Arthur J. Gallagher & Co. Announces Fourth Quarter And Full Year 2013 Financial Results

    Arthur J. Gallagher & Co. Announces Fourth Quarter And Full Year 2013
                              Financial Results

PR Newswire

ITASCA, Ill., Jan. 28, 2014

ITASCA, Ill., Jan.28, 2014 /PRNewswire/ --Arthur J. Gallagher & Co. (NYSE:
AJG) today reported its financial results for the quarter and year ended
December31, 2013. 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 an excellent quarter to finish an outstanding year, and we are well
positioned for 2014," said J. Patrick Gallagher, Jr., Chairman, President and
CEO. "In the fourth quarter, our combined Brokerage and Risk Management
segments posted 18% growth in adjusted total revenues, 6.2% organic growth in
commission and fee revenues, 22% growth in adjusted EBITDAC and adjusted
EBITDAC margin improved by 71basis points."

  oOur Brokerage segment had a terrific quarter. Adjusted total revenues
    were up 22%, base organic commission and fee revenues grew 5.8%, adjusted
    EBITDAC was up 28% and adjusted EBITDAC margin was up 110 basis points.
    For the year, adjusted total revenues were up 18%, base organic commission
    and fee revenues grew 5.6%, adjusted EBITDAC was up 23% and adjusted
    EBITDAC margin was up 110 basis points.
  oOur Risk Management segment had an excellent organic growth quarter of
    7.3%, yet adjusted EBITDAC margin of 14.3% fell slightly short of our
    fourth quarter target of 15.8%,almost entirely due to adverse medical
    plan severity. For the year, adjusted total revenues were up 8%, organic
    fees grew 9.3%, adjusted EBITDAC was up 6%. Adjusted EBITDAC margin of
    15.8% nearly matched our forecasted target of 16% for the year.
  oOur acquisition program finished strong and our integration efforts are on
    track. During the fourth quarter, the Brokerage segment completed another
    13 acquisitions with annualized revenues of $193.5million bringing the
    count for the year to 30 with annualized revenues of $369.9million. The
    Risk Management segment also closed a claim portfolio transfer from an
    insurance company, and going forward we will be their preferred
    administrator for certain claims. This transaction should generate another
    $12 to $15million of annualized revenues for this segment. We are
    extremely pleased to welcome all of our new merger partners and associates
    to the growing family of Gallagher professionals.
  oAs a result of our acquisition program and subsequent centralization
    efforts, during the fourth quarter we took actions to consolidate our
    management ranks and related support staff, mostly in our international
    operations. As a result, pretax charges in the Brokerage and Risk
    Management segments totaled $6.6million and $1.5million, respectively
    and should generate annual workforce cost savings of $9.0million and
    $2.3million, respectively.
  oOur clean energy investments had an outstanding quarter, exceeding our
    forecast. For the year, they generated $63.7million of after tax
    earnings, which was nearly double that of 2012.
  oWe are comfortable with the current rate environment. Stable rates with
    carriers quoting individual lines and covers based on rational and
    informed underwriting continues to bode well for us. In this rate
    environment, our professionals can create solutions based on our deep
    industry knowledge, access the right markets and demonstrate our
    high-quality service offering.
  oWe are increasingly optimistic about the recovering economy in the US and
    in the UK. We are hearing our clients speak more of growth and
    opportunity than we have in years.

"Finally, I am thrilled with the dozens of awards and recognitions we are
receiving for our impeccable culture, our high-quality service, and our
excellence in leadership and talent development. All of these demonstrate
that our unique culture is thriving and most importantly, we are delivering
valuable solutions to our clients and prospects."

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The following provides non-GAAP information that management believes is
helpful when comparing 2013 revenues, EBITDAC and diluted net earnings per
share with the same period in 2012:

