Today's Viewpoint: A MarshBerry Publication

ARTHUR J. GALLAGHER ANNOUNCES 3Q22 EARNINGS RESULTS

Arthur J. Gallagher & Co. reported 3Q2022 results yesterday, with adjusted Earnings Per Share of $1.72 on total revenue of $2.01 billion. This compares to consensus estimates of $1.66 adjusted EPS on $2.04 billion revenue. Read the five things you should know about this earnings report.

Arthur J. Gallagher & Co. (AJG) reported 3Q2022 results yesterday, with adjusted Earnings Per Share (EPS) of $1.72 on total revenue of $2.01 billion. This compares to consensus estimates of $1.66 adjusted EPS on $2.04 billion revenue. Here are five things you should know about this earnings report.

  1. AJG reported organic growth of 8.4% in 3Q22 (vs. 10.7% in 2Q22), with its U.S. retail business and U.S. wholesale operations both posting 9% organic growth. The brokerage segment reported a 32.3% adjusted EBITDAC (Earnings Before Interest, Taxes, Depreciation, Amortization & Change) margin, while Risk Management segment reported an 18.2% adjusted EBITDAC.
  2. During 3Q22, AJG completed six new tuck-in brokerage mergers, representing approximately $20M in annualized revenue. The company also signed another merger in the third quarter, which represents roughly $40 million in annualized revenue. Looking at the pipeline, more than 50 term sheets are signed or are being prepared, comprising nearly $400 million of annualized revenue. AJG Chairman, President and CEO J. Patrick Gallagher commented that although all of them will not close, “we believe we will get our fair share.”
  3. The 3Q22 global Property & Casualty (P&C) renewal premium (both rate and exposure combined) increase of 10.5% was in-line with 2Q22’s 10.5%. Most lines of coverage saw rate increases similar to the first half of the year, with Directors and Officers (D&O) insurance being the exception, where rates are close to flat.
  4. Gallagher stated: “Our customers’ third quarter business activity was not reflective of any economic slowdown.” Again, revenue related to 3Q22 mid-term policy endorsements, audits and cancellations were higher vs. 3Q21 levels. Renewal premium increase remained consistent with the prior year’s level.
  5. There are still signs of hardening in the reinsurance market, with Gallagher stating, “The stage is set for hard or even harder renewals as we enter the important 1/1 renewal season.” While AJG hasn’t seen the impact of Hurricane Ian spill into non-property lines yet, the company believes it could happen if there’s a shift in reinsurance risk appetite and capacity deployment strategies. Gallagher elaborated: “Reinsurance conditions will no doubt influence primary markets in 2023 and carriers are already facing rising loss costs in property and casualty lines. We see good reason for our carrier partners to continue to underwrite retail and wholesale risks cautiously for the foreseeable future.”

To learn more visit: Arthur J. Gallagher & Co. Third Quarter 2022 Financial Results

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This earnings summary has been prepared by Marsh, Berry & Co., LLC. and is not intended to provide investment recommendations on any company. It is not a research report, as such term is defined by applicable laws and regulations, and it does not contain sufficient information upon which to make an investment decision. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities, financial instruments or to participate in any particular trading strategy. These materials are based solely on information contained in publicly available documents and Marsh, Berry & Co., LLC has not independently attempted to investigate or to verify such information. 

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