While Aon continues to make investments to drive organic growth, its president and chief executive officer, Greg Case, emphasized today that the country's second-biggest insurance brokerage can and will do better.
Aon's organic growth is "short of what Aon's capable of doing, particularly given the assets and the capability we have," Mr. Case said in a webinar on its third quarter results.
He noted that investments made for the future, coupled with Aon's "commitment to distinctive client value," produced consolidated organic revenue growth of 6 percent for the third quarter–the highest rate since 2003.
Total revenue for the nine months ended Sept. 30 was up 2 percent to $6.5 billion. Revenue from brokerage commissions and fees for the first three quarters were also up 2 percent to $4.85 billion.
Net income for the first nine months was down 3 percent to $497 million.
Mr. Case said "the third quarter is evidence of good progress in each of our three key metrics–earnings growth, margin expansion and organic revenue growth."
Risk and Insurance Brokerage Services revenue increased 5 percent in the third quarter, to $1.3 billion, with organic revenue growth of 3 percent–led by reinsurance organic revenue growth of 8 percent, Aon said.
Reinsurance, he said, reported its strongest quarter in three years, with the Asia Pacific and Latin American regions doing "extremely well." Reinsurance organic revenue growth was 8 percent for the third quarter. Consulting revenue increased 2 percent to $301 million, with organic revenue growth of 3 percent.
He said "substantial progress" has been made across brokerage and consulting "in the quarter and for the nine months," and that achieving all three metrics he cited are "central to Aon's plan."
In combined insurance, accident, health and life business, "we had another record quarter," he said. Revenue for accident, health and life for the third quarter was $511 million, while revenue for property-casualty insurance underwriting was $8 million for a total of $519 million.
On the adjusted pre-tax margin side, he noted, "we increased over the quarter 190 basis points versus the prior year. Brokerage is up 240 basis points and consulting increased 220 basis points."
On Aon's previously announced restructuring plan, Mr. Case said, "we're ahead of schedule. We committed to $100 million in savings in 2006 and at this point, we're ahead of that pace."
On underwriting strategy, he said Aon is sharpening its focus on combined insurance and is going to exit or runoff the remaining pieces of its portfolio.
"Against that objective, during the quarter we announced a letter of intent to sell our Construction Services Group for $85 million," he said, adding that Aon also continues to work on the pending sale of Aon Warranty Group for $710 million, which is "progressing very well."
Mr. Case noted that Aon has strengthened its reserves on its property-casualty book of business by "more than $100 million, and we continue to explore opportunities for disposition of the books on the runoff side."
On capital management, he said, "we continue to be in a very strong cash position." As of today, he said, "Aon has completed more than 75 percent of its billion-dollar stock buyback." The company has "a lot of flexibility in regard to our capital position," he explained.
Aon reported that its total revenue for the third quarter increased 7 percent to $2.2 billion, and that net income for the third quarter was down to $106 million, or $0.32 per share, compared to $122 million or $0.36 per share for the prior year quarter.
Third quarter 2006 net income included the effect of $102 million ($0.19 per share) related to p-c reserve strengthening, Aon said. Net income from continuing operations was $90 million or $0.27 per share, compared to $97 million or $0.29 per share for the prior year quarter.
Aon said its consulting revenue for the third quarter increased 2 percent to $301 million with organic revenue growth of 3 percent. Insurance underwriting revenue increased to $519 million, with organic revenue growth of 13 percent.
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