Aon's (AON) Q3 Earnings Surpass Estimates, Increase Y/Y
Aon plc’s AON third-quarter 2020 operating earnings of $1.53 per share surpassed the Zacks Consensus Estimate by 1.3%. Further, the bottom line improved 5.5% year over year on the back of reduced operating expenses.
However, total revenues were flat year over year at $2.4 billion, which included unchanged organic revenues. Meanwhile, the top line beat the consensus mark by 2.1%. This upside was on the back of better performance by Reinsurance Solutions.
Operating margin grew 340 basis points (bps) to 18.5% while operating margin, adjusted for certain items, expanded 40 bps to 22.4%.
Total operating expenses in the second quarter declined 4% year over year to $1.9 billion, primarily owing to reduced information technology costs and general expenses plus depreciation of fixed costs.
Aon plc Price, Consensus and EPS Surprise
Aon plc price-consensus-eps-surprise-chart | Aon plc Quote
Organic Revenue Catalysts
Commercial Risk Solutions: Organic revenues inched up 2% year over year on the back of strong growth across every major geography, highlighted by double-digit growth in Asia, primarily driven by solid retention and management of the renewal book portfolio. Results also reflect robust growth in core P&C in the United States.
The segment, however, reported a year-over-year 1% dip in total revenues to $1 billion.
Reinsurance Solutions: Organic revenues improved 13% owing to double-digit growth across treaty, facultative and capital markets transactions, reflecting constant new business generation. Moreover, total revenues for the segment improved 10% year over year to $321 million.
Retirement Solutions: Organic revenues slid 5% year over year. The results were impacted by a continued pressure on the company’s more discretionary parts of the business due to the pandemic, mainly in Human Capital for rewards and assessment services. Further, total revenues decreased 3% year over year to $468 million.
Health Solutions: Organic revenues inched up 1% year over year, primarily on the back of robust international growth, particularly in Asia and the Pacific region as well as a modest positive impact from the timing of certain revenues. The metric from this segment increased 1% year over year to $282 million.
Data & Analytic Services: Organic revenues fell 7% year over year due to reduction in travel and events practice, globally. Revenues increased 3% year over year to $274 million.
Financial Position
In the first nine months of 2020, the company’s cash flow from operations soared 74% from the level in the same period of 2019 to $2 billion.
Moreover, the company’s free cash flow of $1.9 billion skyrocketed 91% from the figure in the first nine months of 2019. This upside can be attributed to an increase in cash flow from operations and a decrease in capital expenditures.
The company exited the third quarter with cash and cash equivalents of $821 million, up 3.9% from the level at 2019 end. As of Sep 30, 2020, Aon had total assets worth $31.3 billion, up 6.6% from the level on Dec 31, 2019.
As of Sep 30, 2020, long-term debt stands at $7.2 billion, increasing 9.4% from the level at 2019 end.
Zacks Rank & Performance of Other Insurers
Aon carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other insurance industry players, which reported third-quarter earnings so far, the bottom-line results of Marsh McLennan Companies, Inc. MMC, Arthur J. Gallagher Co. AJG and Brown Brown, Inc. BRO beat the respective Zacks Consensus Estimate.
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