Quarter Ended December 31                                       Diluted Net
                    Revenues               EBITDAC              Earnings Per
                                                                Share
Segment             4th Q 13 4th Q 12 Chg  4th Q   4th Q   Chg  4th Q   4th Q
                                           13      12           13      12
                    (in millions)          (in millions)
Brokerage, as       $       $ 485.5  22%  $       $       28%  $      $ 
adjusted            590.8                 133.1  103.7       0.41   0.35
 Gains on book      1.9      2.5           1.9     2.5          0.01    0.01
 sales
 Acquisition        -        -             (6.8)   (7.0)        (0.03)  (0.04)
 integration
 Workforce & lease  -        -             (6.6)   (9.7)        (0.03)  (0.05)
 termination
 Acquisition
 related            -        -             -       -            0.01    -
 adjustments
 Levelized foreign
 currency           -        1.1           -       (0.4)        -       -
 translation
 Effective income   -        -             -       -            0.01    (0.02)
 tax rate impact
Brokerage, as       592.7    489.1         121.6   89.1         0.38    0.25
reported
Risk Management,    151.5    143.8    5%   21.6    23.0    -6%  0.07    0.09
as adjusted
 New Zealand
 earthquake claims
   administration   -        1.0           -       -            -       -
 Workforce & lease  -        -             (1.5)   (2.6)        (0.01)  (0.01)
 termination
 South Australia
 and claim
 portfolio
   transfer ramp   -        -             (1.2)   (2.1)        -       (0.01)
   up
Risk Management,    151.5    144.8         18.9    18.3         0.06    0.07
as reported
Total Brokerage &
Risk
 Management, as     744.2    633.9         140.5   107.4        0.44    0.32
 reported
Corporate, as       146.0    39.3          (26.8)  (12.0)       0.01    (0.05)
reported
Total Company, as   $       $ 673.2       $       $           $      $ 
reported            890.2                 113.7  95.4        0.45   0.27
Total Brokerage &
Risk
 Management, as     $       $ 629.3  18%  $       $       22%  $      $ 
 adjusted           742.3                 154.7  126.7       0.48   0.44
Year Ended December 31                                          Diluted Net
                    Revenues               EBITDAC              Earnings Per
                                                                Share
Segment             Year 13  Year 12  Chg  Year 13 Year 12 Chg  Year 13 Year
                                                                        12
                    (in millions)          (in millions)
Brokerage, as       $        $        18%  $       $       23%  $ 1.65 $
adjusted            2,139.1  1,816.2       510.7  414.2               1.43
 Gains on book      5.2      3.9           5.2     3.9          0.03    0.02
 sales
 Acquisition        -        -             (24.1)  (19.3)       (0.11)  (0.10)
 integration
 Workforce & lease  -        -             (7.8)   (14.4)       (0.04)  (0.07)
 termination
 Acquisition
 related            -        -             -       -            0.04    -
 adjustments
 Levelized foreign
 currency           -        7.5           -       (1.1)        -       (0.01)
 translation
Brokerage, as       2,144.3  1,827.6       484.0   383.3        1.57    1.27
reported
Risk Management, as 609.5    563.1    8%   96.1    90.3    6%   0.36    0.36
adjusted
 New Zealand earthquake
 claims
   administration   0.1      8.6           -       1.5          -       0.01
 Workforce & lease  -        -             (1.7)   (2.7)        (0.01)  (0.01)
 termination
 South Australia and claim
 portfolio
   transfer ramp   1.4      -             0.1     (2.1)        -       (0.01)
   up
Risk Management, as 611.0    571.7         94.5    87.0         0.35    0.35
reported
Total Brokerage &
Risk
 Management, as     2,755.3  2,399.3       578.5   470.3        1.92    1.62
 reported
Corporate, as       424.3    121.0         (73.6)  (38.2)       0.14    (0.03)
reported
Total Company, as   $        $             $       $            $ 2.06 $
reported            3,179.6  2,520.3       504.9  432.1               1.59
Total Brokerage &
Risk
 Management, as     $        $        16%  $       $       20%  $ 2.01 $
 adjusted           2,748.6  2,379.3       606.8  504.5               1.79

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Brokerage Segment Fourth Quarter Highlights - The following tables provide
non-GAAP information that management believes is helpful when comparing
certain 2013 financial information with the same periods in 2012
(inmillions):

