) reported second quarter 2012 earnings of $1.02 per share, beating
the Zacks Consensus Estimate by a penny. Also, it slightly fell
from its prior-quarter earnings by a cent. Earnings of $341 million
in the reported quarter decreased by 3.7% from $354 million
recorded in the second quarter of 2011.
The company incurred restructuring charges of $13 million,
intangible asset amortization of $104 million and headquarter
relocation costs of $14 million during the reported quarter.
Adjusting for these one-time charges, Aon Corp. reported a net
income of $246 million or 73 cents per share compared with net
income of $258 million or 75 cents per share.
During the quarter under review, total revenue amounted to $2.82
billion, flat year-on-year but a tad below the Zacks Consensus
Estimate of $2.89 billion. Increase in organic revenue and higher
commissions and fees resulting from acquisitions were offset by
unfavorable foreign currency translation and lower investment
Total operating expenses amounted to $56 million in the second
quarter, increasing 2% from the prior-year quarter primarily due to
a 4% increase in organic revenue, incremental investments in talent
and capabilities, $14 million of headquarter relocation costs and a
$13 million increase in intangible asset amortization expense,
neutralized by a $93 million favorable impact from foreign currency
translation and a $16 million decline in lease termination
The effective tax rate for the current quarter increased 280
basis points to 27.5%.
The Risk Solutions Segment
reported total revenue of $1.9 billion decreasing marginally by 1%
over the prior-year quarter. The improvement was driven by 4%
organic improvement in commissions and fees, partially offset by an
adverse impact of 4% from foreign currency and a decline of 33% in
Adjusted operating income improved 3% year over year to $416
million. Operating margin expanded 80 basis points year over year
to 21.9%, stemming from increase in organic revenue, an 80 basis
point favorable benefit from lower lease termination costs and
savings related to the restructuring programs. However, these
positives were dwarfed by significant investments in GRIP related
services and key talent across Asia and Latin America.
Reported Operating income came in at $384 million increasing 2%
against the prior-year quarter.
The HR Solutions Segment
reported total revenue of $931million, exhibiting an improvement of
3% over the prior-year quarter. The boost in revenue was primarily
due to organic increase in commissions and fees and favorable
impact of acquisitions and divestitures, partially offset by an
unfavorable impact of 2% from foreign currency volatility.
Adjusted operating income decreased 20% year-on-year to $143
million. Operating margin contracted 440 basis points to 15.4%,
attributable to unfavorable impact for investment spend in new
growth opportunities, an unfavorable revenue mix shift, and
increase in deferred costs, partially offset by benefits related to
the Aon Hewitt restructuring program.
Reported operating income plunged 39% to $58 million during the
Cash and cash equivalents of Aon Corp. as of June 30, 2012
increased 5.1% over 2011-end to $286 million. Total assets with the
company were valued at $30.8 billion, increasing 4.2% from $29.6
billion as on December 31, 2011.
Long term debt was $4.1 billion, declined 9.9% over 2011 end
Share Buyback & Dividend
On April 19, 2012, the Board of Aon Corp. authorized a $5
billion share repurchase program as a replacement to its previous
2010-authoriztion. Concurrently, the Board also approved a 5%
During the quarter, Aon Corp. repurchased 5.3 million Class A
ordinary shares for nearly $250 million. Presently, the company has
$4.7 billion of shares remaining under its authorization.
On July 12, 2012, the Board declared a regular dividend of 15.75
cents per share, which will be paid on August 15, 2012, to
shareholders of record as on August 1, 2012.
The company competes closely with
Marsh & McLennan Companies, Inc.
), which is scheduled to release its second quarter earnings on
August 7 and
Willis Group Holdings Public Limited Company
) on August 1
The Zacks Consensus Estimates for Marsh& McLennan and Willis
Group are pegged at 58 cents per share and 59 cents per share,
Aon Corp. carries a Zacks #4 Rank, implying a short-term Sell
AON PLC (AON): Free Stock Analysis Report
MARSH &MCLENNAN (MMC): Free Stock Analysis
WILLIS GP HLDGS (WSH): Free Stock Analysis
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