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Net income for Aon up to US$307 million in Q3, Risk Solutions revenue up 2%


October 28, 2016   by Canadian Underwriter


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Aon plc has reported a net income attributable to shareholders of US$307 million for the third quarter of 2016 ending Sept. 30, up from US$295 million for the prior-year quarter.

Business ReviewTotal revenue was US$2.7 billion, similar to the prior-year quarter, driven primarily by 4% organic revenue growth in commissions and fees, offset by a 2% unfavourable impact from foreign currency translation and a 2% decrease in commissions and fees related to divestitures, net of acquisitions.

By segment, Risk Solutions total revenue increased 2% compared to the prior-year quarter, driven by 3% organic growth in commissions and fees and a 1% increase in commissions and fees related to acquisitions, net of divestitures, partially offset by a 2% unfavourable impact from foreign currency translation, Aon said in a press release on Friday. For Q3 2016, total revenue was US$1.715 billion, from US$1.689 billion in Q3 2015.

Retail organic revenue increased 4% compared to the prior year quarter, reflecting organic revenue growth in both the Americas and International businesses, the commercial brokerage reported. Americas organic revenue increased 5%, driven by growth across all regions, highlighted by strong growth in Affinity and record new business generation and retention in U.S. Retail. International organic revenue increased 2%, driven by effective management of the renewal book portfolio in continental Europe and solid growth in New Zealand and across Asia, Aon said.

Reinsurance organic revenue increased 1% compared to the prior-year quarter due primarily to growth in net new business generation in treaty and growth in facultative placements, partially offset by an “unfavourable market impact globally.”

Third quarter operating income for Risk Solutions increased 2% to US$330 million compared to the prior-year quarter, said Aon, a global provider of risk management, insurance brokerage and reinsurance brokerage, human resources solutions and outsourcing services.

In the HR Solutions segment, total revenue decreased 2% compared to the prior year quarter, driven by a 4% decrease in commissions and fees resulting from net divestitures and a 2% unfavourable impact from foreign currency translation, partially offset by 4% organic growth in commissions and fees. Organic revenue in Consulting increased 3% compared to the prior year quarter, driven by growth in retirement consulting for delegated investment consulting services and growth in communications consulting.

Organic revenue in Outsourcing increased 5% compared to the prior-year quarter, due primarily to strong growth in HR business process outsourcing for cloud-based solutions and for off-cycle enrollments and project-related work in healthcare exchanges, partially offset by an anticipated modest decline in benefits administration, the release said.

Third quarter HR Solutions operating income was US$134 million, similar to the prior-year quarter.

Subsequent to the close of the quarter, the company also announced its acquisition of Stroz Friedberg, “strengthening Aon Risk Solutions’ ability to serve clients as the global leader in cyber risk mitigation.”

“Overall, our performance reflects solid organic revenue growth across both Risk and HR Solutions, effective capital management, and strong double-digit growth in free cash flow,” said Greg Case, Aon president and chief executive officer, in the release. “Looking forward, we expect a strong finish to the year as we head into our seasonally strongest quarter, resulting in improved operating performance for the full year. Our industry-leading platform and significant level of strategic investments continue to position the firm for long-term growth, increased operating leverage and significant free cash flow generation towards our near-term goal of US$2.4 billion for the full year 2017.”


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