Aon posts USD769 million profit for Q2, result boosted by divestitures

AON

Aon Corporation is reporting USD769 million as net income attributable to its shareholders, or $2.93 per share, compared to $300 million or USD1.11 per share, in the prior year period.

Total revenue in the second quarter increased 4% to $2.4 billion, compared to the prior year period driven primarily by 3% organic revenue growth and a 3% increase related to acquisitions, net of divestitures, partially offset by a 2% unfavorable impact from foreign currency translation.

Total operating expenses in the second quarter increased 31% to $2.5 billion compared to the prior year period due primarily to a $380 million non-cash impairment charge to the associated indefinite lived tradenames associated with the sale of the Benefits Administration and HR Business Process Outsourcing (BPO) platform, $155 million of restructuring costs, a $62 million increase in operating expenses related to acquisitions, net of divestitures, $35 million of accelerated amortization related to tradenames, $34 million of costs related to regulatory and compliance matters, and an $8 million increase in intangible asset amortization from previous acquisitions, partially offset by $62 million of expense related to certain non-cash pension settlements in the prior year period, a $50 million favorable impact from foreign currency translation and $44 million of savings related to restructuring and other operational improvement initiatives.

Restructuring expenses were $155 million in the second quarter, primarily driven by workforce reductions. The Company expects to invest $900 million in total cash over a three-year period, and incur $50 million of non-cash charges, in driving one operating model across the firm. This includes an estimated investment of $700 million of cash restructuring charges and $200 million of capital expenditures. To date, the Company has incurred 40% of the total estimated restructuring charges. An analysis of restructuring and related costs by type is detailed on page 15 of this press release.

Restructuring savings in the second quarter related to restructuring and other operational improvement initiatives are estimated at $44 million before reinvestment. Before any potential reinvestment of savings, restructuring and other operational improvement initiatives are expected to deliver run-rate savings of $400 million annually in 2019. To date, the Company has achieved 14% of the total estimated annualized savings.

“Our second quarter results reflect growth across all major lines of revenue, solid operating performance with 110 basis points of adjusted operating margin improvement and 13% earnings per share growth, highlighted by the repurchase of $1 billion of stock in the quarter,” said Greg Case, President and Chief Executive Officer. “During the quarter, we took significant steps to strengthen our industry-leading global professional services platform, including the completed divestiture of our outsourcing businesses and initial investments in our Aon United single operating model. Combined with strong free cash flow generation and capital proceeds from the transaction, we believe we are on track to exceed $7.97 adjusted earnings per share in 2018 and deliver double-digit free cash flow growth over the long-term.”