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AON Q4 Earnings Surpass Estimates on New Business Growth
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Aon plc (AON - Free Report) reported fourth-quarter 2024 adjusted earnings of $4.42 per share, which surpassed the Zacks Consensus Estimate by 4.3%. The bottom line improved 14% year over year.
See the Zacks Earnings Calendar to stay ahead of market-making news.
Total revenues rose 23% year over year to $4.1 billion. However, the top line fell short of the consensus mark by 1.1%. Organic revenue growth was 6%.
The quarterly results were supported by new business growth and solid retention rates in Aon’s solution lines. Its Risk Capital and Human Capital segments gained from organic revenue growth, NFP acquisition synergies and net restructuring savings. However, the upside was partially offset by escalating operating costs.
Total operating expenses of $3.06 billion increased 18% year over year due to higher ongoing operating costs of NFP (an Aon-acquired company), higher expenses related to 6% organic revenue growth, increased intangible asset amortization from the NFP acquisition and long-term growth investments. The metric was lower than our estimate of $3.14 billion.
Adjusted operating income advanced 21% year over year to $1.38 billion, higher than our estimate of $1.35 billion. The metric gained on the back of benefits reaped from the NFP acquisition, organic revenue growth and net restructuring savings. However, the adjusted operating margin of 33.3% deteriorated 50 basis points year over year.
Update on AON’s Segment Restructuring
Aon previously operated as a single segment through which it offered a comprehensive suite of risk and human capital solutions via four solution lines: Commercial Risk, Reinsurance, Health and Wealth. From the fourth quarter of 2024, the company restructured its reporting framework into two distinct segments: Risk Capital and Human Capital. The Risk Capital segment includes Commercial Risk Solutions and Reinsurance Solutions. Meanwhile, the Human Capital unit consists of Health Solutions and Wealth Solutions.
Risk Capital
Commercial Risk Solutions: Organic revenues grew 6% year over year in the fourth quarter, attributable to strength in core P&C operations in North America, solid international growth and expanding construction business. Revenues in this solution line were $2.19 billion, which advanced 15% year over year but missed the Zacks Consensus Estimate of $2.22 billion and our estimate of $2.21 billion.
Reinsurance Solutions: Organic revenues improved 6% year over year on the back of a well-performing Strategy and Technology Group and treaty business. Revenues increased 6% year over year to $351 million, which beat the consensus mark of $346.5 million and our estimate of $345.3 million.
Human Capital
Health Solutions: Organic revenues grew 5% year over year as a result of global expansion in the core health and benefits business. The solution line’s revenues of $1.07 billion climbed 40% year over year but lagged the Zacks Consensus Estimate of $1.12 billion and our estimate of $1.11 billion.
Wealth Solutions: Organic revenues improved 8% year over year in the fourth quarter on the back of a strong Retirement business, which, in turn, received an impetus from sustained advisory demand linked with pension de-risking. Revenues soared 44% year over year to $542 million, higher than the consensus mark of $506.1 million and our estimate of $501.4 million.
AON’s Financial Position (As of Dec. 31, 2024)
Aon exited the fourth quarter with cash and cash equivalents of $1.1 billion, which advanced 39.5% from the 2023-end level. Total assets of $49 billion increased 44.2% from the figure in 2023-end.
Long-term debt amounted to $16.3 billion, up 62.7% from the figure as of Dec. 31, 2023. Short-term debt and current portion of long-term debt totaled $751 million.
Aon generated cash flow from operations of $1.2 billion, which slipped 5% year over year. Adjusted free cash flows tumbled 6% year over year to $1.1 billion.
Aon’s Capital Deployment Update
Aon bought back 0.6 million class A ordinary shares for roughly $200 million in the fourth quarter. A leftover capacity of around $2.3 billion remained under its repurchase authorization as of Dec. 31, 2024.
Management approved a quarterly cash dividend of 67.5 cents per share, which will be paid out on Feb. 14, 2025, to shareholders of record as of Feb. 3.
AON’s Full-Year Update
Total revenues advanced 17% year over year to $15.7 billion. Adjusted earnings of $15.60 per share rose 10% year over year. Adjusted operating income increased 17% year over year to $4.9 billion. The adjusted margin of 31.5% deteriorated 10 bps year over year.
AON’s Forward View
Revenues are expected to register mid-single-digit or higher organic growth for 2025 and beyond. The company expects the adjusted operating margin to expand in 2025. It also estimates adjusted EPS to witness strong growth this year.
Free cash flow is projected to witness double-digit growth in the long term. The company plans to return $1 billion through share buybacks in 2025.
The Aon United Restructuring program is likely to enable the company to achieve total annual run-rate savings of approximately $350 million by the end of 2026. It realized net savings of $40 million in the fourth quarter and projects to achieve $260 million in cumulative annual savings in 2025.
Of the insurance industry players that have reported fourth-quarter 2024 results so far, the bottom-line results of Marsh & McLennan Companies, Inc. (MMC - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and AXIS Capital Holdings Limited (AXS - Free Report) beat the respective Zacks Consensus Estimate.
