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Arthur J. Gallagher & Co. Announces First Quarter 2005 Financial Results

ITASCA, Ill., April 26 /PRNewswire-FirstCall/ -- Gallagher today reported its financial results for the quarter ended March 31, 2005. A printer-friendly format is available at http://www.ajg.com .



     Quarter Ended March 31
                                                                    Diluted
                                                                  Net Earnings
                                                 Net Earnings         (Loss)
                             Revenues               (Loss)          Per Share
                      1st      1st               1st       1st     1st     1st
     Segment         Q 05     Q 04      Chg     Q 05      Q 04    Q 05    Q 04
                    ($ in millions)             ($ in millions)
     Brokerage     $225.3    $202.5     11%    $20.4     $26.7   $0.22   $0.28
       Litigation
        Matters       -         -       -      (21.0)      -     (0.23)    -
     Risk
      Management     91.6      81.4     13%     13.2      10.1    0.14    0.11

     Brokerage &
      Risk
      Management    316.9     283.9     12%     12.6      36.8    0.13    0.39

     Financial
      Services       32.0      23.1     -       (2.2)      2.0   (0.02)   0.02
       Litigation
        Matters       -         -       -      (84.2)      -     (0.91)    -
       Impact of
        FIN 46        -        25.9     -        -         -       -       -

     Discontinued
      Operations      -         -       -       (0.2)      0.1     -       -

     Total
      Company      $348.9    $332.9      5%   $(74.0)    $38.9  $(0.80)  $0.41

"Gallagher continues to do what it does best even in these challenging times -- solve our clients' risk management problems," said J. Patrick Gallagher, Jr., President and Chief Executive Officer. "First quarter 2005 revenue growth reflects the strong efforts of our team in selling insurance products and completing acquisitions which fit in to the Gallagher culture. Risk Management in particular continues to show excellent results."

    Brokerage and Risk Management Combined First Quarter Highlights

    --  12% growth in revenues, of which 4% is organic.
    --  14% pretax margin before litigation and contingent matters, 2% below
        2004 mostly due to investments in new hires of 0.7%, foreign exchange
        of 0.4% and pension and group medical inflation of 0.6%.  Gallagher
        has made amendments to several employee benefit plans that will result
        in a one time gain of $10.0 to $12.0 million in second quarter 2005.
        In addition, Gallagher estimates quarterly savings as a result of
        these amendments of approximately $5.0 million in both third and
        fourth quarters 2005 and approximately $3.0 million quarterly
        thereafter.
    --  Contingent commissions were $20.7 million in first quarter 2005 versus
        $20.0 million in first quarter 2004.  The contingent commissions
        recognized in 2005 by Gallagher relate to contingent commission
        agreements in force during 2004.  As previously announced, Gallagher
        ceased entering into new contingent commission agreements as a retail
        broker effective January 1, 2005.  Accordingly, it is expected that
        future contingent commissions will be substantially reduced.
    --  As previously announced, in first quarter 2005 Gallagher sold its two
        medical claim management operations.  As a result, these operations
        have been accounted for as discontinued operations in the accompanying
        financial statements.  Prior year amounts have been restated to
        reclassify the revenues and expenses of these entities to discontinued
        operations.


