Arthur J. Gallagher & Co. · NYSE:AJG
Arthur J. Gallagher & — Gallagher Arthur J & — Conference Presentation (September 2009)
36 slides from Arthur J. Gallagher &'s conference presentation, Sep 10, 2009
Slide 1: Investment Presentation August 2009
Investment Presentation August 2009 Exhibit 99.1
Slide 2: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 Except for the historical information and discussions contained herein, statements contained herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Slide 3: Certain Non-GAAP Financial Measures
Certain Non-GAAP Financial Measures This presentation includes certain information that may be considered “non-GAAP financial measures” within the meaning of SEC regulations because it is derived from Gallagher’s consolidated financial information but is not required to be presented in financial sta
Slide 4: Arthur J. Gallagher & Co.
Arthur J. Gallagher & Co. • Among the world’s top 5 insurance brokers * – Retail & Wholesale – 89% US; 11% International • Largest MGA manager* • Fastest growing Lloyd’s wholesaler (5 yrs) • Predominate focus on middle market space • Largest P&C third party administrator* – Adjusting WC, liability &
Slide 5: Excellent Start - First Half 2009
Excellent Start - First Half 2009* $144 $175 $50 $100 $150 $200 $250 1H08 1H09 EBITDA up 22% $805 $855 $500 $600 $700 $800 $900 $1,000 1H 08 1H 09 Revenues up 6% *From continuing operations See important disclosures regarding non-GAAP measures (in millions, except per share data) $0.62 $0.73 $0.10 $
Slide 6: Solid Growth in the First Half
Solid Growth in the First Half • Despite: – Soft P/C pricing environment – No investment yield – Sliding economy • By delivering through: – Focused cost savings initiatives – Solid M&A program – Controlling workforce – Acceptable organic growth (given conditions) – Prudent balance sheet
Slide 7: Brokerage Segment
Brokerage Segment Retail 80% Mostly U.S. and Canada Wholesale 20% Mostly U.S. and U.K. See important disclosures regarding Non-GAAP measures on Page 3 2008 EBITDA - $223 m 2008 Revenues - $1.2 b
Slide 8: Brokerage Segment Results
Brokerage Segment Results First Half 2009 $113 $146 $50 $100 $150 $200 1H 08 1H 09 EBITDA up 29% $570 $630 $400 $500 $600 $700 $800 1H 08 1H 09 Revenues up 11% See important disclosures regarding non-GAAP measures (in millions)
Slide 9: Brokerage Segment Focus
• Growth – Domestic – International • Cost containment • Stay in sweet spot – Middle to upper commercial market Brokerage Segment Focus
Slide 10: Growth - Domestic
Growth - Domestic • Organic – Hiring new producers wanting: • Access to our network, expertise and niches • Infrastructure support – Growing our own producers thru: • Two-year internship program • Career Launch program • Acquisitions – 18,000 retail and wholesale brokerages and agencies* in the U.S.
Slide 11: Current Gallagher U.S. Locations
ID MT WA CA UT NV AZ NM TX OK KS NE MN WI MO AR LA TN IL WV PA NY NH ME MA CT NJ DE MD IA CO WY SD ND OR OH MI KY MS AL GA FL SC NC VA VT RI IN AK HI Current Gallagher U.S. Locations
Slide 12: Larger cities where we aren't located
Larger cities where we aren’t located ID MT WA CA 1,777 UT NV AZ NM TX 1,082 OK KS NE MN WI MO AR LA TN IL WV PA NY 1,425 NH ME MA CT NJ DE MD IA CO WY SD ND OR OH MI KY MS AL GA FL 1,079 SC NC VA VT RI IN AK HI DC Puerto Rico Virgin Islands Source for Acquisition Targets: Hales & Co., Inc. and D&B
Slide 13: Growth By Acquisition
Growth By Acquisition $23 $38 $83 $150 $81 $10 $16 $16 $16 $0 $0 $50 $100 $150 Retail Wholesale Annualized Revenue Acquired (in millions) 1H 09 - 2008 was a record year for acquisitions - 1 half 2009 – Liberty/Wausau deal - half 2009 – expect slower pace st nd
Slide 14: Growth by Acquisition
Growth by Acquisition • Approx. 230 deals since 1985 • Typical deal: – $2 to $10 million in revenues – 2 to 5 producers/staff of 10 to 20 – EBITDA margins between 25% - 30% – 2008 – paid 6.3x EBITDA – 2009 June YTD – paid 5.8x EBITDA • Must fit into our sales culture! See important disclosures regar
Slide 15: Unique Deal
Unique Deal Liberty/Wausau – closed 2/27/09 • Annualized revenues of approx. $70m • Approx 125 new producers and 140 support/mgmt staff – 26 states predominately in Midwest & East/Southeast – Approx new locations with “tuck ins” into existing offices • New Gallagher producers – no longer captive age
Slide 16: Growth - International
• Organic – Substantial London operations – Hire experienced sales teams • Opportunistic acquisitions/minority interests • Gallagher Optimus Network – Correspondent brokers and agents in over 100 countries – Stages of partnership to investment Growth - International
Slide 17: Gallagher Optimus Network
Gallagher Optimus Network
Slide 18: Retail Contingent Commission Change
