NU Online News Service, Oct. 28, 1:43 p.m. EDT

Despite reporting a 38 percent increase in 2011 third-quarter net income, financial analysts appear to be dissatisfied with Aon Corp.'s results and they question the performance of its consulting unit.

The Chicago-based insurance broker reports third-quarter net income rose $54 million to $198 million. Earnings per share rose 8 cents to 59 cents a share, missing analysts' consensus earnings of 73 cents. Revenues rose 51 percent, or $922 million, to $2.7 billion.

For the first nine months, net income rose 48 percent, or $227 million, to $702 million. Earnings per share rose 37 cents to $2.05. Revenues were up 48 percent, or $2.7 billion, to $8.3 billion.

Organic growth for the insurance-brokerage business rose 3 percent on a 9 percent increase in revenue, Aon says.

In response to a question during a conference call today, Greg Case, president and CEO of Aon, says insurance rates are beginning to tighten, “but we have not seen the turn” in the soft market. He says the downward direction in prices is becoming less and less.

On the reinsurance side, he says, rates are “getting flat as well.”

Concerning acquisitions, he says the company made five this year amounting to $100 million in revenue. The firm will continue to look at opportunities and make acquisitions “where they make sense.”

However, the focus of financial analysts' questions was Aon's consulting business, particularly the integration of the human resource and outsourcing consulting firm Hewitt with Aon Consulting.

Despite reporting a 246 percent increase in revenues, organic growth came in at minus-2 percent for the division.

Aon says the decline was due “primarily to a decline in health and benefits and communications consulting” on the consulting-services side, and on the outsourcing side the decline was due “to a decline in project-related revenue and price compression.”

Aon reports restructuring expense for Aon Hewitt rose to $26 million. It says it has completed all restructuring activities of Aon Hewitt. The cost was primarily related to workforce reduction and lease consolidation.

Last year, Aon said it planned to eliminate between 1,500 and 1,800 positions globally related to the Aon Hewitt acquisition. The acquisition was complete a year ago this month.

Case says that modest improvement is expected in consulting for the fourth quarter as the economy begins to stabilize.

By noon time today, Aon's shares dropped close to 7 percent to $47.53 a share, off close to $4. Aon's shares closed on Friday down 5 percent, or $2.28 a share, to $47.99 a share.

This story was updated at 4:07 p.m. EDT with the closing share price.

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Aon 3Q Net Income Up 38%; Analysts Question Consulting Unit&rsquo;s Performance

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