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Gallagher reports higher revenue, surge in acquisitions

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Arthur J. Gallagher & Co. reported $1.41 billion in revenue for the first quarter of 2017, an 8.6% increase over the same period last year, as the brokerage reported modest organic revenue growth and a higher-than-usual number of acquisitions in the quarter.

In its core brokerage unit, Gallagher reported revenue of $878.5 million, a 6.4% increase over the same period in 2016. Organic growth in commissions and fees was 2.7% for the quarter, down from 4.8% in the first quarter of 2016, as rates in most lines in the United States and United Kingdom remained flat, J. Patrick Gallagher Jr., chairman, president and CEO, said in a conference call with analysts. In Australia and New Zealand, where Gallagher has made several acquisitions over the past few years, property/casualty rates “appear to be turning the corner into positive rate territory,” he said.

Gallagher’s risk management segment, which includes third-party administrator business Gallagher Bassett Services Inc., reported revenue of $182.6 million for the first quarter, up 1.8% over the 2016 period.

The firm reported net earnings of $67.8 million for the quarter, a 17.1% increase over the same period last year.

Gallagher made 12 acquisitions in the first quarter, representing $62.5 million in annualized revenue, compared with eight acquisitions representing $30 million in revenue in the same period last year.

The first quarter is usually one of the quietest for acquisitions for Gallagher, Mr. Gallagher said. Historically, the firm has made dozens of acquisitions each year.

The market for brokerage acquisitions remains extremely competitive with private equity buyers driving up prices, he said.

“This is a frothy market. There’s a lot of private equity money that wants to be in the brokerage space, and every single deal that is going to have a private equity competitor is going to be a fiercely fought deal,” Mr. Gallagher said.