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Arthur J Gallagher & Co. (AJG - Snapshot Report) reported fourth-quarter 2013 operating net earnings of 48 cents a share that missed the Zacks Consensus Estimate by a penny. However, the result increased from the prior-year quarter number by 23.1%.

Including the effect of integration costs associated with Bollinger and Giles’ acquisitions, Arthur J Gallagher & Co. reported net earnings of 45 cents a share during the reported quarter that surged 66.7%.  

The year-over-year improvement was driven by top-line growth at Arthur J Gallagher & Co.  

Operational Update

Total revenue of Arthur J Gallagher & Co. amounted to $890.2 million, significantly surpassing the Zacks Consensus Estimate by 16.1%. Results also jumped 32.2% year over year. Top-line growth primarily resulted from better results across its Risk Management and Brokerage segments.

Total commissions and fees earned went up 20.5% year over year to $556.3 million in the quarter.

Arthur J Gallagher & Co.’s total expense also increased 33.9% year over year to $840.2 million during the quarter. The rise in expenses was mainly attributable to increased compensation cost, operating expenses and also significantly higher cost of revenues from clean coal activities.

Segment Results

Brokerage Segment

This segment of Arthur J Gallagher & Co. reported total revenue of $592.7 million that increased 21.2% year over year. This was driven by a 5.8% improvement in base organic commissions and fees during the reported quarter.

Total expense also increased significantly by 18.8% year over year.

Additionally, the fourth quarter saw the segment completing 13 acquisitions in this segment with annualized revenues of $193.5 million.

Risk Management Segment

Total revenue in this segment amounted to $151.5 million increasing 4.6% year over year. Also, organic fees rose 9.3% year over year during the same time period.

Total expense during the fourth quarter moved up 4.8% to $137.6 million.

Moreover, this segment completed a claim portfolio transfer during the reported quarter from an insurance company that is expected to generate $12 million to $15 million of additional annualized revenues.

Corporate Segment

This segment reported total revenues of $146 million that increased nearly four times year over year. Growth was primarily driven by a surge in revenues from consolidated clean coal facilities.

Total expense also surged to $187.7 million during the quarter.

Full-Year 2013 Highlights

Arthur J Gallagher & Co. reported net earnings of $2.06 per share for full year 2013 that increased 29.6% from the 2012 comparable number.

Total revenue grossed $3.18 billion, increasing 26.2% over 2012.

Total expense stood at $2.90 billion, escalating 27.7% from the 2012 figure.

Financial Update

Total assets at Arthur J Gallagher & Co. as of end-2013 stood at $6.86 billion increasing 28.2% from the 2012-end level.

Cash and cash equivalents declined marginally by 1.3% over 2012 level and stood at $298.1 million at the end of 2013.

Zacks Rank

Arthur J Gallagher & Co. presently carries a Zacks Rank #3 (Hold). Other better-ranked insurance stocks worth reckoning include Lincoln National Corp. (LNC - Analyst Report), Marsh & Mclennan Companies, Inc. (MMC - Analyst Report) and China Life Insurance Co. Ltd. (LFC - Analyst Report). All these stocks carry a Zacks Rank #2 (Buy).

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