01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
Aon plc's 2011 10-K filing reveals a company in transition, having completed significant acquisitions (Hewitt in 2010) and divested its underwriting businesses.
The company is focused on growing its Risk Solutions and HR Solutions segments, emphasizing higher-margin, capital-light professional services with recurring revenue streams. Aon is also planning a significant strategic move by reincorporating in the U.K. and relocating its headquarters to London, anticipating enhanced focus on growth and financial flexibility. Financially, Aon saw a revenue increase driven by acquisitions, though operating margins experienced some pressure due to global economic challenges and integration costs.
The company continued its share repurchase program and managed its debt effectively. Key financial metrics like organic revenue growth and adjusted diluted earnings per share showed resilience despite the prevailing economic headwinds.
Investors should note the company's strategic shift towards professional services, the impact of acquisitions on its financial performance, and the potential implications of the U.K. reincorporation. The company's performance is susceptible to economic conditions, competitive pressures, and regulatory changes, as detailed in the risk factors section.
02—Key points
Key Highlights
- Aon completed the acquisition of Hewitt Associates in October 2010, significantly expanding its HR Solutions segment and transforming its business portfolio.
- The company is planning to reincorporate in the U.K. and move its headquarters to London, a strategic move expected to enhance focus on growth and financial flexibility.
- Revenue increased by 33% to $11.3 billion in 2011, primarily driven by acquisitions, with organic revenue growth of 2%.
- Operating expenses increased significantly due to acquisitions and integration costs, leading to a slight pressure on operating margins.
- Adjusted diluted earnings per share from continuing operations increased by 5% to $3.29, demonstrating solid operational performance.
- The company maintained its investment-grade credit rating and had access to committed credit facilities, with no borrowings drawn at year-end 2011.
- Aon continued its share repurchase program, buying back $828 million in shares during 2011.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 24, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $11.29B$8.51B | +32.6% |
| Operating Expenses | $9.69B$7.27B | +33.3% |
| Operating Income | $1.60B$1.24B | +28.3% |
| Interest Expense | $245.00M$182.00M | +34.6% |
| Net Income | $979.00M$706.00M | +38.7% |
| EPS (Basic) | $2.92$2.41 | +21.2% |
| EPS (Diluted) | $2.87$2.37 | +21.1% |
| Shares Outstanding (Basic) | 335.50M293.40M | +14.3% |
| Shares Outstanding (Diluted) | 340.90M298.10M | +14.4% |
05—Questions
Frequently Asked Questions
What were the main drivers of Aon's revenue growth in 2011?
Aon's revenue increased by 33% to $11.3 billion in 2011. This growth was primarily driven by acquisitions, notably the integration of Hewitt Associates, which significantly expanded the HR Solutions segment. Favorable foreign currency exchange rates and a 2% increase in organic revenue also contributed to the overall growth.
What is the significance of Aon's planned reincorporation in the U.K. and relocation of its headquarters?
Aon announced its intention to change its jurisdiction of incorporation from Delaware to the U.K. and move its corporate headquarters to London. This strategic move is expected to enhance its focus on growth initiatives, product innovation, talent development, and financial flexibility, aiming to deliver significant value to shareholders.
How did the Hewitt acquisition impact Aon's financial performance and operational structure?
The acquisition of Hewitt in October 2010 was a major factor in Aon's 2011 financial results, substantially increasing revenue and operating expenses, particularly in the HR Solutions segment. While it contributed to overall revenue growth, it also led to increased amortization expenses and integration costs, which put some pressure on operating margins. The integration also involved significant restructuring efforts.
What are the key financial risks and challenges highlighted in the report?
Key risks include the challenging global economic environment impacting client spending and pricing, significant competitive pressures in both Risk and HR Solutions segments, substantial pension obligations, and a notable amount of outstanding debt. Additionally, the company faces risks related to regulatory changes, potential errors and omissions (E&O) claims, and the successful integration of acquired businesses like Hewitt. The planned U.K. reincorporation also carries tax and operational risks.
06—Continue