Arthur J. Gallagher & Co. AJG reported fourth-quarter 2021 adjusted net earnings of 98 cents per share, which beat the Zacks Consensus Estimate by 5.4%. Moreover, the bottom line increased about 11.4% on a year-over-year basis.
The company’s performance was driven by higher adjusted revenues and margin expansion across the Brokerage segment, offset by higher expenses.
Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise
Total revenues were $1.9 billion, up 18.6% year over year, primarily due to higher commissions, fees, and supplemental and contingent revenues. Moreover, the top line beat the Zacks Consensus Estimate by 5.2%.
Arthur J. Gallagher’s total expense increased 18.4% year over year to $1.8 billion, attributed to higher compensation, higher operating cost, increased cost of revenues from clean coal activities, higher interest, amortization and change in estimated acquisition earnout payables.
Adjusted earnings before interest, tax, depreciation and amortization and change in estimated acquisition earnout payables (EBITDAC) grew 18% from the prior-year quarter to $436.1 million.
Brokerage: Adjusted revenues of $1.4 billion increased 16.7% year over year on higher commissions, fees, and supplemental and contingent revenues.
Adjusted EBITDAC climbed 17.2% from the prior-year quarter to $438.5 million while margin expanded 10 basis points (bps) to 30.1%.
Expenses increased 20.2% to $1.2 billion due to higher compensation, operating, depreciation, amortization and change in estimated acquisition earnout payables.
Risk Management: Adjusted revenues were up 17.6% year over year to $254.3 million.
Adjusted EBITDAC increased 13.7% year over year to $47.4 million while margin contracted 70 bps to 18.6%.
Expenses increased 9.3% to $252.5 million due to higher compensation and operating cost.
Corporate: EBITDAC was negative $49.8 million compared with negative $46.4 million in the year-ago quarter.
As of Dec 31, 2021, total assets were $33.3 billion, up 49.3% from the 2020-end level.
Cash and cash equivalents at year-end increased 25% from the 2020 level to $4.5 billion.
Shareholders’ equity increased 37.3% from Dec 31, 2020 to $8.5 billion as of Dec 31, 2021.
The board of directors increased the quarterly cash dividend by 6.2% to 51 cents per share. The dividend will be paid out on Mar 18, 2022 to shareholders of record as of Mar 4.
In the quarter, the company closed 19 acquisitions, with estimated annualized revenues of $812.1 million.
For the year, the company’s total revenues increased 15.4% year over year to $8 billion.
In 2021, the company closed a total of 36 buyouts with estimated annualized revenues of $952 million.
Adjusted earnings for the full year were $5.48 per share, up 14% year over year.
Currently, Arthur J. Gallagher carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
The Travelers Companies’ TRV bottom line beat the Zacks Consensus Estimate for the fourth quarter of 2021 and increased 6% year over year. Total revenues increased 7% from the year-ago quarter to about $9 billion and beat the Zacks Consensus Estimate of $8.7 billion.
Travelers’ net written premiums increased 10% year over year. The combined ratio deteriorated 130 basis points (bps) year over year.
Brown & Brown’s BRO bottom line beat the Zacks Consensus Estimate by 10.5% and rose 31.2% from the year-ago figure.
Adjusted revenues of $739 million beat the Zacks Consensus Estimate by 1.5% and rose 15.1% year over year on higher commissions and fees. Brown & Brown’s commissions and fees grew 15.3% year over year to $737.9 million. Investment income however plunged 80% year over year to $0.2 million.
The Progressive Corporation’s PGR bottom line beat the Zacks Consensus Estimate of 99 cents. However, the bottom line declined 43.2% from the year-ago quarter. Net premiums written were $10.7 billion in the quarter, up 13% from $9.5 billion a year ago.
Progressive’s net premiums earned grew 14% to nearly $11.6 billion. The combined ratio deteriorated 630 bps from the prior-year quarter to 94.7.
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