Aon plc (NYSE: AON) reported results for the three months ended September 30, 2024.
Net income attributable to Aon shareholders decreased 30%, to $1.57 per share on a diluted basis, compared to $2.23 per share on a diluted basis, in the prior year period. Adjusted net income per share attributable to Aon shareholders increased 17% to $2.72 on a diluted basis, including an unfavorable impact of $0.02 per share if prior year period results were translated at current period foreign exchange rates ("foreign currency translation"), compared to $2.32 in the prior year period. Certain items that impacted third quarter results and comparisons with the prior year period are detailed in the "Reconciliation of Non-GAAP Measures - Operating Income, Operating Margin and Diluted Earnings Per Share" on page 10 of this press release.
"Our global team delivered another quarter of excellent results in the third quarter, with 7% total organic revenue growth, including all Solution Lines at 6% or greater, which contributed to adjusted operating margin expansion and 17% growth in adjusted EPS," said Greg Case, CEO of Aon. "Our performance through the first three quarters positions us well to deliver full year results in line with our financial guidance, and demonstrates the success of our 3x3 Plan to bring better client solutions across Risk Capital and Human Capital, powered by Aon Business Services."
THIRD QUARTER 2024 FINANCIAL SUMMARY
Total revenue in the third quarter increased 26% to $3.7 billion compared to the prior year period, reflecting acquired revenues from NFP and 7% organic revenue growth.
Total operating expenses in the third quarter increased 37% to $3.1 billion compared to the prior year period due primarily to the inclusion of NFP's ongoing operating expenses, an increase in intangible asset amortization associated with the acquisition of NFP, an increase in expense associated with 7% organic revenue growth, Accelerating Aon United restructuring program charges, and investments in long-term growth, partially offset by $25 million of restructuring savings realized in the quarter.
Foreign currency translation in the third quarter had a $3 million, or $0.02 per share, unfavorable impact on both U.S. GAAP net income and adjusted net income. If currency were to remain stable at today's rates, the Company would expect an unfavorable impact of approximately $0.01 per share, or an approximately $3 million decrease in adjusted operating income for the fourth quarter, resulting in an unfavorable impact to adjusted operating income of approximately $0.07 per share, or approximately $21 million for full year 2024.
Effective tax rate was 20.9% in the third quarter compared to 16.6% in the prior year period. After adjusting to exclude the applicable tax impact associated with certain non-GAAP adjustments, the adjusted effective tax rate for the third quarter of 2024 was 18.0% compared to 17.2% in the prior year period. The primary drivers of the change in the adjusted effective tax rate were the changes in the geographical distribution of income and a net unfavorable impact from discrete items.
Weighted average diluted shares outstanding increased to 218.4 million in the third quarter compared to 204.6 million in the prior year period due to the issuance of 19.0 million shares in the second quarter of 2024 to fund the NFP acquisition. The Company repurchased 0.9 million class A ordinary shares for approximately $300 million in the third quarter. As of September 30, 2024, the Company had approximately $2.5 billion of remaining authorization under its share repurchase program.
YEAR TO DATE 2024 CASH FLOW SUMMARY
Cash flows provided by operations for the first nine months of 2024 decreased $339 million to $1,835 million compared to the prior year period, primarily due to higher cash taxes, and payments related to restructuring, legal settlement expenses, transaction and integration costs, and higher receivables, including from NFP, partially offset by strong adjusted operating income growth.
Free cash flow, defined as cash flows from operations less capital expenditures, decreased 15%, to $1,672 million for the first nine months of 2024 compared to the prior year period, reflecting a decrease in cash flows provided by operations, partially offset by a $40 million decrease in capital expenditures compared to the prior year period, which was elevated due to the timing of projects and investments within the year.
THIRD QUARTER 2024 REVENUE REVIEW
The third quarter revenue reviews provided below include supplemental information related to organic revenue growth, which is a non-GAAP measure that is described in detail in "Reconciliation of Non-GAAP Measures - Organic Revenue Growth and Free Cash Flow" on page 9 of this press release.
