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Arthur J. Gallagher (AJG) Q4 Earnings in Line, Revenues Lag

Arthur J. Gallagher & Co . AJG recently reported fourth-quarter 2016 adjusted net earnings of 66 cents per share, in line with Zacks Consensus Estimate. The bottom line improved 12% on a year-over-year basis.

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The company's quarterly performance was driven by strong performance by both the Brokerage and Risk Management segments.

Net profit increased by three fold on a year-over-year basis to 3 cents per share.

Operational Update

Total revenue was $1.366 billion, up about 8% year over year. The upside was driven by growth in total adjusted revenues in the Brokerage as well as Risk Management segment. Revenues missed the Zacks Consensus Estimate of $1.389 billion.

Total commissions and fees earned inched up 2.9% year over year to $1.05 billion in the quarter.

Arthur J. Gallagher's total expense increased 0.7% year over year to $1.32 billion in the quarter. Expenses escalated due to a rise in compensation costs, operating costs, cost of revenues from clean coal activities, interest expenses and higher depreciation and amortization expenses.

Earnings before interest, tax, depreciation and amortization (EBITDAC) decreased 21.3% to $197.3 million.

2016 Highlights

Operating earnings came in at $2.74 per share, up 6% year over year.

Operating revenues increased 3.7% year over year to $5.6 billion.

Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise

Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise | Arthur J. Gallagher & Co. Quote

Segment Results

Brokerage : Adjusted revenues of $867.2 million grew 3.7% year over year on higher commissions. Total expense decreased 2.1% year over year to $761.8 million.

Adjusted EBITDAC increased 28% to $210.8 million.

Risk Management : Adjusted revenues were up 2.4% year over year to $176.7 million due to lower fees. Total expense decreased 0.4% year over year to $155.2 million.

Adjusted EBITDAC increased 19.2% year over year to $29.6 million.

Corporate: Total revenue came in at $428 million, up 3.9% year over year. Total expense increased 7.4% year over year to $393.4 million.

EBITDAC came in as a loss of $45.8 million, wider than a loss of $34.8 million in the prior-year quarter.

Financial Update

Total assets as of Sep 30, 2016 were $11.5 billion, up 10.7% from $10.9 billion at year-end 2015.

Cash and cash equivalents at the end of the quarter increased 5.5% to $545.5 million from year-end 2015.

Shareholders' equity increased 1.3% from the 2015-end level to $3.7 billion at the end of the quarter.

Acquisition Update

During 2016, the company closed 37 acquisitions with annualized revenues of over $137.9 million.

Zacks Rank and Performance of Other Insurers

Arthur J. Gallagher presently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Among other players in the insurance industry that have reported their fourth-quarter earnings so far, earnings at Progressive Corp. PGR , MGIC Investment Corp. MTG and RLI Corp. RLI beat their respective Zacks Consensus Estimate.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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