10-QPeriod: Q2 FY2012

Aon plc Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 8, 2012For Securities:AON

Summary

Aon plc's Q2 2012 10-Q filing reveals a period of stabilization with modest revenue growth, primarily driven by organic increases in both Risk Solutions and HR Solutions segments. While overall revenue remained relatively flat year-over-year for the quarter, the company saw a 4% organic revenue growth, indicating underlying business strength. However, net income attributable to Aon shareholders declined slightly compared to the prior year, impacted by increased intangible asset amortization and investments in new growth opportunities, particularly within the HR Solutions segment concerning healthcare exchanges and HR BPO services. The company successfully completed its Redomestication to Aon plc as the parent company, which is expected to enhance capital access and presence in the London market. Despite some headwinds from economic weakness in Europe and specific sector challenges, Aon is focusing on its strategic priorities of organic growth, margin expansion, and earnings per share growth. The company maintains a solid liquidity position and is committed to returning capital to shareholders through share repurchases and dividends.

Financial Highlights

51 data points
Beta

Revenue

$2.82B

Net Income

$246.00M

8.7% Net Margin

EPS (Diluted)

$0.73

Total Assets

$30.81B

Cash & Equivalents

$286.00M

Free Cash Flow

$226.00M

Financial Statements
Beta
Revenue$2.82B
Operating Expenses$2.43B
Operating Income$394.00M
Interest Expense$57.00M
Net Income$246.00M
EPS (Basic)$0.74
EPS (Diluted)$0.73
Shares Outstanding (Basic)332.00M
Shares Outstanding (Diluted)335.60M

Key Highlights

  • 1Organic revenue growth of 4% for both the second quarter and the first six months of 2012, demonstrating resilience in core operations.
  • 2Completion of the corporate Redomestication, establishing Aon plc as the parent company, intended to improve capital access and market presence.
  • 3Slight decrease in Net Income attributable to Aon shareholders for the quarter ($246 million vs. $258 million in Q2 2011) and year-to-date ($484 million vs. $504 million in H1 2011).
  • 4Increased investments in growth areas like healthcare exchanges and HR BPO, impacting the HR Solutions segment's operating margin.
  • 5Continued restructuring efforts under the Aon Hewitt Plan, progressing towards expected annual savings of approximately $280 million in 2013.
  • 6Strong liquidity position maintained with $802 million in cash and short-term investments and $1.2 billion in available credit facilities.
  • 7Active capital return to shareholders with $250 million in share repurchases during the second quarter under the new $5 billion program.

Frequently Asked Questions

Total revenue remained largely flat, increasing by $10 million to $2.81 billion in Q2 2012 compared to $2.79 billion in Q2 2011. This was driven by a 4% organic revenue growth, which was offset by a 4% unfavorable impact from foreign exchange rates and a decrease in fiduciary investment income.

The Redomestication, completed on April 2, 2012, resulted in costs of $14 million and $17 million for headquarters relocation in the three and six months ended June 30, 2012, respectively. While not directly impacting revenue or net income from operations, it signifies a strategic shift in corporate structure aimed at enhancing capital access and market presence.

The decrease in operating margin for the HR Solutions segment was primarily due to higher intangible asset amortization ($148 million for the first six months), significant investments in new growth opportunities such as healthcare exchanges and HR BPO, and anticipated pricing compression in the benefits administration business. This led to a reported operating margin of 7.0% for the first six months of 2012, down from 9.8% in the prior year.

Aon maintained a solid liquidity position with $802 million in cash and cash equivalents and short-term investments, and had access to $1.2 billion under its credit facilities as of June 30, 2012. Total debt stood at $4.5 billion. The company generated $269 million in cash from operations for the first six months of 2012, which is expected to be sufficient to cover operational needs, debt obligations, restructuring costs, capital expenditures, and shareholder returns.