Organic Revenues (non-GAAP)       4th Q 13   4th Q 12   Year 13     Year 12
Base Commissions and Fees
Commissions as reported           $ 426.3    $ 339.8    $1,553.1    $1,302.5
Fees as reported                  130.0      121.8      450.5       403.2
Less commissions and fees from    (72.1)     -          (216.8)     -
acquisitions
Less disposed of operations       -          (3.2)      -           (6.2)
Levelized foreign currency        -          (0.9)      -           (6.7)
translation
Organic base commissions and      $ 484.2    $ 457.5    $1,786.8    $1,692.8
fees
Organic change in base            5.8%       5.2%       5.6%        4.4%
commissions and fees
Supplemental Commissions
Supplemental commissions as       $  23.9   $  17.6   $   77.3  $   67.9
reported
Less supplemental commissions     (2.1)      -          (5.4)       -
from acquisitions
Organic supplemental commissions  $  21.8   $  17.6   $   71.9  $   67.9
Organic change in supplemental    23.9%      9.4%       5.9%        3.3%
commissions
Contingent Commissions
Contingent commissions as         $   8.6  $   5.9  $   52.1  $   42.9
reported
Less contingent commissions from  (1.0)      -          (8.8)       -
acquisitions
Organic contingent commissions    $   7.6  $   5.9  $   43.3  $   42.9
Organic change in contingent      28.8%      54.3%      0.9%        -1.1%
commissions



Adjusted Compensation Expense and Ratio 4th Q 13  4th Q 12  Year 13   Year 12
(non-GAAP)
Reported amounts                        $ 370.1   $ 316.9   $1,290.4  $1,131.6
Acquisition integration                 (4.5)     (6.1)     (10.9)    (13.2)
Workforce and lease termination         (6.6)     (9.0)     (7.7)     (13.7)
related charges
Levelized foreign currency              -         (0.4)     -         (5.4)
translation
Adjusted amounts                        $ 359.0   $ 301.4   $1,271.8  $1,099.3
Adjusted ratios using adjusted        * 60.8%     62.1%     59.5%     60.5%
revenues on page 2

  Adjusted fourth quarter compensation expense ratio was 1.3 pts lower than
* the same period in 2012. This ratio was primarily impacted by workforce
  reductions of 0.7 pts and lower incentive compensation of 0.6 pts.

Adjusted Operating Expense and Ratio  4th Q 13  4th Q 12  Year 13    Year 12
(non-GAAP)
Reported amounts                      $ 101.0   $  83.1  $  369.9  $  312.7
Acquisition integration               (2.3)     (0.9)     (13.2)     (6.1)
Workforce and lease termination       -         (0.7)     (0.1)      (0.7)
related charges
Levelized foreign currency            -         (1.1)     -          (3.2)
translation
Adjusted amounts                      $  98.7  $  80.4  $  356.6  $  302.7
Adjusted ratios using adjusted      * 16.7%     16.6%     16.7%      16.7%
revenues on page 2

    Adjusted fourth quarter operating expense ratio was 0.1pts higher than
* the same period in 2012. Expense components were generally consistent
    with the prior period.

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Brokerage Segment Fourth Quarter Highlights (continued)

Adjusted EBITDAC (non-GAAP)               4th Q 13  4th Q 12  Year 13  Year 12
Total EBITDAC - see page 9 for            $ 121.6   $  89.1  $484.0   $383.3
computation
Gains from books of business sales        (1.9)     (2.5)     (5.2)    (3.9)
Acquisition integration *                6.8       7.0       24.1     19.3
Workforce and lease termination related   6.6       9.7       7.8      14.4
charges
Levelized foreign currency translation    -         0.4       -        1.1
Adjusted EBITDAC                          $ 133.1   $ 103.7   $510.7   $414.2
Adjusted EBITDAC change                   28.4%     18.7%     23.3%    21.2%
Adjusted EBITDAC margin                   22.5%     21.4%     23.9%    22.8%

   Acquisition integration - During the fourth quarter 2013, integration costs
   related to the acquisitions of Bollinger and Giles totaled $4.1 million and
* $2.7million, respectively. These costs were primarily related to the
   on-boarding of over 1,600 employees, communication conversion costs, and
   related performance compensation. Integration costs in 2012 relate to the
   Heath Lambert acquisition only.

