10-QPeriod: Q2 FY2015

Aon plc Quarterly Report for Q2 Ended Jun 30, 2015

Filed July 31, 2015For Securities:AON

Summary

Aon plc's second-quarter 2015 results show a notable decline in net income attributable to shareholders, down 41% year-over-year to $178 million, primarily driven by a significant increase in operating expenses, notably $176 million related to legacy litigation. Despite these pressures, the company demonstrated resilience with organic revenue growth of 2% in both its Risk Solutions and HR Solutions segments. Foreign currency headwinds were a material factor, impacting revenue negatively by 7% overall. Management highlighted their focus on non-GAAP metrics like adjusted diluted earnings per share, which increased to $1.31 from $1.25 in the prior year's quarter, and free cash flow, which grew to $223 million. Shareholder returns were supported by share repurchases totaling $300 million and a 20% increase in the quarterly dividend to $0.30 per share.

Financial Highlights

52 data points
Beta

Revenue

$2.84B

Net Income

$204.00M

7.2% Net Margin

EPS (Diluted)

$0.62

Total Assets

$29.20B

Cash & Equivalents

$367.00M

Free Cash Flow

$200.00M

Financial Statements
Beta
Revenue$2.84B
Operating Expenses$2.53B
Operating Income$308.00M
Interest Expense$68.00M
Net Income$204.00M
EPS (Basic)$0.63
EPS (Diluted)$0.62
Shares Outstanding (Basic)284.50M
Shares Outstanding (Diluted)286.70M

Key Highlights

  • 1Net income attributable to Aon shareholders decreased by 41% to $178 million in Q2 2015 compared to $304 million in Q2 2014.
  • 2Total revenue for Q2 2015 decreased by 4% to $2.8 billion, primarily due to an unfavorable impact of foreign currency exchange rates (-7%), partially offset by 2% organic revenue growth.
  • 3Operating expenses increased by 2% to $2.5 billion in Q2 2015, significantly impacted by $176 million related to legacy litigation.
  • 4Adjusted diluted earnings per share (a non-GAAP measure) increased to $1.31 in Q2 2015 from $1.25 in Q2 2014.
  • 5Free cash flow (a non-GAAP measure) increased by $5 million to $223 million for the first six months of 2015 compared to the same period in 2014.
  • 6Aon repurchased approximately $300 million of Class A Ordinary Shares in Q2 2015 and announced a 20% increase in its quarterly cash dividend to $0.30 per share.

Frequently Asked Questions

The primary driver behind the decrease in net income attributable to Aon shareholders was a significant increase in operating expenses. Notably, the company incurred $176 million in expenses related to legacy litigation during the quarter, which, along with other cost pressures, led to a 41% decline in net income year-over-year.

Foreign currency exchange rates had a significant unfavorable impact on Aon's revenue. For the second quarter of 2015, the adverse currency impact was approximately 7%, which, combined with other factors, led to a 4% overall decrease in total revenue compared to the prior year's quarter.

Yes, Aon was active in capital allocation. The company repurchased approximately $300 million of its Class A Ordinary Shares during the quarter. Additionally, Aon announced a 20% increase in its quarterly cash dividend, raising it to $0.30 per share, demonstrating a commitment to returning capital to shareholders.

Aon believes its balance sheet and strong cash flow provide adequate liquidity. Primary sources include cash flow from operations, cash reserves, and available debt capacity. Management expects these sources to be sufficient to meet operating expenses, capital expenditures, acquisitions, share repurchases, restructuring costs, pension obligations, and shareholder dividends for the foreseeable future.