    Brokerage Segment First Quarter Highlights

    --  Revenue growth of 11% reflecting strong acquisition activity.
    --  Organic growth rate of 1% in a soft market.
    --  Closed two acquisitions and the pipeline remains strong.
    --  First quarter 2005 compensation ratio was 3.2% higher than 2004.  Most
        of this increase results from new hires in the retail operations of
        0.6%, new hires and one-time charges related to staffing changes made
        in Gallagher's London and reinsurance operations of 0.7% and pension
        and group medical inflation of 0.9%.
    --  First quarter operating expense ratio was up 0.6%.  Cost savings were
        more than offset by foreign currency translation of 0.4% and one time
        legal expenses of 0.6%.
    --  Pretax margin before litigation and contingent matters of 12%, a
        5% margin reduction from 2004.  Pretax margin was impacted in 2005 by
        the compensation and operating expense factors discussed above, as
        well as 0.9% related to increased amortization expense.
    --  The insurance industry in general, and Gallagher individually,
        continue to be the subjects of a substantial number of regulatory and
        legal actions by many State Attorneys General and private litigants
        investigating contingent commissions and various other historical
        business practices.  Over the last several months, three other major
        insurance brokers have reached settlement with one or more Attorneys
        General.  Gallagher has recorded a pretax charge to its first quarter
        2005 earnings of $35.0 million ($21.0 million after tax, or $0.23 per
        diluted share) representing its current best estimate of the amount to
        resolve the state insurance investigations, which is based on the
        costs of similar industry settlements thus far, plus an accrual for
        legal costs.
    --  The first quarter 2005 tax benefit of $7.9 million results from
        applying a 23% effective tax rate to the Brokerage Segment's pretax
        earnings before the charge discussed above, plus applying a 40%
        marginal rate to the $35.0 million charge.


    Risk Management Segment First Quarter Highlights

    --  Diluted earnings per share growth of 27% over 2004; 39% growth in
        pretax earnings.
    --  Revenue growth of 13%, 12% growth in fees, all of which is organic.
    --  Increasing claim counts reflect excellent new business sales and the
        impact of recovering economic conditions from existing clients.
    --  Pretax margin of 19%, a 4% margin improvement over 2004 primarily
        reflecting expense savings initiatives put in place in 2004.
    --  Effective tax rate of 23% in 2005 versus 19% in 2004.
    --  Client retention remains strong.
    --  Clients' use of Gallagher's proprietary Risx-Facs(R) system now
        exceeds 18 million page views per month.


    Financial Services Segment Highlights

    --  As previously reported, on February 11, 2005, AJG Financial Services,
        Inc. (AJGFS) received an adverse jury verdict in favor of Headwaters
        Incorporated (Headwaters) in the amount of approximately
        $175.0 million.  The verdict arose from a dispute over a synthetic
        coal technology licensing agreement.  After the jury verdict,
        Headwaters petitioned the trial court for a declaratory judgment that
        AJGFS would also owe Headwaters significant additional payments in
        future years.  The trial court has not yet ruled on Headwaters'
        request for a declaratory judgment.  On April 25, 2005, AJGFS and
        Headwaters reached an agreement in principle to settle this and all
        other litigation between the companies for $50.0 million payable to
        Headwaters in May 2005.  Additionally, AJGFS and Headwaters have
        reached an agreement to modify their existing licensing agreement
        allowing AJGFS to utilize Headwaters' technology in exchange for (i)
        $70.0 million payable on or before January 15, 2006 and (ii) an annual
        royalty, which at full production, would make Headwaters' and AJGFS'
        annual share of the pretax earnings on two of AJGFS' synthetic fuel
        facilities to be approximately $20.0 million each.  This settlement
        agreement is subject to final contract modifications, which are
        expected to be completed before May 2, 2005.  Gallagher has recorded a
        pretax charge to its first quarter 2005 earnings of $131.0 million
        ($84.2 million after tax, or $0.91 per diluted share) related to this
        settlement, including litigation, bonding and other costs.
    --  As previously announced, on April 20, 2005, Gallagher completed the
        sale of its Florida Community Development investment and will record a
        one time gain of approximately $12.0 million ($0.07 per diluted share
        after tax) in second quarter 2005.
    --  On April 1, 2005, Gallagher received $5.8 million in cash comprising a
        $2.1 million dividend ($0.02 per diluted share after tax) and a
        $3.7 million return of capital from one of its Bermuda Insurance
        Investments, which will be recorded in second quarter 2005.
    --  During its January 26, 2005 conference call, Gallagher provided
        quarterly earnings guidance related to its Financial Services Segment
        as shown below.  Based upon adjusted Syn/Coal production plans, the
        resolution of the Headwaters litigation and the currently known second
        quarter gain and dividend discussed above, Gallagher now revises its
        estimated net earnings for the Financial Services Segment as shown
        below.



