10-QPeriod: Q2 FY2016

Aon plc Quarterly Report for Q2 Ended Jun 30, 2016

Filed July 29, 2016For Securities:AON

Summary

Aon plc reported solid financial results for the period ending June 30, 2016. Revenue for the second quarter decreased slightly by 1% to $2.8 billion, impacted by unfavorable foreign currency exchange rates and divestitures, but was partially offset by a 3% organic revenue growth. For the six-month period, revenue decreased 2% to $5.6 billion, also affected by currency headwinds and divestitures, but supported by 3% organic growth. Net income attributable to Aon shareholders saw a significant increase, rising 53% to $272 million for the second quarter and 16% to $587 million for the six-month period. This improvement was driven by lower operating expenses, including a notable decrease related to legacy litigation settlements and favorable foreign currency impacts, alongside continued organic growth. The company also demonstrated strong free cash flow generation, increasing 51% to $660 million for the first six months of the year, reflecting improved operating cash flows and reduced capital expenditures.

Financial Highlights

51 data points
Beta

Revenue

$2.28B

Net Income

$300.00M

13.1% Net Margin

EPS (Diluted)

$1.11

Total Assets

$26.69B

Cash & Equivalents

$438.00M

Free Cash Flow

$460.00M

Financial Statements
Beta
Revenue$2.28B
Operating Expenses$1.90B
Operating Income$387.00M
Interest Expense$73.00M
Net Income$300.00M
EPS (Basic)$1.12
EPS (Diluted)$1.11
Shares Outstanding (Basic)268.00M
Shares Outstanding (Diluted)269.80M

Key Highlights

  • 1Revenue for Q2 2016 was $2.766 billion, a slight decrease of 1% from $2.805 billion in Q2 2015, driven by organic growth offset by currency headwinds and divestitures.
  • 2Net income attributable to Aon shareholders increased significantly by 53% to $272 million in Q2 2016, compared to $178 million in Q2 2015.
  • 3Diluted EPS increased to $1.01 in Q2 2016 from $0.62 in Q2 2015, a substantial improvement.
  • 4Operating expenses decreased by 7% in Q2 2016, largely due to lower legacy litigation settlement expenses and favorable foreign currency impacts.
  • 5Cash flow from operations for the first six months of 2016 increased by 32% to $764 million, demonstrating robust cash generation.
  • 6The company repurchased $750 million of shares in the first six months of 2016, indicating a commitment to returning capital to shareholders.

Frequently Asked Questions

The primary drivers for the significant increase in net income were a decrease in operating expenses, particularly a reduction in legacy litigation settlement expenses compared to the prior year, and a favorable impact from foreign currency exchange rates. This was complemented by sustained organic revenue growth across segments.

Total revenue saw a slight decrease of 1% in the second quarter and 2% for the first six months, primarily due to unfavorable foreign currency exchange rate impacts and the effects of net divestitures. However, these headwinds were partially offset by a consistent 3% organic revenue growth across the company, especially in the Risk Solutions segment's retail brokerage business.

Aon plc demonstrated a commitment to capital return through significant share repurchases, spending $750 million in the first six months of 2016 under its authorized repurchase programs. The company also continued to pay dividends to shareholders.

The company's liquidity is supported by strong cash flow from operations, available cash reserves, and debt capacity under its credit facilities. Total debt increased slightly due to new note issuances, but the company maintained compliance with its financial covenants and had substantial availability under its committed credit facilities, indicating a stable liquidity position.