 4.3 | 4.5 | 6.0 | 0.02 | 0.02 |
Acquisition related adjustments | - | - | 8.0 | 4.8 | 1.8 | 2.5 | 0.04 | 0.03 |
Levelized foreign currency translation | - | (15.4) | - | (1.3) | - | (3.4) | - | (0.01) |
Brokerage, as adjusted * | 937.7 | 866.7 | 133.5 | 121.7 | 284.5 | 258.0 | 0.75 | 0.70 |
Risk Management, as reported | 176.5 | 189.4 | 13.9 | 17.1 | 29.7 | 33.1 | 0.08 | 0.10 |
Workforce & lease termination | - | - | 0.3 | 0.2 | 0.4 | 0.3 | - | - |
Acquisition related adjustments | - | - | - | (0.3) | - | - | - | - |
Levelized foreign currency translation | - | (2.0) | - | (0.5) | - | (0.8) | - | - |
Risk Management, as adjusted * | 176.5 | 187.4 | 14.2 | 16.5 | 30.1 | 32.6 | 0.08 | 0.10 |
Corporate, as reported | 311.5 | 296.4 | 26.9 | 30.2 | (30.9) | (24.7) | 0.12 | 0.13 |
Impact of 2015 litigation settlement | - | - | 4.4 | - | 5.5 | - | 0.02 | - |
Corporate, as adjusted * | 311.5 | 296.4 | 31.3 | 30.2 | (25.4) | (24.7) | 0.14 | 0.13 |
Total Company, as reported | $1,427.1 | $1,371.4 | $ 155.7 | $ 147.6 | $ 266.5 | $ 242.4 | $ 0.84 | $ 0.81 |
Total Company, as adjusted * | $1,425.7 | $1,350.5 | $ 179.0 | $ 168.4 | $ 289.2 | $ 265.9 | $ 0.97 | $ 0.93 |
Total Brokerage & Risk Management, as reported | $1,115.6 | $1,075.0 | $ 128.8 | $ 117.4 | $ 297.4 | $ 267.1 | $ 0.72 | $ 0.68 |
$1,114.2
$1,054.1
$ 147.7
$ 138.2
$ 314.6
$ 290.6
$ 0.83 $
0.80
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* For 2016, the pretax impact of the Brokerage Segment adjustments totals $26.3 million, with a corresponding adjustment to the provision for income taxes of $7.7 million relating to these items. The pretax impact of the Risk Management Segment adjustments totals $0.4 million, with a corresponding adjustment to the provision for income taxes of $0.1 million relating to these items. The pretax impact of the Corporate Segment adjustments totals $5.5 million, with a corresponding adjustment to the provision for income taxes of $1.1 million relating to these items. A detailed reconciliation of the 2016 and 2015 provision for income taxes is shown on page 13.
Six Months Ended June 30 Reported GAAP to Adjusted Non-GAAP Reconciliation: Revenues Net Earnings EBITDAC Diluted Net Earnings (Loss) Per Share Segment 6 Mths 16 6 Mths 15 6 Mths 16 6 Mths 15 6 Mths 16 6 Mths 15 6 Mths 16 6 Mths 15(in millions) (in millions)
(in millions)
Brokerage, as reported | $1,764.6 | $1,636.7 | $ 180.8 | $ 140.9 | $ 444.5 | $ 372.5 | $ 0.99 | $ 0.80 |
Gains on book sales | (3.6) | (4.4) | (2.5) | (3.1) | (3.6) | (4.4) | (0.01) | (0.02) |
Acquisition integration | - | - | 18.4 | 30.0 | 26.1 | 43.2 | 0.10 | 0.18 |
Workforce & lease termination | - | - | 4.3 | 10.1 | 6.1 | 14.5 | 0.02 | 0.06 |
Acquisition related adjustments | - | - | 8.3 | 8.8 | 2.6 | 2.5 | 0.05 | 0.05 |
Levelized foreign currency translation | - | (33.1) | - | (1.7) | - | (6.0) | - | (0.01) |
Brokerage, as adjusted * | 1,761.0 | 1,599.2 | 209.3 | 185.0 | 475.7 | 422.3 | 1.15 | 1.06 |
Risk Management, as reported | 355.8 | 366.6 | 28.9 | 32.0 | 60.7 | 62.7 | 0.16 | 0.19 |
Workforce & lease termination | - | - | 0.6 | 0.3 | 0.9 | 0.5 | 0.01 | - |
Acquisition related adjustments | - | - | - | (0.3) | - | - | - | - |
Levelized foreign currency translation | - | (4.5) | - | (1.1) | - | (1.7) | - | (0.01) |
Risk Management, as adjusted * | 355.8 | 362.1 | 29.5 | 30.9 | 61.6 | 61.5 | 0.17 | 0.18 |
Corporate, as reported | 607.1 | 599.4 | 3.9 | 7.1 | (69.3) | (49.5) | (0.05) | (0.04) |
Impact of 2015 litigation settlement | - | - | 8.1 | - | 10.2 | - | 0.04 | - |
Corporate, as adjusted * | 607.1 | 599.4 | 12.0 | 7.1 | (59.1) | (49.5) | (0.01) | (0.04) |
Total Company, as reported | $2,727.5 | $2,602.7 | $ 213.6 | $ 180.0 | $ 435.9 | $ 385.7 | $ 1.10 | $ 0.95 |
