Aon profit falls slightly despite 'strongest growth in over a decade'
Global broker Aon reported a $20 million increase in transaction costs related to the terminated business combination with Willis Towers Watson (WTW) in its second quarter 2021 results. Despite the adverse effects from the repatterning of expenses, the company enjoyed a big leap in its revenue and organic growth, reflecting continued net new business generation globally.
At the same time, its net profit attributable to Aon shareholders dipped slightly to $379 million, from $398 million reported in the prior year period.
The broker, however, enjoyed an especially good second quarter in terms of revenues, which increased 16 percent to $2.9 billion compared to the prior year period, driven by 11 percent organic revenue growth, a 4 percent favorable impact from foreign currency translation, and a 1 percent favorable impact from acquisitions, divestitures, and other.
Aon's Reinsurance Solutions business saw an organic revenue growth of 9 percent, reflecting growth in treaty, driven by continued net new business generation globally, as well as double-digit growth in capital markets transactions and solid growth in facultative placements.
Its Commercial Risk Solutions business posted an organic revenue growth of 14 percent, highlighting a double-digit growth in the US, Canada, EMEA, Asia, and Latin America, driven by continued strength in core P&C.
Aon noted that its compensation and benefits expense increased $267 million, or 20 percent, compared to the prior year period due primarily to a $135 million negative impact from the repatterning of expenses within the year, a $76 million unfavorable impact from foreign currency translation and an increase in expense associated with 11 percent organic revenue growth.
Additionally, other general expenses increased $56 million, or 21 percent, compared to the prior year period due primarily to a $20 million increase in transaction costs related to the terminated combination with Willis Towers Watson, and a $10 million unfavorable impact from foreign currency translation.
Subsequent to the close of the quarter and as a result of the inability to secure an expedited resolution to litigation with the US Department of Justice, Aon called off its proposed business combination with Willis Towers Watson, requiring Aon to pay a $1 billion termination fee. The remaining transaction costs related to the terminated merger, including the termination fee, will be recognised in Q3 2021.
Aon stated that the market impact was "modestly positive" on its results in the second quarter.
Commenting on the results, chief executive Greg Case said: "In the second quarter, our team delivered 11% organic revenue growth, our strongest growth in over a decade, that translated into 17% growth in earnings per share, and contributed to 13% free cash flow growth for the first half.
"These results demonstrate the incredible resilience of our colleagues and the power of Aon United. We are moving forward at an accelerated pace, with a proven leadership team and an enduring strategy. Our ability to innovate on behalf of clients remains unrivaled and continues to translate into significant progress against key financial metrics and shareholder value creation."
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