Aon plc (NYSE: AON), a leading global professional services firm, has reported impressive financial results for the second quarter and first half of 2024, demonstrating its ability to execute on its strategic priorities and create value for its clients, colleagues, and shareholders.

Financials

In the second quarter of 2024, Aon delivered total revenue of $3.76 billion, a remarkable 18% increase compared to the prior-year period. This strong performance was driven by 6% organic revenue growth across all of the company's solution lines, as well as the contribution from the recently acquired NFP, a leading middle-market provider of property and casualty brokerage, benefits consulting, wealth management, and retirement plan consulting.

For the first half of 2024, Aon reported total revenue of $7.83 billion, an 11% increase compared to the same period in 2023. This growth was fueled by 5% organic revenue growth and the addition of NFP. The company's annual revenue for 2023 was $13.40 billion.

Aon's net income for the second quarter of 2024 was $538 million, while for the first half of the year, net income reached $1.63 billion. The company's annual net income for 2023 was $2.56 billion. Aon's strong financial performance is a testament to its ability to execute on its strategic priorities and deliver value to its clients.

Business Overview

One of the key drivers of Aon's success has been its focus on organic growth. In the second quarter, the company's organic revenue growth was 6%, with all of its solution lines – Commercial Risk, Reinsurance, Health, and Wealth – delivering 6% or greater organic growth. This consistent performance across the business demonstrates Aon's ability to capitalize on evolving client needs and market opportunities.

The company's Commercial Risk Solutions segment, which accounts for the largest portion of its revenue, delivered 6% organic growth in the second quarter, driven by strong new business generation and retention rates across all major geographies. The Reinsurance Solutions segment also performed well, with 7% organic growth, reflecting strong growth in treaty placements and facultative placements, particularly in Latin America, EMEA, and Asia Pacific.

Aon's Health Solutions segment reported 6% organic growth, driven by high single-digit growth in core health and benefits brokerage, as well as strength in consumer-facing and executive benefits solutions. The Wealth Solutions segment delivered an impressive 9% organic growth, reflecting ongoing strength in pension de-risking and core retirement services.

The acquisition of NFP has also been a significant driver of Aon's growth. In the two months since the acquisition was completed, NFP's performance has been in line with expectations, delivering mid-single-digit organic revenue growth. Aon is confident that NFP will contribute to the firm's overall revenue growth through organic growth, including $175 million in net revenue synergies by 2026, as well as inorganic growth from ongoing M&A activities.

Operational Performance

Aon's operational performance has also been strong, with adjusted operating margins of 33.8% in the first half of 2024, an increase of 20 basis points compared to the prior-year period. This margin expansion was driven by revenue growth, portfolio mix shift, efficiencies from the company's Aon Business Services platform, and restructuring savings.

The company's Accelerating Aon United Program, a three-year restructuring initiative, has been a key contributor to Aon's margin expansion. In the second quarter, the program generated $25 million in savings, resulting in $45 million of savings year-to-date and a 60-basis-point contribution to adjusted operating margin. Aon expects the program to generate $100 million in realized savings in 2024 as it continues to streamline operations and enhance its client and colleague experience.

Liquidity

Aon's strong financial performance has also translated into robust cash flow generation. In the first half of 2024, the company generated $822 million in cash flow from operations and $721 million in free cash flow. While near-term free cash flow will be impacted by restructuring costs, higher interest expense, and NFP integration expenses, Aon remains confident in its long-term free cash flow growth potential, with expectations of double-digit growth driven by increasing operating income and continued working capital improvements.

The company's balance sheet remains strong, with total assets of $51.5 billion as of June 30, 2024. Aon's long-term debt stood at $17.6 billion, up from $9.99 billion at the end of 2023, primarily due to the financing of the NFP acquisition. The company expects its credit ratios to be elevated over the next 12-18 months as it works to bring its leverage ratios back in line with its target levels.

Outlook

Looking ahead, Aon remains optimistic about its growth prospects. The company expects to deliver mid-single-digit or greater organic revenue growth for the full year 2024 and over the long term. Additionally, Aon is confident in its ability to drive adjusted operating margin expansion in 2024 and beyond, with a baseline of 30.6% for 2025 and beyond.

The company's capital allocation strategy remains focused on driving long-term value creation. Aon plans to allocate capital across organic investments, acquisitions, and share repurchases, with share buybacks expected to be its highest ROIC opportunity given the firm's strong free cash flow outlook. The company completed $500 million in share repurchases in the first half of 2024 and expects to continue substantial buyback activity, with a target of over $1 billion for the full year.

Conclusion

In summary, Aon's exceptional second-quarter and first-half 2024 results demonstrate the company's ability to execute on its strategic priorities and deliver value for its stakeholders. With its focus on organic growth, operational excellence, and disciplined capital allocation, Aon is well-positioned to continue driving long-term value creation for its clients, colleagues, and shareholders.