Aon posts 25% Q1 profit boost; grows reinsurance book
Aon posted a 25 percent increase in its net profits and a 1 percent growth in its overall revenues in its results for the first quarter of 2014 in a performance boosted by solid organic growth across several business lines including reinsurance.
The broker made a net profit of $325 million in the first quarter, a 24.5 percent increase compared with the $261 million it made the year before. The company’s operating margin was 15.9 percent and its operating margin, adjusted for certain items, increased 30 basis points to 18.8 percent.
Its total revenues for the quarter reached $2.9 billion, a 1 percent rise in total but reflecting underlying organic growth of 2 percent, the company said.
Aon’s growth was reflected in its risk solutions unit where total revenue increased by 1 percent to $2 billion compared to the prior year quarter due to 3 percent organic growth in commissions and fees, offset by a 1 percent decrease in commissions and fees resulting from acquisitions, net of divestitures, and a 1 percent unfavourable impact from foreign currency translation.
It said that its retail organic revenue increased by 3 percent reflecting revenue growth in both the Americas and international businesses. The Americas organic revenue increased 4 percent reflecting growth across all regions driven by new business generation in US retail and strong management of the renewal book portfolio across Latin America and Canada. International organic revenue increased 3 percent driven by strong growth across emerging markets and Asia and a solid renewal book portfolio in continental Europe.
Reinsurance organic revenue increased 3 percent compared to the prior year quarter due primarily to growth in facultative placements and capital markets transactions and advisory business, as well as net new business growth in treaty placements, partially offset by an unfavourable market impact in the quarter.
The company has been returning large amounts of capital to shareholders recently. It repurchased 7.2 million Class A Ordinary Shares for approximately $600 million in the quarter and announced a 43 percent increase in its quarterly cash dividend.
“Our first quarter results reflect a solid start to the year with double-digit earnings growth, highlighted by strong performance across Risk Solutions and effective capital management,” said Greg Case, president and chief executive officer.
“We are returning a record amount of capital to shareholders, highlighted by the repurchase of $600 million of ordinary shares in the quarter and the recently declared 43 percent increase in our quarterly cash dividend, while continuing to invest in innovative solutions across the firm to strengthen our industry-leading platform for long-term growth, strong free cash flow generation and increased financial flexibility.”
Total operating expenses for the first quarter decreased by 1 percent to $2.5 billion compared to the prior year quarter due primarily to a $31 million increase in savings related to restructuring programmes, a $26 million decrease in formal restructuring costs, an $18 million favourable impact from foreign currency translation, a $17 million decrease in expenses related to acquisitions, net of divestitures, and a $13 million decrease in intangible asset amortization, partially offset by an increase in expense to support future growth in our health care exchange business and an increase in expense associated with 2% organic revenue growth.
