Arthur J. Gallagher & Co. (AJG) 8-K Arthur J. Gallagher & Co. Announces Record

Exhibit 99

FOR IMMEDIATE RELEASE	CONTACT:	Marsha J. Akin
		Investor Relations
		(630) 773-3800
		www.ajg.com

ARTHUR J. GALLAGHER & CO. ANNOUNCES RECORD

FIRST QUARTER 2004 FINANCIAL RESULTS

ITASCA, IL, April 27, 2004 — Arthur J. Gallagher & Co. today reported its financial results for the quarter ended March 31, 2004. A printer-friendly format is available atwww.ajg.com.

	Revenues							Net Earnings					Diluted Earnings Per Share
Segment	1st Q 04		1st Q 03			Chg		1st Q 04		1st Q 03			1st Q 04		1st Q 03
	($ in millions)							($ in millions)
Brokerage	$	204.1	$	188.0		9	%	$	26.5	$	20.1		$	0.28	$	0.22
Risk Management		88.4		76.7		15	%		10.4		8.1			0.11		0.09
Financial Services		23.1		(10.4	)				2.0		(16.3	)		0.02		(0.18	)
Impact of FIN 46		25.9		—					—		—			—		—
Total Company	$	341.5	$	254.3		34	%	$	38.9	$	11.9		$	0.41	$	0.13

Brokerage Segment Highlights – Record First Quarter Earnings

• Strong earnings per share growth of 27% over prior year; 24% growth in pretax earnings.

• Pretax margin of 16%, a 2 point margin improvement over the prior year.

• Organic growth rate of 4%, decrease from prior periods is reflective of the moderating insurance market.

• Improved first quarter compensation ratio to 57%, despite margin drag of 0.5% related to expensing stock-based compensation and 0.7% related to foreign currency translation.

Risk Management Segment Highlights – Record First Quarter Earnings

• Earnings per share growth of 22% over prior year; 22% growth in pretax earnings.

• Revenue growth of 15%, all of which is organic.

• Increasing claim counts reflect excellent new business sales and the impact of recovering economic conditions on existing clients.

• Pretax margin of 15%, a 1 point margin improvement over the prior year.

• Client retention remains strong.

• Use of Gallagher’s proprietary Risx-Facs^® system now exceeds 13 million page views per month.

Financial Services Segment Highlights

• Synthetic fuel production for the quarter was ahead of prior year, resulting in a 20% effective tax rate for the company in 2004 versus 25% for the first quarter of 2003.

• First quarter 2003 included an after-tax charge of $19.3 million, or $0.21 per share, relating to the exit from investments in venture capital, development stage enterprises and turn-arounds.

• Adoption of FIN 46 -In the third quarter of 2003, Gallagher adopted a new accounting pronouncement, FASB Interpretation No. 46 (FIN 46) - “Consolidation of Variable Interest Entities,” which required the company to consolidate one investment not previously consolidated because the company does not control the investment through a majority voting interest. Previously reported financial statements were not restated for the adoption of FIN 46.

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“This was a great quarter for Gallagher in spite of rate moderation in the insurance marketplace,” said J. Patrick Gallagher, Jr., President and Chief Executive Officer. “Individually, our Brokerage and Risk Management segments each posted record first quarter earnings. On a combined basis, these segments grew revenues 11%, of which 7% was organic, improved pretax margins 1.6%, and increased pretax earnings 23% and net earnings 31%.”

“The Gallagher culture is alive and well and our team is doing an excellent job. Every day, our professionals are working hard, delivering great value to our customers and growing shareholder value.”

The company will host a webcast conference call on Wednesday, April 28, 2004 at 9:00 a.m. EDT to further discuss these quarterly results. To listen, please go towww.ajg.com.

Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Itasca, Illinois, has operations in nine countries and does business in more than 100 countries around the world through a network of correspondent brokers and consultants. Gallagher is traded under the symbol “AJG” on the New York Stock Exchange.

This press release may contain certain forward-looking statements relating to future results. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expected, depending on a variety of factors such as changes in worldwide and national economic conditions, changes in premium rates and in insurance markets generally and changes in securities and fixed income markets as well as developments in the area of tax legislation. Please refer to our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, for a more detailed discussion of these factors.