                                            2nd Q 05     3rd Q 05     4th Q 05
        Guidance provided on January 26th    $(0.04)        $-          $0.02

        Guidance now provided                 $0.05       $(0.04)      $(0.04)


    --  Adoption of FIN 46 -- In third quarter 2003, Gallagher adopted a new
        accounting pronouncement, FASB Interpretation No. 46 (FIN 46) --
        "Consolidation of Variable Interest Entities," which required the
        company to consolidate one investment not previously consolidated
        because the company does not control the investment through a majority
        voting interest.  Previously reported financial statements were not
        restated for the adoption of FIN 46.  During third quarter 2004,
        Gallagher sold a portion of its interest in this investment, which
        eliminated the requirement to consolidate the investment under the FIN
        46 rules.  This investment is now accounted for using equity method
        accounting.

The company will host a webcast conference call on Wednesday, April 27, 2005, at 9:00 a.m. ET to further discuss these quarterly results. To listen, please go to http://www.ajg.com .

Arthur J. Gallagher & Co. (NYSE: AJG), an international insurance brokerage and risk management services firm, is headquartered in Itasca, Illinois, has operations in eight countries and does business in more than 100 countries around the world through a network of correspondent brokers and consultants. Gallagher is traded under the symbol "AJG" on the New York Stock Exchange.

This press release may contain certain forward-looking statements relating to future results. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expected, depending on a variety of factors such as changes in worldwide and national economic conditions, changes in premium rates and in insurance markets generally and changes in securities and fixed income markets as well as developments in the area of tax legislation. Please refer to our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, for a more detailed discussion of these factors.



                          Arthur J. Gallagher & Co.
                        Segment Statement of Earnings
               (Unaudited - in millions except per share data)

                                             3 Months Ended     3 Months Ended
    BROKERAGE SEGMENT                          Mar 31, 2005       Mar 31, 2004

    Commissions                                     $192.5             $172.9
    Fees                                              29.4               27.1
    Investment income - fiduciary                      3.4                2.5
         Revenues                                    225.3              202.5

    Compensation                                     141.8              120.9
    Operating                                         48.4               42.1
    Depreciation                                       3.4                3.1
    Amortization                                       5.2                2.9
    Litigation and contingent commission
     related matters                                  35.0                 -
         Expenses                                    233.8              169.0

    Earnings (loss) from continuing
     operations before income taxes                   (8.5)              33.5
    Provision (benefit) for income taxes              (7.9)               6.8
    Earnings (loss) from continuing
     operations                                      $(0.6)             $26.7

    Diluted earnings (loss) from
     continuing operations per share                $(0.01)             $0.28
    Growth - revenues                                  11%                 9%
    Organic growth in commissions and
     fees  (1)                                          1%                 1%
    Growth - pretax earnings                           NMF                25%
    Compensation expense ratio                         63%                60%
    Operating expense ratio                            21%                21%
    Pretax profit margin before
     litigation related matters  (2)                   12%                17%
    Effective tax rate                                 NMF                20%

    RISK MANAGEMENT SEGMENT

    Fees                                             $91.0              $81.1
    Investment income - fiduciary                      0.6                0.3
         Revenues                                     91.6               81.4

    Compensation                                      51.4               44.4
    Operating                                         21.1               22.5
    Depreciation                                       1.8                2.0
    Amortization                                       0.1                0.1
         Expenses                                     74.4               69.0

    Earnings from continuing operations
     before income taxes                              17.2               12.4
    Provision for income taxes                         4.0                2.3
    Earnings from continuing operations              $13.2              $10.1

    Diluted earnings from continuing
     operations per share                            $0.14              $0.11
    Growth - revenues                                  13%                18%
    Organic growth in fees  (1)                        12%                18%
    Growth - pretax earnings                           39%                19%
    Compensation expense ratio                         56%                55%
    Operating expense ratio                            23%                28%
    Pretax profit margin                               19%                15%
    Effective tax rate                                 23%                19%

