Aon Corporation reported its net income grew 2 percent in the first quarter of this year as its chief executive credited the insurance brokerage firm's performance to reinvestment in the company and a culture of accountability and performance.
The Chicago-based broker reported net income increased $5 million to $218 million translating into a 2-cent increase in earning per share to 68-cents a share over the same period last year. Revenues grew 7 percent, or $134 million, to $1.9 billion.
Commissions and fees rose 8 percent, or $144 million, to $1.9 billion, but revenues suffered a 14 percent drop of $10 million on investment income, dropping to $59 million.
Despite soft market pressures Aon reported organic growth of 2 percent in total risk and insurance brokerage. The Europe, Middle East and Africa segment reported the strongest organic growth of 5 percent while United Kingdom was down 1 percent. The United States, which Greg Case, Aon's president and chief executive officer, said had "substantially softer conditions," reported 1 percent gain in organic growth.
"As our team reflects on the quarter, it's really a story of continuing momentum and progress," said Mr. Case during an analyst's conference call today. "We're in a position of strength with the industry's broadest globally owned resources and capabilities. We continue to work to change the behavior of how we evaluate and how we sell into our market segments as well as reinforce a culture of being held accountable for performance and delivering distinctive value. We intend to do that while continuing to deliver margin improvement and internally funding very substantial investments which are building the base for longer term growth across Aon."
Risk and insurance brokerage services grew 9 percent, or $135 million, in the quarter to $1.6 billion while consulting contributed $343 million, an increase of 4 percent or $14 million.
During the call, in response to questions about the company's compensation, Mr. Case said its commission and fee split is two-thirds commission and one-third fee, and the amount of fee business is growing.
He indicated that Aon is not growing by undercutting competition on fee schedules.
"We are not low price, but high value," a position that more and more customers are understanding and embracing, Mr. Case noted.
He said the firm feels a substantial portion of Aon's business is isolated from the impact of an economic recession and that it is not seeing a downturn in any one segment of the business.
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