Aon reinsurance expands 8% organically in Q2

Aon’s reinsurance solutions increased organic revenue by 8 percent in the second quarter of 2018 compared to the prior year period, driven by net new business generation globally in treaty and strong growth in facultative placements.

The growth was partially offset by a modest decline in capital markets transactions. The prior year quarter benefited from record catastrophe bond issuance during the mid-year renewal season.

Overall, reinsurance solutions posted a 10 percent year on year increase in revenues to $380 million in the second quarter.

At the same time, commercial risk solutions reported an organic revenue increase of 6 percent compared to the prior year period, driven by growth across every major geography, highlighted by strength across North America, the UK, and Australia, the company said. The results reflect strong global new business generation and management of the renewal book portfolio, according to the statement. In North America, double-digit new business generation was highlighted by strength in the transaction liability business in the US and the construction business in Canada. The unit posted revenues of $1.17 billion in the second quarter of 2018, up 12 percent compared to the same period a year ago.

Overall, Aon posted net income from continuing operations of $47 million compared to a loss of $43 million in the same period a year ago. Net income attributable to Aon shareholders plummeted to $48 million from $769 million over the period. The group’s total revenue in the second quarter increased 8 percent to $2.6 billion on a reported basis compared to the prior year period.

"During the quarter, we took specific steps to strengthen our client-serving capabilities and create greater long-term operating leverage," said CEO Greg Case.

In order to “unite” the firm, Aon appointed Eric Andersen and Michael O'Connor as co-presidents to further align the leadership team. In addition, Aon moved to a single brand to increase consistency and reinforce focus on long-term growth.

In May 2018 Aon said that it was retiring its business unit brands Aon Risk Solutions and Aon Benfield, and creating an integrated global operating committee, co-led by Andersen and O'Connor.

Restructuring expenses were $195 million in the second quarter, primarily driven by costs associated with restructuring and separation initiatives and workforce reductions. Restructuring savings in the second quarter related to restructuring and other operational improvement initiatives are estimated at $84 million before any reinvestment, an increase of $40 million compared to the prior year period. Before any potential reinvestment of savings, restructuring and other operational improvement initiatives are expected to deliver run-rate savings of $450 million annually in 2019. The company has achieved $257 million, or 57 percent, of the total estimated annualized savings, before any potential reinvestment.

"We believe these further steps toward our mission to unite the firm will help deliver our potential for clients and colleagues and will unlock significant shareholder value creation through double-digit free cash flow growth over the long-term," Case said.

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