Gallagher Reports Good 2Q, Considering

Insurance broker Arthur J. Gallagher AJG reported second-quarter earnings that were generally in line with our expectations, and we will keep our fair value estimate for now. Overall revenue was up 6% year over year in the second quarter as well as the first half; we've been looking for 7% revenue growth for the year, with a stronger second half than the first half, so the 6% growth thus far this year is encouraging in light of still-weak economic conditions and insurance premium rates. Operating income grew faster than revenue again in the second quarter. The firm's pretax margin in the brokerage and risk management segments have trended higher this year, on a seasonally adjusted basis, despite the still-soft environment. Gallagher's margins year to date are actually in line with where they were a few years ago, before the recession and the softening in insurance rates.