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Top insurance brokers, No. 4: Arthur J. Gallagher & Co.

J. Patrick Gallagher Jr.

2018 brokerage revenue: $5.11B

Percent increase (decrease): 12.5%

Acquiring talent and market share through smaller, strategic acquisitions continued to be Arthur J. Gallagher & Co.’s modus operandi in 2018.

The Rolling Meadows, Illinois-based brokerage completed another 44 acquisitions in 2018 — including several overseas — with an estimated annual revenue of about $317.9 million and added an additional 3,500 employees to its workforce.

In the past 30 years, the brokerage has completed more than 500 acquisitions, said J. Patrick Gallagher Jr., the company’s chairman, president and CEO.

“2018 was sort of a vintage year for Gallagher,” said Mark Dwelle, director of insurance equity research at RBC Capital Markets LLC in Richmond, Virginia. “(The brokerage) continued to be very active on the merger and acquisitions front, adding a lot of good properties in the U.S. and Europe, and has continued on with that trend in the early part of 2019.”

With a 12.5% increase in brokerage revenue over 2017 — totaling $5.11 billion in 2018 — Gallagher retained its No. 4 spot in Business Insurance’s 2019 ranking of the world’s largest brokerages.

Premium rate increases and value-added services have contributed to increased organic growth in the five largest brokerages, which combined showed a 4% organic growth rate in 2018, said Martha Butler, senior director of New York-based Fitch Ratings Inc.

Gallagher’s organic growth rate of 5.9% led its large broker peers in 2018, said Mr. Dwelle, noting that the company has “really been delivering” on both internal and external factors.

Mr. Gallagher attributes the organic growth to its aggressive focus on sales and client retention.

Acquisition activity among brokerages increased again in 2018 over 2017, and brokerages’ appetite for acquisitions “just keeps ramping up,” said Ms. Butler.

Gallagher has been more active than most of its peers on the acquisition front, said Mr. Dwelle.

Mr. Gallagher says the company will continue with its aggressive acquisition strategy and buy firms that fit in with the brokerage’s collegiate culture and tuck them into the company’s existing businesses.

“The opportunity for us to do acquisitions is better than it’s ever been,” he said. “That means we get to take a step back and be picky. And what we’re picky about is culture.”

In March, the company also made a significant move into the aerospace industry through the acquisition of Jardine Lloyd Thompson Group PLC’s aerospace division. This acquisition gave Gallagher JLT’s global aerospace retail and wholesale insurance broking division, and an additional 250 employees, according to a Gallagher statement.

Marsh & McLennan Cos. Inc., which acquired the rest of JLT, was compelled by European Commission regulators to divest the aerospace division for fear the Marsh/JLT combination would significantly reduce competition in that sector. Although financial details of the agreement, which was finalized in June, were not released, JLT valued the deal at about $250.9 million.

Mr. Dwelle said the acquisition gives Gallagher “a new capability.”

Mr. Gallagher said the aerospace acquisition will provide significant growth opportunities internationally. In 2018, the company generated approximately 30% of its combined brokerage and risk management revenue outside of the U.S. In 2009, 11% of its revenues were derived internationally, according to Securities and Exchange Commission filings.

Mr. Gallagher says Gallagher has growth plans in every country and plans to continue its strategic acquisition strategy both in the U.S. and globally. “We’re expanding literally everywhere around the world,” he said.

For example, Gallagher is in the process of building its South American operations, which contributed to $32.3 million in revenue in 2018 through the acquisition of local family-owned brokerage firms, and the brokerage currently has a presence in Chile, Peru, Columbia and Argentina.

The company also continues to focus on developing future talent. This year, Gallagher expanded its internship program, bringing on another 100 college students to bring the global intern total to 500.

“We’re introducing these college students to this great industry,” said Mr. Gallagher. “We’re probably not going to hire more than 100 of them, but by showing them the many opportunities this industry has to offer, in a sense we’re really contributing to the whole industry.”





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