February 10, 2017 by Canadian Underwriter
Commercial brokerage Aon plc has reported a net income attributable to Aon shareholders of US$502 million in the fourth quarter of 2016 ending Dec. 31 compared to US$584 million for the prior-year quarter. For the full year of 2016, net income attributable to Aon shareholders increased 1% to US$1.4 billion compared to the prior year.
Total revenue in the fourth quarter increased 1% to US$3.3 billion compared to the prior-year quarter, driven primarily by 3% organic revenue growth, partially offset by a 2% unfavourable impact from foreign currency translation, Aon said in a press release on Friday.
For the full year 2016, total revenue was US$11.6 billion with organic revenue growth of 3%. Risk Solutions’ total revenue increased 1% to US$7.5 billion and HR Solutions total revenue decreased 3% to US$4.2 billion.
Total operating expenses for Q4 2016 increased 5% to US$2.7 billion compared to Q4 2015, primarily due to US$158 million of non-cash expenses related to certain pension settlements, US$15 million of transaction costs related to the pending sale of certain assets, US$6 million of transaction costs related to acquisitions and an increase in expense to support 3% organic revenue growth, partially offset by a US$67 million favourable impact from foreign currency translation, a US$10 million decrease in the core expense base related to divested businesses, net of acquisitions, and a US$7 million decrease in intangible asset amortization.
Total revenue for the Risk Solutions segment increased 2% in the most recent quarter to US$2.05 billion from US$2.01 billion, driven by 3% organic growth in commissions and fees, partially offset by a 1% unfavourable impact from foreign currency translation. The release noted that the company has “identified certain immaterial legacy errors related to the quarterly timing of revenue recognition within the Americas Retail brokerage business in Risk Solutions that affected quarterly revenue amounts previously. The impact of the errors on the company’s annual revenue and organic growth is immaterial.” Fourth quarter operating income for Risk Solutions decreased 7% to US$455 million compared to the prior-year quarter.
The HR Solutions segment’s total revenue for the fourth quarter decreased 1% to US$1.3 billion compared to the prior-year quarter, driven by a 4% decrease in commissions and fees related to net divestitures and a 2% unfavorable impact from foreign currency translation, partially offset by 5% organic growth in commissions and fees, the release pointed out. Fourth quarter operating income for the segment decreased 2% to US$281 million compared to the prior-year quarter, the release said.
In the fourth quarter, the company closed its acquisition of Stroz Friedberg, “strengthening its ability to serve clients as the global leader in cyber risk mitigation.” It also closed its acquisition of Admix, a health and benefits brokerage firm in Brazil.
“We ended 2016 in a strong position, driving positive performance across each of our key metrics for both the fourth quarter and the full year, highlighted by growth across every major business and record operating margin in Risk Solutions,” concluded Greg Case, president and chief executive officer, in the release. “Substantial investments in high-growth areas of our industry-leading platform, improved operational performance, and record free cash flow generation of more than US$2.1 billion, continue to position the firm for increased shareholder value creation over the long-term.”