The following is a summary of brokerage acquisition activity for 2013 and
2012:

                              4th Q 13     4th Q 12   Year 13      Year 12
Shares issued for             1,743,000    470,000    5,181,000    7,792,000
acquisitions and earnouts
Number of acquisitions        13           21         30           58
closed
Annualized revenues acquired  $   193.5  $  75.9  $   369.9  $   231.3
(in millions)

Risk Management Segment Fourth Quarter Highlights - The following tables
provide non-GAAP information that management believes is helpful when
comparing certain 2013 financial information with the same periods in 2012
(inmillions):

Organic Revenues (Non-GAAP)               4th Q 13  4th Q 12  Year 13  Year 12
Fees                                      $ 147.6   $ 138.6   $589.0   $550.3
International performance bonus fees     3.3       5.3       20.0     18.2
Fees as reported                          150.9     143.9     609.0    568.5
Less fees from acquisitions               -         -         (2.7)    -
Less South Australia ramp up fees         -         -         (1.4)    -
Less New Zealand earthquake claims        -         (1.0)     (0.1)    (8.6)
administration
Levelized foreign currency translation    -         (2.2)     -        (6.3)
Organic fees                              $ 150.9   $ 140.7   $604.8   $553.6
Organic change in fees                   7.3%      3.4%      9.3%     6.4%

Adjusted Compensation Expense and Ratio   4th Q 13  4th Q 12  Year 13  Year 12
(non-GAAP)
Reported amounts                          $  97.0  $  90.7  $370.5   $347.0
New Zealand earthquake claims             -         (0.8)     -        (5.5)
administration
South Australia and claim portfolio       (1.2)     (1.5)     (1.2)    (1.5)
transfer ramp up costs
Workforce and lease termination related   (1.5)     (2.4)     (1.7)    (2.5)
charges
Adjusted amounts                          $  94.3  $  86.0  $367.6   $337.5
Adjusted ratios using adjusted revenues * 62.2%     59.8%     60.3%    59.9%
on page 2

    Adjusted fourth quarter compensation expense ratio was 2.4pts higher than
* the same period in 2012. This ratio was primarily impacted by increased
    salaries of 1.6pts and employee benefits of 1.0pts, partially offset by
    decreased incentive compensation of 0.4pts.

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Risk Management Segment Fourth Quarter Highlights (continued)

Adjusted Operating Expense and Ratio      4th Q 13  4th Q 12  Year 13  Year 12
(non-GAAP)
Reported amounts                          $  35.6  $  35.8  $146.0   $137.7
New Zealand earthquake claims             -         (0.2)     (0.1)    (1.6)
administration
South Australia and claim portfolio       -         (0.6)     (0.1)    (0.6)
transfer ramp up costs
Workforce and lease termination related   -         (0.2)     -        (0.2)
charges
Adjusted amounts                          $  35.6  $  34.8  $145.8   $135.3
Adjusted ratios using adjusted revenues * 23.5%     24.2%     23.9%    24.0%
on page 2

   Adjusted fourth quarter operating expense ratio was 0.7pts lower than the
   same period in 2012. This ratio was primarily impacted by savings in real
* estate, banking fees and office supplies of 2.0pts, partially offset by
   increased professional fees associated with client-centric service
   enhancements of 1.0pts.

Adjusted EBITDAC (non-GAAP)               4th Q 13  4th Q 12  Year 13  Year 12
Total EBITDAC - see page 9 for            $  18.9  $  18.3  $ 94.5  $ 87.0
computation
New Zealand earthquake claims             -         -         -        (1.5)
administration
South Australia and claim portfolio       1.2       2.1       (0.1)    2.1
transfer ramp up costs
Workforce and lease termination related   1.5       2.6       1.7      2.7
charges
Adjusted EBITDAC                          $  21.6  $  23.0  $ 96.1  $ 90.3
Adjusted EBITDAC change                   -6.1%     6.5%      6.4%     10.9%
Adjusted EBITDAC margin                   14.3%     16.0%     15.8%    16.0%

Corporate Segment Fourth Quarter Highlights - The following table provides
non-GAAP information that management believes is helpful when comparing 2013
operating results for the Corporate Segment with the same periods in 2012
(inmillions):

