Aon : Fourth Quarter 2024 Results Presentation

Published: 2025-01-31 06:08:14 ET AON

Earnings Conference Call

Fourth Quarter and Full Year 2024

January 31, 2025

Explanation of Non-GAAP Measures

This communication includes supplemental information not calculated in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"), including Organic revenue growth, free cash flow, free cash flow margin, adjusted operating income, adjusted operating margin, adjusted earnings per share, adjusted net income attributable to Aon shareholders, adjusted diluted net income per share, adjusted effective tax rate, adjusted other income (expense), and adjusted income before income taxes that exclude the effects of intangible asset amortization and impairment, Accelerating Aon United Program expenses, contingent consideration, NFP transaction and integration costs, certain pension settlements, capital expenditures, and certain other noteworthy items that affected results for the comparable periods. Organic revenue growth includes the impact of intercompany activity and excludes foreign exchange rate changes, acquisitions (provided that Organic revenue growth includes Organic growth of an acquired business as calculated assuming that the acquired business was part of the combined company for the same proportion of the relevant prior year period), divestitures (including held for sale disposal groups, if any), transfers between revenue lines, fiduciary investment income, and gains or losses on derivatives accounted for as hedges. Currency impact represents the effect on prior year period results if they were translated at current period foreign exchange rates. Reconciliations to the closest U.S. GAAP measure for each non-GAAP measure presented in this communication are provided in the attached appendices. Supplemental Organic revenue growth information and additional measures that exclude the effects of certain items noted above do not affect net income or any other U.S. GAAP reported amounts. Free cash flow is cash flows from operating activity less capital expenditures. The adjusted effective tax rate excludes the applicable tax impact associated with adjustments previously described, generally at the estimated annual effective tax rate or jurisdictional rate, where appropriate. Beginning in the third quarter of 2024, the adjusted effective tax rate also excludes interest accruals for income tax reserves related to the termination fee payment made in connection with the Company's terminated proposed combination with Willis Towers Watson. Management believes that these measures are important to make meaningful period-to-period comparisons and that this supplemental information is helpful to investors. Management also uses these measures to assess operating performance and performance for compensation. Non-GAAP measures should be viewed in addition to, not in lieu of, Aon's Condensed Consolidated Financial Statements. Industry peers provide similar supplemental information regarding their performance, although they may not make identical adjustments.

Executive Summary

Key Messages

We closed the year with another strong quarter of performance and delivered an outstanding full year 2024, with 6% Organic revenue growth, strong margins, double-digit adjusted EPS growth and $2.8B of Free Cash Flow, with NFP performing inline or better than our business case

Our strong execution in year one of our 3x3 Plan is creating differentiation in how we serve clients which is translating into winning more clients, expanding client relationships and increasing client retention

Our growth in Risk Capital and Human Capital, powered by Aon Business Services and delivered through Aon Client Leadership, also reflects robust demand for our solutions as we continue to help clients address increasing volatility and complexity in their businesses

We are introducing 2025 guidance that positions Aon to continue its long-term track record of delivering mid-single-digit or greater Organic revenue growth, adjusted margin expansion, strong adjusted EPS growth and double-digit Free Cash Flow growth

Our 2025 Free Cash Flow generation is expected to enable us to execute our capital allocation model, including meeting our leverage objective in Q4'25, investing in organic growth and tuck-in M&A, and returning capital to shareholders, including $1B in share repurchases

Summary Financial Results1

($ in millions, except per share data)

Q4'24

Inc/(Dec)

FY'24

Inc/(Dec)

Total revenue

$4,147

23%

$15,698

17%

Organic revenue growth (Non-GAAP)

Operating income

$1,091

40%

$3,835

Adjusted operating income (Non-GAAP)

$1,380

21%

$4,939

17%

Adjusted operating margin expansion (Non-GAAP)

33.3%

(50) bps

31.5%

(10) bps

Adjusted operating margin expansion, from Aon + NFP2

140 bps

90 bps

Diluted earnings per share

$3.28

33%

$12.49

Adjusted earnings per share (Non-GAAP)

$4.42

14%

$15.60

10%

Free cash flow (Non-GAAP)

$1,145

(6)%

$2,817

(11)%

for FY'24 reflects +90 bps of margin expansion from the combined historical margin profile of Aon and NFP of 30.6%. Please refer to Appendix E.

Quarterly Performance

Organic Revenue¹ - Strong Growth From All Solution Lines

Q4'23

Q4'24

FY'23

FY'24

Risk Capital:

Commercial Risk Solutions

+4%

+6%

+5%

Reinsurance Solutions

+14%

+6%

+10%

+7%

Human Capital:

Health Solutions

+11%

+5%

+10%

+6%

Wealth Solutions

+5%

+8%

+4%

+7%

Total Aon

+7%

+6%

+7%

+6%

1. Organic revenue is a non-GAAP measure that is reconciled to its corresponding U.S. GAAP measure in Appendix A of this presentation.

Quarterly Summary of Organic Revenue Growth¹ By Solution Line

Risk Capital

Commercial Risk Solutions

Reinsurance Solutions

Human Capital

Health Solutions

Wealth Solutions

1. Organic revenue growth is a non-GAAP measure that is reconciled to its corresponding U.S. GAAP measure in Appendix A of this presentation.

Adjusted Operating Margin1 - Driven By Strong Organic Revenue Growth

+17%

+21%

(50) bps

(10) bps

Q4 Commentary

Full Year 2024 Commentary

FY'24 reflects +90 bps of margin expansion from the combined historical margin profile of Aon and NFP of 30.6%. Please refer to Appendix E.

Disclaimer

AON plc published this content on January 31, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on January 31, 2025 at 11:07:32.160.