Summary
Aon plc's (AON) 10-Q filing for the period ending June 30, 2008, reveals a significant shift in the company's financial performance, largely driven by the sale of its insurance underwriting subsidiaries, Combined Insurance Company of America (CICA) and Sterling Life Insurance Company (Sterling). This divestiture resulted in a substantial pretax gain of $1.4 billion in the second quarter of 2008, dramatically boosting net income and earnings per share for the period, especially from discontinued operations. Despite the strong reported net income influenced by the divestiture, operating performance from continuing operations showed a decline. Revenue from continuing operations increased, primarily in Risk and Insurance Brokerage Services and Consulting segments, driven by organic growth and favorable foreign currency translation. However, higher operating expenses, including increased compensation and benefits, other general expenses (partially due to anti-bribery investigations and restructuring charges), and depreciation and amortization, led to a decrease in income from continuing operations before taxes. The company also continued its aggressive share repurchase program, funded in part by the proceeds from the divestitures, demonstrating a commitment to returning capital to shareholders.
Financial Highlights
27 data points| Revenue | $1.96B |
| Operating Expenses | $1.70B |
| Operating Income | $255.00M |
| Interest Expense | $31.00M |
| Net Income | $1.13B |
| EPS (Basic) | $3.82 |
| EPS (Diluted) | $3.71 |
| Shares Outstanding (Basic) | 289.50M |
| Shares Outstanding (Diluted) | 305.30M |
Key Highlights
- 1Aon plc reported a substantial pretax gain of $1.4 billion from the sale of its CICA and Sterling insurance subsidiaries in Q2 2008, significantly impacting net income and EPS.
- 2Revenue from continuing operations increased by 8% on a quarterly basis and 9% year-to-date, primarily driven by the Risk and Insurance Brokerage Services segment.
- 3Operating expenses increased, with 'Compensation and benefits' up 4% quarterly and 'Other general expenses' up 20% quarterly, influenced by restructuring charges and anti-bribery investigations.
- 4The company repurchased approximately 33.4 million shares for $1.5 billion in the first six months of 2008, utilizing proceeds from divestitures.
- 5Income from continuing operations before taxes decreased by 20% year-over-year for the quarter, reflecting higher operating expenses that more than offset revenue growth.
- 6The company has a robust credit rating (BBB+ Stable from S&P, Baa2 Positive from Moody's) but notes potential increases in borrowing costs if ratings were to be downgraded.
- 7Restructuring charges related to the 2007 plan totaled $159 million through June 30, 2008, with expected annualized cost savings of $50-$70 million in 2008, rising to $240 million by 2010.