                           2013                             2012
               Pretax      Income    Net         Pretax     Income   Net
               Earnings   Tax       Earnings   Earnings  Tax      Earnings
               (Loss)      Benefit   (Loss)      (Loss)     Benefit  (Loss)
4th Quarter
Interest and   $          $  5.8  $         $         $       $  
banking costs  (14.5)               (8.7)      (11.6)    4.7     (6.9)
Clean energy   (15.5)      31.3      15.8        (5.7)      6.8      1.1
investments
Acquisition    (6.2)       1.5       (4.7)       (3.3)      0.1      (3.2)
costs
Corporate      (5.5)       3.9       (1.6)       (2.5)      4.6      2.1
               $          $ 42.5   $        $         $ 16.2  $  
               (41.7)               0.8         (23.1)             (6.9)
Year
Interest and   $          $ 21.2   $          $         $ 18.4  $ 
banking costs  (53.0)               (31.8)     (46.1)             (27.7)
Clean energy   (49.3)      113.0     63.7        (17.3)     50.0     32.7
investments
Acquisition    (5.6)       0.2       (5.4)       (7.1)      0.7      (6.4)
costs
Corporate      (18.7)      9.8       (8.9)       (11.4)     9.5      (1.9)
               $ (126.6)  $144.2    $   17.6  $         $ 78.6  $  
                                                 (81.9)             (3.3)

Debt, interest and banking - At December31, 2013, Gallagher had
$925.0million of long-term borrowings and $530.5million of short-term
borrowings under its line of credit facility. As previously announced,
Gallagher has entered into a note purchase agreement for a private placement
of $600 million of senior unsecured notes, which is expected to fund on
February 27, 2014. Proceeds will be used primarily to pay down its line of
credit facility. 

At-the-market equity program - Gallagher previously announced on November 20,
2013, that it had established an at-the-market equity program under which it
may sell up to $200 million of its common stock through Morgan Stanley & Co.
LLC as sales agent. During the fourth quarter 2013, Gallagher sold 91,572
shares of its common stock under the program at a weighted average price of
$47.41 per share, resulting in net proceeds to Gallagher, after sales
commissions, of approximately $4.3 million.

(5 of 11)

Corporate Segment Fourth Quarter Highlights (continued)

Clean energy investments - The following provides certain information related
to Gallagher's investments in limited liability companies that own34 clean
coal production plants, whichproduce refined coal  using  proprietary
technologies owned by Chem-Mod. We believe that the production and sale of
refined coal at these plants qualifies to receive refined coal tax credits
under IRC Section45 through 2019 for the fourteen 2009 Era Plants and through
2021 for the twenty 2011 Era Plants. The underlying operations of those
investments where Gallagher has a controlling ownership interest are
consolidated.

                                               

                                               Gallagher's Portion of
                                               Estimated
                                               Additional
                                Gallagher's    Required            Ultimate
                                Tax-Effected   Tax-Effected        Annual
                                Book Value At  Capital             After-tax
($ inmillions)                 Dec 31, 2013  Investment          Earnings *
Investments that own 2009 Era
Plants
12       Under long-term        $        $            $     
         production contracts   10.3           2.0                  23.0
         In negotiations for                                       Not
2        long-term production   0.7            Not Estimable     Estimable
         contracts
Investments that own 2011 Era
Plants
16       Under long-term        34.8           1.6                 73.5
         production contracts
         In negotiations for                                       Not
4        long-term production   1.4            Not Estimable     Estimable
         contracts

   Reflects management's current best estimate of the ultimate future
   potential annual after-tax earnings based on production estimates from the
* host utilities. However, host utilities do not consistently utilize the
   refined fuel plants at ultimate production levels due to seasonal
   electricity demand, as well as many operational, regulatory and
   environmental compliance reasons.

Gallagher'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 refined coal production 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.

All estimates set forth above regarding the potential future earnings impact
of our clean energy investments are subject to significant risks. Please
refer to Gallagher's filings with the SEC, including Item 1A, "Risk Factors,"
of its Annual Report on Form10-K for the fiscal year ended December31, 2012,
for a more detailed discussion of these and other factors that could impact
the information above.

Acquisition costs - Consists mostly of external professional fees and other
due diligence costs related to acquisitions. In fourth quarter 2013, this
line also includes a net $0.4million after-tax fair value loss related to
three foreign currency derivative investment contracts Gallagher executed in
third quarter in connection with the signing of the agreement to acquire The
Giles Group of Companies. These contracts were designed to hedge a portion of
the GBP denominated purchase price consideration of this acquisition. 

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 years ended December 31,
2013 and 2012 was 2.2% and 20.5%, respectively. Gallagher's tax rate for year
ended December 31, 2013 was lower than the statutory rate and was lower than
2012 due to the amount of IRC Section 45 tax credits earned in 2013 compared
to 2012.

Webcast Conference Call
Gallagher will host a webcast conference call on Wednesday, January29, 2014
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 24 countries and offers client-service capabilities in more than 140
countries around the world through a network of correspondent brokers and
consultants.

