All material subject to strictly enforced copyright laws. © 2021 Inside P&C is part of Euromoney Institutional Investor PLC.
Accessibility | Terms & Conditions | Privacy Policy | Modern Slavery Act | Cookies | Subscription Terms & Conditions

AJG reports Q4 organic growth of 2.6%, Ebitdac margins jump by 526bps


Organic revenue grew at Arthur J Gallagher by 2.6% in the fourth quarter, in line with the recovery the broker saw in the third quarter, while the company’s profit margins expanded steeply, by 526bps.

On Thursday evening, the broker reported $0.88 of adjusted earnings per share, ahead of the $0.78 predicted by analysts.

Ebitdac, the company’s operating profit figure, increased by 26% to $335mn in the last three months of the year.

Organic revenue

Organic revenue growth in the brokerage segment slowed from the third quarter, to 3.1% from 4.2% in Q3, while the risk management segment continued to recover, returning to growth with a 0.1% gain. Organic revenue had been negative in risk management since economic shutdowns took hold at the start of the pandemic.

The broker noted that customers held steady at pre-pandemic levels, while new business flows were higher than prior to the pandemic. Renewal exposure units fell as a result of the economic downturn, but were “effectively mitigated" by rate increases. Mid-term policy modifications were “slightly higher” than in Q4:19.

The exposure unit drop-off in Q4 was better than the lows the company observed in April and May and continued to recover with the economy. Employee benefits had a decrease in new consulting and special project work.

For the risk management division, claim volumes that fell at the beginning of the pandemic have yet to fully recover, which the company said could persist for several quarters.


The company’s profit margins were significantly higher in the quarter, compared with a year ago, growing by 526bps on a consolidated basis. The brokerage unit expanded its Ebitdac margin by 580bps to 29.9%, while risk management improved by 190bps to 19.1%.

Gallagher said expenses from pandemic, including savings on travel, entertainment, advertising, real estate footprint, and some reductions to portions of its workforce had contributed to between $65mn and $70mn in quarterly savings in the last three quarters of 2020.

On liquidity, the broker said it had yet to see a meaningful decline in cash collections from clients.

The broker closed 10 acquisitions in the quarter, with an estimated $100mn in annualized revenue, compared with 11 deals and $117mn in revenue a year ago.


Commentary: J Patrick Gallagher, the company’s chairman, president and CEO, said in a statement: “We delivered another excellent quarter, and a fantastic full year during which we generated record profits.

"Despite the pandemic and the resulting economic fall out, we executed on our long-term operating priorities: growing both organically and through acquisitions, improving both our productivity and quality, and still investing in our bedrock culture. 

He continued: “We are operating in a property casualty environment where rates are up around 8% globally, terms and conditions are tightening, and capacity in certain lines is increasingly constrained. We see these market conditions continuing in 2021.

"In addition, we are seeing increased business activity, a recovering labor market, and a rebound in new arising risk management claims. An environment of rising rates and growing exposure units provides a near-perfect opportunity for us to demonstrate that we provide the very best insurance, consulting and risk management advice for our clients.”

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree