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Aon-Willis asset sales won’t cut cost savings goal: Aon CFO

Aon HQ

Aon PLC still expects to achieve its previously predicted $800 million cost savings through its proposed purchase of rival Willis Towers Watson PLC, even as regulators are expected to force various unit sales before approving the deal, Aon’s chief financial officer said.

Speaking on a conference call with analysts Friday, CFO Christa Davies, however, declined to comment on whether the $1.8 billion divesture cap outlined in the Aon-Willis merger documents still stood.

Ms. Davies made the comments as Aon reported revenue growth in the first quarter amid strong economic growth, increased rates and favorable foreign exchange rates.

The Willis deal, which is being scrutinized by regulators in the European Union and elsewhere, is still expected to close in the first half of this year, she said. The EU, which has demanded the divestiture of several businesses, reportedly including Willis’ reinsurance business, earlier this month extended its deadline to approve the deal to July 27.

“We continue to anticipate $800 million in cost synergies considering the remedies we’ve offered,” Ms. Davies said. The expected savings represent 5.5% of the brokerages’ combined costs base and is lower than the 11% cost savings achieved through Aon’s purchase of Hewitt Associates in 2010 and the 18% cost savings achieved through its acquisition of Benfield Group Ltd. in 2008.

Aon reported revenue of $3.53 billion for the first quarter, a 9.5% increase over the same period last year, and up 6% on an organic basis, which excludes the beneficial effect of the U.S. dollar’s weakness against the euro, among other things.

The rise was driven in large part by better-than-expected macroeconomic growth, Aon CEO Greg Case said on the call.

“Looking forward, if macroeconomic conditions continue to be strong, we would expect mid-single digit or greater organic revenue growth for the full year 2021,” he said.

Net income for the quarter was $933 million, an 18.3% increase over the same period last year.

Aon’s main commercial brokerage unit reported first-quarter revenue of $1.29 billion, a 9% increase over the year-earlier period on an organic basis; its reinsurance unit’s organic revenue increased 6% to $922 million. Retirement business was up 5% to $434 million; health care business rose 4% to $536 million; and data and analytics organic revenue was down 2% to $351 million.

The brokerage continued to see “modestly positive” insurance rate changes, Aon President Eric Andersen said.


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