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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,
statements regarding (i) the amount of, and potential uses for, investment
returns generated by Gallagher's clean energy investments; (ii) our corporate
income tax rate; (iii) anticipated future results or performance of any
segment or the Company as a whole (including recent new business wins in the
Risk Management segment and the Giles acquisition); (iv) anticipated cost
savings from workforce reductions; (v) the premium rate environment; (vi) the
economic environment; and (vii) anticipated funding under a note purchase
agreement.

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
    including 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 could impact (i) and (ii)
    above; and
  oChanges in worldwide and national economic conditions (including an
    economic downturn due to a U.S. government shutdown or default and
    uncertainty regarding the European debt crisis), changes in premium rates
    and in insurance markets generally and changes in the insurance brokerage
    industry's competitive landscape - all could impact (iii) - (vii) 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, 2012, 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.

Adjusted presentation - Gallagher believes that the adjusted presentations of
the current and prior year 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 net gains realized from sales of books of business,
    acquisition integration costs, New Zealand earthquake claims
    administration, South Australia and claim portfolio transfer ramp up
    fees/costs, workforce related charges, lease termination related charges,
    acquisition related adjustments and the impact of foreign currency
    translation, as applicable. Integration costs 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, each divided by adjusted
    revenues.

(7 of 11)

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 net gains realized from sales of books of business, acquisition
    integration costs, workforce related charges, lease termination related
    charges, New Zealand earthquake claims administration costs, South
    Australia and claim portfolio transfer ramp up fees/costs, acquisition
    related adjustments and the period-over-period 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 net gains realized from sales
    of books of business, acquisition integration costs, New Zealand
    earthquake claims administration, South Australia and claim portfolio
    transfer ramp up fees/costs, the impact of foreign currency translation,
    workforce related charges, lease termination related charges, acquisition
    related adjustments 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 - For the Brokerage segment, 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 and the
period-over-period impact of foreign currency translation. The amounts
excluded with respect to foreign currency translation are calculated by
applying current year foreign exchange rates to the same periods in the prior
year. For the Risk Management segment, organic change in fee revenues
excludes the first twelve months of fee revenues generated from acquisitions
accounted for as purchases and the fee revenues related to operations disposed
of in each year presented. In addition, change in organic growth excludes the
impact of South Australia ramp up fees, New Zealand earthquake claims
administration and the period-over-period impact of foreign currency
translation to improve the comparability of our results between periods by
eliminating the impact of the items that have a high degree of variability or
are due to the limited-time nature of these revenue sources.

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 are expected to continue in the current year 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 readers of our financial statements 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 9), for adjusted revenues, adjusted EBITDAC
and adjusted diluted net earnings per share (on page 2), for organic revenue
measures (on pages 3 and4, respectively, for the Brokerage and Risk
Management segments), for adjusted compensation and operating expenses and
adjusted EBITDAC margin (on pages 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.

(8 of 11)

