Aon Beats Earnings Estimates On Organic Revenue Growth

Aon plc’s (AON - Analyst Report) fourth-quarter 2014 operating earnings of $1.89 per share exceeded the Zacks Consensus Estimate of $1.86, thereby marking the seventh straight quarter of positive earnings surprise. The results were also higher than the year-ago quarter figure by 23%.

Aon’s earnings improved year over year on account of organic revenue growth, operating margin improvement across both the segments and effective capital deployment.   

Including extraordinary items worth 33 cents per share, Aon’s net income per share was $1.56, comparing favorably with $1.14 in the year-ago period.

The company’s total revenue went up 3% year over year to $3.3 billion on higher organic revenues (up 6% from the year-ago quarter). Revenues were a tad lower than the Zacks Consensus Estimate of $3.4 billion.

Total operating expenses at the company were $2.7 billion, down 1% year over year. Lower formal restructuring costs, decline in intangible asset amortization and favorable impact from foreign currency translation led to the improvement.

Segment Update

Risk Solutions: Total revenue came in at $2.1 billion, up $3 million year over year. Organic growth of 3% in commissions and fees and a 1% increase in commissions and fees from acquisitions, net of divestitures led to the improvement in revenues.

Adjusted operating earnings increased 5% year over year to $507 million while adjusted operating margin increased 110 basis points to 24.7% during the quarter. The improvement was largely owing to organic revenue growth, return generated on investments and cost containment measures taken.   

Organic revenues at the Retail Brokerage segment increased 4% year over year. This growth came on the back of higher organic revenues from the Americas business (up 7%), led mainly by better business in Latin America and US Retail, and the favorable impact from the timing of some revenues.

Organic revenues at the Reinsurance segment were up 3% mainly on increase in net new business in treaty placements, along with improvement in capital market transactions and advisory businesses and facultative placements. However, these positives were partially mitigated by an unfavorable market impact in treaty placements.