Higher compensation and operating costs offset rising revenue
US-based broking group Arthur J Gallagher made a net profit of $103.6m (£64.8m) for the first nine months of 2011, down 13% on the $119.4m it made in the same period last year.
Earnings before interest, tax depreciation, amortisation and change in estimated acquisition earnout payables (EBITDAC) for the nine month period was down 1% to $266.1m from $269.2m.
While total revenues increased 11% to $1.6bn from $1.4bn, compensation payments increased 17% to $961.7m (first nine months of 2010: $818.5m) and operating expenses grew 25% to $316.1m (first nine months of 2010: $253.4m).
Total expenses increased 14% to $1.4bn from $1.2bn.
For the third quarter of 2011 alone, profits were almost flat at $46.7m (Q3 2010: $46.2m), despite a 22% increase in total revenues to $562.8m (Q3 2010: $463.2m).
Gallagher chief executive Patrick Gallagher praised the results of his company’s broking segment in particular, noting a 21%rise in adjusted total revenues and 17% EBITDAC growth.
He was also sanguine about the future. “We continue to see some indications of market firming and so far our customers’ businesses seem to be weathering the recent economic uncertainty,” he said. “Looking forward, our global team is pushing hard to deliver continued solid results for 2011, which should give us strong momentum going into 2012.”
The results also show that costs for the integration of UK broker Heath Lambert were $5.5m in the third quarter alone and $8.5m for the full year. Gallagher said it expected the Heath Lambert operations to reduce its broking segment’s adjusted EBITDAC margins until the integration process is completed in 2013.
Heath Lambert lowered the EBITDAC margin by 0.8 percentage points in the third quarter of 2011 alone, and 0.4 percentage points for the first none months of the year.
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