Arthur J Gallagher & Co. (NYSE:AJG) Q2 2020 Earnings Conference Call - Final Transcript

Jul 30, 2020 • 05:15 pm ET


Arthur J Gallagher & Co. (NYSE:AJG) Q2 2020 Earnings Conference Call - Final Transcript


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Good afternoon, and welcome to Arthur J. Gallagher and Company's Second Quarter Earnings Conference Call. [Operator Instructions]

Some of the comments made during this conference call, including answers given in response to questions may constitute forward-looking statements within the meanings of the securities laws. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to cautionary statements and risks factors contained in the Company's 10-K, 10-Q and 8-K filings for more detail on its forward-looking 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

Thank you. Good afternoon. Thank you for joining us for our second quarter 2020 earnings call. Also on the call today is Doug Howell, our CFO, as well as the heads of our operating divisions. We delivered an excellent second quarter. Despite the economic deterioration caused by COVID-19, our teams are executing at the highest levels, while we continue to place health and safety first.

We are servicing our clients. We're selling new business. We continue to look at merger and acquisition opportunities, and our bedrock culture keeps our teams working together even while physically apart. I would like to thank our 33,000 Gallagher professionals around the globe for their constant and tireless focus on delivering the very best insurance brokerage, consulting and risk management services to our customers.

More than ever, these are times when our global capabilities and resources support our local professionals as they help our customers navigate these challenging times and still generate strong new business. That really truly is the Gallagher way. Moving to our second quarter financial performance. We grew our combined Brokerage and Risk Management revenues in the second quarter organically and through mergers and acquisitions.

And together with our expense control actions, delivered excellent growth in EBITDAC and net earnings. This demonstrates that our investments over the last decade have enabled us to quickly adjust our workforce and expense base, increase the utilization of our centers of excellence, efficiently work remotely, improve our productivity while always raising our quality.

Let me break down our results further, starting with our Brokerage segment. Reported revenue growth was a positive 6.2% and even a bit better at 7.6% when leveling for foreign exchange. Of that, 2.1% was organic revenue growth. Net earnings margin was up 364 basis points, and adjusted EBITDAC margin expanded by 635 basis points to 32.6%.

Doug will provide some additional details on our expense control efforts, which was primarily responsible as we drove net earnings up 38% and adjusted EBITDAC up 34%. Clearly, a very strong quarter and pointed the team execute in a difficult environment. Let me give you some sound bites about