Aon PLC (NYSE: AON) reported 1Q22 adjusted Earnings Per Share (EPS) today of $4.83 on revenue of $3.67 billion vs. consensus estimates of $4.81 on revenue of $3.72 billion. AON’s quarterly and full year results were driven by continued strong client retention and new business generation.
Notable Highlights from the AON Q1 2022 Earnings Report
- AON reported 1Q22 organic growth of 8% vs. 4Q21’s 10%. Commercial Risk and Consumer Benefit Solutions and Human Capital had strong results in the first quarter. Commercial Risk saw “growth in every major geography and particular strength across renewals and retention.” In the Consumer Benefit Solutions and Human Capital segment, AON noted that clients are very focused on compensation, talent, and opportunities related to Environmental, Social, and Governance.
- AON’s largest business segment, Commercial Risk Solutions, had organic growth of 9% in the first quarter vs. 12% in the 4Q21. AON 1Q2022 earnings results reflect growth across all geographies and strength in retention and renewals.
- Reinsurance Solutions reported organic growth of 7% in 1Q22 below 4Q21’s 13%. AON noted that first-quarter growth was driven by new business generation and retention. Health Solutions had organic growth of 8% vs. 7% in the previous fourth quarter.
- The company highlighted the strength of its Aon Business Services platform as an effective tool for client service and growth. CEO Gregory Case spoke of AON’s work with a multinational chemical company: “Comprehensive data…bring insights around the value of the client’s intellectual property as a driver of their priority M&A activity. This created great value for them and opened up substantial opportunities for us in many areas, including transactional liability and intellectual property solutions. More simply, these analytics help us identify innovative opportunities and where we might be underpenetrated today by geography or by solution lines.”
- In terms of future uses of cash, AON continues to see share repurchase as the highest return on capital opportunity, consistent with the prior fourth quarter. During the first quarter, AON repurchased $800 million of shares. CFO Christa Davies said of the merger & acquisition (M&A) strategy: “Our M&A pipeline is focused on our highest priority areas that will bring scalable solutions to our clients’ growing and evolving challenges. We continue to assess all capital allocation decisions and manage our portfolio on a return on capital basis.” AON noted that it issued $1.5 billion in senior notes in the first quarter with leverage ratios within range for its current investment-grade ratings.
- Looking forward, AON continues to see mid-single-digit or higher organic revenue growth, margin improvement, and double-digit free cash flow growth in 2022 and over the long term.
- CFO Christa Davies discussed the correlation between GDP growth and AON’s revenue, including the drivers of GDP: asset values, corporate revenue, and employment levels. While some global GDP forecasts have decreased, AON believes it has a very resilient revenue base, but noted more uncertainty in “overall trends.”
Overall, AON turned in a strong first quarter for 2022 that was assisted by new opportunities for AON’s clients, as well as continued strength in new business and retention. While the company is confident in its future performance, AON mentioned that it’s continually monitoring and responding to the increasing global volatility, including global conflicts, inflation, interest rates, asset values, employment trends, new variants, and shifts in GDP growth; and how these factors could affect both its business and clients.
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