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Arthur J. Gallagher & Co.

Segment Statement of Earnings

(Unaudited - in millions except per share data)

	3 Months Ended Mar 31, 2004			3 Months Ended Mar 31, 2003
BROKERAGE SEGMENT
Commissions	$	181.8		$	168.6
Fees		28.7			27.7
Investment income - fiduciary		2.5			1.8
Gross revenues		213.0			198.1
Less brokerage		(8.9	)		(10.1	)
Revenues		204.1			188.0
Compensation		122.4			114.7
Operating		42.4			41.4
Depreciation		3.1			3.0
Amortization		3.1			2.1
Expenses		171.0			161.2
Earnings before income taxes		33.1			26.8
Provision for income taxes		6.6			6.7
Net earnings	$	26.5		$	20.1
Diluted net earnings per share	$	0.28		$	0.22
Growth - revenues		9	%		22	%
Organic growth in commissions and fees (1)		4	%		15	%
Growth - pretax earnings		24	%		4	%
Compensation expense ratio		57	%		58	%
Operating expense ratio		20	%		21	%
Pretax profit margin		16	%		14	%
Effective tax rate		20	%		25	%
RISK MANAGEMENT SEGMENT
Fees	$	88.1		$	76.5
Investment income - fiduciary		0.3			0.2
Revenues		88.4			76.7
Compensation		48.3			42.3
Operating		24.6			21.4
Depreciation		2.4			2.3
Amortization		0.1			—
Expenses		75.4			66.0
Earnings before income taxes		13.0			10.7
Provision for income taxes		2.6			2.6
Net earnings	$	10.4		$	8.1
Diluted net earnings per share	$	0.11		$	0.09
Growth - revenues		15	%		9	%
Organic growth in fees (1)		15	%		10	%
Growth - pretax earnings		22	%		-9	%
Compensation expense ratio		55	%		55	%
Operating expense ratio		28	%		28	%
Pretax profit margin		15	%		14	%
Effective tax rate		20	%		25	%

See notes to the first quarter 2004 earnings release and non-GAAP financial measures on page 5.

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Arthur J. Gallagher & Co.

Segment Statement of Earnings

(Unaudited - in millions except per share data)

	3 Months Ended Mar 31, 2004		3 Months Ended Mar 31, 2003
FINANCIAL SERVICES SEGMENT
Investment income	$	20.6	$	15.3
Impact of FIN 46 on investment income		25.9		—
Investment gains (losses)		2.5		(25.7	)
Revenues		49.0		(10.4	)
Investment expenses		16.8		7.3
Impact of FIN 46 on investment expenses		24.7		—
Interest		1.9		2.1
Depreciation		1.9		1.9
Impact of FIN 46 on depreciation expense		1.2		—
Expenses		46.5		11.3
Earnings (loss) before income taxes		2.5		(21.7	)
Provision (benefit) for income taxes		0.5		(5.4	)
Net earnings (loss)	$	2.0	$	(16.3	)
Diluted earnings (loss) per share	$	0.02	$	(0.18	)

Consolidated Statement of Earnings

(Unaudited - in millions except per share data)

	3 Months Ended Mar 31, 2004			3 Months Ended Mar 31, 2003
TOTAL COMPANY
Commissions	$	181.8		$	168.6
Fees		116.8			104.2
Investment income - fiduciary		2.8			2.0
Investment income - all other		46.5			15.3
Investment gains (losses)		2.5			(25.7	)
Gross revenues		350.4			264.4
Less brokerage		(8.9	)		(10.1	)
Revenues		341.5			254.3
Compensation		170.7			157.0
Operating		67.0			62.8
Investment expenses		41.5			7.3
Interest		1.9			2.1
Depreciation		8.6			7.2
Amortization		3.2			2.1
Expenses		292.9			238.5
Earnings before income taxes		48.6			15.8
Provision for income taxes		9.7			3.9
Net earnings	$	38.9		$	11.9
Diluted net earnings per share	$	0.41		$	0.13
Dividends declared per share	$	0.25		$	0.18
Other Information
Diluted weighted average shares outstanding (000s)		93,955			92,312
Common shares repurchased (000s)		555			239
Annualized return on beginning tangible net worth (2)		39	%		12	%
Number of acquisitions closed		7			4
Workforce (includes acquisitions)		7,359			7,088
Earnings Before Investment (Gains) Losses, Depreciation, Amortization and Stock Compensation Expense (3)
Net earnings	$	38.9		$	11.9
Investment (gains) losses		(2.5	)		25.7
Depreciation		8.6			7.2
Amortization		3.2			2.1
Amortization of deferred comp and restricted stock		2.1			1.0
Stock compensation expense		1.2			—
Tax effect		(2.5	)		(9.0	)
Earnings before investment (gains) losses, depreciation, amortization and stock compensation expense	$	49.0		$	38.9
On a diluted per share basis	$	0.52		$	0.42

