Aon reports continued capital markets transaction growth in Q2

Insurance and reinsurance broker Aon has reported continued growth in terms of insurance-linked securities (ILS), catastrophe bonds and other capital markets related reinsurance transactions for the second-quarter, while overall reinsurance broking revenues grew 12%.

In reporting its results today, Aon said that its reinsurance broking and structuring activities related to the capital markets expanded again in Q2 of 2019, following a strong first-quarter when it said these activities increased by double-digits year-on-year.

Aon has reported strong organic growth of its reinsurance broking activities in the second-quarter, as renewal and treaty placement business, as well as strong capital markets activity, all contributed to 12% organic revenue growth for the reinsurance business.

In total Aon’s business recorded a 2% increase in revenues for the quarter to $2.6 billion, with organic revenue growth of 6%.

“Our second quarter results reflect continued progress and momentum from our Aon United initiatives, highlighted by strong organic revenue growth of 6% for the fourth consecutive quarter and substantial operating margin improvement of 240 basis points,” commented Greg Case, Chief Executive Officer. “The steps we are taking to lead Aon United in response to increasing client demand combined with significant investment in content and capability, is not only amplifying our ability to serve clients, but also our ability to deliver improved operational and financial performance that we believe will unlock significant shareholder value creation over the long- term.”

In Aon’s Reinsurance Solutions division organic revenue growth increased by 12% compared to the previous year, the company said.

This was driven by strong net new business generation globally in treaty reinsurance, as well as strong growth globally in facultative placements and capital markets transactions, Aon further explained.

In addition, Aon said that market impact also had a modestly positive effect on its reinsurance results in the second quarter.

Once again in the most recent quarter we actually only have a couple of catastrophe bonds listed in our Deal Directory for which Aon acted as structurer or bookrunner, but numerous mortgage insurance-linked securities (ILS) deals that the company could have played a part in.

It’s also important to remember though that the Aon Insurance Managers business is also actively involved in many capital markets transactions, as well as the Aon Securities team, so the brokers involvement in cat bonds and other ILS is often not as clear as it may seem.

In addition, Aon has likely benefited from collateralised reinsurance placements and private ILS transactions during the period, with a significant amount of deal-flow likely to have occurred around the June renewals of Floridian property catastrophe business in particular.

The capital markets and ILS business is profitable for brokers like Aon, hence growing this has become a key target for the firm and its competitors.

The capital markets business is also expected to drive revenues for Aon’s reinsurance business in the second-half of the year, when it expects this more transactional in nature work to continue.

Read more on Aon’s Q2 2019 results over at our sister publication Reinsurance News.