Aon and Willis suffer but Gallagher is up

2010 is shaping up to be a challenging year for the biggest global brokers, with both Aon and Willis reporting falling profits for the first nine months of the year. However, Arthur J Gallagher has bucked the trend set by its larger rivals.

Aon, the world’s biggest broker, made a net profit of $475m (£296.2m) for the nine months to 30 September 2010, down 13% from the $549m it made in the same period last year. This was despite a 1% increase in revenue to $5.6bn from $5.5bn.

The decline was driven in part by a 34% increase in interest expenses to $117m from $87m and an 89% decline in other income to $3m from £28m. While Aon’s revenues were up overall, its UK book suffered. Commissions, fees and other income from the UK fell 6% in the first nine months of the year to $436m from $464m, and 11% in the third quarter alone to $148m from $167m. The company attributed the UK slump primarily to “weak economic conditions and soft pricing”.

The broker had a better third quarter in 2010 than in the previous year. Net profit was up 20% to $144m from $120m in the third quarter of 2009. Revenues for the quarter were flat at $1.8bn.

The fall in rival broker Willis’s nine-month profit was less marked than Aon’s. It made a profit of $357m for the first nine months of 2010, only 0.6% down on the previous year. Total revenues for the period increased 2.7% to $2.5bn from $2.4bn.

However, Willis had a worse third quarter than Aon – its net income fell 19% to $64m from $78m. This was partly because the broker paid an income tax charge of $10m in the third quarter of 2010 compared with a $29m tax benefit in the same period last year.

Arthur J Gallagher, on the other hand, reported an increase in both nine-month and third-quarter earnings. It made a profit of $119.4m for the first nine months of 2010, up 6.8% on the $111.8m in made the same period last year. Third-quarter profit rose 10.8% to $46.2m from $41.6m.

Gallagher’s nine-month revenues increased 4% to $713.1m from $684.7m. Third-quarter revenues increased 6% to $251.9m from $237m.