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Aon reports higher revenue, profit for fourth quarter


Aon PLC reported increased total revenue, organic revenue and profit for the fourth quarter of 2021, but the $1 billion dollar termination fee it paid in the third quarter related to its failed bid to buy Willis Towers Watson PLC dragged down earnings for the year.

In 2022, the brokerage expects to see expenses rise as wages increase and travel and entertainment costs rise two years after the beginning of the COVID-19 pandemic, but it expects to see financial benefits if interest rates rise.

Aon reported fourth-quarter revenue of $3.08 billion, a 3.9% increase over the same period the previous year. On an organic basis, which excludes the effect of mergers and acquisitions and foreign exchange fluctuations, revenue increased 10%.

Rival brokerages have also reported strong organic revenue growth for the fourth quarter as insurance rates continued to rise in 2021.

Revenue for Aon’s core insurance brokerage business increased 11% to $1.85 billion, up 12% on an organic basis; reinsurance revenue rose 12.7% to $222 million, up 13% on an organic basis; health consulting revenue fell 13. 3% to $651 million but increased 7% on an organic basis, reflecting the sale of its retiree health care exchange business; and retirement and investment revenue grew 1.9% to $364 million, up 1% on an organic basis.

Net income increased 63.2% to $873 million as operating expenses fell and income increased due to the sale of the retiree health exchange, which was originally agreed on as part of its failed effort to buy rival Willis Towers Watson.

For the full year, Aon reported revenue of $12.19 billion, up 10.2%, and net income of $1.31 billion, down 35.2%. Aon paid a $1 billion termination fee in the third quarter related to the scuttled Willis deal, which fell apart in July due to antitrust concerns.

Looking ahead, Aon expects to see an increase in pay-related expenses this year and will likely benefit from rising interest rates, the brokerage’s top financial executive said on a conference call with analysts Friday.

Aon expects to expand its profit margin this year “and as we look to 2022 we also expect investments in colleagues, some ongoing resumption of (travel and entertainment expenses) and investments in long-term growth,” said Christa Davies, the brokerage’s chief financial officer.

But Aon expects wage inflation to be offset by efficiencies, she said.

If interest rates rise, it will be “very positive” for Aon because its fiduciary investment income will rise by $60 million each time there is a 100 basis point increase in short-term interest rates and the company’s pension liabilities will be reduced, among other things, Ms. Davies said.