Arthur J. Gallagher & Co. Announces Fourth Quarter And Full Year 2012 Financial Results

    Arthur J. Gallagher & Co. Announces Fourth Quarter And Full Year 2012
                              Financial Results

PR Newswire

ITASCA, Ill., Jan. 29, 2013

ITASCA, Ill., Jan. 29, 2013 /PRNewswire/ --Arthur J. Gallagher & Co. (NYSE:
AJG) today reported its financial results for the quarter and year ended
December31, 2012. A printer-friendly format and supplemental quarterly data
is available at www.ajg.com. For a description of the non-GAAP measures used
to report financial results in this earnings release, please see "Information
Regarding Non-GAAP Measures" beginning on page 7.

"We had a strong finish to 2012 and we are well positioned for continued
success in 2013," said J. Patrick Gallagher, Jr., Chairman, President and
CEO. "In the fourth quarter, our combined Brokerage and Risk Management
segments posted 14% growth in adjusted total revenues, 4.6% organic growth in
base commission and fee revenues, 17% growth in adjusted EBITDAC and adjusted
EBITDAC margins improved by 50basis points."

  oOur Brokerage segment had an outstanding quarter. Adjusted total revenues
    were up 18%, base organic commission and fee revenues grew 5.2%, adjusted
    EBITDAC was up 20% and adjusted EBITDAC margins were up 40 basis points.
    We also completed another 21 acquisitions with annualized revenues of
    $76million, which pushed total acquired annualized revenues for all of
    2012 to over $230million.
  oOur Risk Management segment had an excellent quarter. Excluding the New
    Zealand earthquake claim-settling unit, which has wrapped up operations,
    adjusted total revenues were up 5%, base organic fees were up 2.9%,
    adjusted EBITDAC was up 6%, adjusted EBITDAC margins improved by 30 basis
    points and we hit our targeted adjusted EBITDAC margin of 16% while making
    our planned client-centric investments. 
  oDuring the fourth quarter, we took actions to contract our global
    workforce by approximately 3%, or 400 middle-office and back-office
    positions. These actions reflect our investments in productivity
    initiatives and improved technology utilization. Pretax chargestotal
    approximately $12.3million and we expect related future annual workforce
    savings of approximately $35.0million. Anticipated to mostly offset
    these future savings will be increased medical costs, reduced discount
    rate on our frozen pension plan, salary increases, increased
    performance-based compensation and increased long-term incentive
    compensation.
  oWe made tremendous progress in rolling-out our clean-energy investments
    during 2012 and now have most of our plants in various stages of ramping
    up production. Our clean energy investments earned nearly $33million in
    2012 and could be more than double that in 2013. These additional
    earnings will be used to continue our M&A strategy in our core brokerage
    and risk management operations.

"As we look towards 2013, we see a rate environment that is still showing
signs of firming in many lines, clients that are finding ways to grow their
businesses even in these uncertain times, a strong M&A pipeline, and an
operating environment where we can control our costs and improve our
productivity. Gallagher's sales and high-quality service culture is thriving
and we are in an excellent position for success in 2013."

The following provides non-GAAP information that management believes is
helpful when comparing 2012 revenues, EBITDAC and diluted net earnings (loss)
per share with the same periods in 2011:

(1 of 12)

Quarter Ended December 31                                        Diluted Net
                                                                 Earnings
                           Revenues           EBITDAC            (Loss) Per
                                                                 Share
Segment                    4th Q  4th Q  Chg  4th Q  4th Q  Chg  4th Q  4th Q
                           12     11          12     11          12     11
                           (in millions)      (in millions)
Brokerage, as adjusted     $     $      18%  $      $     20%  $     $ 
                           486.6 413.9      104.2 86.7       0.35  0.32
 Gains on book sales      2.5    1.1         2.5    1.1         0.01   0.01
 Heath Lambert             -      -           (7.0)  (7.5)       (0.04) (0.04)
 integration
 Workforce & lease         -      -           (9.7)  (0.4)       (0.05) (0.01)
 termination
 Acquisition related       -      -           -      (0.6)       -      (0.01)
 adjustments
 Levelized foreign         -      (1.6)       (0.9)  0.3         -      -
 currency translation
 Effective income tax      -      -           -      -           (0.02) 0.01
 rate impact
Brokerage, as reported     489.1  413.4       89.1   79.6        0.25   0.28
Risk Management, as        143.8  137.4  5%   23.0   21.6   6%   0.09   0.09
adjusted
 New Zealand earthquake
 claims
   administration          1.0    8.3         -      2.5         -      0.02
 GAB Robins integration    -      -           -      (1.7)       -      (0.01)
 South Australia ramp up   -      -           (2.1)  -           (0.01) -
 costs
 Workforce & lease         -      -           (2.6)  (0.4)       (0.01) -
 termination
 Effective income tax      -      -           -      -           -      0.01
 rate impact
Risk Management, as        144.8  145.7       18.3   22.0        0.07   0.11
reported
Total Brokerage & Risk
 Management, as reported   633.9  559.1       107.4  101.6       0.32   0.39
Corporate, as reported     39.3   19.3        (12.0) (10.1)      (0.05) (0.04)
Total Company, as          $     $           $     $          $     $ 
reported                   673.2 578.4      95.4  91.5       0.27  0.35
Total Brokerage & Risk
 Management, as adjusted   $     $      14%  $      $      17%  $     $ 
                           630.4 551.3      127.2 108.3      0.44  0.41

