Aon PLC reported increases in total revenue, organic revenue and profit for the fourth quarter of 2021, but the $1 billion termination fee it paid in the third quarter due to its failed takeover bid of Willis Towers Watson PLC led to lower profits for the year.
In 2022, the brokerage expects to see spending rise as salaries rise and travel and entertainment costs rise two years into the COVID-19 pandemic, but it expects see financial benefits if interest rates rise.
Aon reported fourth quarter revenue of $3.08 billion, an increase of 3.9% over the same period a year earlier. On an organic basis, which excludes the effect of mergers and acquisitions and exchange rate fluctuations, revenues increased by 10%.
Competing brokers also saw strong organic revenue growth for the fourth quarter as insurance rates continued to rise in 2021.
Revenue from Aon’s core insurance brokerage business increased 11% to $1.85 billion, up 12% organically; reinsurance revenue increased 12.7% to $222 million, up 13% on an organic basis; healthcare consulting revenue fell 13.3% to $651 million, but rose 7% on an organic basis, reflecting the sale of its retiree healthcare exchange business; and retirement and investment income increased 1.9% to $364 million, up 1% on an organic basis.
Net profit rose 63.2% to $873 million as operating expenses fell and revenue increased due to the sale of the Pensioners’ Health Exchange, which was originally agreed as part of of its failed effort to buy rival Willis Towers Watson.
For the full year, Aon reported revenue of $12.19 billion, up 10.2%, and net profit of $1.31 billion, down 35, 2%. Aon paid a $1 billion termination fee in the third quarter related to the scuttled Willis deal, which collapsed in July due to antitrust concerns.
Looking ahead, Aon expects to see increased payroll spending this year and will likely benefit from rising interest rates, the brokerage’s chief financial officer said on a conference call on Friday. with analysts.
Aon expects to increase its profit margin this year “and as we look to 2022, we also expect investments in colleagues, a continued recovery in (travel and entertainment costs) and investments in long-term growth. “said Christa Davies, chief financial officer of the brokerage. officer.
But Aon expects wage inflation to be offset by efficiency gains, she said.
If interest rates go up, it will be “very positive” for Aon as its fiduciary investment income will increase by $60 million every time there is a 100 basis point increase in short-term interest rates. and the company’s pension liabilities will be reduced, among other things, Ms Davies said.