Marsh & McLennan reported fourth-quarter 2024 adjusted earnings per share of $1.87, which beat the Zacks Consensus Estimate by 6.9%. The bottom line increased 11% year over year. Consolidated revenues rose 9.4% year over year to $6.1 billion. The figure also improved 7% on an underlying basis. The top line surpassed the consensus mark by 2.5%. Marsh & McLennan’s adjusted operating income was $1.3 billion, up 8.6% year over year. Adjusted operating margin remained unchanged year over year at 23.3%.
Revenues in the Risk and Insurance Services segment were $3.6 billion, which rose 11% year over year and 8% on an underlying basis. Adjusted operating income increased 13% year over year to $893 million. In the United States/Canada operations, revenues grew 21% year over year. Among the international operations, Asia Pacific and EMEA’s revenues grew 9% year over year. The Consulting unit recorded revenues of $2.44 billion, which increased 6% year over year and 6% on an underlying basis.
Brown & Brown’s fourth-quarter 2024 adjusted earnings of 86 cents per share beat the Zacks Consensus Estimate by 14.7%. The bottom line increased 48.3% year over year. Total revenues of $1.2 billion beat the consensus estimate by 6.4%. The top line improved 15.4% year over year. The upside can be primarily attributed to commission and fees, which grew 15.4% year over year to $1.1 billion.
Organic revenues improved 13.8% to $1.1 billion. Investment income increased 22.2% year over year to $22 million. Adjusted EBITDAC was $390 million, up 22.6% year over year. EBITDAC margin expanded 190 bps year over year to 32.9%.
AXIS Capital posted fourth-quarter 2024 operating income of $2.97 per share, which beat the Zacks Consensus Estimate by 10.8%. The bottom line increased 1% year over year. Total operating revenues of $1.6 billion missed the consensus estimate by 2.8%. The top line rose 6.7% year over year. Net premiums written increased 14% to $1.2 billion, attributable to a 9% increase in the Insurance segment and a 64% surge in the Reinsurance segment. Net investment income increased 5% year over year to $195.8 million.
AXIS Capital’s underwriting income was $129.5 million against a loss of $274 million in the year-ago quarter. The combined ratio improved 3040 bps to 94.2%. The Insurance segment’s gross premiums written improved 7.4% year over year to $1.7 billion. Net premiums earned increased 11.9% to $1 billion. In the Reinsurance unit, gross premiums written increased 36.9% year over year to $275 million. Underwriting income was $0.4 million against a loss of $212.4 million in the year-ago quarter.
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AON Q4 Earnings Surpass Estimates on New Business Growth
Aon plc (AON - Free Report) reported fourth-quarter 2024 adjusted earnings of $4.42 per share, which surpassed the Zacks Consensus Estimate by 4.3%. The bottom line improved 14% year over year.
See the Zacks Earnings Calendar to stay ahead of market-making news.
Total revenues rose 23% year over year to $4.1 billion. However, the top line fell short of the consensus mark by 1.1%. Organic revenue growth was 6%.
The quarterly results were supported by new business growth and solid retention rates in Aon’s solution lines. Its Risk Capital and Human Capital segments gained from organic revenue growth, NFP acquisition synergies and net restructuring savings. However, the upside was partially offset by escalating operating costs.
Aon plc Price, Consensus and EPS Surprise
Aon plc price-consensus-eps-surprise-chart | Aon plc Quote
AON’s Q4 Operations
Total operating expenses of $3.06 billion increased 18% year over year due to higher ongoing operating costs of NFP (an Aon-acquired company), higher expenses related to 6% organic revenue growth, increased intangible asset amortization from the NFP acquisition and long-term growth investments. The metric was lower than our estimate of $3.14 billion.
Adjusted operating income advanced 21% year over year to $1.38 billion, higher than our estimate of $1.35 billion. The metric gained on the back of benefits reaped from the NFP acquisition, organic revenue growth and net restructuring savings. However, the adjusted operating margin of 33.3% deteriorated 50 basis points year over year.
Update on AON’s Segment Restructuring
Aon previously operated as a single segment through which it offered a comprehensive suite of risk and human capital solutions via four solution lines: Commercial Risk, Reinsurance, Health and Wealth. From the fourth quarter of 2024, the company restructured its reporting framework into two distinct segments: Risk Capital and Human Capital. The Risk Capital segment includes Commercial Risk Solutions and Reinsurance Solutions. Meanwhile, the Human Capital unit consists of Health Solutions and Wealth Solutions.
Risk Capital
Commercial Risk Solutions: Organic revenues grew 6% year over year in the fourth quarter, attributable to strength in core P&C operations in North America, solid international growth and expanding construction business. Revenues in this solution line were $2.19 billion, which advanced 15% year over year but missed the Zacks Consensus Estimate of $2.22 billion and our estimate of $2.21 billion.
Reinsurance Solutions: Organic revenues improved 6% year over year on the back of a well-performing Strategy and Technology Group and treaty business. Revenues increased 6% year over year to $351 million, which beat the consensus mark of $346.5 million and our estimate of $345.3 million.
