Market remains in “transition” in terms of pricing: Aon president | Insurance Business America Insurance News Market remains in “transition” in terms of pricing: Aon president
Brokers can seize “big opportunities” during this period
Insurance News
By Thea Snape
Aon President Eric Andersen expects global insurance markets to remain in a period of transition for the remainder of 2024, which he said presents a “great opportunity” for clients to change their policy structures and reevaluate their current programs.
During an earnings conference call discussing Aon’s second-quarter 2024 results, Andersen noted that while prices across the market have remained flat, there are clearer rate changes within “mini-markets” such as property, casualty and specialty insurance.
“We’re seeing very favorable pricing for buyers in areas like cyber and D&O, but that pricing is easing up,” Andersen said. “It’s not as steep as it was before.”
He said property prices would remain stable on average, but lower-risk properties were likely to see prices fall, while higher-risk properties could see prices rise slightly.
Property/casualty insurance has been the area under the most scrutiny, with questions about continued pricing adjustments and the need for reserves. Andersen said it expects further price increases but that customer behavior will continue to drive change in the market.
“As [clients] “We take potential savings in certain areas and reinvest premiums elsewhere,” Andersen told analysts.
“Over the last five years, when the market was tough, insurers cut policies, increased reserves and narrowed coverage. Now, in a market like this, insurers can reconsider those decisions.”
What’s next for the NFP megadeal?
One of the highlights for global brokerages during the quarter was the integration of NFP, which Aon acquired for $13.4 billion in December. The deal is expected to boost Aon’s global market share of integrated brokerage businesses to 8.8% from 7.6%, making it second only to Marsh McLennan.
CEO Greg Case said Aon is “doubling down” on building capabilities through talent acquisition, new tools and analytics as part of its three-year “3×3” strategy. He highlighted Aon’s $1 billion investment in business services to attract and develop top talent and improve client experience.
“We have to operate as a global company, and we’re going to provide integrated services based on our customers’ needs,” Case said.
“We’re doubling down on our capabilities, and in doing so it creates opportunity. And that’s why NFP was so attractive to us. We can now offer this capability to not only large companies, but also mid-market companies.”
On M&A, Aon plans to focus on mid-market acquisitions and expects to maintain high credit ratios over the next 12 to 18 months.
Net income for the first half of the year was US$1.63 billion, up from US$1.65 billion in the first half of 2023. Adjusted net income per share increased 6% to US$2.93 due to the unfavorable impact of foreign exchange rates.
However, total revenue for the three months ending June 30, 2024 increased 18% to US$3.8 billion, mainly due to the acquisition of NFPs. Organic revenue growth of 6% was driven by strong customer retention and new business generation.
Total operating expenses increased 33% year over year to US$3.1 billion in the second quarter of 2024 due to the acquisition of NFP. Restructuring changes and long-term growth investments also contributed to the increase, partially offset by savings from restructuring programs and favorable foreign exchange impacts.
Other highlights for Aon in the second quarter included the launch of a public-private partnership initiative in Ukraine and the repurchase of 800,000 shares for US$250 million.
Segment revenue growth was revealed as follows:
Commercial Risk Solutions: Up 14%, with 6% organic growth driven by strong client retention and net new business. Reinsurance Solutions: Up 5%, with 7% organic growth driven by strong treaties and voluntary placements. Health Solutions: Up 48%, with 6% organic growth driven by strong performance in health and benefits broking. Wealth Solutions: Up 32%, with 9% organic growth driven by advisory demand and market performance.
Have something to say about Aon’s predictions and post-NFP trading plans? Please leave a comment below.
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