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Gallagher reports sharp revenue increase as rates continue to rise

J. Patrick Gallagher Jr.

Insurance buyers face a difficult environment for the remainder of 2022 as insurers push for more rate increases, Arthur J. Gallagher & Co.’s top executive said Thursday.

Higher loss costs, inflation, increased frequency and severity of catastrophe losses, rising court awards and settlements, low investment returns and higher reinsurance costs are forcing underwriters to rethink pricing, said J. Patrick Gallagher Jr., chairman, president and CEO of the brokerage, on a call with analysts to discuss the brokerage’s fourth-quarter results.

“I think carriers will continue to push for rate and don’t see a dramatic change in the near term,” he said.

Even workers compensation rates, which had been flat while other rates increased over the past several years, are increasing, Mr. Gallagher said.

Other lines are still seeing sharp increases. “Professional liability is going through the roof; cyber is almost unbrokable,” he said.

Gallagher reported $1.97 billion in total revenue for the fourth quarter of 2021, a 15.8% increase over the same period a year earlier.

Its core brokerage unit reported $1.47 billion in revenue for the quarter, an 18.7% increase over the 2020 period. Brokerage revenue increased 10.6% on an organic basis, which excludes the effect of acquisitions and foreign exchange fluctuations.

Gallagher completed 19 brokerage acquisitions during the fourth quarter with annualized revenue of $821.1 million, which includes its Dec. 1 acquisition of Willis Towers Watson PLC’s treaty reinsurance business.

Gallagher’s retail property/casualty business saw a 13% increase in organic revenue in the quarter, and its wholesale operations reported 15% organic growth.

Its risk management division, which includes its third-party administration business, reported $254.3 million in revenue, a 17.5% increase over the year-earlier period and up 13.1% on an organic basis.

The company reported net earnings of $120.9 million for the quarter, a 21% decrease compared with the same period in 2020, as compensation, operating expenses, acquisition earnouts and other expenses increased.

For the full year 2021, Gallagher reported $8.21 billion in total revenue, a 17.2% increase over 2020. Net earnings increased 11.3% to $955 million.




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