Year Ended December                                              Diluted Net
31                                                               Earnings
                       Revenues             EBITDAC              (Loss) Per
                                                                 Share
Segment                Year 12 Year 11 Chg  Year 12 Year 11 Chg  Year   Year
                                                                 12     11
                       (in millions)        (in millions)
Brokerage, as          $       $       18%  $ 414.7 $ 340.5 22%  $     $ 
adjusted               1,823.7 1,549.3                           1.43   1.28
 Gains on book sales  3.9     5.5          3.9     5.5          0.02   0.03
 Heath Lambert         -       -            (19.3)  (16.0)       (0.10) (0.08)
 integration
 Workforce & lease     -       -            (14.4)  (2.6)        (0.07) (0.01)
 termination
 Acquisition related   -       -            -       (7.0)        -      0.03
 adjustments
 Levelized foreign     -       1.7          (1.6)   0.4          (0.01) -
 currency translation
Brokerage, as          1,827.6 1,556.5      383.3   320.8        1.27   1.25
reported
Risk Management, as    563.1   527.0   7%   90.3    81.4    11%  0.36   0.35
adjusted
 New Zealand
 earthquake claims
   administration      8.6     21.8         1.5     6.1          0.01   0.03
 GAB Robins            -       -            -       (13.0)       -      (0.06)
 integration
 South Australia ramp  -       -            (2.1)   -            (0.01) -
 up costs
 Workforce & lease     -       -            (2.7)   (5.6)        (0.01) (0.03)
 termination
Risk Management, as    571.7   548.8        87.0    68.9         0.35   0.29
reported
Total Brokerage &
Risk
 Management, as        2,399.3 2,105.3      470.3   389.7        1.62   1.54
 reported
Corporate, as          121.0   29.4         (38.2)  (32.1)       (0.03) (0.26)
reported
Total Company, as      $       $            $ 432.1 $ 357.6      $     $ 
reported               2,520.3 2,134.7                           1.59   1.28
Total Brokerage &
Risk
 Management, as        $       $       15%  $ 505.0 $ 421.9 20%  $     $ 
 adjusted              2,386.8 2,076.3                           1.79   1.63

(2 of 12)

Brokerage Segment Fourth Quarter Highlights - The following tables provide
non-GAAP information that management believes is helpful when comparing
certain 2012 financial information with the same periods in 2011
(inmillions):

Organic Revenues (Non-GAAP)     4th Q 12   4th Q 11   Year 12      Year 11
Base Commissions and Fees
Commissions as reported         $ 339.8   $ 297.7   $ 1,302.5    $ 1,127.4
Fees as reported                121.8      96.4       403.2        324.1
Less commissions and fees from  (46.4)     -          (200.1)      -
acquisitions
Less disposed of operations     -          (0.9)      -            (8.1)
Levelized foreign currency      -          1.5        -            (1.5)
translation
Organic base commissions and    $ 415.2   $ 394.7   $ 1,505.6    $ 1,441.9
fees
Organic change in base          5.2%       4.9%       4.4%         2.8%
commissions and fees
Supplemental Commissions
Supplemental commissions as     $  17.6   $  14.0   $   67.9  $   56.0
reported
Less supplemental commissions   (2.4)      -          (10.7)       -
from acquisitions
Less disposed of operations     -          (0.1)      -            (0.6)
Organic supplemental            $  15.2   $  13.9   $   57.2  $   55.4
commissions
Organic change in supplemental  9.4%       12.4%      3.3%         12.8%
commissions
Contingent Commissions
Contingent commissions as       $   5.9  $   3.5  $   42.9  $   38.1
reported
Less contingent commissions     (0.5)      -          (5.2)        -
from acquisitions
Organic contingent commissions  $   5.4  $   3.5  $   37.7  $   38.1
Organic change in contingent    54.3%      3.2%       -1.1%        -6.3%
commissions

Adjusted Compensation Expense and    4th Q 12  4th Q 11  Year 12    Year 11
Ratio (non-GAAP)
Reported amounts                     $ 316.9  $ 267.3  $ 1,131.6  $  968.4
Heath Lambert integration            (6.1)     (4.7)     (13.2)     (9.2)
Earnout related compensation         -         (0.6)     -          (7.0)
charge
Workforce and lease termination      (9.0)     (0.3)     (13.7)     (2.5)
related charges
Levelized foreign currency           -         1.5       -          (0.8)
translation
Adjusted amounts                     $ 301.8  $ 263.2  $ 1,104.7  $  948.9
Adjusted ratios using adjusted     * 62.0%     63.6%     60.6%      61.3%
revenues on page 2

   Adjusted fourth quarter compensation ratio was 1.6pts lower than the same
* period in 2011. This ratio was primarily impacted by reductions in
   incentive compensation of 1.3pts and 0.4pts due to headcount control.

Adjusted Operating Expense and        4th Q 12  4th Q 11  Year 12    Year 11
Ratio (non-GAAP)
Reported amounts                      $  83.1  $  66.5  $  312.7  $  267.3
Heath Lambert integration             (0.9)     (2.8)     (6.1)      (6.8)
Workforce and lease termination       (0.7)     (0.1)     (0.7)      (0.1)
related charges
Levelized foreign currency            (0.9)     0.4       (1.6)      (0.5)
translation
Adjusted amounts                      $  80.6  $  64.0  $  304.3  $  259.9
Adjusted ratios using adjusted      * 16.6%     15.5%     16.7%      16.8%
revenues on page 2

   Adjusted fourth quarter operating expense ratio was 1.1pts higher than the
* same period in 2011. This ratio was primarily impacted by increased travel
   and meeting expenses of 0.5pts and increased office expenses of 0.3pts.

