ARTHUR J. GALLAGHER & CO. ITASCA, IL, February 2, 2016 - Arthur J. Gallagher & Co. (NYSE: AJG) today reported its financial results for the quarter ended December 31, 2015. A printer-friendly format of this earnings release, "Supplemental Quarterly Data" and "CFO
Commentary," which includes certain estimates relating to 2016 quarterly results, are available at ajg.com/IR.
For a
description of the non-GAAP measures used to report financial results in this earnings release and information regarding their most comparable GAAP measures, please see "Information Regarding Non-GAAP Measures" beginning on page 9.
"We had a strong quarter to finish an excellent year," said J. Patrick Gallagher, Jr., Chairman, President and CEO. "In the fourth quarter, our combined Brokerage and Risk Management segments posted 10% growth in adjusted revenues, of which 4.2% was total organic growth, adjusted EBITDAC increased 12% and our adjusted EBITDAC margin improved 46 basis
points.
For the year, our combined Brokerage and Risk Management segments posted 17% growth in adjusted revenues, of
which 5.1% was total organic growth, adjusted EBITDAC increased 22% and adjusted margins increased 92 basis points. Total company adjusted net earnings per share grew 12%."
Our Brokerage segment had a strong quarter. Adjusted total revenues increased 11%, of which 2.8% was total organic growth, adjusted EBITDAC increased 12% and we improved our adjusted EBITDAC margin 30 basis points. For the year, adjusted total revenues increased 19%, of which 3.6% was total organic growth, adjusted EBITDAC increased 22%
and we improved our adjusted EBITDAC margin 70 basis points.
During the fourth quarter, we completed 15
acquisitions with annualized revenues of over $46 million, bringing our year-to-date total to 42 acquisitions with
estimated annualized revenues totaling $223 million.
In 2016, while we see retail P&C rates as a headwind, we do see
P&C exposure growth offsetting this partially. We also see employment growth and complexity surrounding the Affordable Care Act as tailwinds for our employee benefit units. In addition, our history of strong new business generation, solid retentions and enhanced value-added services for our carrier partners should all result in further organic growth opportunities around the world. Integration efforts related to larger mergers we did in the U.S., Australia, New Zealand and Canada are effectively done, and we expect our integration efforts in the U.K. to be nearly done by the
end of 2016.
Integration costs in 2016 should be less than half of 2015 amounts. Margins are excellent in most of our
units around the world with some further opportunities for efficiencies in Australia and our U.K. retail and underwriting businesses.
Our Risk Management segment had an outstanding quarter. Total organic revenues increased 10.5%, adjusted EBITDAC increased 17% and we improved our adjusted EBITDAC margin 140 basis points. For the year, total organic revenues increased 11.3%, adjusted EBITDAC increased 18% and we improved our adjusted EBITDAC margin 120 basis points.
Our clean energy investments had a good quarter of consistent production but warmer weather did adversely impact
fourth quarter results by about a penny.
For the year, we topped $100 million in net after-tax earnings. As we look
towards 2016, demand for our remaining plants is robust and nearly all are committed to locations. Accordingly, we anticipate that annualized net after-tax earnings from our clean-energy investments could increase by approximately 15% per annum in 2016 and 2017.
"Finally, our culture is thriving around the world. I am thrilled with the many awards and recognitions we are receiving which are testaments to our unique culture, our high-quality service, and our excellence in leadership and talent development. Most recently, we were recognized by JD Power & Associates as ranking the highest in customer satisfaction among brokers for large commercial insurance, by the Strategic Risk magazine as being the best broker for service in the U.K. and by Advisen s claims satisfaction survey of risk managers and brokers as being the best Third Party Administrator for casualty claims handling. These rankings demonstrate that we are delivering valuable, trusted and thought-leading solutions to our clients."
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The following table provides information that management believes is helpful when comparing fourth quarter 2015 revenues, EBITDAC and diluted net earnings per share with the same period in 2014. In addition, this table provides reconciliations to the most comparable GAAP measures for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share. A reconciliation of EBITDAC is provided on page 11.
