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Aon PLC reported 8% organic revenue growth in the first quarter and expects to report mid-single-digit or higher growth for the whole of 2022, despite the uncertain global political and economic outlook.
Inflation, a slowdown in gross domestic product and rising interest rates will have mixed effects on the company, its top financial executive said.
Aon reported total revenue of $3.67 billion for the first quarter, a 4.1% increase over the same period last year. Foreign exchange fluctuations, driven mainly by a weaker euro versus the U.S. dollar, limited revenue growth, said Christa Davies, the brokerage’s chief financial officer on a call with analysts Friday.
Aon’s core commercial brokerage operations reported $1.72 billion in revenue for the quarter, up 9% on an organic basis, which excludes the effect of foreign exchange fluctuations and mergers and acquisitions.
Reinsurance brokerage revenue increased 7% on an organic basis to $976 million.
Aon reported net income of $1.05 billion for the quarter, a 12.3% increase over the prior-year period.
Ms. Davies said projected decreases in global GDP growth, due to the ongoing effect of COVID-19, the war in Ukraine, rising inflation and higher interest rates, could affect Aon’s revenue, which is correlated to economic growth.
But changes in GDP tend to affect the more “discretionary” portions of Aon’s business, such as project-related business, she said.
Inflation, on the other hand, drives higher insured values and health care costs for Aon’s clients, Ms. Davies said.
Higher interest rates may hit Aon’s construction and transactional liability businesses, but higher rates also benefit Aon through increased investment income and lower pension liabilities, she said.
Aon’s decision in March to suspend its operations in Russia will have little effect on its revenue, said CEO Greg Case.
“We are in the process of suspending operations but (with) minimal impact,” he said.
Marsh & McLennan Cos. Inc. said Thursday it would exit the Russian insurance market, and its largest rival, Aon PLC, said it will suspend its operations in the country in response to Russia’s invasion of Ukraine.