International re/insurance broker Gallagher has reported a $39.5 million rise in first quarter net earnings, while the total impact of COVID-19 was estimated at $42.2 million.
“We are extremely pleased with our first quarter performance, even with the economic deterioration caused by COVID-19,” said J. Patrick Gallagher, Jr., Chairman, President and Chief Executive Officer.
“Our teams have not missed a step; all the while placing health and safety first. We are servicing our clients, we are selling new business, we continue to look at merger and acquisition opportunities, and our bedrock culture keeps our teams working together in these challenging times.”
In the first quarter, Gallagher grew its Brokerage and Risk Management revenues – both organically and through M&A.
“Our first quarter financial results reflect our best estimate of the accounting impact of the COVID-19 crisis, but still show our solid financial and operational condition and we have ample liquidity,” said Gallagher.
“Looking forward, while I’m encouraged by the resiliency of our business thus far in April, we are balancing that early information with the reality that deteriorating economic conditions will likely impact our future financial performance.
“Accordingly, we are taking appropriate measures to make expense-base adjustments in a staged, contemplative manner over the coming months.
In Brokerage operations, Gallagher saw meaningful changes to new business, lost business or renewed business in the first quarter or second quarter to date, and it continued to see increases in premium rates.
However, the company does not expect to see declining client exposure units, which will impact ultimate revenues. In the future, further premium rate increases may partially offset declines in exposure units.
Gallagher’s Risk Management operations had already seen a meaningful decline in new claims arising from retail, hospitality, restaurant and transportation clients during the last two weeks of March, which persisted into April, and could continue into future quarters.
Gallagher activated its business COVID-19 continuity plan in mid-March. More than 99% of staff is working remotely.
“We believe our service levels are unchanged from pre-pandemic levels, having only experienced very limited minor temporary disruptions in our operations,” the company said.
“Given the deterioration in economic conditions, and depending on the severity and duration of the economic downturn, we are actively managing costs through eliminating discretionary spending, reducing travel and entertainment expenses, limiting use of temporary help and consultants, increasing utilization of our centers of excellence, and implementing a support-layer hiring and wage freeze.”
