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2021 brokerage revenue: $12.19B
Percent increase: 10.4%
Nearly a year after its long-planned acquisition of rival Willis Towers Watson PLC was scuttled due to regulatory concerns, Aon PLC has revamped its organizational structure and is continuing with its strategy of seeking to offer clients multiple financial services.
While the failure to complete the deal was a blow to the brokerage, it appears to have rebounded as it continues to report solid revenue growth, analysts say.
The Willis deal, which was announced in March 2020 and would have created the world’s largest brokerage, was scrapped after the U.S. Department of Justice filed an antitrust lawsuit against Aon in June 2021. At first, Aon indicated it would fight the lawsuit, but at the end of July it announced it was pulling the plug. It paid a $1 billion breakup fee to Willis and quickly announced a restructuring.
The company reorganized along four business lines — commercial risk solutions, health solutions, reinsurance solutions and wealth solutions — and five geographic regions.
Aon had spent several years building itself into an integrated organization offering a full range of services to clients, rather than a collection of business units, said Eric Andersen, president of Aon. As part of this effort, the bonuses of the top 250 managers were tied to the success of Aon as a whole.
“We went through the Willis Towers Watson integration process with an eye toward moving the combined firm to that model, and so when the deal didn’t happen, we essentially kept going with the play,” Mr. Andersen said.
Aon moved quickly after the deal fell through, announcing a cost-cutting program, which improved its profit margin, and share buybacks, said Mark Dwelle, director, insurance equity research, at RBC Capital Markets LLC in Richmond, Virginia.
“They still ended up with a very strong year, even though it wasn’t necessarily the year that they would have planned for,” he said.
Aon reported $12.19 billion in brokerage revenue last year, a 10.4% increase over 2020, and remains No. 2 in Business Insurance’s ranking of the world’s largest brokers.
Aon has largely recovered from the failure of the Willis deal, said Meyer Shields, Baltimore-based managing director at Keefe, Bruyette & Woods Inc.
“Clearly it was a big deal, but nothing that would really throw them off their game,” he said. “In recent quarters’ results we’ve seen Aon basically produce the sort of results that Aon’s always produced.”
In the first quarter of 2022, Aon reported 8% organic revenue growth and said it expects to report mid-single-digit or higher growth for the year.
Unlike several of its rivals that added staff, Aon’s employee numbers were static in 2021.
“There’s been a little bit of internal turnover that they’re contending with, but I think overall it’s manageable,” Mr. Shields said.
Aon does a lot of entry-level hiring and developing of staff, and its hiring tends to focus on areas where the company is looking to expand, such as intellectual property and other emerging risks, Mr. Andersen said. “Other than that, it’s really been a promote from within strategy,” he said.
Mr. Andersen noted the stiff competition for staff in the brokerage sector.
“We are competing for our people,” he said. “We like our people and we’re fighting hard to keep our people. We do that by paying them well and providing them with career opportunities that they can’t get anywhere else.”
The failure of the Willis deal will likely deter Aon from attempting larger acquisitions for the foreseeable future, Mr. Shields said.
“I think there will always be interest in identifying bolt-on deals, but I don't think they want to involve the regulators the same way that happened in the Willis deal,” he said.
Earlier this year, Aon announced the purchase of Tyche, an actuarial software program that offers capital modeling to reinsurers, from London-based RPC Tyche.
“The plan is to expand it and move it toward not just insurance company clients but corporate clients as well,” Mr. Andersen said.
Aon will continue to look for acquisitions to expand its capabilities, Mr. Andersen said.
Meanwhile, last month it agreed to sell its e-discovery practice to legal and cyber services provider Technology Concepts & Design Inc. It acquired e-discovery capabilities through its acquisition of Stroz Friedberg Inc. in 2016.
“We look at our portfolio all the time and there are some things that fit better with other owners,” Mr. Andersen said.
2021 brokerage revenue: $19.86B
Percent increase: 15%