Arthur J. Gallagher & Co. (AJG - Free Report) reported first-quarter 2023 adjusted net earnings of $3.03 per share, which beat the Zacks Consensus Estimate by 1% and our estimate of $2.98. Moreover, the bottom line increased about 7.8% on a year-over-year basis.
Total revenues were $2,672.9 million, up 11.2% year over year, primarily driven by higher commissions, fees and supplemental, contingent revenues and investment income. Moreover, the top line beat the Zacks Consensus Estimate by 0.3% and our estimate of $2,605.2 million.
The quarterly results benefited from higher adjusted revenues and margin expansion across the Brokerage and the Risk Management segments, partially offset by higher expenses.
Operational Update
Arthur J. Gallagher’s total expense increased 10.7% year over year to $2,100.3 million, attributed to higher compensation, higher operating cost, reimbursements, higher interest, depreciation and change in estimated acquisition earnout payables. The figure is higher than our estimate of $1,981.3 million.
Adjusted earnings before interest, tax, depreciation, amortization and change in estimated acquisition earnout payables (EBITDAC) grew 11.8% from the prior-year quarter to $874.9 million. The figure is lower than our estimate of $896.3 million.
Segment Results
Brokerage: Adjusted revenues of $2,375 million increased 14.1% year over year on higher commissions, fees, supplemental and contingent revenues and investment income. This metric missed the Zacks Consensus Estimate by 1.2% but beat our estimate of $2,296.8 million. Strong results were supported by new business production, renewal premium increases and consistently stable retention.
Adjusted EBITDAC climbed 14.6% from the prior-year quarter to $958.4 million while the margin expanded 20 basis points (bps) to 40.4%. Adjusted EBITDAC for the quarter beat the Zacks Consensus Estimate by 0.9%.
Expenses increased 12% to $1,684.3 million, driven by higher compensation, operating, depreciation, and change in estimated acquisition earnout payables.
Risk Management: Adjusted revenues were up 16.2% year over year to $297.5 million on higher fees. However, the metric missed the Zacks Consensus Estimate by 1.6% and our estimate of $307.9 million. Strong results from this segment were caused by continued growth from new business wins, the New Zealand cyclone and flooding contributing to the upside.
Adjusted EBITDAC increased 28% year over year to $57.1 million, while the margin expanded 180 bps to 19.2%. Adjusted EBITDAC for the quarter beat the Zacks Consensus Estimate by 17.4%.
Expenses increased 10.8% to $285.3 million because of higher compensation, operating cost and reimbursements.
Corporate: EBITDAC was negative $57.2 million compared with negative $32.4 million in the year-ago quarter.
Financial Update
As of Mar 31, 2023, total assets were $45,094.4 million, up from $38,358.4 million at 2022-end.
As of Mar 31, 2023, cash and cash equivalents increased to $1,549.9 million from $842.3 million at 2022-end.
Shareholders’ equity increased 7.3% from Dec 31, 2022, to $9,858.3 million as of Mar 31, 2023.
Acquisition Update
In the quarter, the company closed 10 acquisitions with estimated annualized revenues of $69 million.
2023 Guidance
Management of AJG expects organic growth in the brokerage segment to be between 7% and 9% in 2023, the mid-point of which indicates a deterioration of 17.5% from the 2022 figure of 9.7%.
Adjusted EBITDAC margin are expected to rise between 60 and 80 bps in 2023, the mid-point of which indicates a 30% decrease from the 2022 rise of 100 bps.
Organic growth in the Risk Management segment is expected to be between 12% and 13% in 2023, the mid-point of which indicates a 6% fall from the 2022 figure of 13.3%.
Adjusted EBITDAC margin in the Risk Management segment is expected to rise more than 19% for 2023, indicating a 2.7% rise from the 2022 figure of 18.5%.
Zacks Rank
Currently, Arthur J. Gallagher carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Marsh & McLennan Companies, Inc. (MMC - Free Report) reported first-quarter 2023 adjusted earnings per share of $2.53, which outpaced the Zacks Consensus Estimate of $2.45 by 3.3%. The bottom line advanced 10% year over year.
Consolidated revenues of MMC amounted to $5,924 million, which rose 7% year over year. The figure improved 9% on an underlying basis. The top line beat the consensus mark by 1.3%.
Willis Towers Watson Public Limited Company (WTW - Free Report) delivered first-quarter 2023 adjusted earnings of $2.84 per share, which beat the Zacks Consensus Estimate by 1.1%. The bottom line improved 6.8% year over year.
The solid performance of WTW’s Health, Wealth & Career segment and lower expenses were offset by the soft performance of the Risk & Broking segment.
Brown & Brown, Inc.’s (BRO - Free Report) first-quarter 2023 adjusted earnings of 84 cents per share beat the Zacks Consensus Estimate by 3.7%. The bottom line increased 13.5% year over year.
The quarterly results reflected improved organic growth and higher net investment income, partly offset by higher expenses.
