UPDATE 1-Arthur Gallagher soars as cost cuts bear fruits

* Says continues to look at cost cutting measures

* Sees additional rev of $100 mln from deals in 2009

* Posts better-than-expected Q1 oper profit

* Q1 commissions up 13 pct at $233.2 mln

* Shares up as much as 15 pct

By Anurag Kotoky and Amiteshwar Singh

BANGALORE, April 29 (Reuters) - Shares of Arthur J. Gallagher & Co (AJG.N) jumped 15 percent Wednesday as investors cheered the insurance brokerage's focus on cost containment, after its results came in way above expectations amid a difficult operating environment.

"Historically, there has been so much pessimism regarding Gallagher's expense control," Stifel Nicolaus analyst Meyer Shields told Reuters. "They have finally proven that they can do it."

The company, one of the largest insurance brokerages in United States, said it is seeing the benefits of trying to grow through tuck-in acquisitions and that its cost-saving initiatives are also starting to bear fruits.

Speaking at a conference call with analysts, Chief Executive Patrick Gallagher said the company expects to add about $100 million in revenue from acquisitions in 2009 and backed his targets of $25 million to $30 million from the cost-saving programs this year.

"They have done a very good job of identifying the right people (to acquire) and integrating them," analyst Shields said by phone.

The company said it is working hard to keep a lid on headcount and is shifting work to lower cost labor locations to reduce operating expenses.

Shields, however, does not expect aggressive job cuts at the company, instead he feels that there could be back office consolidation and clamping down on unnecessary costs.

Arthur Gallagher, which closed three acquisitions and saw its workforce grow by 123 employees during the quarter, reported a 2 percent rise in expenses in the latest quarter.

The insurance brokerage industry helps commercial clients find insurance coverage for a wide range of risks. However, a number of companies are looking to chase growth through deals as a softening market for most insurance lines nips at their revenue base.

On Tuesday, the company posted first-quarter operating earnings of 29 cents a share, while analysts were looking for 14 cents a share.

Langen McAlenney analyst Paul Howard said the company has proved it can weather a difficult marketplace and the results should ease concerns about a potential dividend cut. "We feel good about Gallagher's growth prospects long-term as we think pricing is turning (albeit slowly) and once recent acquisitions become more seasoned, margins should follow suit."

However, Barclays Capital analyst Jay Gelb said the company's brokerage revenue growth and margins may be pressured by an economic recession, and property and casualty pricing could be less robust than estimates.

Shares of the Itasca, Illinois-based company were up $2.78 at $21.81 in morning trade on the New York Stock Exchange. They earlier touched a high of $22.20. (Reporting by Anurag Kotoky in Bangalore; Editing by Anil D'Silva)