(3 of 12)

Brokerage Segment Fourth Quarter Highlights (continued)

Adjusted EBITDAC (non-GAAP)               4th Q 12  4th Q 11  Year 12  Year 11
Total EBITDAC - see page 10 for           $  89.1  $  79.6  $ 383.3  $ 320.8
computation
Gains from books of business sales        (2.5)     (1.1)     (3.9)    (5.5)
Heath Lambert integration                 7.0       7.5       19.3     16.0
Earnout related compensation charge       -         0.6       -        7.0
Workforce and lease termination related   9.7       0.4       14.4     2.6
charges
Levelized foreign currency translation    0.9       (0.3)     1.6      (0.4)
Adjusted EBITDAC                          $ 104.2  $  86.7  $ 414.7  $ 340.5
Adjusted EBITDAC change                   20.2%     26.6%     21.8%    17.7%
Adjusted EBITDAC margin                   21.4%     21.0%     22.7%    22.0%

The following is a summary of brokerage acquisition activity for 2012 and
2011:

                             4th Q 12    4th Q 11   Year 12       Year 11
Shares issued for            470,000     1,062,000  7,792,000     3,454,000
acquisitions and earnouts
Number of acquisitions       21          11         58            32
closed
Annualized revenues          $   75.9  $       $   231.3  $   277.0
acquired (in millions)                  42.2

Risk Management Segment Fourth Quarter Highlights - The following tables
provide non-GAAP information that management believes is helpful when
comparing certain 2012 financial information with the same periods in 2011
(inmillions):

Organic Revenues (Non-GAAP)               4th Q 12  4th Q 11  Year 12  Year 11
Base domestic and international fees      $ 137.6  $ 132.2  $ 541.7  $ 510.7
Less fees from acquisitions               (0.9)     -         (2.2)    -
Levelized foreign currency translation    -         0.7       -        (0.1)
Organic base domestic and international   136.7     132.9     539.5    510.6
fees
International performance bonus fees     5.3       4.5       18.2     13.6
New Zealand earthquake claims             1.0       8.3       8.6      21.8
administration
Organic fees                              $ 143.0  $ 145.7  $ 566.3  $ 546.0
Organic change in fees                   -1.9%     12.6%     3.7%     9.4%
Organic change in base domestic and       2.9%      5.5%      5.7%     4.9%
international fees

Adjusted Compensation Expense and Ratio   4th Q 12  4th Q 11  Year 12  Year 11
(non-GAAP)
Reported amounts                          $  90.7  $  88.9  $ 347.0  $ 344.1
New Zealand earthquake claims             (0.8)     (4.9)     (5.5)    (13.1)
administration
GAB Robins integration                   -         (0.8)     -        (9.2)
South Australia ramp up costs             (1.5)     -         (1.5)    -
Workforce and lease termination related   (2.4)     (0.4)     (2.5)    (3.9)
charges
Adjusted amounts                          $  86.0  $  82.8  $ 337.5  $ 317.9
Adjusted ratios using adjusted revenues * 59.8%     60.3%     59.9%    60.3%
on page 2

     Adjusted fourth quarter compensation ratio was 0.5pts lower than the
* same period in 2011. This ratio was primarily impacted by reduced
     incentive compensation of 1.7pts, partially offset by increased employee
     benefits costs of 0.7pts and temporary help of 0.5pts.

(4 of 12)

Risk Management Segment Fourth Quarter Highlights (continued)

Adjusted Operating Expense and Ratio      4th Q 12  4th Q 11  Year 12  Year 11
(non-GAAP)
Reported amounts                          $  35.8  $  34.8  $ 137.7  $ 135.8
New Zealand earthquake claims             (0.2)     (0.9)     (1.6)    (2.6)
administration
GAB Robins integration                   -         (0.9)     -        (3.8)
South Australia ramp up costs             (0.6)     -         (0.6)    -
Workforce and lease termination related   (0.2)     -         (0.2)    (1.7)
charges
Adjusted amounts                          $  34.8  $  33.0  $ 135.3  $ 127.7
Adjusted ratios using adjusted revenues * 24.2%     24.0%     24.0%    24.2%
on page 2

    Adjusted fourth quarter operating expense ratio was 0.2 pts higher than
    the same period in 2011. This year, a new product was introduced that is
    primarily outsourced, the cost of which flows through operating expenses.
* The impact of this product was 1.3pts on the quarter. Excluding the
    impact of this product, the adjusted fourth quarter operating expense
    ratio would have been 1.1pts lower than the same period in 2011. This
    ratio was primarily impacted by a decrease in professional fees of 0.3pts
    and a reduction in business insurance of 0.5pts.

Adjusted EBITDAC (non-GAAP)             4th Q 12  4th Q 11  Year 12   Year 11
Total EBITDAC - see page 10 for         $  18.3  $  22.0  $  87.0  $  68.9
computation
New Zealand earthquake claims           -         (2.5)     (1.5)     (6.1)
administration
GAB Robins integration                 -         1.7       -         13.0
South Australia ramp up costs           2.1       -         2.1       -
Workforce and lease termination         2.6       0.4       2.7       5.6
related charges
Adjusted EBITDAC                        $  23.0  $  21.6  $  90.3  $  81.4
Adjusted EBITDAC change                 6.5%      16.8%     10.9%     15.3%
Adjusted EBITDAC margin                 16.0%     15.7%     16.0%     15.4%

Corporate Segment Fourth Quarter Highlights - The following table provides
non-GAAP information that management believes is helpful when comparing 2012
operating results for the Corporate Segment with the same periods in 2011
(inmillions):

