We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Aon Plc's (AON) Q2 Earnings and Revenues Miss Estimates
Read MoreHide Full Article
Aon plc’s (AON - Free Report) second-quarter 2016 operating earnings of $1.39 per share narrowly missed the Zacks Consensus Estimate of $1.40. Earnings, however, increased 6% from the year-ago quarter.
The year-over-year improvement in earnings can be attributed to a decline in total operating expenses.
Aon’s total revenue dipped 1% year over year to $2,766 million due to a 2% unfavorable impact of foreign currency translation and a 2% decrease in commissions and fees. However, a 3% organic revenue growth limited the downside. Revenues missed the Zacks Consensus Estimate of $2,845 million.
Operating expenses decreased 7% year over year to $2.4 billion due to lower expenses related to certain legacy litigation settlements in the prior-year quarter, decrease in expenses related to net divestitures , favorable impact from foreign currency translation, and a decrease in intangible asset amortization.
Segmental Update
Risk Solutions: Total revenue grew 1% year over year to $1.8 billion due to 3% growth in commissions and fees, partially offset by a 2% unfavorable impact from foreign currency translation.
Adjusted operating income increased 3% year over year to $459 million, while adjusted operating margin increased 70 basis points (bps) to 24.9% during the quarter.
Organic revenues at the Retail sub-segment increased 4% year over year on the back of 2% higher organic revenues from the Americas business and 6% growth in the International business. Growth in the Americas business was mainly supported by record new business generation in the U.S. Retail, sturdy improvement in Affinity, and modest growth in Latin America. International growth was largely driven by growth across Europe, Asia and the Pacific through new business generation and better management of the renewal book portfolio.
Organic revenues at the Reinsurance sub-segment were up 1% mainly due to growth in facultative placements, decent demand in treaty placements and new business generation. However, unfavorable impact of international market partially limited the upside.
HR Solutions: Total revenue of $931 million declined 5% year over year owing to lower commissions and fees and a 1% unfavorable impact from foreign currency translation, partially offset by 1% organic growth in commissions and fees.
Adjusted operating income decreased 8% to $119 million. Adjusted operating margin was 12.8%, down 40 bps year over year, due to an increase in expense from initiatives to boost future growth and divestitures of certain businesses.
Organic revenues at Consulting Services increased 1% year over year. This was primarily owing to solid growth in investment consulting as well in core pension solutions.
Organic revenues at Outsourcing remained unchanged, largely due to the sustained increase in HR BPO for cloud-based solutions. The upside was partially limited by a modest decline in benefits administration and project-related work.
Financial Position
As of Jun 30, 2016, cash and cash equivalents of Aon were $438 million, up from $384 million as of Dec 31, 2015. Total assets of Aon as of Jun 30, 2016 were $26.7 million, down from $26.9 billion at year-end 2015.
Long-term debt was $5.9 billion as of Jun 30, 2016, up from $5.1 billion as of Dec 31, 2015.
Cash flow from operations as of Jun 30, 2016 increased 32% to $764 million and free cash flow grew 51% in the first six months of 2016.
The company expects free cash flow of $2.4 billion in 2017.
Dividend and Share Repurchase Update
During the first six months of 2016, Aon paid $169 million of cash dividend.
As of Jun 30, 2016, Aon had $3.3 billion of remaining under its share repurchase program.
The bottom line at Brown & Brown Inc. (BRO - Free Report) and Arthur J. Gallagher & Co. (AJG - Free Report) beat their respective Zacks Consensus Estimate, while Marsh & McLennan Companies, Inc.’s (MMC - Free Report) earnings were in line with expectations.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Aon Plc's (AON) Q2 Earnings and Revenues Miss Estimates
Aon plc’s (AON - Free Report) second-quarter 2016 operating earnings of $1.39 per share narrowly missed the Zacks Consensus Estimate of $1.40. Earnings, however, increased 6% from the year-ago quarter.
The year-over-year improvement in earnings can be attributed to a decline in total operating expenses.
Aon’s total revenue dipped 1% year over year to $2,766 million due to a 2% unfavorable impact of foreign currency translation and a 2% decrease in commissions and fees. However, a 3% organic revenue growth limited the downside. Revenues missed the Zacks Consensus Estimate of $2,845 million.
Operating expenses decreased 7% year over year to $2.4 billion due to lower expenses related to certain legacy litigation settlements in the prior-year quarter, decrease in expenses related to net divestitures , favorable impact from foreign currency translation, and a decrease in intangible asset amortization.
Segmental Update
Risk Solutions: Total revenue grew 1% year over year to $1.8 billion due to 3% growth in commissions and fees, partially offset by a 2% unfavorable impact from foreign currency translation.
Adjusted operating income increased 3% year over year to $459 million, while adjusted operating margin increased 70 basis points (bps) to 24.9% during the quarter.
Organic revenues at the Retail sub-segment increased 4% year over year on the back of 2% higher organic revenues from the Americas business and 6% growth in the International business. Growth in the Americas business was mainly supported by record new business generation in the U.S. Retail, sturdy improvement in Affinity, and modest growth in Latin America. International growth was largely driven by growth across Europe, Asia and the Pacific through new business generation and better management of the renewal book portfolio.
Organic revenues at the Reinsurance sub-segment were up 1% mainly due to growth in facultative placements, decent demand in treaty placements and new business generation. However, unfavorable impact of international market partially limited the upside.
HR Solutions: Total revenue of $931 million declined 5% year over year owing to lower commissions and fees and a 1% unfavorable impact from foreign currency translation, partially offset by 1% organic growth in commissions and fees.
Adjusted operating income decreased 8% to $119 million. Adjusted operating margin was 12.8%, down 40 bps year over year, due to an increase in expense from initiatives to boost future growth and divestitures of certain businesses.
Organic revenues at Consulting Services increased 1% year over year. This was primarily owing to solid growth in investment consulting as well in core pension solutions.
Organic revenues at Outsourcing remained unchanged, largely due to the sustained increase in HR BPO for cloud-based solutions. The upside was partially limited by a modest decline in benefits administration and project-related work.
Financial Position
As of Jun 30, 2016, cash and cash equivalents of Aon were $438 million, up from $384 million as of Dec 31, 2015. Total assets of Aon as of Jun 30, 2016 were $26.7 million, down from $26.9 billion at year-end 2015.
Long-term debt was $5.9 billion as of Jun 30, 2016, up from $5.1 billion as of Dec 31, 2015.
Cash flow from operations as of Jun 30, 2016 increased 32% to $764 million and free cash flow grew 51% in the first six months of 2016.
The company expects free cash flow of $2.4 billion in 2017.
Dividend and Share Repurchase Update
During the first six months of 2016, Aon paid $169 million of cash dividend.
As of Jun 30, 2016, Aon had $3.3 billion of remaining under its share repurchase program.
AON PLC Price, Consensus and EPS Surprise
AON PLC Price, Consensus and EPS Surprise | AON PLC Quote
Zacks Rank
Aon carries a Zacks Rank # 4 (Sell).
Performance of Other Insurance Brokers
The bottom line at Brown & Brown Inc. (BRO - Free Report) and Arthur J. Gallagher & Co. (AJG - Free Report) beat their respective Zacks Consensus Estimate, while Marsh & McLennan Companies, Inc.’s (MMC - Free Report) earnings were in line with expectations.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report