Tags: AON | insurance | Hewitt | stocks

Acquisitions Fuel Growth at Insurer Aon

By    |   Tuesday, 13 Sep 2011 03:18 PM

Global insurance broker Aon (AON) recently posted some impressive year-over-year earnings and revenue gains. The increases are the result of a strategic acquisition completed near the end of 2010. The purchase, of Hewitt Associates, also diversified the company's business model.

Aon is the world's largest insurance and reinsurance broker, with operations in more than 120 countries. The acquisition of Hewitt and the formation of Aon Hewitt made the company into a human resources consulting power. For the second quarter of 2011, insurance operations contributed just over 60 percent of revenues and the balance of about 40 percent of sales was from HR operations. The insurance side contributed 80 percent of Aon's income from continuing operations.

For the second quarter, Aon reported net income of 75 cents per share, up from 54 cents a year earlier. Income from “risk solutions” (insurance) posted a 16 percent increase. Sales on the insurance side were up 9 percent, of which 2 percent was organic growth and the balance from currency exchange benefits and acquisitions. Net income from HR solutions increased by 155 percent due to the integration of Aon Hewitt revenues.

The consensus estimate of earnings for full year 2011 is $3.40 per share, compared to the $3.12 earned in 2010. The estimate for 2010 comes in at $3.85.

Cyclical growth

Aon’s growth model may be boosted by a couple of cyclical factors. Insurance rates have been flat for several years and insurance company profits have been squeezed. When insurance companies start to increase rates, Aon's commission revenues also will increase. On the human resources side, an eventual move to higher employment levels will increase revenue growth. When the employment picture will improve is still just a guess.

Recent Wall Street analyst actions concerning Aon revolve around decreasing the target price while maintaining a buy rating on the stock. The analysts at Deutsche Bank and Citigroup have both pared a few dollars from their target prices. The analysts at Macquarie Group recently initiated coverage on Aon with an outperform rating. The company reports next on Oct. 28.

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Global insurance broker Aon (AON) recently posted some impressive year-over-year earnings and revenue gains. The increases are the result of a strategic acquisition completed near the end of 2010. The purchase, of Hewitt Associates, also diversified the company's business...
AON,insurance,Hewitt,stocks
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2011-18-13
Tuesday, 13 Sep 2011 03:18 PM
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