There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

November 24, 2008 - A. J. Gallagher & Co. (AJG-NYSE) together with its subsidiaries, provides insurance brokerage and third-party claims settlement and administration services. It operates in three segments: Brokerage, Risk Management, and Financial Services.

The Risk Management segment provides contract claim settlement and administration services for enterprises that choose to self-insure some or all of their P/C coverages and for insurance companies that choose to outsource some or all of their P/C claims departments. This segment also offers integrated disability management programs, information services, risk control consulting (loss control) services, and appraisal services.

The Financial Services segment manages Gallagher's interests in tax-advantaged and clean-energy investments, as well as its equity ownership position in an alternative investment fund manager that has ownership interests in private investment management firms. It has operations in the United States, Australia, Bermuda, Canada, and the United Kingdom. The company was founded in 1927 and is based in Itasca, Illinois.

Insurance premiums have been soft of late, putting downward pressure on profits at AJG. Last quarter, earnings came in at 44 cents a share, down from 54 cents a year ago in the same quarter. Next quarter, look for 20 cents a share, up from 18 cents last year. For the full year, the average estimate for earnings from 11 analysts is $1.45, down from $1.59 in 2007. Next year, they see $1.58. Earnings have been a bit erratic over the last several years, but if the economy begins to resurrect, AJG should see continued positive improvement.

Internal growth in the past has come from premium hikes, managing claims for self-insured companies and writing new business. But increasing prices isn't an option in this market unless catastrophic losses happen more frequently. For internal growth, the company is focused on increasing market share by hiring more salespeople.

External growth has been picking up. The company averages about 14 acquisitions a year. This year, in the first 9 months, it closed twice as many purchases, and more are being negotiated. These tend to be smaller, independent brokerages who welcome the opportunity to join a larger, more financially sound operation. Expect to see more acquisitions as the engine to keep earnings growing. Just in the last 3 weeks, Gallagher bought 2 firms: HR Group LLC and Roberts & Roberts Insurance Service, Inc.

Some numbers: P/E is 22.4 on trailing earnings, 14.6 on forward numbers. Price to sales is 1.31 while Price to Book is 2.78. Operating margin is 14.51% and profit margin is 5.8%. Return on equity is 17.5%. Revenue was $1.64 billion for the last 12 months. There's $254.7 million in cash in the bank, making for $2.68 a share in cash. Total debt to equity is .67. Current ratio is .96. Book Value is $8.16. There are 95 million shares outstanding with a float of 93.23 million. Insiders own 1.7% of the stock. Institutions own 73%. Value Line gives the company a financial strength rating of A.

And the last number: the dividend yield of 5.6%. While it takes 86% of profits to pay the dividend, the company has been raising the pay out every year for the last 4 years, taking it from $1.00 a share in 2004 to its current level of $1.28.

This stock has held up relatively well in a market marked by extreme volatility. With a very good dividend, diversified revenue streams, and management that delivered decent earnings for years, this stock should have interest for conservative investors looking for more stability in their portfolios.

Company Web site: www.ajg.com

- Ted Allrich