Aon Plc is a leading global professional services firm that provides a range of risk, retirement, and health solutions to clients around the world. The company's financial strength is a critical factor in its ability to deliver on its promises to clients and investors. In this review, we will examine Aon's financial strength in detail, including its revenue, profitability, balance sheet, and cash flow.
Revenue and Profitability
Aon’s revenue has consistently grown over the years, driven by its diversified portfolio of services and its global presence. In 2022, the company reported revenue of 12.1 billion, up 4% from 11.6 billion in 2021. Aon’s profitability is also strong, with a net income of $1.3 billion in 2022, representing a margin of 10.7%.
The company’s operating margin has been steadily improving, driven by its efforts to streamline operations and improve efficiency. In 2022, Aon’s operating margin was 15.1%, up from 14.4% in 2021. The company’s return on equity (ROE) is also impressive, at 42.1% in 2022, indicating that it is generating strong returns for its shareholders.
Aon’s revenue is diversified across its three main segments: Risk & Health Solutions, Retirement Solutions, and Data & Analytic Services. The Risk & Health Solutions segment is the largest contributor to revenue, accounting for 54% of total revenue in 2022. The Retirement Solutions segment accounted for 26% of revenue, while the Data & Analytic Services segment accounted for 20%.
Balance Sheet
Aon’s balance sheet is strong, with a debt-to-equity ratio of 0.64 in 2022, indicating that the company has a conservative approach to debt financing. The company’s current ratio is also healthy, at 1.23, indicating that it has sufficient liquidity to meet its short-term obligations.
Aon’s balance sheet is supported by its investment portfolio, which includes a diversified range of assets, such as bonds, stocks, and real estate. The company’s investment portfolio had a fair value of 24.6 billion at the end of 2022, representing a significant source of potential future earnings.</p> <p>The following table summarizes Aon's balance sheet metrics:</p> <table> <tr><th>Metric</th><th>2022</th><th>2021</th></tr> <tr><td>Debt-to-equity ratio</td><td>0.64</td><td>0.67</td></tr> <tr><td>Current ratio</td><td>1.23</td><td>1.20</td></tr> <tr><td>Investment portfolio (fair value)</td><td>24.6 billion$23.4 billion
Cash Flow
Aon’s cash flow is strong, with operating cash flow of 2.3 billion in 2022, representing a margin of 19.1% of revenue. The company's <em>free cash flow</em> is also impressive, at 1.8 billion in 2022, indicating that it has sufficient cash to invest in growth initiatives and return capital to shareholders.
The company’s cash flow is supported by its working capital management, which includes a range of initiatives to optimize its accounts receivable, accounts payable, and inventory levels. Aon’s working capital management has resulted in a days sales outstanding (DSO) of 45 days in 2022, which is relatively low compared to its peers.
Regulatory Environment
Aon operates in a highly regulated environment, with a range of laws and regulations governing its activities. The company is subject to regulation by various government agencies, including the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) in the United States.
Aon is also subject to international regulatory requirements, such as the European Union’s General Data Protection Regulation (GDPR) and the United Kingdom’s Financial Conduct Authority (FCA) regulations. The company has a strong compliance program in place to ensure that it meets all relevant regulatory requirements.
The following table summarizes Aon’s regulatory environment:
| Regulator | Jurisdiction |
|---|---|
| Securities and Exchange Commission (SEC) | United States |
| Financial Industry Regulatory Authority (FINRA) | United States |
| European Union’s General Data Protection Regulation (GDPR) | European Union |
| United Kingdom’s Financial Conduct Authority (FCA) | United Kingdom |
What is Aon’s business model?
+Aon’s business model is based on providing a range of risk, retirement, and health solutions to clients around the world. The company generates revenue through a combination of commissions, fees, and investment income.
What are Aon’s key financial metrics?
+Aon’s key financial metrics include revenue, net income, operating margin, return on equity, debt-to-equity ratio, current ratio, and investment portfolio fair value.
What is Aon’s regulatory environment?
+Aon operates in a highly regulated environment, with a range of laws and regulations governing its activities. The company is subject to regulation by various government agencies, including the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) in the United States.
