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Aon revenue increases; staff shrinks after outsourcing sale

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Aon P.L.C. reported higher total revenue for the first quarter of 2017, as it revealed that staff reductions and other savings related to the recent sale of its benefits outsourcing business would save the firm $400 million annually by the end of 2019.

The firm has eliminated more than 1,000 positions so far and a further 900 jobs maybe eliminated as it restructures its operations, according to regulatory filings.

Aon reported $2.38 billion in total revenue for the first quarter of 2017 on Tuesday, a 5% increase over the same period last year. Organic growth increased 4%, with much of that being driven by its health solutions unit, where organic growth was 14%.

In its core brokerage business, commercial risk solutions revenue edged up to $984 million, representing 2% organic growth. Growth in the U.S., Europe and Asia was partially offset by a decline in revenue from Latin America, an Aon statement said. Its reinsurance brokerage business also saw a 2% increase in organic growth with quarterly revenue of $371 million.

Net income fell to $305 million in the first quarter, down 9% from the year-ago period, as operating expenses increased 10% to $2.04 billion, primarily due to $144 million in restructuring costs, of which $103 million was related to staff reduction.

In its quarterly statment filed with the U.S. Securities and Exchange Commission on Tuesday, Aon revealed that has elmininted 1,065 positions so far and expects to elminiate a total of 1,600-1,900 jobs as a result of the restructuring.

Earlier this month, Aon completed the sale of its benefits outsourcing unit to Blackstone Group L.P. for $4.8 billion. The firm also announced that Aon Hewitt CEO Kristi Savacool would be leaving the firm.

As a result of the sale, Aon will consolidate some of its operations, Chief Financial Officer Christa Davies said in a conference call with analysts on Tuesday.

“We’ve moved from 72,000 colleagues to 50,000 colleagues and our 50,000 colleagues are primarily client-facing colleagues,” she said, which allows Aon to “optimize the real estate portfolio in a way that we weren’t able to previously.”

In addition, divesting the benefits outsourcing unit “allows us to pull together the infrastructure that supported HR solutions with the infrastructure supporting risk solutions into one Aon model, which allows us to design it for Aon today,” Ms. Davies said.