Chicago-based Aon Corp. has reported first quarter 2005 net income of $200 million or $0.59 per share, increasing 18% and 16%, respectively, from the first quarter of 2004. Income from continuing operations was $200 million or $0.59 per share compared to $192 million or $0.58 per share a year ago.
Gregory Case, Aon’s president and CEO, noted, “I am encouraged that Aon achieved improved results in the first quarter despite a difficult revenue environment in the insurance brokerage and human resources consulting industries and despite our decision to eliminate contingent commissions last year. During the quarter, we continued our efforts to keep costs under control and to develop new sources of revenue. We are committed to increasing profitability by developing growth opportunities and effectively managing expenses.”
Risk and Insurance Brokerage Services first quarter revenue declined 4% to $1.4 billion, with organic revenue declining 5%. Excluding contingent commissions, organic revenue in the current quarter declined 3%.
Contingent commission revenue was $12 million in the first quarter of 2005, reflecting amounts related to arrangements terminated as of Oct. 1, 2004. Contingent commission revenue was $35 million in the first quarter of 2004. Investment income increased $13 million in the quarter.
Organic revenue in Brokerage-Americas declined 9%, primarily driven by the elimination of contingent commissions and the impact of declining property and casualty pricing. Excluding the impact of contingent commissions, Brokerage-Americas organic revenue declined 5%. Brokerage-International reported a 1% decline in organic revenue, and Reinsurance organic revenue declined 4%.
First quarter 2005 pretax income and margin comparisons were favorably influenced by a 5% reduction in expenses largely reflecting the exit of the claims services business, changes to incentive compensation programs, and continued emphasis on cost control, in particular, reductions in staff. Pretax income was $243 million, unchanged from the prior year, and the pretax margin improved to 17.4% from 16.6% a year ago.
Consulting revenue rose 3% to $309 million during the quarter. Organic revenue declined 1%, reflecting the loss of contingent commissions and a decline in outsourcing revenue. Excluding contingent commissions, organic revenue growth was nil in the current quarter. Contingent commission revenue was negligible in the first quarter of 2005 compared to $4 million in the first quarter of 2004. Organic revenue growth in consulting services was 2%, while outsourcing revenues declined 11%, primarily reflecting the loss of a
Pretax income was $26 million, unchanged from the prior year, and the pretax margin was 8.4% versus 8.6% in 2004.
Insurance underwriting revenue increased 1% to $789 million, with segment organic revenue declining 3% during the quarter. Reported revenue in the quarter included a $12 million increase due to reinsurance program changes for a specialty accident and health (A&H) line.
These changes had no impact on organic revenue growth or pretax income. In addition, strong growth in the sales of a supplemental health product was partially offset by planned reductions in certain programs and the run-off of non-core businesses. The decline in warranty, credit and property and casualty revenue principally reflected the loss of an account within the European credit line of business that had minimal impact on pretax income.
Pretax income rose 28% to $68 million from $53 million last year. The
pretax margin improved to 8.6% from 6.8% for 2004, reflecting improved profitability in both underwriting subsegments and higher investment income.