10-QPeriod: Q1 FY2012

Aon plc Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 8, 2012For Securities:AON

Summary

Aon plc's first-quarter 2012 results show a slight increase in revenue, driven by organic growth in both its Risk Solutions and HR Solutions segments. Despite this revenue growth, net income attributable to Aon stockholders saw a modest decrease compared to the prior year quarter, primarily impacted by higher intangible asset amortization, restructuring costs, and unfavorable foreign exchange rates. The company successfully completed a significant redomestication to Aon plc as the parent company on April 2, 2012, which is expected to yield long-term benefits, though it also involved associated transaction costs. Management highlights a focus on organic revenue growth, margin expansion, and increased earnings per share. While adjusted diluted EPS from continuing operations was slightly down year-over-year, organic revenue growth improved. The company is actively managing its restructuring initiatives, with the Aon Hewitt plan progressing and nearing completion, contributing to anticipated future cost savings. Liquidity remains strong, supported by operating cash flows and available credit facilities, allowing for continued capital allocation towards share repurchases and dividends.

Financial Highlights

52 data points
Beta

Revenue

$2.84B

Net Income

$238.00M

8.4% Net Margin

EPS (Diluted)

$0.71

Total Assets

$30.27B

Cash & Equivalents

$323.00M

Free Cash Flow

-$86.00M

Financial Statements
Beta
Revenue$2.84B
Operating Expenses$2.44B
Operating Income$402.00M
Interest Expense$59.00M
Net Income$238.00M
EPS (Basic)$0.72
EPS (Diluted)$0.71
Shares Outstanding (Basic)332.40M
Shares Outstanding (Diluted)336.60M

Key Highlights

  • 1Total revenue for the first quarter of 2012 increased by 3% to $2.8 billion, driven by 4% organic revenue growth across both the Risk Solutions and HR Solutions segments.
  • 2Net income attributable to Aon stockholders decreased by 3% to $238 million ($0.71 diluted EPS) compared to the first quarter of 2011, impacted by higher operating expenses, including intangible asset amortization.
  • 3Aon plc completed its corporate redomestication to become the publicly held parent company on April 2, 2012, a significant structural change.
  • 4Operating margin for the Risk Solutions segment was 19.2% (18.7% in Q1 2011), while the HR Solutions segment saw its operating margin decrease to 7.7% (9.1% in Q1 2011) due to investments and pricing pressures.
  • 5The company incurred $12 million in restructuring charges related to the Aon Hewitt Plan in Q1 2012, contributing to expected future cost savings of approximately $280 million annually from this initiative.
  • 6Liquidity remains strong, with $833 million in cash and cash equivalents and short-term investments as of March 31, 2012. The company has $1.3 billion in available credit facilities.
  • 7Shareholder returns included $100 million in share repurchases and $49 million in dividends paid during the first quarter of 2012.

Frequently Asked Questions

In the first quarter of 2012, Aon plc reported total revenue of $2.8 billion, a 3% increase year-over-year, primarily driven by 4% organic revenue growth. However, net income attributable to Aon stockholders decreased by 3% to $238 million, or $0.71 per diluted share, compared to the prior year quarter. This decrease was influenced by higher operating expenses, particularly intangible asset amortization and restructuring costs, as well as unfavorable foreign exchange impacts.

The most significant event noted is the completion of Aon plc's corporate redomestication on April 2, 2012, where Aon plc became the publicly held parent company. This structural change is expected to provide long-term strategic and financial benefits, including potential tax advantages related to the UK dividend exemption system, although it also involved associated transaction costs during the quarter.

The Risk Solutions segment saw revenue increase by 3% and operating income grow by 5%, with operating margins improving slightly to 19.2%. The HR Solutions segment also experienced revenue growth of 3%, but its operating income decreased by 12%, and operating margin declined to 7.7% from 9.1% year-over-year. This decline in HR Solutions was attributed to investments in new growth areas, pricing pressures in benefits administration, and higher intangible asset amortization.

Aon plc maintains a strong liquidity position with $833 million in cash and cash equivalents and short-term investments as of March 31, 2012, along with $1.3 billion in available credit facilities. The company expects sufficient cash flow from operations to meet its obligations, fund restructuring costs, capital expenditures, and shareholder returns. During the quarter, Aon returned capital to shareholders through $100 million in share repurchases and $49 million in dividends.