Summary:
Aon's durability lies in its core business strengthening initiatives, efficient capital deployments and cost savings generated from its restructuring programs. However, increasing debt burden and competitive pressure raise concern. The company s third quarter earnings surpassed the Zacks Consensus Estimate on improved underlying operational performance and prudent capital management. The acquisition of National Flood Services also fostered improved operational efficiencies, thereby enhancing Aon s capabilities within flood insurance. Additionally, strong M&A activities, divestitures and restructuring initiatives position Aon to generate long-term growth. However, deterioration in the leverage ratio, stiff competition, ongoing legal hassles and foreign currency fluctuations remain headwinds. Hence, we maintain our Neutral recommendation on the stock.
Overview:
Headquartered in London, Aon plc is a British multinational corporation that offers risk management services, insurance and reinsurance brokerage, human resource consulting and outsourcing services globally. The company operates in more than 120 countries. As an insurance broker, Aon utilizes its resources to develop individual as well as group insurance programs. It offers its services globally across personal lines, mid-market companies and multinational companies.
In Oct 2010, Aon Corporation, a wholly owned subsidiary of Aon plc, acquired Hewitt Associates an American company that provided human capital and management consulting services. Hewitt merged with the consulting services business of Aon to form Aon Hewitt.
The two reportable segments of Aon are:
The Risk Solutions (contributing 66% of revenues in 2013) segment provides advisory and insurance and reinsurance brokerage services. To help its clients manage risks, the segment offers consultation and negotiation services through Aon's global distribution network.
The HR Solutions (34%) segment collaborates with organizations to provide solutions to their complex benefits, talent and related financial challenges. Moreover, this segment designs, implements, communicates and administers human capital, retirement, compensation, talent management and so on to enhance operating performance of these organizations.
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