                            2012                            2011
                 Pretax     Income    Net        Pretax     Income   Net
                 Earnings  Tax       Earnings  Earnings  Tax      Earnings
                 (Loss)     Benefit   (Loss)     (Loss)     Benefit  (Loss)
4th Quarter
Interest and     $         $  4.7  $        $         $       $  
banking costs    (11.6)              (6.9)     (11.1)    4.5     (6.6)
Clean energy     (5.7)      6.8       1.1        (4.7)      7.2      2.5
investments
Acquisition      (3.3)      0.1       (3.2)      (0.8)      (0.4)    (1.2)
costs
Corporate        (2.5)      4.6       2.1        (3.6)      3.9      0.3
Legacy           -          -         -          (0.4)      1.8      1.4
investments
                 $         $ 16.2   $        $         $ 17.0  $  
                 (23.1)              (6.9)     (20.6)             (3.6)
Year
Interest and     $         $ 18.4   $         $         $ 17.5  $ 
banking costs    (46.1)              (27.7)    (43.8)             (26.3)
Clean energy     (17.3)     50.0      32.7       (14.8)     18.7     3.9
investments
Acquisition      (7.1)      0.7       (6.4)      (4.7)      0.6      (4.1)
costs
Corporate        (11.4)     9.5       (1.9)      (9.8)      5.5      (4.3)
Legacy           -          -         -          (0.3)      1.7      1.4
investments
                 $         $ 78.6   $        $         $ 44.0  $ 
                 (81.9)              (3.3)     (73.4)             (29.4)

Debt, interest and banking - At December31, 2012, Gallagher had
$725.0million of long-term borrowings outstanding under four private
placement agreements, which are due and payable in various amounts in 2014
through 2023. Gallagher also maintains an unsecured line of credit of
$500.0million that expires July 14, 2014. There were $129.0million of
borrowings outstanding under Gallagher's line of credit facility at December
31, 2012.

(5 of 12)

Corporate Segment Fourth Quarter Highlights (continued)

Clean energy investments - Gallagher has investments in limited liability
companies that own 29 clean coal production plants which produce refined coal
using proprietary technologies owned by Chem-Mod. We believe these plants are
qualified to receive refined coal tax credits under IRC Section45. The
fourteen plants which were placed in service prior toDecember31, 2009 (which
we refer to as the 2009 Era Plants) can receive tax credits through 2019 and
the fifteen plants which were placed in service prior to December31, 2011
(which we refer to as the 2011 Era Plants) can receive tax credits through
2021.

  o2009 Era Plants - Twelve of the fourteen plants are under long-term
    production contracts. At December31, 2012, Gallagher's tax-effected
    carrying value of these investments was $4.7million and collectively they
    could generate approximately $4.5million of net after-tax earnings per
    quarter through 2019. Gallagher is currently in negotiations with a
    utility for long-term production contracts for the remaining two plants.
    At December31, 2012, Gallagher's tax-effected carrying value of these
    two investments was $0.8million. Gallagher cannot predict when these two
    plants will resume production of refined coal or the amount of refined
    coal that will ultimately be produced.
  o2011 Era Plants - Seven of the fifteen plants are under long-term
    production contracts. Gallagher's tax-effected carrying value of these
    investments at December31, 2012 was $13.5million and collectively they
    could generate approximately $12.0million of net after-tax earnings per
    quarter through 2021. Gallagher has signed long-term production
    agreements for two plants that may resume production in mid-2013.
    Gallagher's tax-effected carrying value of these investments at
    December31, 2012 was $0.8million and they could generate approximately
    $3.0million of net after-tax earnings per quarter through 2021 once
    production resumes. Gallagher is in negotiations for long-term production
    agreements for two plants that may resume production in mid-2013.
    Gallagher's tax-effected carrying value of these two investments at
    December 31, 2012 was $0.7million and collectively they could generate
    approximately $1.5million of net after-tax earnings per quarter through
    2021 once production resumes. Gallagher has been selected as a finalist
    in a request for proposal to provide refined coal at two of the remaining
    four plants, which had a tax-effected carrying value of $0.8million at
    December31, 2012. Gallagher is seeking long-term production contracts
    for the remaining two plants which had a tax-effected carrying value of
    $0.8million at December31, 2012. Gallagher cannot predict when these
    four plants will resume production of refined coal or the amount of
    refined coal that will ultimately be produced.
  oFor those 2009 and 2011 Era Plants that are not yet under long-term
    production contracts, we estimate that we will invest an average of
    $4.0million additional per plant on a tax-effected basis to connect and
    house each of these plants. For those plants that will have majority
    ownership co-investors, the tax-effected average additional investment
    will be $2.0million.
  oGallagher has sold co-investor majority ownership interests in twelve
    plants. Gallagher also has agreements in principle with co-investors for
    the sale of majority ownership interests in five additional plants. We
    may sell ownership interests in some or all of the remaining plants to
    co-investors. 
  oGallagher's investment in Chem-Mod generates royalty income from clean
    energy plants owned by those limited liability companies in which it
    invests as well as clean energy plants owned by other unrelated parties.
    Based on current production estimates provided by licensees, Chem-Mod
    could generate for Gallagher approximately $3.6million of net after-tax
    earnings per quarter.
  oPlease note that all estimates set forth above regarding the potential
    future quarterly earnings impact of our clean energy investments are
    subject to significant risks, including those referred to below under
    "Information Regarding Forward-Looking Statements."

Acquisition costs - Consists mostly of external professional fees and other
due diligence costs related to acquisitions.

Corporate - Consists of overhead allocations mostly related to corporate staff
compensation.

Income Taxes

Gallagher allocates the provision for income taxes to its Brokerage and Risk
Management segments as if those segments were computing income tax provisions
on a separate company basis. Gallagher historically has reported, and
anticipates reporting for the foreseeable future, an effective tax rate of
approximately 37% to 39% in both its Brokerage and Risk Management segments.
Gallagher's consolidated effective tax rate for the quarter ended December31,
2012 and 2011 was 26.2% and 14.6%, respectively. Gallagher's tax rate for
fourth quarter 2012 was lower than the statutory rate primarily due to the
amount of IRC Section 45 tax credits earned in the quarter. Gallagher's
effective tax rate for fourth quarter 2012 was higher than the same period in
2011 primarily due to several tax related adjustments made during fourth
quarter 2011 which did not recur in 2012.

