NU Online News Service, July 30, 1:51 p.m. EDT
Aon Corp. reported flat second quarter organic growth and net income fell 87 percent compared with the previous period when it profited from the sale of its insurance companies.
The Chicago-based insurance broker posted net income of $984 million, down from $1.13 billion, to $149 million. Earnings per share fell from $3.71 last year to 52-cents a share. Total revenues were off 4 percent, or $71 million, to $1.89 billion.
Management attributed the drop in net income was primarily the result of the $1 billion sale of the firm's two insurance units last year, Combined Insurance Companies of America and Sterling Life Insurance, which was recorded in the second quarter.
For the first six months of the year net income is down 68 percent, or $922 million, to $429 million. This translated into a drop in earnings per share from $4.32 last year to $1.48. Revenues were off 3 percent, or $122 million, to $3.74 billion.
At a teleconference with financial analysts today, Greg Case, president and chief executive officer of Aon, said, "The global economic crisis is providing significant head winds for our business. We continue to operate in a soft insurance pricing market as rates continue to decline, albeit at a somewhat slower pace.
"In addition to the pricing declines, we are seeing a volume impact due to the current economic environment. The reality of the economic recession for our clients will be continued pressure on volume and constrained organic growth in the industry in the near future at a rate similar, we believe, to what we have seen for the past two quarters."
Mr. Case said further that, "irrespective of the short-term marketplace, or economic challenges, the core foundation of Aon continues to improve and is stronger than ever. The plans we have put in place to substantially improve our firm are on track and show very good progress. Given this context, we are very pleased with our performance in Q-two."
Despite the rate and economic environment, he noted that the flat organic growth was solid and some segments, such as reinsurance brokerage Aon Benfield and Americas, delivered organic growth of 4 percent and 3 percent respectively.
Aon, said Mr. Case, has increased business in the U.S. and Latin America while other regions are seeing impact from the global recession.
The company is focused on investing in initiatives aimed at providing improved service to clients, he related, and appears to have growing success in several areas.
The performance of Aon Benfield, the London-based reinsurance brokerage Aon acquired last year, has been outstanding, said Mr. Case, noting that besides the organic growth, the reinsurance firm has retained its 30 top clients, and despite reports of losses of executives from Benfield, few have left the firm.
"We could not be more excited about the progress we have made" integrating Benfield, said Mr. Case.
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