Costs push Gallagher UK units into 2011 loss

UK broker Arthur J Gallagher (UK) and sister MGA OIM Underwriting both made losses in 2011 because of one-off costs related to their expansion.

Both companies are ultimately owned by US broking group Arthur J Gallagher, making up part of its Gallagher International division.

Gallagher (UK) made a statutory after tax loss of £2m in the year ended 31 December 2011, compared with a 2010 profit of £2.3m.

The company attributed the loss to integration costs from acquisitions it made during 2011. But it added that it expects to achieve annual cost savings from the acquisitions going forward.

During 2011, Gallagher (UK) took teams from rival brokers Aon Entertaining, Lonmar Global Risks and Oxygen Insurance Brokers.

Overall expenses at Gallagher (UK) jumped 27% to £67.9m (2010: £53.5m).

Meanwhile, OIM made a £3.2m loss in 2011, compared with a £2.7m profit in 2010. The MGA said this was due to one-off salary costs following the expansion of its sales force.

OIM’s operating expenses tripled to £14m (2011: £4.4m), and staff costs also tripled to £10m (2010: £3.3m). Some of the costs were caused by completing the integration of OIM into the Gallagher group, including executive remuneration.

Despite the downturn in profitability, both companies boosted revenues. Gallagher (UK)’s turnover was up 14% to £65m, and OIM’s rose 21% to £9.8m (2010: £8.1m).

Gallagher International chief executive David Ross noted that several of the companies in the Gallagher International stable, which also includes Heath Lambert, had incurred one-off costs in 2011. Some of the charges were caused the integration of Heath Lambert, which the group acquired last May.

However, Ross added: “We knew that was coming down the pipe and that’s factored into the strategic plan.

“Our continued execution against that plan gives us confidence in our ability to grow, witnessed by a slew of industry awards from our peers. The transformational Heath Lambert deal has acted as a springboard for growth and without the acquisition we would not be expanding as quickly as we have throughout last year.”