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Aon's (AON) Earnings Surpass Estimates in Q2, Improve Y/Y

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Aon plc  (AON - Free Report) reported second-quarter 2021 operating earnings of $2.29 per share, which outpaced the Zacks Consensus Estimate by 27.2%. Moreover, the bottom line climbed 16.8% year over year.

Results benefited from higher revenues and solid contributions from its Reinsurance Solutions, Retirement Solutions, Data & Analytic Services, Health Solutions and Commercial Risk Solutions segments.

Total revenues improved 16% year over year to $2.9 billion, which comprised organic revenue growth of 11% and a 4% favorable impact from forex translation and a 1% positive impact from buyouts, divestitures and other. This upside can primarily be attributed to improved performances at Reinsurance Solutions, Retirement Solutions, Health Solutions, Data & Analytic Services and Commercial Risk Solutions. Moreover, the top line outpaced the consensus mark by 9.2%.

Operating margin declined 50 basis points (bps) to 23.3% while operating margin, adjusted for certain items, contracted 100 bps to 25.8%.

Total operating expenses in the second quarter rose 16% year over year to $2.2 billion due to the negative impact from the repatterning of expenses, an unfavorable impact from forex translation, hike in expenses related to organic revenue growth and an increase in transaction costs associated with the Willis Towers Watson deal.

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 14% year over year on the back of new business generation, robust retention and management of the renewal book portfolio resulting in double-digit growth in the United States, Asia, EMEA and Latin America. Results pertaining to the United States also reflect robust growth in more discretionary parts of the business, etc. The segment reported a year-over-year rise of 20% in total revenues to $1.34 billion.

Reinsurance Solutions:  Organic revenues improved 9% year over year, courtesy of growth across treaty resulting from higher facultative payments, double-digit growth in capital market transactions and a consistent net new business generation. Moreover, total revenues for the segment climbed 12% year over year to $500 million.

Retirement Solutions:  Organic revenues rose 5% year over year. This upside can be attributed to strong growth in Human Capital and a hike in the Retirement business. Results were aided by better utilization rates. Total revenues at the segment also rose 12% year over year.

Health Solutions:  Organic revenues grew 14% year over year. The upside came on the back of growth in the more discretionary portions, led by an increase in project-related work as well as strength in voluntary benefits. Revenues from this segment also advanced 19% year over year to $307 million.

Data & Analytic Services:  Organic revenues rose 5% year over year on the back of global growth in the affinity business in consumer and business solutions along with double-digit growth generated through the company’s CoverWallet digital platform. Revenues increased 7% year over year to $294 million.

Financial Position

The company exited the second quarter with cash and cash equivalents of $1 billion, which increased 23.4% from the level at 2020 end. As of Jun 30, 2021, Aon had total assets worth $34.6 billion, up 7.7% from the level on Dec 31, 20120.

Cash flow from operations was up 10% year over year to $1.34 billion.
As of Jun 30, 2021, long-term debt stands at $7.2 billion, which dipped 0.1% from the level at 2020 end.

Share Repurchase Update

The company bought back 1.1 million Class A Ordinary shares for around $240 million in the quarter under review. Management also announced an 11% hike in the quarterly cash dividend.

Zacks Rank

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

Performance of Other Brokers

Among other insurance industry players, which have reported second-quarter earnings so far, the bottom-line results of The Progressive Corporation (PGR - Free Report) , RLI Corp. (RLI - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) beat the respective Zacks Consensus Estimate.