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Aon plc (NYSE: AON) reported an 18% increase in total revenue for the second quarter of 2024, reaching $3.8 billion compared to the prior year period. This growth was driven by a combination of acquired revenues from NFP and a 6% organic revenue growth, partially offset by a 1% unfavorable impact from foreign currency translation. Despite this revenue growth, the company’s operating margin decreased by 910 basis points to 17.4%. However, on an adjusted basis, the operating margin saw a slight increase of 10 basis points to 27.4%.
The company also reported a decrease in net income attributable to Aon shareholders, which fell by 6% to $524 million. Adjusted net income, however, increased by 9% to $624 million. Earnings per share (EPS) decreased by 9% to $2.46, while adjusted EPS rose by 6% to $2.93. The decline in GAAP EPS was attributed to higher operating expenses, which increased by 33% to $3.1 billion, primarily due to the inclusion of NFP’s ongoing expenses and restructuring program charges.
AON Falls Short on EPS Expectations in Q2, Posts Better than Expected Revenue
Aon’s second-quarter performance showed mixed results when compared to market expectations. The company reported an adjusted EPS of $2.93, which fell short of the expected EPS of $3.09. This represents a 5% shortfall. On the revenue front, Aon exceeded expectations by reporting $3.8 billion in revenue, surpassing the anticipated $3.74 billion. This demonstrates the company’s ability to generate higher-than-expected revenue despite facing challenges in meeting EPS targets.
The company’s organic revenue growth was robust across various segments. Commercial Risk Solutions saw a 6% growth, driven by new business generation and strong retention across all major geographies. Reinsurance Solutions also performed well with a 7% organic revenue growth, reflecting strong growth in treaty and facultative placements. Health Solutions and Wealth Solutions reported 6% and 9% organic revenue growth, respectively, highlighting the strength in core health and benefits brokerage and advisory demand in retirement services.
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Guidance
Looking ahead, Aon provided insights into its future performance, particularly concerning the impact of foreign currency translation. The company expects an unfavorable impact of approximately $0.01 per share on adjusted operating income in the third quarter of 2024 if currency rates remain stable. This impact is projected to increase to $0.02 per share in the fourth quarter, resulting in a total unfavorable impact of $0.07 per share for the full year 2024. This translates to an approximate $21 million decrease in adjusted operating income for the year.
Aon also highlighted its ongoing integration of NFP and the anticipated financial commitments. The acquisition of NFP, valued at $13.0 billion, is expected to contribute significantly to the company’s growth. However, the integration process will incur non-recurring costs, including transaction and integration costs, which were $95 million in the second quarter.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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