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Arthur J. Gallagher (AJG) Q4 Earnings Top, Revenues Miss

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Arthur J. Gallagher & Co. (AJG - Free Report) reported fourth-quarter 2020 adjusted net earnings of 88 cents per share, which beat the Zacks Consensus Estimate by 14.3%. Moreover, the bottom line increased about 51.7% on a year-over-year basis.

The company’s performance was driven by lower expenses, higher adjusted revenues, and strong margin expansion across Brokerage as well as Risk Management segments.   

Operational Update

Total revenues were $1.7 billion, down 1.2% year over year, primarily due to higher commissions, fees, and supplemental and contingent revenues. Moreover, the top line missed the Zacks Consensus Estimate by 0.2%.

Arthur J. Gallagher’s total expense decreased 4.1% year over year to $1.6 billion, attributed to lower compensation.

Adjusted earnings before interest, tax, depreciation and amortization and change in estimated acquisition earnout payables (EBITDAC) grew 26.4% from the prior-year quarter to $368 million.

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

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

Arthur J. Gallagher & Co. price-consensus-eps-surprise-chart | Arthur J. Gallagher & Co. Quote

Segment Results   

Brokerage: Adjusted revenues of $1.2 billion increased 4.5% year over year on higher commissions, fees, and supplemental and contingent revenues.

Adjusted EBITDAC climbed 29.6% from the prior-year quarter to $373 million while margin expanded 580 basis points (bps) to 29.9%.

Risk Management: Adjusted revenues were down 0.1% year over year to $216.4 million.

Adjusted EBITDAC increased 11.3% year over year to $41.4 million while margin expanded 190 bps to 19.1%.

Corporate: EBITDAC was negative $46.4 million compared with negative $33.9 million in the year-ago quarter.

Financial Update

As of Dec 31, 2020, total assets were $22.3 billion, up 13.7% from the 2019-end level.

Cash and cash equivalents at year-end increased 36.2% from the 2019 level to $3.6 billion.

Shareholders’ equity increased 19.5% from Dec 31, 2019 to $6.2 billion as of Dec 31, 2020.

Acquisition Update

In 2020, the company closed 27 acquisitions, with estimated annualized revenues of $251.4 million.

Zacks Rank

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

Performance of Other Insurers

Of the insurance industry players that have reported fourth-quarter results so far, The Travelers Companies (TRV - Free Report) , W.R. Berkley Corporation (WRB - Free Report) and Brown & Brown (BRO - Free Report) beat earnings estimates.

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