    BROKERAGE & RISK MANAGEMENT COMBINED

    Commissions                                     $192.5             $172.9
    Fees                                             120.4              108.2
    Investment income - fiduciary                      4.0                2.8
         Revenues                                    316.9              283.9

    Compensation                                     193.2              165.3
    Operating                                         69.5               64.6
    Depreciation                                       5.2                5.1
    Amortization                                       5.3                3.0
    Litigation and contingent commission
     related matters                                  35.0                 -
         Expenses                                    308.2              238.0

    Earnings (loss) from continuing
     operations before income taxes                    8.7               45.9
    Provision (benefit) for income taxes              (3.9)               9.1
    Earnings (loss) from continuing
     operations                                      $12.6              $36.8

    Diluted earnings (loss) from
     continuing operations per share                 $0.13              $0.39
    Growth - revenues                                  12%                11%
    Organic growth in commissions and
     fees  (1)                                          4%                 8%
    Growth - pretax earnings                           NMF                23%
    Compensation expense ratio                         61%                58%
    Operating expense ratio                            22%                23%
    Pretax profit margin before
     litigation related matters  (2)                   14%                16%
    Effective tax rate                                 NMF                20%

     See notes to first quarter 2005 earnings release and non-GAAP financial
     measures on page 6.



                          Arthur J. Gallagher & Co.
                        Segment Statement of Earnings
               (Unaudited - in millions except per share data)

                                               3 Months Ended   3 Months Ended
    FINANCIAL SERVICES SEGMENT                  Mar 31, 2005     Mar 31, 2004

    Investment income                                 $32.1            $20.6
    Impact of FIN 46 on investment income                -              25.9
    Investment gains (losses)                          (0.1)             2.5
         Revenues                                      32.0             49.0

    Investment expenses                                28.7             16.8
    Impact of FIN 46 on investment
     expenses                                            -              24.7
    Interest                                            2.6              1.9
    Depreciation                                        3.5              1.9
    Impact of FIN 46 on depreciation
     expense                                             -               1.2
    Litigation related matters                        131.0               -
         Expenses                                     165.8             46.5

    Earnings (loss) from continuing
     operations before income taxes                  (133.8)             2.5
    Provision (benefit) for income taxes              (47.4)             0.5
    Earnings (loss) from continuing
     operations                                      $(86.4)            $2.0

    Diluted earnings (loss) from
     continuing operations per share                 $(0.93)           $0.02



                      Consolidated Statement of Earnings
               (Unaudited - in millions except per share data)

                                             3 Months Ended     3 Months Ended
    TOTAL COMPANY                             Mar 31, 2005       Mar 31, 2004

    Commissions                                     $192.5             $172.9
    Fees                                             120.4              108.2
    Investment income - fiduciary                      4.0                2.8
    Investment income - all other                     32.1               46.5
    Investment gains (losses)                         (0.1)               2.5
         Revenues                                    348.9              332.9

    Compensation                                     193.2              165.3
    Operating                                         69.5               64.6
    Investment expenses                               28.7               41.5
    Interest                                           2.6                1.9
    Depreciation                                       8.7                8.2
    Amortization                                       5.3                3.0
    Litigation and contingent commission
     related matters                                 166.0                 -
         Expenses                                    474.0              284.5

    Earnings (loss) from continuing
     operations before income taxes                 (125.1)              48.4
    Provision (benefit) for income taxes             (51.3)               9.6
    Earnings (loss) from continuing
     operations                                      (73.8)              38.8

    Earnings (loss) on discontinued
     operations, net of income taxes                  (0.2)               0.1

    Net earnings (loss)                             $(74.0)             $38.9

    Diluted earnings (loss) from
     continuing operations per share                $(0.80)             $0.41
    Diluted earnings (loss) on
     discontinued operations per share                 -                  -
    Net earnings (loss)                             $(0.80)             $0.41