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,
                                  2013       2012       2013        2012
Commissions                       $       $       $         $  
                                  426.3     339.8     1,553.1     1,302.5
Fees                              130.0      121.8      450.5       403.2
Supplemental commissions         23.9       17.6       77.3        67.9
Contingent commissions            8.6        5.9        52.1        42.9
Investment income and gains
realized on books of business     3.9        4.0        11.3        11.1
sales
            Revenues              592.7      489.1      2,144.3     1,827.6
Compensation                      370.1      316.9      1,290.4     1,131.6
Operating                         101.0      83.1       369.9       312.7
Depreciation                      9.0        6.4        31.1        24.7
Amortization                      34.5       25.1       122.7       96.2
Change in estimated acquisition   1.0        2.6        2.6         3.6
earnout payables
            Expenses              515.6      434.1      1,816.7     1,568.8
Earnings before income taxes      77.1       55.0       327.6       258.8
Provision for income taxes        26.6       23.5       122.8       103.0
Net earnings                     $      $      $        $   
                                  50.5      31.5      204.8      155.8
EBITDAC
Net earnings                     $      $      $        $   
                                  50.5      31.5      204.8      155.8
Provision for income taxes        26.6       23.5       122.8       103.0
Depreciation                      9.0        6.4        31.1        24.7
Amortization                      34.5       25.1       122.7       96.2
Change in estimated acquisition   1.0        2.6        2.6         3.6
earnout payables
EBITDAC                           $       $      $        $   
                                  121.6     89.1      484.0      383.3
                                  4th Q      4th Q      Year Ended  Year Ended
                                  Ended      Ended
Risk Management Segment          Dec 31,    Dec 31,    Dec 31,     Dec 31,
                                  2013       2012       2013        2012
Fees                              $       $       $        $   
                                  150.9     143.9     609.0      568.5
Investment income                 0.6        0.9        2.0         3.2
            Revenues              151.5      144.8      611.0       571.7
Compensation                      97.0       90.7       370.5       347.0
Operating                         35.6       35.8       146.0       137.7
Depreciation                      5.2        4.2        19.4        16.0
Amortization                      0.6        0.8        2.5         2.8
Change in estimated acquisition   (0.8)      (0.2)      (0.9)       (0.2)
earnout payables
            Expenses              137.6      131.3      537.5       503.3
Earnings before income taxes      13.9       13.5       73.5        68.4
Provision for income taxes        5.2        4.6        27.3        25.9
Net earnings                     $      $      $       $    
                                   8.7       8.9      46.2       42.5
EBITDAC
Net earnings                     $      $      $       $    
                                   8.7       8.9      46.2       42.5
Provision for income taxes        5.2        4.6        27.3        25.9
Depreciation                      5.2        4.2        19.4        16.0
Amortization                      0.6        0.8        2.5         2.8
Change in estimated acquisition   (0.8)      (0.2)      (0.9)       (0.2)
earnout payables
EBITDAC                           $      $      $       $    
                                  18.9      18.3      94.5       87.0
                                  4th Q      4th Q      Year Ended  Year Ended
                                  Ended      Ended
Corporate Segment                Dec 31,    Dec 31,    Dec 31,     Dec 31,
                                  2013       2012       2013        2012
Revenues from consolidated clean  $       $      $        $    
coal facilities                   141.9     32.7      387.1      98.0
Royalty income from clean coal    8.8        8.5        32.0        27.6
licenses
Loss from unconsolidated clean    (2.3)      (1.9)      (6.6)       (6.0)
coal facilities
Other net revenues                (2.4)      -          11.8        1.4
            Revenues              146.0      39.3       424.3       121.0
Cost of revenues from
consolidated clean coal           155.7      37.2       437.3       111.6
facilities
Compensation                      6.0        3.4        24.1        14.8
Operating                         11.1       10.7       36.5        32.8
Interest                          13.9       10.9       50.1        43.0
Depreciation                      1.0        0.2        2.9         0.7
            Expenses              187.7      62.4       550.9       202.9
Loss before income taxes          (41.7)     (23.1)     (126.6)     (81.9)
Benefit for income taxes          (42.5)     (16.2)     (144.2)     (78.6)
Net earnings                     $      $      $       $    
                                   0.8      (6.9)     17.6       (3.3)
EBITDAC
Net earnings                      $      $      $       $    
                                   0.8      (6.9)     17.6       (3.3)
Benefit for income taxes          (42.5)     (16.2)     (144.2)     (78.6)
Interest                          13.9       10.9       50.1        43.0
Depreciation                      1.0        0.2        2.9         0.7
EBITDAC                           $      $      $       $    
                                  (26.8)     (12.0)     (73.6)      (38.2)
See "Information Regarding Non-GAAP Measures" on page
7 of 11.

(9 of 11)

