Aon’s Q2 Earnings Report: Revenue Growth; Net Income Drop

July 30, 2012

Aon announced mixed results in its second quarter earnings report. While “organic revenue growth” rose 4 percent, contributing to a $2.8 billion total, Aon said “net income attributable to Aon shareholders decreased 5 percent to $246 million, or $0.73 per share, compared to $258 million, or $0.75 per share, for the prior year quarter. 

Other highlights of the report included the following:
– EPS from continuing operations was $0.73 -
– EPS from continuing operations, adjusted for certain items, was $1.02
- Risk Solutions revenue decreased 1 percent to $1.9 billion with organic revenue growth of 4 percent
- Risk Solutions operating margin was 20.2 percent and the operating margin, adjusted for certain items, increased 80 basis points to 21.9 percent
- HR Solutions revenue increased 3 percent to $931 million with organic revenue growth of 4 percent
- HR Solutions operating margin was 6.2 percent and the operating margin, adjusted for certain items, decreased 440 basis points to 15.4 percent
- Repurchased 5.3 million Class A ordinary shares for approximately $250 million
- On April 2, 2012, the Company completed its change in corporate domicile of the parent company of the Aon group of companies from Delaware to the U.K.

“Our second quarter results reflect improved organic revenue growth across all of our major businesses as we make significant investments to further strengthen our client-serving capabilities,” stated Greg Case, president and CEO.  “While macro conditions remain fragile globally, we continue to anticipate improved performance in the second half of the year, our underlying performance is on track with our long-term targets and we have completed significant steps to position the firm for long-term growth, strong free cash flow generation and increased financial flexibility as highlighted by the repurchase of $250 million of ordinary shares in the quarter.”

The report also said: “Total operating expenses increased 2 percent, or $56 million, to $2.4 billion due primarily to a 4 percent increase in organic revenue, incremental investments in key talent and capabilities, $14 million of headquarter relocation costs and a $13 million increase in intangible asset amortization expense, partially offset by a $93 million favorable impact from foreign currency translation and a $16 million decline in lease termination costs.

“Depreciation expense decreased 2 percent, or $1 million, to $57 million compared to the prior year quarter.

“Intangible asset amortization expense increased 14 percent, or $13 million, to $104 million compared to the prior year quarter due primarily to a $16 million increase relating to assets associated with the merger with Hewitt.

“Restructuring expenses were $13 million compared to $14 million in the prior year quarter.  In the second quarter, the Company incurred $11 million of costs in the HR Solutions segment and $2 million of costs in the Risk Solutions segment related to the Aon Hewitt restructuring program.  The Company has closed and completed all restructuring activities and incurred 100 percent of the total costs for the Aon Benfield restructuring program.”

The report also pointed out that “restructuring savings in the second quarter related to the Aon Hewitt restructuring program are estimated at $57 million compared to $34 million in the prior year quarter.  Of the estimated savings in the second quarter, approximately $10 million were related to the Risk Solutions segment compared to $2 million in the prior year quarter.  The Company expects to deliver cumulative expense savings of $355 million in 2013 related to the Aon Hewitt restructuring program, including $280 million related to the restructuring program and $75 million in additional synergy savings from areas such as information technology, procurement and public company costs. 

“Associated with the transfer of the Health and Benefits business effective January 1, 2012, approximately $46 million of the estimated savings under the Aon Hewitt restructuring program will be achieved in Risk Solutions.  As of the second quarter, an estimated $26 million of cumulative savings have been achieved in Risk Solutions.

“Average diluted shares outstanding decreased to 335.6 million in the second quarter compared to 342.7 million in the prior year quarter. The Company repurchased 5.3 million Class A ordinary shares for approximately $250 million in the second quarter.  As part of the change in corporate domicile, Aon plc’s Board of Directors authorized a $5 billion share repurchase program on April 19, 2012 that replaced the previous share repurchase program authorized by Aon Corporation’s Board of Directors in January 2010.  The Company has $4.7 billion of remaining authorization.”

Source: Aon

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Latest Comments

  • July 30, 2012 at 2:31 pm
    reality bites says:
    And the reduction of how many good people were factored into the restructuring costs of $13 mil?
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