Brokers Report Mixed 3Q Results

Insurance brokers have reported mixed results for 2011’s third quarter, with Willis Group Holdings PLC posting an 8 percent decrease in net income; Arthur J. Gallagher posting a 14 percent increase; and Aon Corp. reporting a 38 percent increase—but facing questions from financial analysts over the performance of its consulting unit.

Chicago-based Aon reports its third-quarter net income rose $54 million to $198 million. Revenues jumped 51 percent, or $922 million, to $2.7 billion.

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

Despite reporting a 246 percent increase in revenues, organic growth came in at -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 says restructuring expense for Aon Hewitt rose to $26 million, but adds that it has completed all restructuring activities. 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 Hewitt acquisition completed a year ago last month.

J. Patrick Gallagher Jr., chairman, president and COO of Arthur J. Gallagher,  was upbeat about the firm’s third-quarter net income of $49 million, which represents a 14 percent increase year-over-year. “This is the third quarter that we have been in positive organic territory, and I’m pleased with that,” he says.

The firm says organic growth in commissions, fees and supplemental-commission revenues grew by more than 5 percent in the third quarter. Revenues rose 22 percent, or $103 million, to $562 million.

For Willis, third-quarter net income dropped $5 million to $60 million compared to a year ago due in part to a charge for its operational review, along with declines in its Loan Protector business.

Revenues increased 4 percent, or $29 million, to $762 million.

Organic growth in the third quarter rose 2 percent on the strength of Willis’ global and international business. North America organic growth was -4 percent.

Willis’ operational review resulted in a $15 million charge for the third quarter and $130 million for the first nine months of this year. The review resulted in the elimination of 200 positions in the third quarter and 800 positions through the first nine months of this year.

The firm says it has “identified further opportunities for efficiencies” and its operational review will result in a total charge of approximately $160 million for the year.