See notes to the first quarter 2004 earnings release and non-GAAP financial measures on page 5.

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Arthur J. Gallagher & Co.

Consolidated Balance Sheet

(Unaudited - in millions except per share data)

	Mar 31, 2004			Dec 31, 2003
Cash and cash equivalents	$	211.5		$	193.6
Restricted cash		454.6			437.6
Trading securities		—			5.0
Investments - current		26.1			26.9
Premiums and fees receivable		1,225.9			1,286.4
Other current assets		131.2			158.4
Total current assets		2,049.3			2,107.9
Investments – long-term		116.1			121.0
Fixed assets related to consolidated investments - net		203.7			205.2
Other fixed assets - net		59.4			61.0
Deferred income taxes		141.4			137.8
Other noncurrent assets		49.7			45.8
Goodwill – net		151.0			138.3
Amortizable intangible assets - net		102.4			84.6
Total assets	$	2,873.0		$	2,901.6
Premiums payable to insurance and reinsurance companies	$	1,694.4		$	1,743.5
Accrued compensation and other accrued liabilities		209.7			219.3
Unearned fees		30.7			27.3
Income taxes payable		19.5			24.3
Other current liabilities		16.3			16.0
Corporate related borrowings		—			—
Consolidated investments borrowings - current		33.9			30.9
Total current liabilities		2,004.5			2,061.3
Consolidated investments related borrowings - long-term		121.3			122.1
Other noncurrent liabilities		99.2			99.1
Total liabilities		2,225.0			2,282.5
Stockholders’ equity:
Common stock - issued and outstanding		90.8			90.0
Capital in excess of par value		121.9			105.5
Retained earnings		458.6			442.3
Unearned deferred compensation		(13.9	)		(9.6	)
Unearned restricted stock		(9.4	)		(9.1	)
Total stockholders’ equity		648.0			619.1
Total liabilities and stockholders’ equity	$	2,873.0		$	2,901.6
Other Information
Tangible net worth (4)	$	394.6		$	396.2
Book value per share	$	7.14		$	6.88
Tangible book value per share (5)	$	4.35		$	4.40

Notes to First Quarter 2004 Earnings Release and Non-GAAP Financial Measures

This exhibit contains supplemental non-GAAP financial information within the meaning of Regulation G of the SEC’s rules. Consistent with Regulation G, a description of such information is provided below and a reconciliation of certain of such items to accounting principles generally accepted in the United States (GAAP) is provided elsewhere in this press release. We believe the items described below provide meaningful additional information, which may be helpful to investors in assessing certain aspects of the Company’s operating performance and financial condition that may not be otherwise apparent from GAAP. Industry peers provide similar supplemental information, although they may not use the same or comparable terminology and may not make identical adjustments. This non-GAAP information should be used in addition to, but not as a substitute for, our GAAP information.

Non-GAAP Measures Defined

(1) Organic growth excludes the first twelve months of net commission and/or fee revenues generated from the acquisitions accounted for as purchases and the net commission and/or fee revenues related to operations disposed of in each year presented. These commissions and fees are excluded from organic revenues in order to determine the revenue growth that is associated with the operations that were a part of Gallagher in both the current and prior year.

(2) Represents net earnings divided by total stockholders’ equity, less net balance of goodwill and amortizable intangible assets, as of the beginning of the year.

(3) Represents net earnings before the after-tax effect of investment gains (losses), depreciation, amortization, amortization of deferred compensation and restricted stock expense and stock compensation expense.

(4) Represents total stockholders’ equity less net balance of goodwill and amortizable intangible assets.