Total Company, as adjusted * | $2,723.9 | $2,560.7 | $ 250.7 | $ 223.0 | $ 478.2 | $ 434.3 | $ 1.31 | $ 1.20 |
Total Brokerage & Risk Management, as reported | $2,120.4 | $2,003.3 | $ 209.7 | $ 172.9 | $ 505.2 | $ 435.2 | $ 1.15 | $ 0.99 |
$2,116.8
$1,961.3
$ 238.8
$ 215.9
$ 537.3
$ 483.8
$ 1.32 $
1.24
* For 2016, the pretax impact of the Brokerage Segment adjustments totals $40.4 million, with a corresponding adjustment to the provision for income taxes of $11.9 million relating to these items. The pretax impact of the Risk Management Segment adjustments totals $0.9 million, with a corresponding adjustment to the provision for income taxes of $0.3 million relating to these items. The pretax impact of the Corporate Segment adjustments totals $10.2 million, with a corresponding adjustment to the provision for income taxes of $2.1 million relating to these items. A detailed reconciliation of the 2016 and 2015 provision for income taxes is shown on page 14.
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Brokerage Segment Reported GAAP to Adjusted Non-GAAP Reconciliations (dollars in millions):Or ganic Revenues (Non-GAAP) | 2nd Q 16 | 2nd Q 15 | Change | 6 Mths 16 | 6 Mths 15 | Change |
Base Commissions and Fees | ||||||
Commissions and fees, as reported | $ 861.7 | $ 812.3 | 6.1% | $ 1,586.8 | $ 1,478.1 | 7.4% |
Less commissions and fees from acquisitions | (50.5) | - | (100.9) | - |
Less disposed of operations - (0.5) - (0.8)
Levelized foreign currency translation - (14.6) - (31.0)
Organic base commissions and feesSupple mental Commissions Supplemental commissions, as reported
$ 811.2
$ 38.6
$ 797.2
$ 34.8
1.8%
10.9%
$ 1,485.9
$ 71.5
$ 1,446.3
$ 61.7
2.7%
15.9%
Less supplemental commissions from acquisitions (0.3) - (1.3) - Levelized foreign currency translation - (1.1) - (1.8)
Organic supplemental commissionsContingent Commis sions
Contingent commissions, as reported$ 38.3
$ 25.1
$ 33.7
$ 22.8
13.7% $
10.1% $
70.2
80.3
$ 59.9
$ 67.3
17.2%
19.3%
$ 22.9 | $ 22.6 | 1.3% | $ 73.6 | $ 66.8 | 10.2% |
$ 925.4 | $ 869.9 | 6.4% | $ 1,738.6 | $ 1,607.1 | 8.2% |
Less contingent commissions from acquisitions (2.2) - (6.7) - Levelized foreign currency translation - (0.2) - (0.5)
Organic contingent commissions Total reported commissions, fees, supplemental commissions and contingent commissionsLess commissions and fees from acquisitions (53.0) - (108.9) -
Less disposed of operations - (0.5) - (0.8)
Levelized foreign currency translation - (15.9) - (33.3)
Total organic commissions, fees, supplemental commissions and contingent commissions$ 872.4
$ 853.5
2.2%
$ 1,629.7
$ 1,573.0
3.6%
Of the 2.2% growth in total organic revenues for second quarter 2016, domestic posted 3% growth and international posted 1% growth. As previously announced, the loss of one large international account negatively impacted organic growth; excluding the lost account, international would have posted 2% growth and total brokerage would have posted 2.5% growth.
Acquisition Activity 2nd Q 16 2nd Q 15 6 Mths 16 6 Mths 15
Number of acquisitions closed * | 13 | 11 | 21 | 22 |
Estimated annualized revenues acquired (in millions) | $ 40.4 | $ 82.3 | $ 70.4 | $ 115.9 |
* Gallagher repurchased 697,000 shares in the second quarter of 2016 to fully offset shares issued for tax-free exchange mergers in the quarter. Gallagher also repurchased 804,000 shares in the second quarter of 2016 in contemplation of closing tax-free exchange mergers that are anticipated to occur in the third quarter of 2016 or thereafter.
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Arthur J.Gallagher & Co. published this content on 28 July 2016 and is solely responsible for the information contained herein.
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