(6 of 12)

Webcast Conference Call

Gallagher will host a webcast conference call on Wednesday, January 30, 2013
at 9:15 a.m. ET/8:15 a.m. CT. To listen to this call, please go to
www.ajg.com. The call will be available for replay at such website for not
less than 90 days.

About Arthur J. Gallagher & Co.

Arthur J. Gallagher & Co., an international insurance brokerage and risk
management services firm, is headquartered in Itasca, Illinois, has operations
in 18 countries and offers client-service capabilities in more than 140
countries around the world through a network of correspondent brokers and
consultants.

Information Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. When used in this press
release, the words "anticipates," "believes," "contemplates," "see," "should,"
"could," "estimates," "expects," "intends," "plans" and variations thereof and
similar expressions, are intended to identify forward-looking statements.
Examples of forward-looking statements include, but are not limited to, (i)
statements regarding the amount of, and potential uses for, investment returns
generated by Gallagher's clean energy investments, (ii) our corporate income
tax rate, (iii) the insurance premium rate environment, (iv) the strength of
our clients' businesses, (v) prospects for our acquisition strategy and
pipeline, (vi) our ability to control expenses and improve productivity, (vii)
the future revenue and earnings impact of recent acquisitions, (viii) drivers
of organic growth in the Brokerage and Risk Management segments and (ix)
anticipated future results or performance of any segment or the Company as a
whole.

Gallagher's actual results may differ materially from those contemplated by
the forward-looking statements. Readers are therefore cautioned against
relying on any of the forward-looking statements, which are neither statements
of historical fact nor guarantees or assurances of future performance.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements include the following:

  oRisks and uncertainties related to Gallagher's clean energy investments
    include uncertainties related to political and regulatory risks, including
    potential actions by Congress or challenges by the IRS eliminating or
    reducing the availability of tax credits under IRC Section 45
    retroactively and/or going forward; the ability to maintain and find
    co-investors; the potential for divergent business objectives by
    co-investors and other stakeholders; plant operational risks, including
    supply-chain risks; utilities' future use of, or demand for, coal; the
    market price of coal; the costs of moving a clean coal plant; intellectual
    property risks; and environmental risks – all of which could impact (i)
    and (ii) above; and
  oChanges in worldwide and national economic conditions (including an
    economic downturn and uncertainty regarding the European debt crisis),
    changes in premium rates and in insurance markets generally, changes in
    the insurance brokerage industry's competitive landscape, our inability to
    identify appropriate acquisition targets at the right price, and the
    difficulties inherent in combining the cultures and systems of different
    companies could impact (iii) – (ix) above.

Please refer to Gallagher's filings with the SEC, including Item 1A, "Risk
Factors," of its Annual Report on Form 10-K for the fiscal year ended
December31, 2011, for a more detailed discussion of these and other factors
that could impact its forward-looking statements. Any forward-looking
statement made by Gallagher in this press release speaks only as of the date
on which it is made. Except as required by applicable law, Gallagher does not
undertake to update the information included herein or the corresponding
earnings release posted on Gallagher's website.

Information Regarding Non-GAAP Measures

In addition to reporting financial results in accordance with GAAP, this press
release provides information regarding EBITDAC, EBITDAC margin, adjusted
EBITDAC, adjusted EBITDAC margin, diluted net earnings per share (as adjusted)
for the Brokerage and Risk Management segments, adjusted revenues, adjusted
compensation and operating expenses, adjusted compensation expense ratio,
adjusted operating expense ratio and organic revenue measures for each
operating segment. These measures are not in accordance with, or an
alternative to, the GAAP information provided in this press release.
Gallagher's management believes that these presentations provide useful
information to management, analysts and investors regarding financial and
business trends relating to Gallagher's results of operations and financial
condition. Gallagher's industry peers may provide similar supplemental
non-GAAP information related to organic revenues and EBITDAC, although they
may not use the same or comparable terminology and may not make identical
adjustments. The non-GAAP information provided by Gallagher should be used in
addition to, but not as a substitute for, the GAAP information provided.
Certain reclassifications have been made to the prior year amounts reported in
this press release in order to conform them to the current year presentation.

(7 of 12)

Adjusted presentation - Gallagher believes that the adjusted presentations of
the 2012 and 2011 information, presented in this earnings release, provides
stockholders and other interested persons with useful information regarding
certain financial metrics of Gallagher that may assist such persons in
analyzing Gallagher's operating results as they develop a future earnings
outlook for Gallagher. The after-tax amounts related to the adjustments were
computed using the normalized effective tax rate for each respective period.

  oAdjusted revenues and expenses - Gallagher defines these measures as
    revenues, compensation expense and operating expense, respectively, each
    adjusted to exclude gains realized from sales of books of business, Heath
    Lambert integration costs, New Zealand earthquake claims administration,
    South Australia ramp up costs, workforce related charges, lease
    termination related charges, acquisition related adjustments, the impact
    of foreign currency translation and effective income tax rate impact, as
    applicable. Acquisition related adjustments include costs related to
    transactions not expected to occur on an ongoing basis in the future once
    we fully assimilate the applicable acquisition. These costs are typically
    associated with redundant workforce, extra lease space, duplicate services
    and external costs incurred to assimilate the acquisition with our IT
    related systems.
  oAdjusted ratios - Adjusted compensation expense ratio and adjusted
    operating expense ratio are defined as adjusted compensation expense and
    adjusted operating expense, respectively, further adjusted to exclude GAB
    Robins integration costs and South Australia ramp up costs, as applicable,
    each divided by adjusted revenues.