Quarter Ended December 31 Segment | Revenues 4th Q 15 4th Q 14 | Chg | EBITDAC 4th Q 15 4th Q 14 | Chg | Diluted Net Earnings Per Share 4th Q 15 4th Q 14 |
(in millions) | (in millions) | ||||
Brokerage, as adjusted | $ 852.1 $ 770.6 | 11% | $ 210.9 $ 189.0 | 12% | $ 0.50 $ 0.48 |
U.K. statutory income tax rate change | - - | - - | 0.02 - | ||
Effective income tax rate impact | - - | - - | - (0.01) | ||
Gains on book sales | (0.3) 4.7 | (0.3) 4.7 | - 0.02 | ||
Acquisition integration | - - | (34.4) (26.5) | (0.11) (0.12) | ||
Workforce & lease termination | - - | (5.1) (1.8) | (0.02) (0.01) | ||
Acquisition related adjustments | - - | (0.7) - | (0.09) 0.01 | ||
Levelized foreign currency translation | - 23.5 | - 6.0 | - 0.02 | ||
Brokerage, as reported | 851.8 798.8 | 170.4 171.4 | 0.30 0.39 | ||
Risk Management, as adjusted | 181.3 167.8 | 8% | 31.1 26.5 | 17% | 0.08 0.08 |
Client run-off | - - | (3.0) (12.9) | (0.02) (0.05) | ||
Workforce & lease termination | - - | (1.0) (0.2) | - - | ||
Claim portfolio transfer ramp up | - - | - (1.7) | - (0.01) | ||
Levelized foreign currency translation | - 4.6 | - 1.4 | - - | ||
Risk Management, as reported | 181.3 172.4 | 27.1 13.1 | 0.06 0.02 | ||
Total Brokerage & Risk Management, as reported | $1,033.1 $ 971.2 | $ 197.5 $ 184.5 | 0.36 0.41 |
Corporate, as adjusted 0.01 (0.02)
Retirement plan de-risking strategies - (0.08)
Litigation settlem ent (0.02) -
Corporate, as reported (0.01) (0.10)
Total Company, as reported Total Brokerage & Risk
Management, as adjusted Total Company, as adjusted
$1,033.4
$ 938.4
10%
$ 242.0
$ 215.5
12%
$ 0.35 $
$ 0.58 $
$ 0.59 $
0.31
0.56
0.54
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The following table provides information that management believes is helpful when comparing 2015 revenues, EBITDAC and diluted net earnings per share with the same period in 2014.
Year Ended December 31 | Revenues | EBITDAC | Diluted Net Earnings Per Share | |||||
Segment | Year 15 Year 14 | Chg | Year 15 Year 14 | Chg | Year 15 Year 14 | |||
(in millions) | (in millions) | |||||||
Brokerage, as adjusted | $3,317.3 | $2,795.0 | 19% | $ 866.8 | $ 709.5 | 22% | $ 2.14 | $ 1.99 |
U.K. statutory income tax rate change | - | - | - | - | 0.02 | - | ||
Gains on book sales | 6.7 | 7.3 | 6.7 | 7.3 | 0.03 | 0.03 | ||
Acquisition integration | - | - | (100.9) | (67.1) | (0.40) | (0.33) | ||
Workforce & lease termination | - | - | (23.0) | (7.8) | (0.09) | (0.03) | ||
Acquisition related adjustments | - | - | (3.4) | (1.1) | (0.16) | (0.02) | ||
Levelized foreign currency translation | - | 94.0 | - | 22.3 | - | 0.06 | ||
Brokerage, as reported | 3,324.0 | 2,896.3 | 746.2 | 663.1 | 1.54 | 1.70 | ||
Risk Management, as adjusted | 728.1 | 660.4 | 10% | 126.0 | 106.6 | 18% | 0.36 | 0.34 |
Client run-off/bankruptcy | (1.0) | - | (4.0) | (12.9) | (0.02) | (0.05) | ||
Workforce & lease termination | - | - | (2.9) | (1.0) | (0.01) | - | ||
Claim portfolio transfer ramp up | - | - | - | (6.4) | - | (0.03) | ||
Levelized foreign currency translation | - | 21.9 | - | 5.4 | - | 0.02 | ||