    Dividends declared per share                     $0.28              $0.25

    Other Information
    Basic weighted average shares
     outstanding (000s)                             92,463             90,376
    Diluted weighted average shares
     outstanding (000s)                             94,790             93,955
    Common shares repurchased (000s)                   -                  555
    Annualized return on beginning
     tangible net worth (3)                            NMF                37%
    Number of acquisitions closed                        2                  7
    Workforce at end of period (includes
     acquisitions)                                   7,975              6,958

    Earnings (Loss) From Continuing
     Operations Before Income
     Taxes, Litigation and Contingent
     Commission Related Matters, Investment
     (Gains) Losses, Depreciation,
     Amortization and Stock Compensation
     Expense (4)
    Earnings (loss) from continuing
     operations                                     $(73.8)             $38.9
    Litigation and contingent commission
     related matters                                 166.0                 -
    Investment (gains) losses                          0.1               (2.5)
    Depreciation                                       8.7                8.2
    Amortization                                       5.3                3.0
    Amortization of deferred comp and
     restricted stock                                  2.7                2.1
    Stock compensation expense                         2.2                1.2
    Tax effect                                       (65.1)              (2.2)
    Earnings (loss) from continuing
     operations before income taxes,
     litigation and contingent
     commission related matters,
     investment (gains) losses,
     depreciation, amortization and
     stock compensation expense                      $46.1              $48.7

    On a diluted per share basis                     $0.49              $0.52

     See notes to first quarter 2005 earnings release and non-GAAP financial
     measures on page 6.



                          Arthur J. Gallagher & Co.
                          Consolidated Balance Sheet
               (Unaudited - in millions except per share data)

                                                Mar 31, 2005      Dec 31, 2004

    Cash and cash equivalents                       $212.3            $224.6
    Restricted cash                                  506.1             488.9
    Unconsolidated investments - current              27.8              26.0
    Premiums and fees receivable                   1,305.4           1,355.5
    Income taxes recoverable                           5.9                -
    Other current assets                             159.5             132.8
         Total current assets                      2,217.0           2,227.8

    Unconsolidated investments -
     noncurrent                                      129.4             132.4
    Fixed assets related to consolidated
     investments - net                               194.6             195.6
    Other fixed assets - net                          57.6              63.4
    Deferred income taxes                            185.9             184.8
    Other noncurrent assets                           70.3              59.7
    Goodwill - net                                   209.7             219.0
    Amortizable intangible assets - net              163.2             155.2
         Total assets                             $3,227.7          $3,237.9


    Premiums payable to insurance and
     reinsurance companies                        $1,827.4          $1,838.9
    Accrued compensation and other
     accrued liabilities                             355.0             253.4
    Unearned fees                                     39.3              35.0
    Income taxes payable                                -               24.8
    Other current liabilities                         17.1              18.6
    Corporate related borrowings                        -                 -
    Investment related borrowings -
     current                                          42.9              41.4
         Total current liabilities                 2,281.7           2,212.1

    Investment related borrowings -
     noncurrent                                      138.3             140.0
    Other noncurrent liabilities                     125.0             124.8
         Total liabilities                         2,545.0           2,476.9

    Stockholders' equity:
    Common stock - issued and outstanding             93.2              92.1
    Capital in excess of par value                   172.9             146.4
    Retained earnings                                438.8             539.0
    Unearned deferred compensation                   (16.5)            (12.2)
    Unearned restricted stock                         (5.7)             (4.3)
         Total stockholders' equity                  682.7             761.0
         Total liabilities and
          stockholders' equity                    $3,227.7          $3,237.9

    Other Information
    Tangible net worth  (5)                         $309.8            $386.8
    Book value per share                             $7.33             $8.26
    Tangible book value per share  (6)               $3.32             $4.20



     Notes to First Quarter 2005 Earnings Release and Non-GAAP Financial
     Measures

     This exhibit contains supplemental non-GAAP financial information within
     the meaning of Regulation G of the SEC's rules.  Consistent with
     Regulation G, a description of such information is provided below and a
     reconciliation of certain of such items to U.S. generally accepted
     accounting principles (GAAP) is provided elsewhere in this press release.
     Gallagher believes the items described below provide meaningful
     additional information, which may be helpful to investors in assessing
     certain aspects of Gallagher's operating performance and financial
     condition that may not be otherwise apparent from GAAP.  Industry peers
     provide similar supplemental information, although they may not use the
     same or comparable terminology and may not make identical adjustments.
     This non-GAAP information should be used in addition to, but not as a
     substitute for, the GAAP information.