Earnings Measures - Gallagher believes that each of EBITDAC, EBITDAC margin,
adjusted EBITDAC, adjusted EBITDAC margin and diluted net earnings per share
(as adjusted) for the Brokerage and Risk Management segments, as defined
below, provides a meaningful representation of its operating performance.
Gallagher considers EBITDAC and EBITDAC margin as a way to measure financial
performance on an ongoing basis. Adjusted EBITDAC, adjusted EBITDAC margin
and diluted net earnings per share (as adjusted) for the Brokerage and Risk
Management segments are presented to improve the comparability of our results
between periods by eliminating the impact of the items that have a high degree
of variability.

  oEBITDAC - Gallagher defines this measure as net earnings before interest,
    income taxes, depreciation, amortization and the change in estimated
    acquisition earnout payables.
  oEBITDAC margin - Gallagher defines this measure as EBITDAC divided by
    total revenues.
  oAdjusted EBITDAC - Gallagher defines this measure as EBITDAC adjusted to
    exclude gains realized from sales of books of business, Heath Lambert
    integration costs, earnout related compensation charges, workforce related
    charges, lease termination related charges, New Zealand earthquake claims
    administration costs, GAB Robins integration costs, South Australia ramp
    up costs, acquisition related adjustments and the impact of foreign
    currency translation, as applicable.
  oAdjusted EBITDAC margin - Gallagher defines this measure as adjusted
    EBITDAC divided by total adjusted revenues (defined above).
  oDiluted net earnings per share (as adjusted) for the Brokerage and Risk
    Management segments - Gallagher defines this measure as net earnings
    adjusted to exclude the after-tax impact of gains realized from sales of
    books of business, Heath Lambert integration costs, New Zealand earthquake
    claims administration, GAB Robins integration costs, South Australia ramp
    up costs, the impact of foreign currency translation, workforce related
    charges, lease termination related charges, acquisition related
    adjustments, adjustments to change in estimated acquisition earnout
    payables and effective income tax rate impact divided by diluted weighted
    average shares outstanding. The effective income tax rate impact
    represents the difference in income tax expense for tax amounts derived
    using the actual effective tax rate compared to tax amounts derived using
    a normalized effective tax rate.

Organic Revenues - Organic change in base commission and fee revenues excludes
the first twelve months of net commission and fee revenues generated from
acquisitions accounted for as purchases and the net commission and fee
revenues related to operations disposed of in each year presented. These
commissions and fees are excluded from organic revenues in order to help
interested persons analyze the revenue growth associated with the operations
that were a part of Gallagher in both the current and prior year. In
addition, change in organic growth excludes the impact of supplemental
commission and contingent commission revenues, the period-over-period impact
of foreign currency translation. The amounts excluded with respect to foreign
currency translation are calculated by applying 2012 foreign exchange rates to
the same periods in 2011. For the Risk Management segment, organic change in
base domestic and international fee revenues excludes international
performance bonus fees and New Zealand earthquake claims administration to
improve the comparability of our results between periods by eliminating the
impact of the items that have a high degree of variability or due to the
limited-time nature of these revenue sources.

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These revenue items are excluded from organic revenues in order to determine a
comparable measurement of revenue growth that is associated with the revenue
sources that will be continuing in 2013 and beyond. Gallagher has
historically viewed organic revenue growth as an important indicator when
assessing and evaluating the performance of its Brokerage and Risk Management
segments. Gallagher also believes that using this measure allows financial
statement users to measure, analyze and compare the growth from its Brokerage
and Risk Management segments in a meaningful and consistent manner.

Reconciliation of Non-GAAP Information Presented to GAAP Measures - This press
release includes tabular reconciliations to the most comparable GAAP measures,
as follows: for EBITDAC (onpage 10), for adjusted revenues, adjusted EBITDAC
and adjusted diluted net earnings per share (on page 2), for organic revenue
measures (on pages 3 and 4, respectively, for the Brokerage and Risk
Management segments), for adjusted compensation and operating expenses and
adjusted EBITDAC margin (on pages 3, 4 and 5, respectively, for the Brokerage
and Risk Management segments). Reported compensation and operating expense
ratios can be found in the supplemental quarterly data available at
www.ajg.com.

