Aon’s revenue rises as inflation, interest rate hikes benefit broker
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Aon PLC reported $2.98 billion in revenue for the second quarter, a 3.4 % increase over the same period last year and an 8% rise on an organic basis.
Economic conditions such as increases in inflation and interest rates over the past several months added revenue to the brokerage and so far have outweighed the effects of any reduction in general economic activity on Aon’s business, the brokerage’s senior executives said on a call with analysts Friday.
Aon’s core commercial insurance brokerage unit reported $1.69 billion in revenue for the quarter, up 3% from last year’s second quarter and 7% higher on an organic basis, which excludes the effect of foreign currency fluctuations, mergers and acquisitions, and divestitures; its reinsurance brokerage business reported $537 million in revenue, up 7.4% and 9% on an organic basis.
The brokerage’s health care consulting business reported $414 million in revenue, up 5.9% and 11% on an organic basis. Its wealth solutions division, which includes retirement plan consulting, reported $343 million in revenue, down 3.7% but up 3% on an organic basis.
Net income rose 30.8% to $514 million. Income tax expenses fell to $119 million from $203 million in the same period last year as Aon’s effective tax rate decreased to 18.8% from 34.1%, according to the brokerage’s results statement.
Economic trends, such as rising inflation and increased interest rates, have a positive effect on insurance brokers, which can offset a slowdown in general economic growth, said Christa Davies, Aon’s chief financial officer.
“Inflation increases insured values, which has a positive impact on our business, and we continue to see modest tailwinds in insurance pricing, which remains strong. Interest rate increases benefit us through fiduciary investment income and reduced pension liabilities,” she said.
Each 1% increase in interest rates boosts Aon’s revenue and profit by $60 million, Ms. Davies said.
