Aon PLC on Friday reported 7% organic revenue growth in the first quarter, driven by strong results in its reinsurance business, and expects to report mid-digit or higher organic growth for all of 2023.
The U.S. retail insurance broker saw modest growth after double-digit gains in the previous year as its transaction risk business was affected by a tough mergers and acquisitions market, Aon said.
Retail brokerage revenue in EMEA, however, saw double-digit growth.
Aon reported total revenue of $3.87 billion for the first quarter, an increase of 5% compared to the same period last year. It said a 1% favorable impact from management investment income was partially offset by a 3% unfavorable impact from foreign currency headwinds.
Currency effects were mainly driven by a weaker euro against the U.S. dollar as the first quarter is Aon̵7;s seasonally biggest quarter for euro revenue, Christa Davies, the brokerage’s chief financial officer, said on a call with analysts on Friday.
Aon’s core commercial brokerage business reported $1.78 billion in revenue for the quarter, up 6% on an organic basis, which excludes the impact of currency fluctuations and mergers and acquisitions.
Reinsurance broker revenue increased 10% to $1.08 billion and 9% on an organic basis, driven by strong growth in contract business following the January 1 reinsurance renewals. Its health solutions revenue rose 5% and 8% on an organic basis to $671 million; its wealth solutions revenue rose 1% to $350 million but rose 6% on an organic basis.
Aon reported net income of $1.05 billion for the quarter, up 3% year-over-year.
The real estate market remains an increasingly challenging and volatile sector, Aon CEO Greg Case said on the earnings call.
“Market dynamics are causing reinsurers to change risk appetite, requiring primary carriers to accept more risk, which in turn means property placements are more challenging for our clients,” said Mr. Case.
Aon is making greater use of analytics and integrated brokerage options, including traditional risk placements, wholesale trading, managing general agents, facultatives and captives to help clients optimize their total cost of risk, he said.
Total operating expenses in the quarter increased 4% to $2.40 billion as compensation and benefits and business travel increased post-COVID-19.
Investments increased in the first quarter as Aon initiated various technology projects to drive long-term growth and real estate initiatives in line with its “smart work strategy,” Davies said.
Aon’s capital spending is expected to be about $200 million to $225 million this year, and “it’s reasonable to expect going forward in 2024 and beyond that capital spending will grow in line with spending,” she said.