Event Brief of Q2 2004 Arthur J. Gallagher & Co. Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

CORPORATE PARTICIPANTS

. J. Patrick Gallagher, Arthur J. Gallagher & Co., President & CEO

. Jim Gault, Arthur J. Gallagher & Co., President, Brokerage Services Retail Division . Rich McKenna, Arthur J. Gallagher & Co., President, Gallagher Bassett Services . Dave McGurn, Arthur J. Gallagher & Co., President, Specialty Marketing & International Division . John Rosengren, Arthur J. Gallagher & Co., General Counsel

. Doug Howell, Arthur J. Gallagher & Co., CFO

OVERVIEW

AJG reported that 2Q04 EPS was up 26%, with revenue up 13%, including 8% organic growth. Pre-tax profit growth of 20%. Gallagher Bassett Services showed 2Q04 organic growth of 19%, and received 49,000 new claims arising in month of June, up 20% YoverY. AJG anticipates its Financial Services segment will break even or show $0.01-0.02 of loss for the full year. Q&A Focus: operating costs, margins, acquisitions, organic growth.

FINANCIAL DATA

A. Key Data From Call 1. Cash generation up 33% YoverY. 2. Dividends = $23m. 3. Capex = $6m. 4. Acquisitions = $14m. 5. Contingent commissions = $8.7m. 6. Tax rate = 20%.

PRESENTATION SUMMARY

S1. 2Q04 Performance (J.G.) 1. 2Q04 Performance: 1. Highlights:

1. EPS up 26%. 2. Revenue up 13%, including 8% organic growth. 3. Pre-tax profit growth of 20%. 4. Over one point of margin improvement. 5. Solid results given operating environment.

2. 1H04 Strategies: 1. Business Mix: 1. Different than many competitors. 2. Model includes risk mgt. segment comprised mostly of Gallagher Bassett Services (GBS). 3. GBS had outstanding quarter, with 19% organic growth. 4. Business model intentionally brings more fee income. 5. Co. believes this fee income will bring greater revenue

stability and allow for quicker growth in down cycle. 6. Benefits and Wholesaling operations had outstanding quarters. 2. Acquisitions: 1. Co. remains rigorous in due diligence and selection process. 2. Co. has done ten deals FY04 YTD. 3. Co. reports this has become a core competence. 3. S&M Focus: 1. Focus on selling insurance and keeping clients. 3. New Business: 1. Niche marketing efforts continue to be honed. 2. Not unusual to see niche participants from various offices meeting with prospects and clients. 3. Employee survey: 96% of responding employees reported commitment to growth. 4. Market Cycle: 1. Property & Casualty market is softening. 2. Some classes are still seeing increases, but the market is heading down. 3. Large Property schedules off 25-50%. 4. Flow Property off 15-20%. 5. Package business off 15-30%, especially anything that a regional carrier may want.

6. Casualty lines are a little firmer. 7. Umbrellas remains flat. 8. General Liability off 5-10%. 9. Products liability is essentially flat. 10. Habitational Risks down 10%. 11. CA Workers' Comp is softening 5-7% based on reform. 12. Trucking Risks approx. flat. 13. Regardless of class, carriers are making it clear that they will match pricing. 14. Underwriting restrictions are loosening. 15. Terms are improving for customers. 16. New players are entering market, even in tough lines. 17. Expense control is of the essence. 18. Critical focus: new business sales and keeping customers. 5. Performance by Segment: 1. Gallagher Bassett Services (GBS): 1. 2Q Organic growth of 19%. 2. Received 49,000 new claims arising in month of June, up 20% YoverY. 3. Drivers: new business last year and early this year, client recovery from recession. 4. Pre-tax 6-month margins = 16%. 5. Co. now has 9,000 licensees that use Riskfax.com. 6. In June system handled 16m page views from these clients. 7. Today 80% of co. reports go out over web on paperless basis. …