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Arthur J. Gallagher 2Q Results Short of Views

Source: Dow Jones

Posted on 28 Jul 2010

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Arthur J. Gallagher & Co. (AJG) second-quarter earnings rose a meager 0.5% as results underperformed analysts' expectations.

The insurance broker and risk-management firm is continuing to experience one of the most difficult economic environments in its history, Chairman and Chief Executive J. Patrick Gallagher Jr. said Tuesday. He said client exposures are declining and the insurance market softened even further in the most recent period.

The fifth-largest broker in the world has grown by buying smaller insurance companies, including three last month alone.

Arthur J. Gallagher posted a profit of $44 million, or 42 cents a share, compared with $43.8 million, or 44 cents a share, a year earlier. The most recent period included a 2-cent boost from earnings from discontinued operations, and the company had 3.9% more shares outstanding.

Revenue increased 1.3% to $459.5 million.

Analysts surveyed by Thomson Reuters predicted earnings of 46 cents on revenue of $464 million.

Commissions, which are more than half of total revenue, rose 2.9%, while fees dropped 4%.

At the brokerage segment, revenue rose 2% but earnings dropped 9.9% as compensation and operating expenses rose. Risk management saw a modest increase in earnings despite a slight drop in revenue as the division's expenses dropped.

Arthur J. Gallagher shares were inactive after-hours after closing at $25.99. The stock has risen 15% so far this year, outperforming the broader market.