01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
Aon Corporation's 2009 10-K filing reveals a company navigating a challenging economic landscape, with a slight increase in total revenue to $7.6 billiona, largely due to the Benfield merger, but facing headwinds from a soft insurance market and economic pressures impacting client spending.
Despite a 1% decline in organic revenue, Aon demonstrated expense discipline, maintaining operating expenses at prior-year levels. The company reported a 7% increase in diluted EPS from continuing operations to $2.19b, driven by revenue growth and expense management, particularly a net pension curtailment gain. The Risk and Insurance Brokerage Services segment remains dominant, accounting for 83% of revenue, while the Consulting segment experienced a revenue decrease.
Restructuring efforts from the Benfield merger and a prior global plan are ongoing, with significant cost savings anticipated. Financially, Aon maintained a strong balance sheet with total debt representing 27.2%c of total capital.
The company repurchased approximately $590 milliond of its common stock in 2009 and authorized a new $2 billion repurchase program, signaling confidence and a commitment to returning capital to shareholders. The company also highlighted its liquidity position, supported by operating cash flow and available credit facilities.
02—Key points
Key Highlights
- Total revenue increased by 1% to $7.6 billion, primarily driven by the Benfield merger, offsetting a 1% decline in organic revenue due to challenging economic conditions.
- Diluted EPS from continuing operations rose by 7% to $2.19, reflecting effective expense management and a net pension curtailment gain.
- The Risk and Insurance Brokerage Services segment generated 83% of total revenue, with reinsurance brokerage revenue up 48% due to the Benfield acquisition.
- Operating expenses were stable year-over-year, with benefits from favorable foreign currency, restructuring savings, and lower E&O costs offsetting increased integration and restructuring charges.
- The company repurchased $590 million of common stock in 2009 and authorized a new $2 billion share repurchase program, demonstrating a commitment to shareholder returns.
- Restructuring plans, including the integration of Benfield and a prior global initiative, are in progress, with significant annualized savings projected by 2010-2011.
- The company maintained strong liquidity, with $639 million in cash and cash equivalents and short-term investments, and undrawn credit facilities of approximately $1.3 billion.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $7.59B$7.53B | +0.9% |
| Operating Expenses | $6.57B$6.59B | −0.2% |
| Operating Income | $1.02B$940.00M | +8.6% |
| Interest Expense | $122.00M$126.00M | −3.2% |
| Net Income | $747.00M$1.46B | −48.9% |
| EPS (Basic) | $2.64$4.99 | −47.1% |
| EPS (Diluted) | $2.57$4.80 | −46.5% |
| Shares Outstanding (Basic) | 283.20M292.80M | −3.3% |
| Shares Outstanding (Diluted) | 291.10M304.50M | −4.4% |
05—Questions
Frequently Asked Questions
What was Aon's overall financial performance in 2009?
In 2009, Aon reported total revenue of $7.6 billion, a slight increase from the previous year, primarily driven by the Benfield acquisition. Despite a 1% decline in organic revenue due to global economic challenges, the company managed expenses effectively, leading to a 7% increase in diluted EPS from continuing operations to $2.19.
How did the Benfield merger impact Aon's results?
The merger with Benfield, completed in November 2008, significantly contributed to Aon's revenue growth in 2009, particularly boosting the Reinsurance brokerage segment. While integration costs were incurred, the merger is expected to yield substantial cost savings and synergies in the coming years.
What is Aon's current financial health and liquidity position?
Aon demonstrated a solid financial position, with total debt representing 27.2% of total capital at year-end 2009. The company held $639 million in cash and short-term investments and had access to $1.3 billion in undrawn credit facilities, indicating strong liquidity to manage its operations and strategic initiatives.
What are the key risks facing Aon in its business segments?
Aon faces significant competitive pressures in both its Risk and Insurance Brokerage Services and Consulting segments. Key risks include fluctuations in insurance and reinsurance industry pricing, changes in the economic environment impacting client spending, potential disruptions in financial markets, and regulatory changes. The company also notes the impact of natural disasters and the need to retain key personnel.
06—Continue