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Arthur J. Gallagher & Co. (AJG - Free Report) reported first-quarter 2023 adjusted net earnings of $3.03 per share, which beat the Zacks Consensus Estimate by 1% and our estimate of $2.98. Moreover, the bottom line increased about 7.8% on a year-over-year basis.
Total revenues were $2,672.9 million, up 11.2% year over year, primarily driven by higher commissions, fees and supplemental, contingent revenues and investment income. Moreover, the top line beat the Zacks Consensus Estimate by 0.3% and our estimate of $2,605.2 million.
The quarterly results benefited from higher adjusted revenues and margin expansion across the Brokerage and the Risk Management segments, partially offset by higher expenses.
Operational Update
Arthur J. Gallagher’s total expense increased 10.7% year over year to $2,100.3 million, attributed to higher compensation, higher operating cost, reimbursements, higher interest, depreciation and change in estimated acquisition earnout payables. The figure is higher than our estimate of $1,981.3 million.
Adjusted earnings before interest, tax, depreciation, amortization and change in estimated acquisition earnout payables (EBITDAC) grew 11.8% from the prior-year quarter to $874.9 million. The figure is lower than our estimate of $896.3 million.
Segment Results
Brokerage: Adjusted revenues of $2,375 million increased 14.1% year over year on higher commissions, fees, supplemental and contingent revenues and investment income. This metric missed the Zacks Consensus Estimate by 1.2% but beat our estimate of $2,296.8 million. Strong results were supported by new business production, renewal premium increases and consistently stable retention.
Adjusted EBITDAC climbed 14.6% from the prior-year quarter to $958.4 million while the margin expanded 20 basis points (bps) to 40.4%. Adjusted EBITDAC for the quarter beat the Zacks Consensus Estimate by 0.9%.
Expenses increased 12% to $1,684.3 million, driven by higher compensation, operating, depreciation, and change in estimated acquisition earnout payables.
Risk Management: Adjusted revenues were up 16.2% year over year to $297.5 million on higher fees. However, the metric missed the Zacks Consensus Estimate by 1.6% and our estimate of $307.9 million. Strong results from this segment were caused by continued growth from new business wins, the New Zealand cyclone and flooding contributing to the upside.
Adjusted EBITDAC increased 28% year over year to $57.1 million, while the margin expanded 180 bps to 19.2%. Adjusted EBITDAC for the quarter beat the Zacks Consensus Estimate by 17.4%.
Expenses increased 10.8% to $285.3 million because of higher compensation, operating cost and reimbursements.
Corporate: EBITDAC was negative $57.2 million compared with negative $32.4 million in the year-ago quarter.
Financial Update
As of Mar 31, 2023, total assets were $45,094.4 million, up from $38,358.4 million at 2022-end.
As of Mar 31, 2023, cash and cash equivalents increased to $1,549.9 million from $842.3 million at 2022-end.
Shareholders’ equity increased 7.3% from Dec 31, 2022, to $9,858.3 million as of Mar 31, 2023.
Acquisition Update
In the quarter, the company closed 10 acquisitions with estimated annualized revenues of $69 million.
2023 Guidance
Management of AJG expects organic growth in the brokerage segment to be between 7% and 9% in 2023, the mid-point of which indicates a deterioration of 17.5% from the 2022 figure of 9.7%.
Adjusted EBITDAC margin are expected to rise between 60 and 80 bps in 2023, the mid-point of which indicates a 30% decrease from the 2022 rise of 100 bps.
Organic growth in the Risk Management segment is expected to be between 12% and 13% in 2023, the mid-point of which indicates a 6% fall from the 2022 figure of 13.3%.
Adjusted EBITDAC margin in the Risk Management segment is expected to rise more than 19% for 2023, indicating a 2.7% rise from the 2022 figure of 18.5%.
Zacks Rank
Currently, Arthur J. Gallagher carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurance-Brokerage Players
Marsh & McLennan Companies, Inc. (MMC - Free Report) reported first-quarter 2023 adjusted earnings per share of $2.53, which outpaced the Zacks Consensus Estimate of $2.45 by 3.3%. The bottom line advanced 10% year over year.
Consolidated revenues of MMC amounted to $5,924 million, which rose 7% year over year. The figure improved 9% on an underlying basis. The top line beat the consensus mark by 1.3%.
Willis Towers Watson Public Limited Company (WTW - Free Report) delivered first-quarter 2023 adjusted earnings of $2.84 per share, which beat the Zacks Consensus Estimate by 1.1%. The bottom line improved 6.8% year over year.
The solid performance of WTW’s Health, Wealth & Career segment and lower expenses were offset by the soft performance of the Risk & Broking segment.
Brown & Brown, Inc.’s (BRO - Free Report) first-quarter 2023 adjusted earnings of 84 cents per share beat the Zacks Consensus Estimate by 3.7%. The bottom line increased 13.5% year over year.
The quarterly results reflected improved organic growth and higher net investment income, partly offset by higher expenses.
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Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.2% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>
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