* Sees margin pressure to persist
* Adj oper margin down 180 bps in HR solutions
* Q1 adj EPS $0.98 vs est $1.06
* Q1 rev up 3 pct to $2.84 bln vs est $2.84 bln
* Shares down 5 percent
By Aman Shah
May 4 (Reuters) – Insurance broker Aon Plc’s margins
will continue to face pressure in the near term, but said it
expects to start reaping benefits from investments in its human
resources segment by next year.
The world’s largest insurance broker posted a lower
first-quarter adjusted profit after margins at its HR segment,
Aon Hewitt, continued to fall for the third time in a row due to
rising costs and slowing revenue growth.
Aon bought HR specialist Hewitt Associates for $4.9 billion
in 2010 to create the world’s largest HR services company, but
costs continue to climb as it invests in new areas such as
healthcare exchanges and HR business process outsourcing.
The company expects to cut back on investments and sees
greater savings in the second half of the year, which will lead
to operating income growth in 2013, Chief Financial Officer
Christa Davies said.
The company operates under two main segments – risk
solutions and HR solutions. The risk solutions unit includes
Aon’s retail insurance brokerage and reinsurance business, while
the HR solutions unit consists of consulting and outsourcing
operations.
“Risk solutions margins will be positive in 2012, on a
year-on-year basis,” CEO Greg Case said on a post-earnings
conference call.
The company, which has a market capitalization of $16.76
billion, also backed its long-term operating margin target of 26
percent in the risk solutions segment and 22 percent in the HR
solutions segment.
1ST-QTR PROFIT MISSES
For the first quarter, Aon said that adjusted operating
income at its HR unit fell 7 percent to $156 million, while
operating margins fell to 16.5 percent from 18.3 percent.
Net income attributable to shareholders fell to $238 million
from $246 million for the year-ago period.
On a per-share basis, net income was flat at 71 cents per
share, while excluding items, Aon — which sponsors English
Premier League football club Manchester United — earned 98
cents per share. [ID: nL4E8G454L]
Aon’s results were in contrast to those of rival Marsh &
McLennan Co Inc, which posted estimate-topping profit
earlier this week, as its consulting segment showed strong
revenue growth and margin expansion.
Aon shares were trading down 5 percent at $48.73 in late
morning trade on the New York Stock Exchange. They had touched a
low of $48.44 earlier in the session.
The stock has risen 10 percent so far this year,
underperforming the broader S&P; 500 index, which has
grown about 12 percent in the same period.
