EUR 850.00 For Business Accounts Only

Morningstar | Aon Is Fast Off the Blocks in 1Q

Aon had a good start to the year, with solid growth and ongoing margin improvement thanks to the company’s restructuring plan. However, nothing in the quarter alters our long-term view. We still see Aon as something of a tollbooth business, capable of modest but relatively stable growth. We will maintain our $154 fair value estimate and narrow moat rating.

Aon had a good quarter on the brokerage side, with the commercial risk and reinsurance solutions segments growing 6% and 9% year over year, respectively, excluding currency effects and acquisitions. To some extent, we believe the company is benefiting from a firming insurance pricing environment, as its main peer, Marsh & McLennan, also reported good results on this side. But Aon did slightly outperform its primary competitor on this score.

The rest of Aon’s operations were somewhat mixed, with the retirement, health and data, and analytics segments posting year-over-year growth of 2%, 5%, and 5%, respectively, excluding currency effects and acquisitions. Having expected only modest growth from these areas longer term, the quarter was more or less in line with our expectations.

Aon continues to see strong margin improvement on the back of its restructuring efforts, with adjusted operating margins increasing to 33.7% from 31.8% last year. The restructuring will wrap up by year-end, though, and the company has already incurred 88% of its planned restructuring costs. This suggests the margin improvement is almost fully baked into results at this point. Still, we think the profitability improvements associated with this effort have been impressive, and the company’s success is further support for our Exemplary stewardship rating.