Human Capital
Health Solutions: Organic revenues grew 5% year over year as a result of global expansion in the core health and benefits business. The solution line’s revenues of $1.07 billion climbed 40% year over year but lagged the Zacks Consensus Estimate of $1.12 billion and our estimate of $1.11 billion.
Wealth Solutions: Organic revenues improved 8% year over year in the fourth quarter on the back of a strong Retirement business, which, in turn, received an impetus from sustained advisory demand linked with pension de-risking. Revenues soared 44% year over year to $542 million, higher than the consensus mark of $506.1 million and our estimate of $501.4 million.
AON’s Financial Position (As of Dec. 31, 2024)
Aon exited the fourth quarter with cash and cash equivalents of $1.1 billion, which advanced 39.5% from the 2023-end level. Total assets of $49 billion increased 44.2% from the figure in 2023-end.
Long-term debt amounted to $16.3 billion, up 62.7% from the figure as of Dec. 31, 2023. Short-term debt and current portion of long-term debt totaled $751 million.
Aon generated cash flow from operations of $1.2 billion, which slipped 5% year over year. Adjusted free cash flows tumbled 6% year over year to $1.1 billion.
Aon’s Capital Deployment Update
Aon bought back 0.6 million class A ordinary shares for roughly $200 million in the fourth quarter. A leftover capacity of around $2.3 billion remained under its repurchase authorization as of Dec. 31, 2024.
Management approved a quarterly cash dividend of 67.5 cents per share, which will be paid out on Feb. 14, 2025, to shareholders of record as of Feb. 3.
AON’s Full-Year Update
Total revenues advanced 17% year over year to $15.7 billion. Adjusted earnings of $15.60 per share rose 10% year over year. Adjusted operating income increased 17% year over year to $4.9 billion. The adjusted margin of 31.5% deteriorated 10 bps year over year.
AON’s Forward View
Revenues are expected to register mid-single-digit or higher organic growth for 2025 and beyond. The company expects the adjusted operating margin to expand in 2025. It also estimates adjusted EPS to witness strong growth this year.
Free cash flow is projected to witness double-digit growth in the long term. The company plans to return $1 billion through share buybacks in 2025.
The Aon United Restructuring program is likely to enable the company to achieve total annual run-rate savings of approximately $350 million by the end of 2026. It realized net savings of $40 million in the fourth quarter and projects to achieve $260 million in cumulative annual savings in 2025.
Aon’s Zacks Rank
Aon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Of the insurance industry players that have reported fourth-quarter 2024 results so far, the bottom-line results of Marsh & McLennan Companies, Inc. (MMC - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and AXIS Capital Holdings Limited (AXS - Free Report) beat the respective Zacks Consensus Estimate.
Marsh & McLennan reported fourth-quarter 2024 adjusted earnings per share of $1.87, which beat the Zacks Consensus Estimate by 6.9%. The bottom line increased 11% year over year. Consolidated revenues rose 9.4% year over year to $6.1 billion. The figure also improved 7% on an underlying basis. The top line surpassed the consensus mark by 2.5%. Marsh & McLennan’s adjusted operating income was $1.3 billion, up 8.6% year over year. Adjusted operating margin remained unchanged year over year at 23.3%.
Revenues in the Risk and Insurance Services segment were $3.6 billion, which rose 11% year over year and 8% on an underlying basis. Adjusted operating income increased 13% year over year to $893 million. In the United States/Canada operations, revenues grew 21% year over year. Among the international operations, Asia Pacific and EMEA’s revenues grew 9% year over year. The Consulting unit recorded revenues of $2.44 billion, which increased 6% year over year and 6% on an underlying basis.
Brown & Brown’s fourth-quarter 2024 adjusted earnings of 86 cents per share beat the Zacks Consensus Estimate by 14.7%. The bottom line increased 48.3% year over year. Total revenues of $1.2 billion beat the consensus estimate by 6.4%. The top line improved 15.4% year over year. The upside can be primarily attributed to commission and fees, which grew 15.4% year over year to $1.1 billion.
Organic revenues improved 13.8% to $1.1 billion. Investment income increased 22.2% year over year to $22 million. Adjusted EBITDAC was $390 million, up 22.6% year over year. EBITDAC margin expanded 190 bps year over year to 32.9%.
AXIS Capital posted fourth-quarter 2024 operating income of $2.97 per share, which beat the Zacks Consensus Estimate by 10.8%. The bottom line increased 1% year over year. Total operating revenues of $1.6 billion missed the consensus estimate by 2.8%. The top line rose 6.7% year over year. Net premiums written increased 14% to $1.2 billion, attributable to a 9% increase in the Insurance segment and a 64% surge in the Reinsurance segment. Net investment income increased 5% year over year to $195.8 million.
AXIS Capital’s underwriting income was $129.5 million against a loss of $274 million in the year-ago quarter. The combined ratio improved 3040 bps to 94.2%. The Insurance segment’s gross premiums written improved 7.4% year over year to $1.7 billion. Net premiums earned increased 11.9% to $1 billion. In the Reinsurance unit, gross premiums written increased 36.9% year over year to $275 million. Underwriting income was $0.4 million against a loss of $212.4 million in the year-ago quarter.