Giles integration costs at high end of estimate range in Q1
Arthur J Gallagher’s broking segment reported organic growth of 3.3% in the first quarter of 2014, down 1.5 percentage points on the 4.8% growth it reported in the same period last year.
The global broking group also reported that its costs for integrating the acquisition of UK broker Giles in the first quarter were at the top end of its expected range of £1.5 to £2.5m a quarter.
Despite the organic growth slowdown, Gallagher’s profitability improved. Group net profit in the first quarter of 2014 was up 22% to $49.3m (£29.6m) (Q1 2013: $40.5m).
Group earnings before interest, tax, depreciation, amortisation and change in acquisition earn-out payables (EBITDAC) increased by 22.6% to $120.5m (Q1 2013: $98.3m).
Net profit at Gallagher’s broking segment increased by 32.5% to $32.6m in the first quarter of 2014 (Q1 2013: 24.6m).
Broking segment EBITDAC grew by 26.9% to $101.9m ($80.3m).
Gallagher said its Giles integration costs for the quarter were $4.2m (£2.5m) – at the top end of the expected quarterly range of between £1.5m and £2.5m.
The company expects to be paying between £1.5m and £2.5m a quarter to integrate Giles until “early 2015”.
Gallagher paid £233m for Giles in a deal that closed on 14 November 2013.
The results contained no integration costs for UK broker Oval, which Gallagher bought for £199m on 1 April this year.
Gallagher expects to pay between £1.5m and £2m a quarter to integrate Oval until the end of 2015.
Gallagher group chief executive Patrick Gallagher said: “We are off to an excellent start in 2014.
“Our revenue momentum continues; our combined brokerage and risk management segments posted 20% growth in adjusted total revenues, 4% organic growth in commissions and fee revenues, and already in 2014 we have announced 10 mergers with annualised revenues of approximately $153.6m.”
He added that pricing in the insurance market remained “steady” because of insurers’ continuing focus on profitable underwriting.
Gallagher said: “We believe they are quoting rational prices on a line-by-line basis that allows us to demonstrate our expertise and high-quality value-added service. In addition, we are seeing our clients slowly expand their businesses and payrolls. Our global team is energised and well positioned for 2014.”