Moody's Investors Service, the credit rating wing of
) has provided the pending debt issuance of
) with a "Baa2" rating. The rating carried a positive outlook.
The proceeds from the senior unsecured notes, guaranteed by Aon's
main U.S. subsidiary, Aon Corporation will be used for general
corporate purposes and repayment of the commercial paper
The ratings came on the back of Aon's strong global foothold,
huge clientele across various businesses, diversified product
portfolio and proficient provision of risk and human resource
solutions to middle-market, national and global customers.
So far in 2013, Aon generated 3% organic revenue growth and
maintained robust earnings before interest, tax, depreciation and
amortization (EBITDA) and net profit margins. Moreover, Aon is
the holding company of one of the leading insurance brokerage and
consulting businesses in the world that has helped it generate
strong profits over the past few years. Moody's also recognizes
that Aon is capable of improving margins further as it approaches
the culmination of its restructuring initiatives.
However, as per Moody's, high financial leverage and weak fixed
charge coverage metrics partially offset the strengths of the
company. Slow economic growth, especially in Europe, and risks
associated with the professional services business including
potential liabilities that stem from errors and omissions, also
weigh on Aon's performance.
Moody's stated that an upgrade in Aon's ratings is likely if net
profit margin approaches 10%, (EBITDA excluding capex) interest
coverage is above 7x or debt-to-EBITDA ratio is below 2.5x. On
the contrary, a downward revision in outlook to stable is
possible if net profit margin is below 7%, (EBITDA excluding
capex) interest coverage is below 5x or debt-to-EBITDA is above
Aon has scored strongly with credit rating agencies. In Oct 2013,
Fitch Ratings affirmed Aon's Issuer Default Rating (IDR) and
senior debt ratings at "BBB+". The commercial paper ratings were
also affirmed at "F2". All the ratings carried a stable outlook.
Strong ratings from credit rating agencies increase
creditworthiness of a company in the market. We believe that
Aon's present score with the credit rating agencies will help it
write more business going forward.
Among other insurance brokers,
Willis Group Holdings Inc.
) received Moody's "Baa3" rating on its $250 million of 10-year
and $275 million of 30-year senior unsecured notes, issued by one
of its subsidiaries, Trinity Acquisition plc in Aug 2013. The
rating carried a stable outlook.
Aon carries a Zacks Rank #2 (Buy). Another better-ranked stock
in the insurance space is
Employers Holdings, Inc.
) with a Zacks Rank #1 (Strong Buy).
AON PLC (AON): Free Stock Analysis Report
MOODYS CORP (MCO): Free Stock Analysis Report
WILLIS GP HLDGS (WSH): Free Stock Analysis
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