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Aon (AON) Q2 Earnings Beat Estimates on Higher Revenues

Zacks Equity Research
Updated

Aon plc’s AON second-quarter operating earnings of $1.71 per share beat the Zacks Consensus Estimate of $1.63 and grew 31% year over year. Rise in revenues primarily supported the results.

The company posted revenues of $2.6 billion, which came in above the Zacks Consensus Estimate of $2.5 billion and increased 10% year over year. The increase was supported by 5% organic revenue growth, a 3% rise related to acquisitions and net of divestitures and 2% favorable impact from foreign currency translation. This was partly offset by 2% reduction from new revenue recognition standard.

Total operating expenses increased 3% to $2.6 billion, led by higher expenses on compensation and benefits, information technology and other general expenses.

Aon plc Price, Consensus and EPS Surprise

Aon plc Price, Consensus and EPS Surprise | Aon plc Quote

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Adjusted operating margin expanded 130 basis points to 22%.

The adjusted effective tax rate on a comparable basis for the second quarter of 2018 was 14.7% compared with 16.1% in the prior year quarter. The decrease was primarily driven by changes in geographical distribution of income and various impacts of U.S. Tax Reform.

Organic Revenue Drivers     

Commercial Risk Solutions: Organic revenues increased 6% year over year to $1.17 billion on the back of strong growth in the Americas and EMEA regions, driven by double-digit new business generation and strong management of the renewal book portfolio.

Reinsurance Solutions: Organic revenues increased 8% year over year to $380 million. The rise was driven by solid growth across all the major product lines, especially in treaty placements driven by new business generation and growth in facultative placements partly offset by declines in capital markets transactions.

Retirement Solutions: Organic revenues increased 3% year over year to $431 million driven by solid growth in core actuarial retirement, as well as solid growth in talent practice for assessment services and in rewards practice for data-driven services.

Health Solutions: Organic revenues were up 7% year over year to $309 million led by strong results in the U.S. and double-digit growth in both Latin America and Asia.

Data & Analytic Services: Organic revenues decreased 4% year over year to $277 million, led by the unfavorable impacts from certain client contracts partly offset by strong growth across Affinity, particularly in the United States.

Financial Position Improves

Adjusted free cash flow increased 16% to $580 million in the first six months ended Jun 30, 2018

Total current assets increased to $14.86 billion, up 8.6% from the Dec 31, 2018 level.

Share Repurchase and Dividend Update

The company repurchased 2.8 million shares for approximately $400 million in the quarter. The company announced an 11% increase in quarterly dividend.

Zacks Rank and Performance of Other Insurers

Aon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other players from the insurance industry that have reported first-quarter earnings till now, the bottom line of Brown & Brown, Inc. BRO, MGIC Investment Corporation MTG and The Progressive Corporation PGR beat the respective Zacks Consensus Estimate.

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Aon plc (AON) : Free Stock Analysis Report
 
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The Progressive Corporation (PGR) : Free Stock Analysis Report
 
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