Today's Viewpoint: A MarshBerry Publication

AON ANNOUNCES 1Q2022 EARNINGS

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.

Here are notable highlights from the earnings report:

  • AON reported 1Q22 organic growth 8% of 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. 1Q2022 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 prior 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 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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This earnings summary has been prepared by Marsh, Berry & Co., LLC. 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., LLC has not independently attempted to investigate or to verify such information.

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