10-QPeriod: Q1 FY2014

Aon plc Quarterly Report for Q1 Ended Mar 31, 2014

Filed April 25, 2014For Securities:AON

Summary

Aon plc's first-quarter 2014 results show a modest increase in total revenue to $2.9 billion, a 1% rise driven by organic growth across both its Risk Solutions and HR Solutions segments. Despite facing headwinds such as economic weakness in Europe and price compression in benefits administration, the company demonstrated improved profitability. Operating income increased by 13% to $469 million, and net income attributable to Aon shareholders grew by 25% to $325 million, or $1.06 per diluted share, compared to the prior year quarter. The company's focus on key non-GAAP metrics like organic revenue growth and adjusted operating margin remained a priority. Organic revenue grew by 2%, with the Risk Solutions segment showing solid growth in retail brokerage and reinsurance, while HR Solutions saw contributions from consulting and outsourcing services. Significant share repurchases totaling $600 million in the quarter reflect a strong commitment to returning capital to shareholders, though this also contributed to a decrease in operating cash flow to a negative $11 million for the period.

Financial Highlights

52 data points
Beta

Revenue

$2.95B

Net Income

$325.00M

11.0% Net Margin

EPS (Diluted)

$1.06

Total Assets

$30.08B

Cash & Equivalents

$338.00M

Free Cash Flow

-$66.00M

Financial Statements
Beta
Revenue$2.95B
Operating Expenses$2.48B
Operating Income$469.00M
Interest Expense$58.00M
Net Income$325.00M
EPS (Basic)$1.07
EPS (Diluted)$1.06
Shares Outstanding (Basic)303.50M
Shares Outstanding (Diluted)307.20M

Key Highlights

  • 1Total revenue increased by 1% to $2.9 billion, driven by 2% organic revenue growth across segments.
  • 2Operating income rose 13% to $469 million, with operating margin improving to 15.9% from 14.1% in the prior year quarter.
  • 3Net income attributable to Aon shareholders increased 25% to $325 million ($1.06 per diluted share) from $261 million ($0.82 per diluted share) in Q1 2013.
  • 4Significant share repurchases of $600 million were executed under the 2012 Share Repurchase Program.
  • 5Cash flow from operating activities turned negative, at -$11 million for the quarter, a decrease from +$54 million in Q1 2013, primarily due to timing of payments and working capital changes.
  • 6The Risk Solutions segment reported revenue growth of 1% to $1.99 billion and an improved operating margin of 22.3%.
  • 7The HR Solutions segment also saw revenue growth of 1% to $965 million, with operating margin increasing to 6.9%.

Frequently Asked Questions

Aon's revenue grew by 1% to $2.9 billion, primarily driven by a 2% organic revenue growth. The Risk Solutions segment saw solid growth in its Retail brokerage and Reinsurance businesses, while the HR Solutions segment benefited from growth in investment and compensation consulting and modest growth in benefits administration and outsourcing.

Profitability improved significantly. Operating income increased by 13% to $469 million, and operating margin expanded to 15.9% from 14.1%. Net income attributable to Aon shareholders rose by 25% to $325 million, translating to diluted earnings per share of $1.06, up from $0.82 in the prior year.

Aon repurchased $600 million of its shares in the first quarter of 2014, a substantial capital return to shareholders. However, this, along with other factors like timing of incentive compensation and interest payments, contributed to a decrease in cash flow from operating activities, resulting in a net cash usage of $11 million for the quarter, compared to a positive inflow in the prior year.

The Risk Solutions segment generated $1.99 billion in revenue, up 1%, with operating income of $445 million and an improved operating margin of 22.3%. The HR Solutions segment reported $965 million in revenue, also up 1%, with operating income of $67 million and an expanded operating margin of 6.9%.