Arthur J Gallagher & Co. (NYSE:AJG) reported third-quarter 2016 adjusted net earnings of 77 cents per share that surpassed the Zacks Consensus Estimate by a penny. The bottom line remained flat year over year.
The company’s outperformance in the quarter was driven by strong performance from the Brokerage segment.
Net profit decreased 8% year over year to 69 cents per share.
Operational Update
Total revenue was $1.48 billion, up 2.8% year over year. The upside was driven by 8% growth in total adjusted revenues in the Brokerage segment. Revenues beat the Zacks Consensus Estimate if $1.46 billion.
Total commissions and fees earned improved 3.4% year over year to $987.9 million in the quarter.
Arthur J Gallagher’s total expense increased 2.8% year over year to $1.39 billion in the quarter. Expenses escalated due to a rise in compensation cost, cost of revenues, interest expenses and higher depreciation and amortization expenses.
Earnings before interest, tax, depreciation and amortization (EBITDAC) decreased 2.9% to $216.4 million.
Segment Results
Brokerage: Adjusted revenues of $876.5 million increased 8% year over year on higher commissions. Total expense increased 2.2% year over year to $728.5 million.
Adjusted EBITDAC increased 9% to $244.8 million.
Risk Management: Adjusted revenues amounted to $176.7 million, down 2% year over year due to lower fees. Total expense decreased 1% year over year to $155.2 million.
Adjusted EBITDAC decreased 7% year over year to $29.6 million.
Corporate
Total revenue came in at $428 million, down 2.7% year over year.
Total expense increased 5.1% year over year.
EBITDAC came in as a loss of $42.7 million, wider than a loss of $9.7 million in the prior-year quarter.
Financial Update
Total assets as of Sep 30, 2016 were $11.2 billion, up 10.7% from $10.9 billion at year-end 2015.
Cash and cash equivalents at the end of the quarter decreased 14% to $531.8 million from year-end 2015.
Shareholders’ equity increased 1.3% from the 2015-end level to $3.7 billion at the end of the quarter.
Acquisition Update
During the quarter, the company closed seven acquisitions with annualized revenues of over $27.4 million.
Zacks Rank and Performance of Other Insurers
Arthur J Gallagher presently carries a Zacks Rank #3 (Hold). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other players in the insurance industry that have reported their third-quarter earnings so far, earnings at Progressive Corp. (NYSE:PGR) and MGIC Investment Corp. (NYSE:MTG) beat their respective Zacks Consensus Estimate, while the bottom line of RLI Corp. (NYSE:RLI) missed the same.
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GALLAGHER ARTHU (AJG): Free Stock Analysis Report
MGIC INVSTMT CP (MTG): Free Stock Analysis Report
RLI CORP (RLI): Free Stock Analysis Report
PROGRESSIVE COR (PGR): Free Stock Analysis Report
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