Big brokers report organic growth in 2014 despite headwinds

Aon, the world's largest insurance broker, posted a 26% increase in net income for 2014 at $1.4bn, while its revenue grew 2% to $12bn. The group's insurance and reinsurance broking business posted commissions and fees of $7.81bn, up 2% organically for the full year. "Our results reflect a strong finish to the year despite foreign currency headwinds," said Greg Case, President and Chief Executive Officer (CEO) of Aon. "We delivered continued growth and operational improvement, making significant investments in our client-serving capabilities across the firm, as well as returning a record $2.5bn of capital to shareholders," he told analysts. Marsh & McLennan Companies (MMC) group, the second largest global broker when measured by broking revenue, saw its net income rise 8% to $1.47bn in 2014, while revenue was almost 6% higher at $12.95bn in 2014. The company's Risk Services division, which includes the insurance business of Marsh and the reinsurance broking arm of Guy Carpenter, reported a 5% increase in revenue to $6.93bn and a 6% increase in earnings to $1.51bn.hide"Another year of outstanding performance in 2014, capped by a strong fourth quarter," Dan Glaser, President and CEO of MMC, told analysts last week. Margins of 21% in the fourth quarter were the highest since 2003, he noted. Bucking this trend, the world's third largest broker Willis reported slightly lower net income in 2014, down almost 1% to $362m as expenses grew faster than revenues. However, like its larger peers, Willis reported strong organic growth for the full year and fourth quarter. Commissions and fees were up by almost 4% in 2014 to $3.77bn and 3% higher in the fourth quarter at $939m. Both Aon and Marsh's good organic growth accelerated in the fourth quarter. Growth was largely down to improved conditions in the US retail broking market and emerging markets. It was achieved despite pressure on rates and difficult economic conditions in Europe. Overall, Aon posted organic revenue growth of 6% in the fourth quarter, its strongest quarter in more than a decade. "For the full year, organic revenue growth was 3% overall, reflecting solid growth [in HR and retail broking] despite pricing pressure on reinsurance business and overall economic uncertainty in Europe," said Mr Case. Aon reported 2% organic growth in its insurance broking business, Aon Risk Solutions, with 3% growth in the fourth quarter. The increase was down to strong growth - 7% in the fourth quarter and 4% for the full year - in the Americas, said Mr Case. International business, however, was affected by "modestly negative pricing" and "fragile" market conditions in Europe. Despite strong growth in Asia, international revenue at Aon was flat in the fourth quarter and 2% higher for the full year 2014. "The results in the fourth quarter were offset by a modest decline in continental Europe," Mr Case told analysts. "For the full year, Europe delivered modest growth, driven by new business in many countries - an excellent outcome against market headwinds and economic uncertainty," he added. Aon's reinsurance business under the Aon Benfield brand saw revenues decline 1% in 2014 to $1.47bn, as excess capacity continued to put pressure on pricing, said Mr Case. In contrast, MMC's Guy Carpenter grew its reinsurance broking business by 2% to $1.15bn. MMC saw its total revenue increase 5% for the full year in 2014. Revenues at the group's insurance broking arm Marsh were up 4% to $1.5bn. Marsh's revenues grew in all major territories. In the US, revenues increased 3% to $2.68bn, in EMEA 3% to $1.9bn, in Asia 7% to $693m and in Latin America 10% to $413m. The New York-based group also ended 2014 on a positive note. It reported a positive 6% growth in revenue during the fourth quarter, its strongest quarter in the year, noted Mr Glaser. Willis did not enjoy the same level of revenue growth in the fourth quarter - especially in the US, which helped drive results at Aon and Marsh. Organic commissions and fees at Willis North America declined 0.5% in the fourth quarter of 2014, although they grew 2.8% to $1.37bn for the full year. Willis's international business fared better, posting organic growth of 11% for the fourth quarter of 2014 and 9% to $1.02bn for the full year. The broker enjoyed growth in all regions outside the US in Q4, including Europe where revenues grew by double digits. Willis Global, which includes Willis Re and Willis Insurance UK, posted organic commission and fees of $1.39bn for the full year, 1.4% higher than in 2013. Record new business helped revenue growth at both Marsh and Aon. Marsh reported its highest ever fourth quarter new business figures, which exceeded $300m. New business was most prevalent in the US, UK, Canada, Peru and Africa, said Mr Glazer. According to Mr Case, new business generation at Aon was strong at $360m in the fourth quarter, reflecting record new business generation in US retail and double-digit new business growth across many countries in Asia Pacific and other emerging markets. Client retention rates were also positive at more than 90%, highlighting strong client satisfaction in retail business, he said. Both Aon and MMC suggested that last year's good results were partly the result of measures taken in previous years to grow revenue and increase margins. Mr Case also drew attention to Aon's investment in client capabilities, productivity, creativity and client retention. He noted that Aon had rolled out its "unified approach" to clients across the business as well as invested in its "client promise". According to MMC's CEO, 2014's results are not just about improved financial performance, but are a reflection of MMC's investment in talent, focus on enhanced value for clients and its efficiency. The company has invested some $5bn in growth since 2009, including $1.9bn in capital expenditure and some 85 acquisitions - including 22 in 2014 alone that saw the broker expand in Chile, Canada, Australia, Panama and South Africa, he added.

Big brokers report organic growth in 2014 despite headwinds

Want to read this article?

Read Next

Over 50% of exporters considering moving supply chains due to geopolitical risk

New carbon capture and storage insurance product from Aon

Nordics come top in global cyber security poll

EU strengthens CO2 emission standards for heavy-duty vehicles

Italian credit insurer opens office in Singapore

Over 50% of exporters considering moving supply chains due to geopolitical risk

New carbon capture and storage insurance product from Aon

Nordics come top in global cyber security poll

EU strengthens CO2 emission standards for heavy-duty vehicles

Italian credit insurer opens office in Singapore

Want to read this article?

Read Next

Over 50% of exporters considering moving supply chains due to geopolitical risk

New carbon capture and storage insurance product from Aon

Nordics come top in global cyber security poll

EU strengthens CO2 emission standards for heavy-duty vehicles

Italian credit insurer opens office in Singapore

Related Articles