Today's Viewpoint: A MarshBerry Publication

AON Announces 1Q20 Earnings

Highlights from the AON earnings release and analyst call

AON plc. (AON) reported 1Q20 results this morning, which included 5% organic growth in the quarter which aligns with the other broker summaries MarshBerry has published this week. In March, AON announced its intent to acquire Willis Towers Watson (WLTW), a deal which is expected to close in the first quarter of 2021 after the necessary regulatory approvals. AON commentary on the earnings call is summarized below:

  • Results in the quarter were impacted by the COVID-19 crisis in specific segments where there is some discretionary project work (retirement solutions and data and analytics), but management described the impact through April as “modest.” AON indicated its revenue base is 80% non-discretionary spend. Management withdrew its financial guidance for the investment community of mid-single-digit or greater organic growth for the year.
  • AON was pressed by analysts to discuss any future projections on the business or range of possible outcomes but did not provide much detail. There were repeated references to the non-discretionary nature of the majority of the business and the fact that AON is a solution provider to their clients, not just a vendor. AON suggested that it is in a much more stable and diversified business position than the Great Recession, which saw revenues decline 1%.
  • AON is actively managing cash flow by centrally managing outside vendor spending, pausing its share buybacks, merger & acquisition activity and other discretionary investment spending. AON has not yet drawn on its committed credit facilities.
  • AON mentioned 98% of its workforce is working remotely and its committed to maintaining its workforce in full (no layoffs related to COVID-19). In an earlier announcement, AON’s CEO stated that he and other named officers are taking a 50% salary reduction, while the majority of the company will see salary reductions of approximately 20%, effective May 1st. Approximately 30% of AON’s staff will have no reduction at all.

Overall, the conference call did not include a great deal of detail with regards to the current impacts from COVID-19 or the outlook. Clearly there are expected to be some impacts as indicated by the redacted financial guidance, but the specifics were not communicated broadly.

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This earnings summary has been prepared by Marsh, Berry & Co., Inc. and is not intended to provide investment recommendations on any company. It is not a research report, as such term is defined by applicable laws and regulations, and it does not contain sufficient information upon which to make an investment decision. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities, financial instruments or to participate in any particular trading strategy. These materials are based solely on information contained in publicly available documents and Marsh, Berry & Co., Inc. has not independently attempted to investigate or to verify such information.

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