UPDATE 2-Arthur J Gallagher Q3 profit up, to cut 400 jobs

* Q3 EPS $0.41 vs est $0.42 * Says to cut 4 pct of global workforce

* Sees annual pretax cost savings of $25 mln-$28 mln

* Q3 revenue up 3 pct (Adds analyst's comments, details, background)

By Abhinav Sharma

BANGALORE, Oct 27 (Reuters) - Arthur J. Gallagher (AJG.N), one of the largest U.S. insurance brokerages, reported a 10 percent rise in quarterly profit, helped by higher commission and fee revenue, and said it will cut about 400 positions.

Analyst Meyer Shields of Stifel Nicolaus termed the job cuts as necessary and said it represents a significant cultural shift for the company which has been, historically, a more comfortable place to work.

The company expects annual pretax cost savings associated with the workforce reduction of about $25 million to $28 million.

While falling insurance rates in recent years have cost brokers, who are largely compensated by commissions, most have curbed spending, helping to cushion the bottom line.

Organic revenue declined 5.5 percent to $279.2 million, for the third quarter.

Organic revenue growth was significantly negative and it was the probably the worst results ever reported by Arthur J. Gallagher, said analyst Shields.

The insurance brokerage industry helps commercial clients find insurance coverage for a wide range of risks. However, a softening market for most insurance lines is nipping at their revenue base.

The company continues to be concerned about the current operating environment as insurance rates remain soft and exposure units continue to decline, Chief Executive Patrick Gallagher said in a statement.

For the third quarter, the company earned $41.6 million, or 41 cents a share, compared with $37.8 million, or 40 cents a share, a year ago.

Analysts were looking for a profit of 42 cents a share, before exceptional items, according to Thomson Reuters I/B/E/S.

Third-quarter revenue rose to $439.5 million from $428.2 million.

The company expects pretax severance-related charge of about $10 million to $13 million in the fourth quarter, Arthur J. Gallagher said in a statement.

Shares of the Itasca, Illinois-based company closed at $24.01 Tuesday on the New York Stock Exchange. (Reporting by Abhinav Sharma in Bangalore; Editing by Pradeep Kurup, Unnikrishnan Nair)