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Aon Reports Third Quarter 2022 Results
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PR Newswire
DUBLIN, Oct. 28, 2022
Third Quarter Key Metrics
- Total revenue was flat at $2.7 billion, including organic revenue growth of 5%
- Operating margin increased 5,150 basis points to 21.9%, and operating margin, adjusted for certain items, increased 100 basis points to 23.1%
- EPS increased 148% to $1.92, and EPS, adjusted for certain items, increased 16% to $2.02
- For the first nine months of 2022, cash flows from operations increased 74% to $2,177 million, and free cash flow increased 79% to $2,051 million
Third Quarter Highlights
- Repurchased 4.2 million class A ordinary shares for approximately $1.2 billion
- Established the Strategy and Technology Group within Reinsurance, which combines strategic advice with data-driven consulting, analytics, and modeling tools to help clients deploy capital efficiently and effectively
- Within Wealth Solutions, achieved $1 billion in U.S. plan assets and commitments for Aon's pooled employer plan (PEP), and reached a new pension risk transfer milestone, advising on transactions totaling over $200 billion of premium since 2010
- Appointed James Platt as Chief Digital Officer and Mindy Simon as Chief Operating Officer, accelerating the digital delivery of our capabilities and furthering our growth enablement from Aon Business Services
DUBLIN, Oct. 28, 2022 /PRNewswire/ -- Aon plc (NYSE: AON) today reported results for the three months ended September 30, 2022.
Net income (loss) attributable to Aon shareholders increased to $408 million, or $1.92 per share on a diluted basis, compared to $(900) million, or $(3.99) per share, in the prior year period. Net income per share attributable to Aon shareholders, adjusted for certain items, increased 16% to $2.02 on a diluted basis, including an unfavorable impact of $0.05 per share if prior year period results were translated at current period foreign exchange rates ("foreign currency translation"), compared to $1.74 in the prior year period. Certain items that impacted third quarter results and comparisons with the prior year period are detailed in the "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings Per Share" on page 10 of this press release.
"In the third quarter, our team continued to deliver strong top and bottom-line results, highlighted by 5% organic revenue growth and 16% adjusted EPS growth, and contributing to strong year-to-date progress on our key financial metrics, including 7% organic revenue growth year-to-date, adjusted operating margin expansion of 80 basis points, and strong free cash flow growth," said Greg Case, Chief Executive Officer. "These results demonstrate the importance of our Aon United strategy in helping clients navigate growing volatility and make better decisions that protect and grow their business."
THIRD QUARTER 2022 FINANCIAL SUMMARY
Total revenue in the third quarter was flat at $2.7 billion compared to the prior year period reflecting 5% organic revenue growth and a 1% favorable impact from fiduciary investment income, offset by a 5% unfavorable impact from foreign currency translation and a 1% unfavorable impact from acquisitions, divestitures, and other.
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Total operating expenses in the third quarter decreased 40% to $2.1 billion compared to the prior year period due primarily to the $1.0 billion payment made in connection with the termination of the proposed combination with Willis Towers Watson (the "Termination Fee") and certain transaction costs incurred related to the termination in the prior year period (together, the "transaction costs") and a $138 million favorable impact from foreign currency translation, partially offset by an increase in expense associated with 5% organic revenue growth and investments in long-term growth.
Foreign currency translation in the third quarter had a $9 million, or $0.04 per share, favorable impact on net income and a $10 million, or $0.05 per share, unfavorable impact on adjusted net income. If currency were to remain stable at today's rates, the Company would expect an unfavorable impact of approximately $0.11 per share, or an approximately $33 million decrease in operating income, in the fourth quarter of 2022.
Effective tax rate in the third quarter was 18.0%, compared to (2.6)% in the prior year period. The primary driver of the change was the impact of the $1 billion Termination Fee payment in the prior year period. After adjusting to exclude the applicable tax impact associated with certain non-GAAP adjustments, the adjusted effective tax rate for the third quarter of 2022 decreased to 19.1% compared to 23.9% in the prior year period. The primary drivers of the change in the adjusted tax rate were the geographical distribution of income and a net favorable impact from discrete items.
