Arthur J. Gallagher & Co.AJG

Morningstar Rating

Stock Research and Analysis

by Bill Bergman

Arthur J. Gallagher's focus on selling insurance to niche market clients and successful development of scale and scope economies garner the firm a narrow economic moat.

We see insurance brokerage as a moat-prone business generally, and Gallagher stands Read more

Bulls Say

Insurance brokerage is not capital-intensive, and it does not involve taking on claims risk directly. This allows Gallagher to shoulder less risk and generate higher returns on capital than insurers.

Gallagher has developed significant expertise in identifying and melding acquired brokerage operations successfully.

Gallagher uses its cash to buy back shares and pay a generous dividend. Read more

Bears Say

Even though Gallagher has settled with the Illinois attorney general, it still faces several lawsuits from plaintiffs asserting they were harmed by the firm's past compensation structure.

Gallagher risks overpaying for acquisitions as it attempts to maintain growth.

A protracted soft insurance market could test investors' patience. Read more

Strategy

Gallagher's goal is to grow by serving customer risk-management needs and reducing their costs. It intends to expand its brokerage business internally and through select acquisitions. Gallagher specializes Read more

Management

We think stewardship at Gallagher is good. CEO Pat Gallagher took the reins in 1995 from his uncle Bob Gallagher, who served as CEO from 1963 to 1994 and then remained as chairman. With the passing of Bob Gallagher in August 2006, Pat became chairman Read more

Profile

More than two thirds of revenue at Arthur J. Gallagher comes from insurance brokerage. Gallagher advises corporate and institutional clients on managing risk and recommends Read more

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