     Non-GAAP Measures Defined
     (1)  Organic growth excludes the first twelve months of net commission
          and/or fee revenues generated from the acquisitions accounted for as
          purchases and the net commission and/or fee revenues related to
          operations disposed of in each year presented.  These commissions
          and fees are excluded from organic revenues in order to determine
          the revenue growth that is associated with the operations that were
          a part of Gallagher in both the current and prior year.  In
          addition, organic growth excludes the impact of the period over
          period change in contingent commissions.

     (2)  Represents pretax earnings (loss) from continuing operations before
          the impact of pretax litigation and contingent commission related
          matters divided by total revenues.

     (3)  Represents year-to-date net earnings divided by total stockholders'
          equity, less net balance of goodwill and amortizable intangible
          assets, as of the beginning of the year.

     (4)  Represents net earnings before the after-tax effect of the impact of
          litigation and contingent commission related matters, investment
          gains (losses), depreciation, amortization, amortization of deferred
          compensation and restricted stock expense and stock compensation
          expense.

     (5)  Represents total stockholders' equity less net balance of goodwill
          and amortizable intangible assets.

     (6)  Represents tangible net worth divided by the common shares
          outstanding at the end of the period.

     Notes to First Quarter 2005 Unconsolidated and Consolidated Investment
     Summaries

     (7)  On April 1, 2005, Gallagher received $5.8 million in cash comprising
          a $2.1 million dividend ($0.02 per diluted share, net of tax) and a
          $3.7 million return of capital from one of its Bermuda insurance
          investments which will be recorded in second quarter 2005.

     (8)  On April 20, 2005, Gallagher completed the sale of its Florida
          Community Development investment and will record a one time gain of
          approximately $12.0 million ($0.07 per diluted share, net of tax) in
          second quarter 2005.  Accordingly, these Florida Community
          Development balances will be eliminated from Gallagher's
          consolidated balance sheet in second quarter 2005.  Terms of the
          transaction provide that Gallagher continue to post a $12.6 million
          letter of credit to guarantee $12.4 million of bonds issued by the
          development.  Gallagher is fully indemnified by an affiliate of the
          purchaser and in consideration will receive cash compensation
          sufficient to cover its costs plus 1% of certain future cash flow
          residuals from the development.



                          Arthur J. Gallagher & Co.
                      Unconsolidated Investment Summary
                          (Unaudited - in millions)

                                                                  March 31,
                                                                    2005
                                March 31,       December 31,   LOCs &
                                  2005             2004      Financial Funding
                                      Non-              Non-  Guaran-  Commit-
                           Current  current  Current  current  tees    ments

    Unconsolidated
     Investments:
    Direct and indirect
     investments in Asset
     Alliance Corporation
     (AAC)                  $0.1     $47.3     $0.8    $46.7     $-       $-

    Low income housing
     (LIH) developments:
      Bridge loans           5.3        -       5.2       -       -        -
      Partnership interests   -        1.3       -       1.5      -        -
      LIH Developer           -        9.1       -       9.2      -        -

    Alternative energy
     investments:
      Owned partnership
       interests             0.9      18.7      0.9     19.1     4.4      0.8
      Biogas project          -       15.0       -      14.7      -        -
      Partnership interest
       installment sales    21.4      11.3     18.6     12.9      -        -

    Bermuda insurance
     investments (7)          -       20.4       -      20.4     6.7       -

    Real estate, venture
     capital and other
     investments             0.1       6.3      0.5      7.9      -       2.0

      Total unconsolidated
       investments          27.8     129.4     26.0    132.4    11.1      2.8