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      4th Q      Year Ended  Year Ended
                                  Ended      Ended
Total Company                    Dec 31,    Dec 31,    Dec 31,     Dec 31,
                                  2013       2012       2013        2012
Commissions                       $       $       $         $  
                                  426.3     339.8     1,553.1     1,302.5
Fees                              280.9      265.7      1,059.5     971.7
Supplemental commissions         23.9       17.6       77.3        67.9
Contingent commissions            8.6        5.9        52.1        42.9
Investment income and gains
realized on books of business     4.5        4.9        13.3        14.3
sales
Revenues from clean coal          148.4      39.3       412.5       119.6
activities
Other net revenues -              (2.4)      -          11.8        1.4
Corporate
           Revenues               890.2      673.2      3,179.6     2,520.3
Compensation                      473.1      411.0      1,685.0     1,493.4
Operating                         147.7      129.6      552.4       483.2
Cost of revenues from clean       155.7      37.2       437.3       111.6
coal activities
Interest                          13.9       10.9       50.1        43.0
Depreciation                      15.2       10.8       53.4        41.4
Amortization                      35.1       25.9       125.2       99.0
Change in estimated acquisition   0.2        2.4        1.7         3.4
earnout payables
           Expenses               840.9      627.8      2,905.1     2,275.0
Earnings before income taxes      49.3       45.4       274.5       245.3
Provision (benefit) for           (10.7)     11.9       5.9         50.3
income taxes
Net earnings                     $      $      $        $   
                                  60.0      33.5      268.6      195.0
Diluted net earnings per          $      $      $       $    
share                             0.45      0.27      2.06       1.59
Dividends declared per share      $      $      $       $    
                                  0.35      0.34      1.40       1.36
EBITDAC
Net earnings                     $      $      $        $   
                                  60.0      33.5      268.6      195.0
Provision (benefit) for           (10.7)     11.9       5.9         50.3
income taxes
Interest                          13.9       10.9       50.1        43.0
Depreciation                      15.2       10.8       53.4        41.4
Amortization                      35.1       25.9       125.2       99.0
Change in estimated acquisition   0.2        2.4        1.7         3.4
earnout payables
EBITDAC                           $       $      $        $   
                                  113.7     95.4      504.9      432.1

Arthur J. Gallagher & Co
Consolidated Balance Sheet
(Unaudited - in millions except per share data)
                                                Dec 31, 2013    Dec 31, 2012
Cash and cash equivalents                       $    298.1  $    302.1
Restricted cash                                 1,027.4         851.6
Premiums and fees receivable                   1,288.8         1,096.1
Other current assets                            261.3           179.7
        Total current assets                    2,875.6         2,429.5
Fixed assets - net                              160.4           105.4
Deferred income taxes                           279.8           251.8
Other noncurrent assets                         320.7           283.3
Goodwill - net                                  2,145.2         1,472.7
Amortizable intangible assets - net             1,078.8         809.6
        Total assets                            $   6,860.5   $   5,352.3
Premiums payable to insurance and               $   2,154.7   $   1,819.7
reinsurance companies
Accrued compensation and other accrued          370.6           306.7
liabilities
Unearned fees                                   84.5            70.6
Other current liabilities                       44.5            36.9
Corporate related borrowings - current          630.5           129.0
        Total current liabilities               3,284.8         2,362.9
Corporate related borrowings -                  825.0           725.0
noncurrent
Other noncurrent liabilities                    665.2           605.8
        Total liabilities                       4,775.0         3,693.7
Stockholders' equity:
Common stock - issued and outstanding           133.6           125.6
Capital in excess of par value                  1,358.1         1,055.4
Retained earnings                               596.4           510.4
Accumulated other comprehensive loss            (2.6)           (32.8)
        Total stockholders' equity              2,085.5         1,658.6
        Total liabilities and                   $   6,860.5   $   5,352.3
        stockholders' equity
See "Information Regarding Non-GAAP Measures"
on page 7 of 11.

(10 of 11)

Arthur J. Gallagher & Co
Other Information and Notes
(Unaudited - data is rounded where indicated)
                              4th Q Ended  4th Q Ended  Year Ended  Year Ended
OTHER INFORMATION             Dec 31,      Dec 31,      Dec 31,     Dec 31,
                              2013         2012         2013        2012
Basic weighted average shares 132,334      124,941      128,894     121,018
outstanding (000s)
Diluted weighted average      133,990      126,315      130,467     122,478
shares outstanding (000s)
Common shares                 -            20           -           82
repurchased (000s)
Common shares issued for
acquisitions and earnouts     1,743        470          5,181       7,792
(000s)
Number of acquisitions        14           22           31          60
closed
Annualized revenues           $         $        $        $   
acquired (in millions)        207.5       76.2        383.9      231.7
Workforce at end of period
(includes acquisitions):
     Brokerage                                         11,193      9,002
     Risk Management                                   4,806       4,390
     Total Company                                     16,336      13,707

Contact: Marsha Akin
Director - Investor Relations
630-285-3501 or marsha_akin@ajg.com

(11 of 11)

SOURCE Arthur J. Gallagher & Co.

Website: http://www.ajg.com
 
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