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Arthur J. Gallagher & Co.
Reported Statement of Earnings and EBITDAC - 4th Qtr and Year Ended
December 31,
(Unaudited - in millions except per share, percentage and workforce data)
                              4th Q      4th Q      Year Ended  Year Ended
                              Ended      Ended
Brokerage Segment            Dec 31,    Dec 31,    Dec 31,     Dec 31,
                              2012       2011       2012        2011
Commissions                   $       $       $         $  
                              339.8     297.7     1,302.5     1,127.4
Fees                          121.8      96.4       403.2       324.1
Supplemental commissions (1) 17.6       14.0       67.9        56.0
Contingent commissions (1)   5.9        3.5        42.9        38.1
Investment income and gains
realized on books of         4.0        1.8        11.1        10.9
business sales
            Revenues          489.1      413.4      1,827.6     1,556.5
Compensation                  316.9      267.3      1,131.6     968.4
Operating                     83.1       66.5       312.7       267.3
Depreciation                  6.4        5.5        24.7        21.2
Amortization                  25.1       24.1       96.2        77.0
Change in estimated           2.6        (0.2)      3.6         (6.2)
acquisition earnout payables
            Expenses          434.1      363.2      1,568.8     1,327.7
Earnings before income taxes  55.0       50.2       258.8       228.8
Provision for income taxes    23.5       18.3       103.0       88.6
Net earnings                 $      $      $        $   
                              31.5      31.9      155.8      140.2
EBITDAC
Net earnings                 $      $      $        $   
                              31.5      31.9      155.8      140.2
Provision for income taxes    23.5       18.3       103.0       88.6
Depreciation                  6.4        5.5        24.7        21.2
Amortization                  25.1       24.1       96.2        77.0
Change in estimated           2.6        (0.2)      3.6         (6.2)
acquisition earnout payables
EBITDAC                       $      $      $        $   
                              89.1      79.6      383.3      320.8
                              4th Q      4th Q      Year Ended  Year Ended
                              Ended      Ended
Risk Management Segment      Dec 31,    Dec 31,    Dec 31,     Dec 31,
                              2012       2011       2012        2011
Fees                          $       $       $        $   
                              143.9     145.0     568.5      546.1
Investment income             0.9        0.7        3.2         2.7
            Revenues          144.8      145.7      571.7       548.8
Compensation                  90.7       88.9       347.0       344.1
Operating                     35.8       34.8       137.7       135.8
Depreciation                  4.2        3.7        16.0        14.2
Amortization                  0.8        0.5        2.8         2.3
Change in estimated           (0.2)      -          (0.2)       -
acquisition earnout payables
            Expenses          131.3      127.9      503.3       496.4
Earnings before income taxes  13.5       17.8       68.4        52.4
Provision for income taxes    4.6        5.6        25.9        19.1
Net earnings                 $      $      $       $    
                               8.9      12.2      42.5       33.3
EBITDAC
Net earnings                 $      $      $       $    
                               8.9      12.2      42.5       33.3
Provision for income taxes    4.6        5.6        25.9        19.1
Depreciation                  4.2        3.7        16.0        14.2
Amortization                  0.8        0.5        2.8         2.3
Change in estimated           (0.2)      -          (0.2)       -
acquisition earnout payables
EBITDAC                       $      $      $       $    
                              18.3      22.0      87.0       68.9
                              4th Q      4th Q      Year Ended  Year Ended
                              Ended      Ended
Corporate Segment            Dec 31,    Dec 31,    Dec 31,     Dec 31,
                              2012       2011       2012        2011
Revenues from consolidated    $      $      $       $    
clean coal facilities         32.7      16.7      98.0       27.3
Royalty income from clean     8.5        2.8        27.6        4.5
coal licenses
Loss from unconsolidated      (1.9)      (0.3)      (6.0)       (2.6)
clean coal facilities
Other net revenues            -          0.1        1.4         0.2
            Revenues          39.3       19.3       121.0       29.4
Cost of revenues from
consolidated clean coal       37.2       19.6       111.6       32.0
facilities
Compensation                  3.4        4.8        14.8        13.6
Operating                     10.7       5.0        32.8        15.9
Interest                      10.9       10.4       43.0        40.8
Depreciation                  0.2        0.1        0.7         0.5
            Expenses          62.4       39.9       202.9       102.8
Loss before income taxes      (23.1)     (20.6)     (81.9)      (73.4)
Benefit for income taxes      (16.2)     (17.0)     (78.6)      (44.0)
Net loss                      $      $      $       $    
                              (6.9)     (3.6)     (3.3)      (29.4)
EBITDAC
Net loss                      $      $      $       $    
                              (6.9)     (3.6)     (3.3)      (29.4)
Benefit for income taxes      (16.2)     (17.0)     (78.6)      (44.0)
Interest                      10.9       10.4       43.0        40.8
Depreciation                  0.2        0.1        0.7         0.5
EBITDAC                       $      $      $       $    
                              (12.0)     (10.1)     (38.2)      (32.1)
See "Information Regarding Non-GAAP Measures" on page 7 of 12 and notes to
fourth quarter 2012 earnings release on page 12 of 12.

(10 of 12)

Arthur J. Gallagher & Co.
Reported Statement of Earnings and EBITDAC - 4th Qtr and Year Ended December
31,
(Unaudited - in millions except share and per share data)
                              4th Q Ended  4th Q Ended  Year Ended  Year Ended
Total Company                Dec 31,      Dec 31,      Dec 31,     Dec 31,
                              2012         2011         2012        2011
Commissions                   $         $         $         $  
                              339.8       297.7       1,302.5     1,127.4
Fees                          265.7        241.4        971.7       870.2
Supplemental commissions (1) 17.6         14.0         67.9        56.0
Contingent commissions (1)   5.9          3.5          42.9        38.1
Investment income and gains
realized on books of business 4.9          2.5          14.3        13.6
sales
Revenues from clean coal      39.3         19.2         119.6       29.2
activities
Other net revenues -          -            0.1          1.4         0.2
Corporate
           Revenues           673.2        578.4        2,520.3     2,134.7
Compensation                  411.0        361.0        1,493.4     1,326.1
Operating                     129.6        106.3        483.2       419.0
Cost of revenues from clean   37.2         19.6         111.6       32.0
coal activities
Interest                      10.9         10.4         43.0        40.8
Depreciation                  10.8         9.3          41.4        35.9
Amortization                  25.9         24.6         99.0        79.3
Change in estimated           2.4          (0.2)        3.4         (6.2)
acquisition earnout payables
           Expenses           627.8        531.0        2,275.0     1,926.9
Earnings before income taxes  45.4         47.4         245.3       207.8
Provision for income taxes    11.9         6.9          50.3        63.7
Net earnings                 $        $        $        $   
                              33.5        40.5        195.0      144.1
Diluted net earnings per      $        $        $       $    
share                         0.27        0.35        1.59       1.28
Dividends declared per share  $        $        $       $    
                              0.34        0.33        1.36       1.32
EBITDAC
Net earnings                 $        $        $        $   
                              33.5        40.5        195.0      144.1
Provision for income taxes    11.9         6.9          50.3        63.7
Interest                      10.9         10.4         43.0        40.8
Depreciation                  10.8         9.3          41.4        35.9
Amortization                  25.9         24.6         99.0        79.3
Change in estimated           2.4          (0.2)        3.4         (6.2)
acquisition earnout payables
EBITDAC                       $        $        $        $   
                              95.4        91.5        432.1      357.6

