Insurance broker Aon plc says second quarter net income was down 1 percent compared to the prior year's results despite a 3 percent increase in revenue as it continues to absorb restructuring costs.
Net income for 2Q stands at $252 million, off by $2 million from the same period last year. Revenues grew 3 percent to $2.9 billion. For the first six months of this year, net income is up 4 percent to $524 million and revenues increased 3 percent to $5.81 billion.
Impacting the quarter's results was $40 million increase in restructuring expense from the prior year to $53 million. The expense comes from Aon's acquisition of the human resource consulting firm Hewitt in 2010 as it continues to reduce headcount and consolidate locations. The company also incurred a 25 percent decline in investment income and 1 percent unfavorable impact from foreign currency translation.
During a conference call with financial analysts, President and CEO Greg Case and Chief Financial Officer Christa Davies emphasized that the company's expense charges continue to position Aon for future long term growth through savings. Davies says restructuring charges should end by the end of this year.
Aon reports organic growth of 3 percent in the quarter, with positive contributions from risk solutions and human resource consulting. The firm's Americas segment in risk solutions organic growth increased by 5 percent while reinsurance was the weakest at up 2 percent.
Case says insurance brokerage produced solid, but modest results “against market and economic headwinds.” He says reinsurance numbers are weak because abundant capacity is dampening rates and cedents are retaining more risk “driving unfavorable market impact in the quarter.”
The major focus of discussion during the conference call was Aon's Healthcare Exchange. Case says the exchange is poised to see significant new clients in the coming year along with new carriers joining the program.
“It has been a very positive enrollment cycle this time and we have a pipeline that is even more substantial for the coming year,” says Case.
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