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Aon's (AON) Earnings Surpass Estimates in Q4, Surge Y/Y

·4 min read

Aon plc AON reported fourth-quarter 2021 operating earnings of $3.71 per share, which outpaced the Zacks Consensus Estimate by 9.1%. The bottom line climbed 42% year over year.

Results benefited from higher revenues and solid contributions from its Reinsurance Solutions, Commercial Risk Solutions, Health Solutions and Wealth Solutions segments.

Total revenues improved 4% year over year to $3.1 billion, which comprised organic revenue growth of 10%, partially offset by a 5% unfavorable impact from divestitures and a 1% unfavorable impact from foreign currency translation. This upside can primarily be attributed to improved performances at Reinsurance Solutions, Commercial Risk Solutions, Health Solutions and Wealth Solutions. The top line missed the consensus mark by 3.6%.

Total operating expenses dropped 6% year over year to $2.1 billion owing to a positive impact resulting from repatterning discretionary expenses, reducing divestitures-related costs, lowering transaction costs and gaining from a favorable foreign currency translation.

Adjusted operating margin expanded 590 bps to 32.8%.

Aon plc Price, Consensus and EPS Surprise

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 12% year over year on the back of new business generation, robust retention and management of the renewal book portfolio.

Strength in retail brokerage reflects double-digit growth in the United States, Latin America, Asia and EMEA. Results also reflected solid growth in core P&C along with double-digit growth in transaction solutions and project-related work. Other factors contributing to the upside are global growth in the affinity business in consumer and business solutions.

The segment reported a year-over-year rise of 11% in total revenues to $1.8 billion.

Reinsurance Solutions: Organic revenues improved 13% year over year, courtesy of double-digit growth in treaty owing to a continued new business generation, globally, as well as strong retention, and a hike in facultative placements and capital market transactions. Total revenues climbed 13% year over year to $222 million.

Health Solutions: Organic revenues improved 7% year over year, driven by growth in core health and benefits brokerage owing to solid retention and management of the renewal book portfolio. Other factors contributing to the upside include growth in human capital on the back of rewards and assessments solutions.Total revenues of the segment decreased 13% year over year to $651 million.

Wealth Solutions: Organic revenues improved 1% year over year, driven by strong growth in investment, consisting of double-digit growth in delegated investment management. Total revenues of the segment climbed 2% year over year to $364 million.

Financial Position

AON exited the fourth quarter with cash and cash equivalents of $544 million, which decreased 38.5% from the level at 2020 end. As of Dec 31, 2021, Aon had total assets worth $31.9 billion, down 0.6% from the level on Dec 31, 2020.

Cash flow from operations was down 22% year over year to $2.1 billion in 2021. Free cash flow decreased 23% year over year to $2 billion for 2021.

As of Dec 31, 2021, long-term debt was $8.2 billion, which increased 13% from the level at 2020 end.

Share Repurchase Update

AON bought back 6.7 million Class A Ordinary shares for around $2 billion in the quarter under review. It had $1.7 billion of authorization remaining under its share repurchase program as of Dec 31, 2021.

2021 Update

Total revenues in 2021 rose 10% year over year to $12.2 billion. This upside can be attributed to a 2% favorable impact from foreign currency translation along with 9% organic revenue growth. Net income for AON plunged 34% year over year to $5.55 per share.

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

Of the insurance brokers that have reported fourth-quarter results so far, the bottom-line results of Brown & Brown, Inc. BRO, Arthur J. Gallagher & Co. AJG and Marsh & McLennan Companies, Inc. MMC beat the respective Zacks Consensus Estimate.


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