(5) Represents tangible net worth divided by the common shares outstanding at the end of the period.

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Arthur J. Gallagher & Co.

Unconsolidated Investment Summary

(Unaudited - in millions except per share data)

	March 31, 2004				December 31, 2003				March 31, 2004
									LOCs & Financial Guarantees		Funding Commitments
	Current		Long-term		Current		Long-term
Trading securities managed by third parties	$	—	$	—	$	5.0	$	—	$	—	$	—
Unconsolidated Investments:
Direct and indirect investments in Asset
Alliance Corporation (AAC)	$	0.4	$	49.1	$	1.3	$	49.8	$	—	$	—
Low income housing (LIH) developments:
Bridge loans		7.1		—		9.5		—		—		—
Partnership interests		—		2.6		—		3.1		—		—
LIH Developer		—		8.5		—		7.6		—		—
Alternative energy investments:
Owned partnership interests		1.8		22.6		1.5		28.3		5.9		—
Partnership interest installment sales		15.6		7.4		14.6		8.0		—		—
Bermuda insurance investments		—		20.4		—		20.4		6.7		—
Real estate, venture capital and other investments		1.2		5.5		—		3.8		—		4.0
Total unconsolidated investments	$	26.1	$	116.1	$	26.9	$	121.0	$	12.6	$	4.0

Consolidated Investment Summary

(Unaudited - in millions)

	March 31, 2004			December 31, 2003			March 31, 2004
							LOCs & Financial Guarantees		Funding Commitments
Home office land and building:
Fixed assets	$	101.0		$	100.9		$	—	$	—
Accumulated depreciation		(13.9	)		(13.2	)		—		—
Non-recourse borrowings - current		(0.8	)		(0.8	)		—		—
Recourse borrowings - current		—			—			—		—
Non-recourse borrowings - noncurrent		(73.8	)		(74.0	)		—		—
Recourse borrowings - noncurrent		(3.0	)		(3.0	)		—		—
Net other consolidated assets and liabilities		2.4			2.2			—		—
Net investment		11.9			12.1			—		—
Florida community development:
Fixed assets		57.6			56.0			—		—
Accumulated depreciation		—			—			—		—
Non-recourse borrowings - current		(13.7	)		(10.7	)		—		—
Recourse borrowings - current		(17.0	)		(17.0	)		—		—
Non-recourse borrowings - noncurrent		(0.2	)		(0.2	)		—		—
Recourse borrowings - noncurrent		(12.4	)		(12.4	)		—		—
Net other consolidated assets and liabilities		(3.1	)		(3.6	)		12.8		1.5
Net investment		11.2			12.1			12.8		1.5
Airplane leasing company:
Fixed assets		51.8			51.8			—		—
Accumulated depreciation		(11.4	)		(10.5	)		—		—
Non-recourse borrowings - current		(2.4	)		(2.4	)		—		—
Recourse borrowings - current		—			—			—		—
Non-recourse borrowings - noncurrent		(31.9	)		(32.5	)		—		—
Recourse borrowings - noncurrent		—			—			—		—
Net other consolidated assets and liabilities		0.9			0.9			—		—
Net investment		7.0			7.3			—		—
Syn/Coal partnerships:
Fixed assets		34.8			35.2			—		—
Accumulated depreciation		(16.2	)		(15.0	)		—		—
Non-recourse borrowings - current		—			—			—		—
Recourse borrowings - current		—			—			—		—
Non-recourse borrowings - noncurrent		—			—			—		—
Recourse borrowings - noncurrent		—			—			—		—
Net other consolidated assets and liabilities		1.2			0.6			—		—
Net investment		19.8			20.8			—		—
Total consolidated investments:
Fixed assets		245.2			243.9			—		—
Accumulated depreciation		(41.5	)		(38.7	)		—		—
Non-recourse borrowings - current		(16.9	)		(13.9	)		—		—
Recourse borrowings - current		(17.0	)		(17.0	)		—		—
Non-recourse borrowings - noncurrent		(105.9	)		(106.7	)		—		—
Recourse borrowings - noncurrent		(15.4	)		(15.4	)		—		—
Net other consolidated assets and liabilities		1.4			0.1			12.8		1.5
Net investment	$	49.9		$	52.3		$	12.8	$	1.5

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