Arthur J. Gallagher & Co.
Consolidated Balance Sheet
(Unaudited - in millions except per share data)
                                     Dec 31, 2012    Dec 31, 2011
Cash and cash equivalents            $            $   
                                     302.1          291.2
Restricted cash                      851.6           692.5
Premiums and fees receivable        1,096.1         1,027.1
Other current assets                 179.7           188.6
     Total current assets            2,429.5         2,199.4
Fixed assets - net                   105.4           91.3
Deferred income taxes                251.8           240.2
Other noncurrent assets              283.3           235.8
Goodwill - net                       1,472.7         1,155.3
Amortizable intangible assets -      809.6           561.5
net
     Total assets                    $   5,352.3   $   4,483.5
Premiums payable to insurance and    $   1,819.7   $   1,621.9
reinsurance companies
Accrued compensation and other       306.7           304.1
accrued liabilities
Unearned fees                        70.6            69.7
Other current liabilities            36.9            67.9
Corporate related borrowings -       129.0           10.0
current
     Total current liabilities       2,362.9         2,073.6
Corporate related borrowings -       725.0           675.0
noncurrent
Other noncurrent liabilities         605.8           491.3
     Total liabilities               3,693.7         3,239.9
Stockholders' equity:
Common stock - issued and            125.6           114.7
outstanding
Capital in excess of par value       1,055.4         693.2
Retained earnings                    510.4           482.9
Accumulated other comprehensive      (32.8)          (47.2)
loss
     Total stockholders' equity      1,658.6         1,243.6
     Total liabilities and           $   5,352.3   $   4,483.5
     stockholders' equity
See "Information Regarding Non-GAAP Measures" on page 7 of 12 and notes to
fourth quarter 2012 earnings release on page 12 of 12.

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Arthur J. Gallagher & Co.
Other Information and Notes
(Unaudited - data is rounded where indicated)
                                   4th Q        4th Q      Year       Year
                                   Ended        Ended      Ended      Ended
OTHER INFORMATION                  Dec 31,      Dec 31,    Dec 31,    Dec 31,
                                   2012         2011       2012       2011
Basic weighted
average shares                     124,941      113,721    121,018    111,667
outstanding (000s)
Diluted weighted
average shares                     126,315      114,745    122,478    112,465
outstanding (000s)
Common shares                      20           3          82         41
repurchased (000s)
Common shares issued
for acquisitions and               470          1,062      7,792      3,454
earnouts (000s)
Number of                          22           11         60         32
acquisitions closed
Annualized revenues                $        $       $       $   
acquired (in                         76.2                      
millions)                                       42.2      231.7     277.0
Workforce at end of
period (includes
acquisitions):
    Brokerage                                             9,002      7,868
    Risk Management                                       4,390      4,264
    Total Company                                         13,707     12,383
Notes to Fourth Quarter 2012 Earnings Release
    Reported supplemental commission revenues recognized in 2012, 2011 and
    2010 by quarter are shown in the financial supplement. As previously
    disclosed, manyinsurance carriers now provide sufficient information for
    Gallagher to recognize supplemental commission revenues on a quarterly
    basis for a majority of its 2012, 2011 and 2010 supplemental commission
    arrangements. However, in 2009 and prior years, most carriers only
    provided this information on an annual basis after the end of the contract
(1) period. Accordingly, the 2010 amounts reported in the table include both a
    full year of 2009 supplemental commission revenues and 2010 supplemental
    commission revenues that were recognized by Gallagher on a quarterly
    basis. This situation did not occur again in 2011 or 2012 and should not
    occur in 2013 or later years as Gallagher anticipates that most of the
    carriers will continue to provide information on a quarterly basis
    sufficient to allow recognition of revenues in a similar manner in future
    quarters. The reported and adjusted supplemental commissions for 2012,
    2011 and 2010 are as follows (in millions):
                        Q1         Q2           Q3         Q4         Full
                                                                      Year
    2012
    Reported            $       $        $       $       $   
    supplemental                  16.6                      
    commissions         17.1                   16.6      17.6      67.9
    Reported
    contingent          19.0       10.3         7.7        5.9        42.9
    commissions
    Reported            $                    $       $       $   
    supplemental and            $                         
    contingent          36.1        26.9    24.3      23.5      110.8
    commissions
    2011
    Reported            $       $        $       $       $   
    supplemental                  14.0                      
    commissions         13.5                   14.5      14.0      56.0
    Reported
    contingent          16.8       7.9          9.9        3.5        38.1
    commissions
    
                        $                    $       $       $   
    Reported                    $                          
    supplemental and    30.3        21.9    24.4      17.5      94.1
    contingent
    commissions
    2010
    Reported            $       $        $       $       $   
    supplemental                  10.6                      
    commissions         27.9                   10.2      12.1      60.8
    Adjustment as if
    supplemental
    commission          (14.7)     -            -          -          (14.7)
    information was
    provided on a
    quarterly basis
    Adjusted
    supplemental        13.2       10.6         10.2       12.1       46.1
    commissions
    Reported
    contingent          15.5       8.7          9.5        3.1        36.8
    commissions
    Adjusted
    supplemental and    $       $        $       $       $   
    reported                      19.3                      
    contingent          28.7                   19.7      15.2      82.9
    commissions
Contact: Marsha Akin
Director - Investor Relations
630-285-3501 or marsha_akin@ajg.com

(12 of 12)







SOURCE Arthur J. Gallagher & Co.

Website: http://www.ajg.com