Aon

In a study published in a high-brow industry journal, scientists at Emory University and Baylor College of Medicine set out to explain how people responded to the unexpected. It turns out that pleasure centres in the brain do not react equally. They react more strongly when any such pleasure is unexpected. That may be true for a sugary bonbon, but when it comes to financial results, investors do not typically like surprises. More so in a pandemic ravaged economy. Which is why recent results from Aon, the insurance broker, caused a purr of approval. Adjusted EPS $1.96. The crowd was expecting $1.93. Margins came in a bit better. This on a top line that barely budged. Aon is one of the world’s largest insurance brokers, with big operations in reinsurance, investment and retirement consulting. In a world of pandemics and climate change, and with cyber criminals potentially behind every innocuous two-for-one meal deal email from a favourite local haunt, many businesses are dealing with a very long tail of risks that threaten to hobble their operations. Aon, along with the likes of Marsh and McLennan, help iron out the linen, reduce volatility, and provide solutions for client needs. Marsh too recently ruffled the earnings tape. The result much the same. Rock solid. For money managers, stocks like Aon and Marsh offer a backbone to a portfolio; stocks that will calmly weather recessions and court an appropriate multiple. Quality growth, but steady growth and, importantly, quality growth without the gaudy multiple. Aon, too, is in the midst of the sector’s biggest ever deal, an all-share mash up with Willis Towers Watson. A deal that combines the number two and three in the market. A deal, according to Aon CEO Greg Case, that will make the company stronger in particular regions, and in market segments such as small businesses. There are clearly risks to any big-ticket integration, but with the deal accretive, and the business model proven in what could be the worst economic shemozzle since the Great Depression, the market may start to look at the insurance brokers and decide to pay a bit more than it has in the past. Time will tell.