Retail Contingent Commission Change • July 2009 amended agreement – Continue to be fully transparent to clients on all compensation – Can accept across all lines of brokerage business – Effective 10/1/09 – Anticipate approx $10m additional EBITDA on annualized basis by 2011
Slide 19: Risk Management Segment
Risk Management Segment 2008 Revenues - $465m Workers Compensation 69% Liability 27% Property 4% Domestic 84% International 16% 2008 EBITDA - $58m See important disclosures regarding Non-GAAP measures on Page 3
Slide 20: Risk Management Segment Results
Risk Management Segment Results First Half 2009 See important disclosures regarding non-GAAP measures (in millions) Excludes the impact of foreign exchange. As reported 1H 08 revenues were $231m and 1H 08 EBITDA was $33m. $223 $226 $50 $100 $150 $200 $250 $300 $350 1H 08 1H 09 Revenues up 1% $30 $34
Slide 21: Risk Management Segment - Focus
• Growth – Domestic – International • Client service – High quality standards – Technology • Cost containment Risk Management Segment - Focus
Slide 22: RM Growth - Domestic
RM Growth - Domestic • All organic • Over 86% non-Gallagher clients • Targeting – Mainly Fortune 1000 – Standard platform enables profitable service to smaller accounts • Differentiation – Network focused or dedicated - flexibility – Client intimacy – Quality standards – Proprietary technology – Nat
Slide 23: RM Growth - International
• Fastest growing – Revenues - year CAGR of 24% • In Australia, Canada, UK & New Zealand • Largely public entity but leveraging US expertise to penetrate commercial clients • Global technology capabilities • Standard claims process RM Growth - International
Slide 24: Risk Management Locations
AK HI AUSTRALIA NEW ZELAND SCOTLAND ENGLAND ID MT WA CA UT NV AZ N M TX OK KS NE MN WI M O AR LA TN IL W V PA NY NH ME MA CT NJ D E M D IA CO W Y SD ND OR OH MI KY MS AL GA FL SC NC VA VT RI IN ONTARIO Risk Management Locations
Slide 25: In Summary
IN SUMMARY
Slide 26: Growing Revenues
Growing Revenues* $500 $800 $1,100 $1,400 $1,700 $2,000 11% CAGR $1,045 $1,288 $1,408 $1,558 $1,653 *Brokerage & Risk Management Revenues from continuing operations excluding retail contingent commissions prior to See important disclosures regarding Non-GAAP measures on Page 3 $1,175 1H 08 1H 09 $80
Slide 27: Improving Operations
Improving Operations 18% 21% 16% 17% 18% 19% 20% 21% 22% 1H 08 1H 09 EBITDA Margins* - First Half 2009 See important disclosures regarding Non-GAAP measures on Page 3. + 300 bps *Brokerage & Risk Management
Slide 28: Generating Cash
Generating Cash * See important disclosures regarding Non-GAAP measures on Page 3. (In millions) 24% $0 $50 $100 $150 $200 $250 $300 $350 1H 08 1H 09 Operating Cash Flows EBITDA
Slide 29: Returning Cash to Shareholders
Returning Cash to Shareholders 2007 excludes share repurchases of $262M financed by debt. See important disclosures regarding Non-GAAP measures on Page 3 39% 45% 50% 50% 56% 59% 30% 1% 15% 0% 1% 51% 30% 40% 50% 60% 70% 80% 90% 100% Dividends / operating cash flows Repurchases / operating cash flows
Slide 30: Paying Dividends
$1.28* Paying Dividends Year $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 *Indicated – On July 23, 2009, Gallagher’s Board of Directors declared a $.32 per share 3Q 09 quarterly dividend Dividends Per Share
Slide 31: Dividend Yield
$1.28* As of 8/31/09 Yield is 5.4% Dividend Yield Year $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 *Indicated – On July 23, 2009, Gallagher’s Board of Directors declared a $.32 per share 3Q 09 quarterly dividend Dividends Per Share
Slide 32: Prudent Balance Sheet
Global Insurance Broker Avg S&P 1000 (millions) 2008 2008 2008 Gallagher Prudent Balance Sheet • Flexibility remains - $243M available line of credit capacity at 6/30/09 See important disclosures regarding Non-GAAP measures on Page 3 Total Debt $532 Stockholders' equity $739 Debt to Total Capital (D
Slide 33: In Summary
In Summary • Top priority – servicing our clients – Helping them navigate troubled economy – Continuing to increase quality service levels – Expanding capabilities and options
Slide 34: Questions & Answers
•Questions & Answers
Slide 35: Short-cut To Understand Cash Flows
$ millions 2005 2006 2007 2008 1H 2008 1H 2009 Exhibit 1 Short-cut To Understand Cash Flows (See GAAP cash flows in Statement of Cash Flows*) See important disclosures regarding Non-GAAP measures on Page 3 Brokerage & Risk Management EBITDA from Continuing Operations (adjusted for unusual items) Sto
Slide 36: For Additional Information
For Additional Information • Website: www.ajg.com • Email: investor_relations@ajg.com • Marsha Akin Marsha_Akin@ajg.com Phone: 630-773-3800
Gallagher Arthur J & — Conference Presentation (September 2009) on 6ix