“We’re off to a great start for 2011,” J. Patrick Gallagher Jr., chairman, president and CEO, told financial analysts during a conference call today.

He says the results have to be examined on an adjusted basis, and looking at it that way, “we had a great quarter.”

On an adjusted basis, net income was down 13 percent, or less than $3 million, to $18 million. Earnings per share fell 3 cents to 16 cents a share. Revenues were down 4 percent, or $21 million, to $446 million.

In its brokerage and risk-management segments, the firm posted organic growth of 1.6 percent and 5.8 percent, respectively.

Gallagher gives credit to a combination of new business and economic improvement that fueled the positive postings in organic growth, adding that the firm “feels a little better about the environment today.” He says much of that growth came from business in Canada, England and Australia.

Among some of the reasons he cites for his positive outlook were:

• A sense of improving economic climate among clients.
• Carriers tiring of the soft market and seeking to increase rates.
• The sense among carriers that rate increases are needed in Florida, California and Illinois in workers’ compensation.
• There are signs of rate increases in the excess and surplus lines market in Florida.

He emphasizes that he does not see a turn in the soft market coming yet, but carriers are beginning to “dig in their heels” on rate. He says they are holding the line on renewal business or walking away from it. However, rate decreases are still achievable on new business, he notes, and the decreases are more in line with single-digit reductions.

Addressing the firm’s benefits business, Gallagher says the firm is benefiting from the new health-care law as new clients come to the firm to work through the complexities of the Patient Protection and Affordable Care Act (PPACA). Small benefits firms lack the expertise to deal with the law’s complications, and some of those firms are even showing interest in joining AJG, he says.

Adding to the pressure on these small brokers, James W. Durkin Jr., president of employee-benefit brokerage operations, says some carriers are moving away from the typical commission payments. Instead, agent commissions are billed as fees to clients. That means the benefit broker has to convince the client of his or her value to the transaction in order to get paid. He says some state regulators are preventing insurers from moving in that direction.