Aon ready for transactions uptick as IPO slowdown hits growth: Case
Chief executive attributes 'modest' Q1 growth in the broking group's US business to reduced M&A activity, amid rising interest rates and concerns about the economic outlook, but predicts 'terrific' long-term prospects
Commercial Risk Solutions organic growth slows to 6% in the first quarter amid modest US revenue expansion, as Reinsurance Solutions division accelerates on strong treaty business
Aon chief executive, Greg Case, said the global broking giant was poised to benefit from any uptick in transactional activity in the US after organic growth in the firm’s corporate broking arm slowed in the first quarter.
The Commercial Risk Solutions division booked organic growth of 6% in the quarter with revenues of $1.78bn, compared with 9% growth in the same period a year earlier.
The deceleration was attributed to the US region, which grew only “modestly” in the first quarter after double-digit growth a year earlier. This was attributed to a slowdown in mergers and acquisitions (M&A) and initial public offering activity in the quarter, amid rising interest rates and concerns about the economic outlook.
Speaking to analysts, Case said the division still had a strong quarter and was ready to capitalise on changing economic conditions.
“We have very strong capability in specialty areas, a few of which have been under pressure, but we continue to invest in them because we know they’re going to be terrific long term,” he said. “As the market shifts a bit on the M&A transaction side, we’re going to obviously benefit from that,” he added.
Outside the US, the Commercial Risk Solutions business achieved “double-digit” retail broking growth in Europe, the Middle East and Africa, Latin America and the Pacific in core property/casualty business. It also reported “strong growth globally” in its affinity business across both consumer and business solutions.
Meanwhile, organic growth in Aon’s reinsurance arm accelerated in the first quarter of 2023.
Reinsurance Solutions booked revenues of $1.08bn in the quarter, representing organic growth of 9%. This compared with 7% organic growth in the first quarter of 2022.
The division benefited from “strong growth” in treaty, as well as “double-digit growth” in both the Strategy and Technology Group and facultative placements, Aon said.
Hardening reinsurance market conditions were “modestly positive” on the quarter’s results, the company added.
Overall, Aon’s total revenues increased 5% to $3.9bn in the first quarter, including organic revenue growth of 7%. The firm’s adjusted operating margin increased 70 basis points to 38.7%. Net income increased 3% to $1.05bn compared with $1.02bn a year earlier.
“In the first quarter, our team built momentum for 2023 by delivering strong operational performance,” Case said.