Risk Management, as reported | 727.1 | 682.3 | 119.1 | 91.7 | 0.33 | 0.28 | ||
Total Brokerage & Risk | ||||||||
Management, as reported | $4,051.1 | $3,578.6 | $ 865.3 | $ 754.8 | 1.87 | 1.98 | ||
Corporate, as adjusted | 0.09 | (0.02) | ||||||
Non-cash gains on changes in owners | - | 0.09 | ||||||
Retirement plan de-risking strategies | - | (0.08) | ||||||
Litigation settlement net gain | 0.10 | - | ||||||
Corporate, as reported | 0.19 | (0.01) | ||||||
Total Company, as reported | $ 2.06 | $ 1.97 | ||||||
Total Brokerage & Risk | ||||||||
Management, as adjusted | $4,045.4 | $3,455.4 | 17% | $ 992.8 | $ 816.1 | 22% | $ 2.50 | $ 2.33 |
hip levels
Total Company, as adjusted
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$ 2.59 $
2.31
Brokerage Segment Fourth Quarter Highlights - The following tables provide information that management believes is helpful when comparing certain 2015 financial information with the same period in 2014 (in millions).Organic Re ve nues (non-GAAP) | 4th Q 15 | 4th Q 14 | Year 15 | Year 14 |
Base Commissions and Fees Commissions as reported | $ 590.1 | $ 559.5 | $ 2,338.7 | $ 2,083.0 |
Fees as reported | 200.0 | 173.8 | 705.8 | 577.0 |
Less commissions and fees from acquisitions | (60.5) | - | (390.6) | - |
Less disposed of operations | - | (1.1) | - | (9.1) |
Levelized foreign currency translation | - | (19.7) | - | (82.1) |
Organic base commissions and fees | $ 729.6 | $ 712.5 | $ 2,653.9 | $ 2,568.8 |
Organic change in base commissions and fees | 2.4% | 3.3% | ||
Supplemental Commissions Supplemental commissions as reported | $ 34.6 | $ 26.5 | $ 125.5 | $ 104.0 |
Less supplemental commissions from acquisitions | (0.2) | - | (9.1) | - |
Levelized foreign currency translation | - | (0.7) | - | (3.5) |
Organic supplemental commissions | $ 34.4 | $ 25.8 | $ 116.4 | $ 100.5 |
Organic change in supplemental commissions | 33.3% | 15.8% | ||
Contingent Commissions Contingent commissions as reported | $ 11.9 | $ 16.3 | $ 93.7 | $ 84.7 |
Less contingent commissions from acquisitions | (0.4) | - | (11.6) | - |
Levelized foreign currency translation | - | (0.4) | - | (1.4) |
Organic contingent commissions | $ 11.5 | $ 15.9 | $ 82.1 | $ 83.3 |
Organic change in contingent commissions | -27.7% | -1.4% | ||
Total organic change | 2.8% | 3.6% |
The following is a summary of Brokerage segment acquisition activity for 2015 and 2014 (in millions except number of acquisitions closed):
Shares issued for acquisitions, earnouts, secondary | 4th Q 15 | 4th Q 14 | Year 15 | Year 14 |
offering and the at-the-market equity program | 0.1 | 2.4 | 10.4 | 28.9 |
Number of acquisitions closed | 15 | 15 | 42 | 60 |
Estimated annualized revenues acquired | $ 46.3 | $ 67.6 | $ 223.2 | $ 761.2 |
Rollover revenues recognized in period from | ||||
2014 and Q1, Q2 and Q3 2015 acquisitions | $ 55.9 | $ 426.3 |
Portion of Q4 2015 acquisitions revenues
recognized in period 5.2 5.2
Total
$ 61.1
(4 of 13)
$ 431.5
Arthur J.Gallagher & Co. issued this content on 02 February 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 02 February 2016 21:55:49 UTC
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