Mixed 1Q, Improving Outlook for Gallagher

Insurance brokerage and risk-management services firm Arthur J. Gallagher AJG posted good first-quarter results in light of continuing weakness in insurance premium rates and a modest but developing recovery in demand. Internal brokerage revenue (excluding contingent commissions and acquisitions) declined 3% from the first quarter of 2009, a somewhat better result than recent quarters and despite a roughly 5% decline in premium rates that Gallagher estimated for its relevant markets. Client exposure units were flat in the first quarter, after declining over the past two years. Gallagher's profitability in its brokerage operations has been improving over the past year, despite marked market weakness, and its EBITDAC margin continued to rise slowly in the first quarter of 2010 on a seasonally adjusted basis. Gallagher believes its brokerage results have been lagging a recovery in economic activity, as they should, and its leaders are reporting better prospects in acquisitions as well as new business production.