Back to top

Image: Bigstock

Aon's (AON) Q1 Earnings Surpass Estimates, Increase Y/Y

Read MoreHide Full Article

Aon plc (AON - Free Report) reported first-quarter 2021 operating earnings of $4.28 per share, which outpaced the Zacks Consensus Estimate by 5.9%. Moreover, the bottom line climbed 16% year over year.

The company’s results benefited from higher revenues and solid contributions from its Reinsurance Solutions, Retirement Solutions Health Solutions and Commercial Risk Solutions segments.

Further, total revenues improved 10% year over year to $3.5 billion, which comprised organic revenue growth of 6%. This upside can primarily be attributed to improved performances at Reinsurance Solutions, Retirement Solutions Health Solutions and Commercial Risk Solutions. Moreover, the top line outpaced the consensus mark by 5.3%.

Operating margin expanded 320 basis points (bps) to 35.3% while operating margin, adjusted for certain items, expanded 170 bps to 37.4%.
Total operating expenses in the first quarter rose 4% year over year to $2.3 billion due to unfavourable impact from forex translation, hike in organic growth expenses, increase in transaction costs related to the buyout of Willis Towers Watson, etc.

Aon plc Price, Consensus and EPS Surprise

Aon plc Price, Consensus and EPS Surprise

Aon plc price-consensus-eps-surprise-chart | Aon plc Quote

Organic Revenue Catalysts

Commercial Risk Solutions:  Organic revenues improved 9% year over year on the back of growth in every major geography, robust retention and management of the renewal book portfolio resulting in double-digit growth in the United States, Asia and Latin America. Results in the United States also reflect robust new business generation along with growth in core P & C, growth in more discretionary parts of business, etc. Notably, the segment reported a year-over-year rise of 12% in total revenues to $1.2 billion.

Reinsurance Solutions:  Organic revenues improved 6% year over year, courtesy of growth across treaty stemming from higher facultative payments and consistent net new business generation. Moreover, total revenues for the segment improved 9% year over year to $922 million.

Retirement Solutions:  Organic revenues rose 5% year over year. The results were attributed to growth in every major business along with strong growth in Human Capital. Rise in core Retirement business also contributed to the upside. Results were positively impact by a rebound from 2020 and better utilization rates. Further, total revenues at the segment rose 9% year over year.

Health Solutions: Organic revenues grew 4% year over year. The upside came on the back of growth in core health and benefits brokerage. Further, revenues from this segment advanced 7% year over year to $536 million.

Data & Analytic Services:  Organic revenues fell 2% year over year due to reduction in travel and events practice, globally. Revenues increased 6% year over year to $351 million.

Financial Position

The company exited the first quarter with cash and cash equivalents of $822 million, which declined 7% from the level at 2020 end. As of Mar 31, 2021, Aon had total assets worth $32.1 billion, up 0.2% from the level on Dec 31, 20120.

Cash flow from operations surged 66% year over year to $561 million.
As of Mar 31, 2021, long-term debt stands at $7.3 billion, which dipped 0.2% from the level at 2020 end.

Share Repurchase Update

The company bought back 0.2 million Class A Ordinary shares for around $50 million in the quarter under review. As of Mar 31, 2021, Aon has shares worth $5.2 billion remaining under its share buyback plan.

Zacks Rank

Aon currently carries a Zacks Rank #4 (Sell).

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

Performance of Other Brokers

Of the insurance industry players that have reported first-quarter results so far, earnings of The Travelers Companies, Inc.  (TRV - Free Report) ,  W.R. Berkley Corporation  (WRB - Free Report) and  Brown & Brown, Inc.  (BRO - Free Report) beat the respective Zacks Consensus Estimate.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>