    Non-recourse
     borrowings -
     Biogas project         (0.3)    (13.7)    (0.2)   (13.8)     -        -

      Net unconsolidated
       investments         $27.5    $115.7    $25.8   $118.6   $11.1     $2.8



                       Consolidated Investment Summary
                          (Unaudited - in millions)

                                                               March 31, 2005
                                                             LOCs &
                                          March   December  Financial  Funding
                                            31,       31,    Guaran-   Commit-
                                           2005      2004     tees     ments

    Home office land and building:
      Fixed assets                       $101.4    $101.3      $-       $-
      Accumulated depreciation            (16.5)    (15.8)      -        -
      Non-recourse borrowings - current    (0.9)     (0.9)      -        -
      Recourse borrowings - current          -         -        -        -
      Non-recourse borrowings -
       noncurrent                         (72.9)    (73.1)      -        -
      Recourse borrowings - noncurrent     (3.0)     (3.0)      -        -
      Net other consolidated assets and
       liabilities                          3.0       2.8       -        -

           Net investment                  11.1      11.3       -        -

    Florida community development:  (8)
      Fixed assets                         62.0      60.3       -        -
      Accumulated depreciation             (0.9)     (0.7)      -        -
      Non-recourse borrowings - current   (19.0)    (17.9)      -        -
      Recourse borrowings - current       (17.0)    (17.0)      -        -
      Non-recourse borrowings -
       noncurrent                          (0.2)     (0.1)      -        -
      Recourse borrowings - noncurrent    (12.4)    (12.4)      -        -
      Net other consolidated assets and
       liabilities                         (3.1)     (2.4)     2.7       -

           Net investment                   9.4       9.8      2.7       -

    Airplane leasing company:
      Fixed assets                         51.8      51.8       -        -
      Accumulated depreciation            (15.0)    (14.1)      -        -
      Non-recourse borrowings - current    (2.6)     (2.6)      -        -
      Recourse borrowings - current          -         -        -        -
      Non-recourse borrowings -
       noncurrent                         (29.3)    (29.9)      -        -
      Recourse borrowings - noncurrent       -         -        -        -
      Net other consolidated assets and
       liabilities                         (0.1)       -        -        -

           Net investment                   4.8       5.2       -        -

    Syn/Coal partnerships:
      Fixed assets                         15.7      15.6       -        -
      Accumulated depreciation             (3.9)     (2.8)      -        -
      Non-recourse borrowings - current    (3.1)     (2.8)      -        -
      Recourse borrowings - current          -         -        -        -
      Non-recourse borrowings -
       noncurrent                          (6.8)     (7.7)      -        -
      Recourse borrowings - noncurrent       -         -        -        -
      Net other consolidated assets and
       liabilities                          0.4       1.6       -        -

           Net investment                   2.3       3.9       -        -

    Total consolidated investments:
      Fixed assets                        230.9     229.0       -        -
      Accumulated depreciation            (36.3)    (33.4)      -        -
      Non-recourse borrowings - current   (25.6)    (24.2)      -        -
      Recourse borrowings - current       (17.0)    (17.0)      -        -
      Non-recourse borrowings -
       noncurrent                        (109.2)   (110.8)      -        -
      Recourse borrowings - noncurrent    (15.4)    (15.4)      -        -
      Net other consolidated assets and
       liabilities                          0.2       2.0      2.7       -

           Net investment                 $27.6     $30.2     $2.7      $-

     See notes to first quarter 2005 earnings release and unconsolidated and
     consolidated investment summaries on page 6.
SOURCE  Arthur J. Gallagher & Co.
    -0-                             04/26/2005
    /CONTACT:  Marsha J. Akin, Investor Relations of Arthur J. Gallagher &
Co., +1-630-773-3800/
    /Web site:  http://www.ajg.com /
    (AJG)

CO:  Arthur J. Gallagher & Co.
ST:  Illinois
IN:  INS FIN
SU:  ERN ERP CCA

AM-JK
-- CGTU074 --
6846 04/26/2005 16:43 EDT http://www.prnewswire.com