Marsh & McLennan and Aon Examined: Insurance Brokerages to See Better Operating Performance

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Marsh & McLennan and Aon Examined: Insurance Brokerages to See Better Operating Performance

The Provides Stock Research on Marsh & McLennan Companies Inc. and Aon Plc

New York City, New York -- In the last two years, insurance brokers such as Marsh & McLennan and Aon Plc have seen an improvement in operating performance. The trend is likely to continue for the insurance brokerage industry in 2013. The growth for the insurance brokerage industry going forward is expected to be driven by emerging markets. Emerging markets are expected to drive organic revenue growth at insurance brokers in 2013.

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In a recent conference call with analysts, Gregory C. Case, President and CEO of Aon, said that the company saw strong growth in emerging markets and in many regions across Asia, including double-digit growth in areas such as India, China and Taiwan.

The insurance brokerage industry should also benefit from a slightly improved commercial pricing environment and improving global economic outlook. Improved operating performance should also boost brokers’ profit margins in 2013.

Last week, London-based Aon reported its financial results for the quarter ended December 31, 2012. The company’s net income for the quarter was $305 million, or $0.93 per share, compared to $277 million, or $0.82 per share for the same period in the previous year. AON’s total revenue for the quarter rose 4% to $3.1 billion, with Risk Solutions revenue rising 2% to $2.1 billion. The company’s retail brokerage organic revenue rose 3%. While Americas organic revenue rose 4% in the quarter, International organic revenue rose 2%, driven by robust growth across Asia and emerging markets.

CEO Case noted that the company finished 2012 having made significant investments in GRIP and in healthcare exchanges, taking significant steps to increase its strategic position and financial flexibility with the redomicile to London, delivering record cash flow from operations of $1.4 billion and creating significant value for shareholders through the repurchase of over $1.1 billion of ordinary shares. Case said that looking ahead to 2013 the company has positioned its industry-leading platform for solid long-term growth, improved operational performance, strong free cash flow and effective capital management.

Investors are now focusing on Marsh & McLennan’s fourth quarter results, which will be released on Tuesday, February 12, 2013. In the third quarter of 2012, Marsh & McLennan had reported a 2% increase in its Risk and Insurance Services segment revenue. The segment’s operating income rose an impressive 26% in the third quarter of 2012, reflecting the company’s improved operating performance.

Marsh & McLennan’s third quarter adjusted operating income rose 13% to $213 million.

Consolidated revenue for the third quarter of 2012 rose 1% or 3% on an underlying basis to $2.8 billion. Income from continuing operations stood at $246 million, or $0.43 per share for the third quarter of 2012, compared to $133 million, or $0.23 per share reported for the same period in the previous year.

President and CEO Brian Duperreault said that the company delivered another strong quarter and each of its operating companies continued to generate growth in underlying revenue, which, combined with ongoing expense discipline, produced across-the-board improvement in operating margins and profitability.



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