Aon revenues fall flat in 2020 despite strong reinsurance organic growth

Broker Aon enjoyed organic revenue growth in its reinsurance and commercial risk solutions segments, but reported overall flat results in 2020 - a year it said was "filled with unprecedented challenges". CEO Greg Case highlighted the company's stability and strength as it gears up for business combination with rival Willis Towers Watson.

The broker's profit attributable to its shareholders increased to $1.968 billion in 2020, a 28.4 percent increase from the $1.533 billion it posted the year before. In the fourth quarter, it made a profit of $524 million, compared with $374 million in the same period a year earlier.

Its total revenues in full-year 2020 were flat at $11.1 billion compared to the prior year, driven by 1 percent organic revenue growth, partially offset by a 1 percent unfavorable impact from divestitures, net of acquisitions. For the fourth quarter, total revenue increased 3 percent to $3 billion, including organic revenue growth of 2 percent - driven by ongoing retention and net new business generation.

Aon said that market impact was "modestly positive" on its results in the fourth quarter. Its reinsurance solutions business generated an impressive organic revenue growth of 12 percent in Q4, reflecting double-digit growth in treaty driven by continued net new business generation globally and growth in facultative placements, partially offset by a decline in capital markets transactions.

Meanwhile, its commercial risk solutions posted organic revenue growth of 4 percent, reflecting growth across most major geographies - driven by strong retention of the renewal book portfolio, and strong growth in Latin America and the US. Aon reported that its decreased its operating expenses in the fourth quarter by 5 percent to $2.3 billion, due primarily to a $170 million decrease in restructuring charges, expense discipline, including lower travel and entertainment expense, and a $51 million decrease from accelerated amortization.

This was partially offset by $44 million of transaction costs related to the pending combination with Willis Towers Watson, a $38 million unfavorable impact from foreign currency translation, a $19 million increase in expenses related to acquisitions, net of divestitures, an increase in expense associated with 2 percent organic revenue growth, and an increase in compensation and benefits expense.

Case said: "We delivered a strong finish to 2020, with 2 percent organic revenue growth and 4 percent EPS growth in the fourth quarter. For the full year, free cash flow increased by $1.0 billion to $2.6 billion, the highest in our firm's history, demonstrating the stability of our business and the efficiency of our Aon Business Services platform.

"Our team is incredibly proud of the tremendous resiliency demonstrated by our colleagues. Understanding the opportunity and the need in front of them, they responded by bringing the best of our firm to our clients and each other, allowing the firm to excel during a year filled with unprecedented challenges."

"We enter 2021 in a position of strength, with momentum for Aon and our pending combination with Willis Towers Watson," he added.

Source: Intelligent insurer