Event Brief of Q4 2003 Arthur J. Gallagher & Co. Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

CORPORATE PARTICIPANTS

. J. Patrick Gallagher Jr, Arthur J. Gallagher, President,CEO . Doug Howell, Arthur J. Gallagher, CFO . Richard Cary, Arthur J. Gallagher, Controller,Chief Accounting Officer . Jack Lazarro, Arthur J. Gallagher Financial Services, CFO . Jack Rosengren, Arthur J. Gallagher, General Counsel . Rich McKenna, Gallagher Bassett Services, President

. Dave McGurn, Arthur J.Gallagher Specialty Marketing Division,

President . Jim Gault, Arthur J. Gallagher Brokerage Services Retail Division, President

OVERVIEW

AJG announces 4Q03 results with record production in almost all divisions for the year. Brokerage net earnings were up 24% for the year. 2004 has had a strong start. Q&A Focus: property and casualty premium rates, FIN 46, dividend increase.

FINANCIAL DATA

A. Key Data From Call 1. 2003 capex = $25m. 2. Line of credit = $250m 3. Dividend = +39% 4. 2003 contingents = $33m.

PRESENTATION SUMMARY

S1. Overview (J.P.G.) 1. 39% increase in dividend. 2. Board of directors changed to almost all independent directors. 3. 2003 results:

1. Record production in almost all divisions. 2. Brokerage net earnings up 24%. 3. Rates moderating. 4. Renewals flat to downwards. 5. Brokerage plus risk management revenues up 15%.

6. 14 acquisitions. 7. Benefits pre-tax up almost 50% year-over-year.

8. Health care costs continuing to rise. 4. Property and Casualty:

1. Brokerage 4Q organic growth up 6%, down from 9% in Q3 2. Retail pre-tax up 20% for the year. 5. Specialty market segment slowed.

6. Entire brokerage segment earnings up 24% for the year. 7. Options go throughout entire company -- strong building block: 1. Cost $0.02 a share in 2003. 8. 2004 looking good.

S2. Gallagher Basset (R.M.) 1. Record $66m new business in 2003.

2. Claim counts fully recovered from 9/11 slowdown. 1. 45,000 new claims monthly average. 2. Over 501,000 new claims in 2003; up 15% on 2002. 3. Clients using Internet, E-mail for almost all accounts.

S3. Balance sheet (D.H.) 1. Cash use: 1. Capex $25m. 2. $25m to pay corporate debt. 3. Acquisitions $29m. 2. Brokerage and risk management generated $2.00 a share in 2003 vs. GAAP EPS $1.75.

3. New $250m line of credit. 4. 4Q03 contingents $7.9m. 5. Full year contingents $33m. 6. Investment exposure reduced $122m since Dec. 31 2002. 7. IRS ended enquiries into synthetic coal, no changes proposed. 8. More activity in coal. 9. If coal credits are used to own account: 1. 2004 overall tax rate mid- to low 20s. 2. Financial services segment should break even in 2004. 10. Stock options vary in financial effect, but minor impact. Next year will be spread across several quarters. 11. Exchange rate effects: 1. If rates had been unchanged in 2003, brokerage 4Q03 earnings would have been about $0.01 higher. 2. Pre-tax margins would have been 0.5% higher. 3. If unchanged for full year 2003 brokerage earnings $0.03 higher. 12. No real change after implementation of FIN 46. 13. Brokerage margins historically lower in 1Q and 2Q.

QUESTION AND ANSWER SUMMARY

Q1. (Jeff Thompson, KBW Inc.) I wanted to focus in on your comment about property casualty premium rates. Maybe give a little more color. I think you're saying you're seeing rates overall go down. Is that a 1Q outlook or is it something you're going to see for the year? Secondly, talk about your own brokerage line. Do you think margins are peaking as a result? How are you going to deal with this operationally?

A. (Patrick Gallagher) I think as we go into 1Q and then through 2004, we're going to see flattish renewals to down, with the exception of some of the tougher placements: medical malpractices going no place but up, some of the high, tough excess liability still continuing up. In general, just as you look at the whole book of business, I think the field now is that we're looking at more of a flattish environment by …