Aon SWOT & PESTLE Analysis

Strength

1. Strong growth in Reinsurance solutions: Reinsurance solutions is becoming the strength of the business and it achieved the organic growth of 7% in Q3 2017 ($355 million) as compared to 0% in the prior year(2016) quarter Q3 ($329 million) which is tremendous. There has been growth across every major product line, but Treaty placements has been the strength driven by the record growth in new business generation with inclusion of many new clients to Aon which has increased its market share significantly.

2. Double-digit growth in earnings per share: A share price analysis of Aon shows that earnings per share grew from $1.09 to $1.29 showing a strong growth rate of 18% in 2017 Q3 compared to 2016 Q3 which has been a highlight considering the industry wide and overall growth. This double-digit growth is driven by strong operational improvement, effective capital management and strong revenue growth. Also, with the firm being valued based on free cash flow, it has made a substantial progress since introducing cash flow as key metric in 2010. It recorded a free cash flow of $2.1 billion in 2016 with its disciplined capital management approach focused on returning maximum returns on capital invested. Since 2010, Aon has increased its free cash flow margin by nearly 1,000 basis points to 18.1% in 2016.

3. Strong growth in Data and Analytics service: The investments in high growth areas like Data and Analytics has started to strengthen and improve Aon’s long term growth profile with third quarter result of 2017 showing organic revenue growth of 3% with Affinity business being the strength, showing highest growth in U.S.

Weakness

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Opportunity

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Threat

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Political

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Economic

1. Insurance Relevance to the Economy: Globally, the insurance premium has decreased over the decade and as of today it stands to being 2.0 percent of the GDP which was 2.2 percent a decade ago- The reason for this being the significant drop among the countries in Europe. However, countries like India, China and Latin America are some of the bright spots and show a growth. The chart below compares the property-casualty premium and GDP for the top 50 countries over the last 10 years.

2. Need for insurance in Emerging Economies: Emerging Economies like India which are undergoing the Economic transition there is tremendous potential for growth because there is need for insurance of health, property etc which is still at a very nascent stage. For example, around 40 million people in India suffer financial crises due to health issues. Aon can capitalize on this opportunity by creating products for these markets.

3. Reduction in interest rates leading to decline in premiums: The interest rates are decreasing continuously in some of the economies where Aon is operating leading to recution in interest oin the products that are offered which in turn has led to lower premium growth. Also, some of the major economies are experiencing slowdown which has resulted in lower growth for products other than life and health insurance.

Social

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Technological

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Legal

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Environmental

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