ITASCA, Ill.—Arthur J. Gallagher & Co. said it is eliminating approximately 4% of its workforce through a combination of job eliminations and attrition over the next few months amid concerns over its current operating environment.
The Itasca, Ill.-based brokerage said Tuesday it will eliminate about 400 middle and back office positions and will record a pretax charge in the fourth quarter of 2009 of between $10 million to $13 million for related severance costs. It expects to achieve annual pretax savings of approximately $25 million to $28 million as a result of the reduction, it said.
Gallagher made the announcement as it reported commission and fee revenue for the first nine months of 2009 increased to an acquisition-fueled $1.29 billion, up 5.9% compared with the same period last year, and a 54% increase in net income to $111.8 million.
While Gallagher's brokerage segment reported 4% higher revenues in the third quarter of 2009 compared with the same quarter in 2008, organic revenue declined 5.5%, the broker said. In addition, revenue within its risk management segment declined 4% in the quarter, with a 2.8% drop in organic revenue.
“I continue to be concerned about the current operating environment as insurance rates remain soft and exposure units continue to decline,” Patrick Gallagher Jr., the broker's chairman, president and chief executive officer, said in a statement. “I believe Gallagher, and the brokerage industry as a whole, will face continued growth challenges in late 2009 and into next year.”
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