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Aon plc's (AON) Q3 Earnings Beat Estimates, Improve Y/Y

Zacks Equity Research

Aon plc’s AON third-quarter 2019 operating earnings of $1.45 per share beat the Zacks Consensus Estimate of $1.43 by 1.4% and also grew 10.7% year over year owing to higher revenues.

Total revenues inched up 1% to $2.4 billion including 5% organic revenue growth. However, 2% unfavorable impact from foreign currency translation and 2% adverse impact from divestitures, net of acquisitions, remitted this upside.

Organic revenue growth was mainly driven by solid management of the renewal book globally in Commercial Risk Solutions and a strong new business generation across the portfolio. However, the top line missed the Zacks Consensus Estimate by 3.7%.

Operating margin increased to 15.1% while and operating margin, adjusted for certain items, expanded 350 basis points to 22%.

Total operating expenses dipped 3% to $2 billion on the back of a favorable foreign currency translation, decline in restricting costs, incremental savings in relation with restructuring and other operational improvement initiatives as well as a decrease in divestiture-related expenses, net of acquisitions.

The adjusted effective tax rate on a comparable basis for the third quarter of 2019 was 21.4% compared with 12.8% in the prior-year quarter on the back of changes in geographical distribution of income and a net unfavorable impact from discrete items.

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 Drivers   
Commercial Risk Solutions: Organic revenues increased 7%, led by strong growth in every major geography, reflecting double-digit growth in the United States, Canada and Latin America. The segment witnessed its total revenues rise 3% year over year to $1.1 billion.

Reinsurance Solutions: Organic revenues rose 5%, driven by solid growth in facultative placements as well as a consistent net new business generation across the world in treaty. Also, total revenues for the segment improved 4% year over year.

Retirement Solutions: Organic revenues improved 3% year over year, attributable to solid growth in all major business, especially in core retirement on the back higher demand for retirement consulting in the United States as well as better actuarial services volume in the EMEA region.

Health Solutions: Organic revenues were up 2% year over year, backed by strong global growth in health and benefits brokerage.

Data & Analytic Services: Organic revenues for this segment grew 3% year over year owing to global growth in Affinity business as well as improved growth in Aon Client Treaty.

Solid Financial Position

For the first nine months of 2019, adjusted free cash flow increased 25% to $996 million.

Total current assets stood at $15.3 billion, up 6.6% from the Dec 31, 2018 level.

Share Repurchase and Dividend Update

In the quarter under consideration, the company repurchased 1.8 million Class A Ordinary shares for nearly $350 million.

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 having reported third-quarter earnings so far, the bottom-line results of The Progressive Corporation PGR, MGIC Investment Corporation MTG and RLI Corp. RLI outpaced the respective Zacks Consensus Estimate.   

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