AON(US:AON)2019-04-26 20:32Financial Performance - For Q1 2019, total revenue increased by 2%, or $53 million, to $3.1 billion, driven by organic revenue growth of 6%[162] - Operating margin improved to 27.7% in Q1 2019 from 25.9% in the prior year, supported by organic revenue growth and operational improvements[164] - Net income from continuing operations rose by $72 million, or 12%, to $676 million in Q1 2019 compared to the prior year[164] - Diluted earnings per share from continuing operations increased to $2.70 in Q1 2019 from $2.35 in the prior year[165] - Organic revenue growth was 6% for Q1 2019, up from 3% in the prior year, with strong performance in Reinsurance Solutions and Commercial Risk Solutions[167] - Adjusted operating margin for Q1 2019 was 33.7%, compared to 31.8% in the prior year, reflecting core operational improvements[168] - Adjusted operating income for the three months ended March 31, 2019, was $1,060 million, up from $983 million in the prior year, resulting in an adjusted operating margin of 33.7% compared to 31.8%[197] - Adjusted diluted earnings per share for the three months ended March 31, 2019, was $3.31, an increase from $2.97 in the same period of 2018[200] Revenue Breakdown - Commercial Risk Solutions revenue decreased by $66 million, or 6%, to $1,118 million, despite 6% organic revenue growth driven by strong new business generation[173] - Reinsurance Solutions revenue increased by $46 million, or 6%, to $788 million, with organic revenue growth of 9% driven by strong global business generation[174] - Health Solutions revenue increased by $35 million, or 8%, to $486 million, with organic revenue growth of 5% supported by strong international performance[176] - Organic revenue growth for the same period was 6%, with Commercial Risk Solutions experiencing a 6% decline, while Reinsurance Solutions grew by 9%[195] Cash Flow and Investments - Free cash flow decreased by $78 million, or 82%, to $17 million in Q1 2019, impacted by a decline in cash flow from operations[170] - Free cash flow for the three months ended March 31, 2019, was $17 million, a significant decrease from $95 million in the prior year[204] - Cash flow used for investing activities was $27 million during the three months ended March 31, 2019, a decrease of $373 million compared to the prior year period[223] - Cash flow used for financing activities was $140 million during the three months ended March 31, 2019, a decrease of $523 million compared to the prior year period[227] Debt and Financial Health - Total debt at March 31, 2019, was $6.4 billion, an increase of $172 million compared to December 31, 2018[230] - As of March 31, 2019, the company had distributable reserves of over $3.5 billion, up from $2.2 billion as of December 31, 2018, indicating strong financial health for funding shareholder dividends[234] - The company expects cash generated from operations in 2019 to be sufficient to service debt, finance capital expenditures, and continue share repurchases and dividends[235] - The company has two committed credit facilities totaling $1.3 billion, with $900 million expiring in February 2022 and $400 million in October 2022, and no borrowings under either facility as of March 31, 2019[236][237] Regulatory and Market Conditions - The company does not anticipate significant impacts from the U.K. Competition and Markets Authority's investigation into investment consulting and fiduciary management services[208] - The Financial Conduct Authority's market study found no evidence of material market conditions warranting further regulatory intervention affecting the company[209] Currency and Interest Rate Risks - Currency fluctuations had a $0.12 unfavorable impact on net income per diluted share during the three months ended March 31, 2019[206] - The company is exposed to foreign exchange rate risk, primarily between the U.S. dollar and several currencies, and has hedged approximately 45% of its U.K. subsidiaries' expected exposures for 2019 and 2020[259] - If prior year results were translated at current quarter exchange rates, diluted earnings per share would decrease by $0.12 for the three months ended March 31, 2019[261] - The company monitors its exposure to short-term interest rates and hedges this exposure with various derivative financial instruments, as changes in interest rates affect fiduciary investment income[263] Shareholder Actions - The company repurchased 0.6 million shares at an average price of $161.16 during the three months ended March 31, 2019, with total costs recorded to retained earnings of $101 million[229] Other Financial Metrics - The effective tax rate for continuing operations under U.S. GAAP was 15.7% for the three months ended March 31, 2019[200] - The company completed the acquisition of one business for a total consideration of $22 million during the first three months of 2019[225] - Pension contributions were $47 million for the three months ended March 31, 2019, compared to $48 million for the same period in 2018[217] - The restructuring plan is expected to incur cumulative costs of approximately $1,225 million through the end of the plan at December 31, 2019[219] - Fiduciary assets included cash and short-term investments of $4.5 billion at March 31, 2019[212] - The company guaranteed future operating lease commitments related to the Divested Business, with maximum potential future payments of $81 million and an estimated fair value of $16 million as of March 31, 2019[241] - Performance guarantees related to client arrangements assumed by the Buyer have a maximum potential future payment of $179 million, with an estimated fair value of $1 million[242] - The company had total letters of credit outstanding of approximately $92 million as of March 31, 2019, an increase from $83 million at December 31, 2018[243]