Arthur J Gallagher & Co. (NYSE:AJG) Q3 2019 Earnings Conference Call - Final Transcript

Oct 24, 2019 • 05:15 pm ET


Arthur J Gallagher & Co. (NYSE:AJG) Q3 2019 Earnings Conference Call - Final Transcript


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Good afternoon, and welcome to Arthur J. Gallagher & Company's Third Quarter 2019 Earnings Conference Call. Participants have been placed on a listen-only mode. Your lines will be open for questions following the presentation. Today's call is being recorded. If you have any objections you may disconnect at this time.

Some of the comments made during this conference call, including answers given in response to questions, may constitute forward-looking statements within the meaning of the security laws. These forward-looking statements are subject to certain risks and uncertainties discussed on this call or described in the Company's reports filed with the Securities and Exchange Commission. Actual results may differ materially from those discussed today and the Company undertakes no obligation to update these statements. In addition, for reconciliations of the non-GAAP measures discussed on this call, as well as other information regarding these measures, please refer to the earnings release and other materials in the Investor Relations section of the Company's website.

It is now my pleasure to introduce J. Patrick Gallagher, Chairman, President and CEO of Arthur J. Gallagher & Company. Mr. Gallagher, you may begin.

J. Patrick Gallagher, Jr.

Thank you, Devin. Good afternoon. Thank you for joining us for our third quarter 2019 earnings call. With me today is Doug Howell, our Chief Financial Officer, as well as the heads of operating divisions.

Let me just start by saying, we had another excellent quarter. Our combined Brokerage and Risk Management segments delivered 13% growth in revenues, 5.8% all-in organic growth, adjusted EBITDAC margin expansion of 66 basis points, and we completed 14 mergers with about $85 million of estimated annualized revenues. Just a terrific quarter by the team.

Today, Doug and I are going to spend our time focused on the four key components of our strategy to drive shareholder value. First, organic growth. I'll review organic by geography, comment on the pricing environment and give you some insight regarding exposures; second, growing through mergers and acquisitions; third, productivity and quality; Doug will hit this topic after my remarks; and fourth, maintaining our unique culture.

Okay. To organic. Let me start with the Brokerage segment. Third quarter organic was 5.8% all-in, which is similar to our organic performance through the first six months of 2019. I'm very pleased that all of our divisions globally contributed to this result. For example, our domestic retail PC operations had another strong quarter with organic of about 5%[Phonetic]. Our wholesale operations had an excellent quarter, posting about 6.5% organic. This includes over 10% in our domestic open brokerage operations. Our benefits operations also had a strong show in this quarter, posting base organic of about 4.5%.

And then, internationally, our retail brokerage operations combined to post 7% organic, with Canada up more than 10%, Australia and New Zealand up about 6%, and the UK up 5%. Another really strong quarter of production by the team.

Let me move to the rate environment. We've been hearing a consistent message, whether it's from our carrier partners at the CIAB