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Sep 30, 2020
Arthur J. Gallagher Q3 2020 Earnings Report
Arthur J. Gallagher's Q3 2020 financial performance was announced, demonstrating revenue growth and effective expense control.
Key Takeaways
Arthur J. Gallagher & Co. reported a strong third quarter with revenue growth in both Brokerage and Risk Management segments, driven by organic growth and M&A activities. Expense control measures led to excellent growth in EBITDAC and net earnings.
Combined Brokerage and Risk Management revenues grew through organic means and M&A.
Expense control efforts resulted in excellent growth in EBITDAC and net earnings.
Global P&C rates increased nearly 7%, offsetting exposure declines.
Merger and acquisition pipeline continues to grow, indicating a potentially active finish to the year.
Arthur J. Gallagher
Arthur J. Gallagher
Arthur J. Gallagher Revenue by Segment
Revenue by Segment
Brokerage Revenue
CapyFin.comRisk Management Revenue
CapyFin.com Forward Guidance
The company anticipates continued savings in the fourth quarter compared to the same quarter in 2019, with potential offsets from implementation and execution costs. They also foresee a prolonged economic downturn may cause a deterioration of future cash collections but they believe their cost savings, reduced non-client facing capital expenditures and working capital improvements could mitigate a potential decline in our cash flows over the near-term.
Positive Outlook
- Savings in the fourth quarter compared to the same quarter in 2019 could total approximately $65 million to $70 million pretax after adjusting for pro forma full-quarter costs related to acquisitions.
- Cost savings could mitigate a potential decline in cash flows over the near-term.
- Reduced non-client facing capital expenditures could mitigate a potential decline in cash flows over the near-term.
- Working capital improvements could mitigate a potential decline in cash flows over the near-term.
- The company has more than $1.6 billion of available liquidity.
Challenges Ahead
- Offsetting possible future savings would be additional implementation and execution costs, which we estimate could total approximately $5 million to $10 million pretax.
- Future net savings may be lower if the economy recovers faster than we are forecasting.
- Future net savings may be lower if our costs to implement changes exceed our estimates.
- A prolonged economic downturn may cause a deterioration of future cash collections
- Premium rates across most geographies and lines of coverage have continued to increase, effectively mitigating exposure unit declines
Revenue & Expenses
Visualization of income flow from segment revenue to net income