“We delivered an excellent second quarter,” said J. Patrick Gallagher, Jr., chairman, president and CEO. “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 are 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.
“We grew our combined brokerage and risk management revenues in the second quarter – organically and through M&A – and 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 utilisation of our centres of excellence, efficiently work remotely, improve our productivity, while continually raising our quality.”
According to the AJG financial statement, the property/casualty brokerage operation maintained its new business generation at pre-pandemic levels through Q2 of 2020. The brokerage did experience some decline in client retention and renewal customer exposure units (i.e. insured values) but said that the declines were mitigated by rising premium rates across most geographies.
The CEO commented: “In the second quarter, most P&C rates increased mid-to-high single digits, offsetting exposure unit decreases. Employee benefits covered lives decreased during the second quarter, but not nearly as much as head-line unemployment numbers. New arising risk management claims bottomed in April and showed improvement in both May and June.”
He added: “Looking forward, we feel highly confident our expense control efforts can offset a lull in organic growth and we see our M&A program returning to more historical levels by the end of the year.”
AJG, like most major global companies, activated its business continuity plan in mid-March, when the severity of the COVID-19 pandemic became clear. By the end of the second quarter, over 90% of the global firm’s staff is still working remotely.
The brokerage announced: “Given the deterioration in economic conditions, we are actively managing costs by limiting discretionary spending such as travel, entertainment and advertising expenses, adjusting our real estate footprint, reducing capital expenditures, limiting use of outside labour and consultants, increasing utilisation of our centres of excellence, and implementing a support-layer hiring and wage freeze.
“In addition, we have adjusted portions of our workforce where volumes have declined significantly and normal attrition is not sufficient; which to date has impacted less than 3%, and may impact an additional 1% in 2020, of our global workforce. The impact of these actions in the second quarter of 2020 was substantial; with estimated savings of approximately US$74 million pretax compared to second quarter 2019, as adjusted for pro forma full-quarter costs related to acquisitions closed after March 31, 2019.”