Weighted average diluted shares outstanding decreased to 212.6 million in the third quarter compared to 225.4 million in the prior year period. The Company repurchased 4.2 million Class A Ordinary Shares for approximately $1.2 billion in the third quarter. As of September 30, 2022, the Company had approximately $6.7 billion of remaining authorization under its share repurchase program.
YEAR TO DATE 2022 CASH FLOW SUMMARY
Cash flows provided by operations for the first nine months of 2022 increased $926 million, or 74%, to $2,177 million compared to the prior year period, primarily due to the transaction costs in the prior year period, and strong operating income growth, partially offset by higher receivables and incentive compensation payments following strong performance in 2021.
Free cash flow, defined as cash flows from operations less capital expenditures, increased 79%, to $2,051 million for the first nine months of 2022 compared to the prior year period, reflecting an increase in cash flows from operations, partially offset by a $24 million increase in capital expenditures.
THIRD QUARTER 2022 REVENUE REVIEW
The third quarter revenue reviews provided below include supplemental information related to organic revenue growth, which is a non-GAAP measure that is described in detail in "Reconciliation of Non-GAAP Measures - Organic Revenue Growth and Free Cash Flow" on page 9 of this press release.
| | | Three Months Ended | | | | | | | | | | | ||
| (millions) | | 2022 | | 2021 | | % Change | | Less: | | Less: | | Less: | | Organic |
| Revenue | | | | | | | | | | | | | | |
| Commercial Risk Solutions | | $ 1,482 | | $ 1,505 | | (2) % | | (5) % | | 1 % | | (3) % | | 5 % |
| Reinsurance Solutions | | 396 | | 353 | | 12 | | (4) | | 3 | | 6 | | 7 |
| Health Solutions | | 494 | | 497 | | (1) | | (4) | | — | | (2) | | 5 |
| Wealth Solutions | | 326 | | 351 | | (7) | | (6) | | — | | (3) | | 2 |
| Eliminations | | (2) | | (4) | | N/A | | N/A | | N/A | | N/A | | N/A |
| Total revenue | | $ 2,696 | | $ 2,702 | | — % | | (5) % | | 1 % | | (1) % | | 5 % |
Total revenue was flat at $2,696 million compared to the prior year period, with organic revenue growth of 5%, driven by ongoing strong retention and net new business generation.
Commercial Risk Solutions organic revenue growth of 5% reflects strong growth across most major geographies driven by strong retention, new business generation, and management of the renewal book portfolio. Strength in retail brokerage was highlighted by double-digit growth in the UK, Asia, and Latin America, driven by continued strength in core P&C. U.S. retail brokerage was pressured primarily by transaction solutions, which declined primarily due to lower external deal volume. On average globally, exposures and pricing were modestly positive, resulting in a modestly positive market impact.
Reinsurance Solutions organic revenue growth of 7% reflects strong growth in treaty, driven by strong retention and new business generation, as well as solid growth in both facultative placements and the Strategy and Technology Group. Market impact was modestly positive on results in the quarter. The majority of revenue in our treaty portfolio is recurring in nature and is recorded in connection with the major renewal periods that take place throughout the first half of the year, while the second half of the year is largely driven by facultative placements and capital markets that are more transactional in nature.
Health Solutions organic revenue growth of 5% reflects double-digit growth in Human Capital, driven by data and advisory solutions. Results also reflect growth globally in core health and benefits brokerage, driven by strong retention and management of the renewal book portfolio, partially offset by a negative impact from the timing of certain revenues, as described in the second quarter and prior year period.
Wealth Solutions organic revenue growth of 2% reflects growth in Retirement, driven by higher utilization rates and project work related to pension de-risking and ongoing impacts of regulatory changes. In Investments, a decrease in AUM-based delegated investment management revenue was partially offset by growth in project-related work.
THIRD QUARTER 2022 EXPENSE REVIEW
| | | Three Months Ended | | | | | ||
| (millions) | | 2022 | | 2021 | | $ Change | | % Change |
| Expenses | | | | | | | | |
| Compensation and benefits | | $ 1,532 | | $ 1,835 | | $ (303) | | (17) % |
| Information technology | | 133 | | 130 | | 3 | | 2 Werbung Mehr Nachrichten zur Aon Plc. Aktie kostenlos abonnieren
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