AON - Aon falls as foreign currency translation pension costs said to continue to hit earnings

2023-04-28 14:38:16 ET

Insurance broker Aon ( NYSE: AON ) fell ~3% during afternoon trading on Friday after reporting mixed Q1 results, as foreign currency translation and pension costs are said to continue to hit future earnings.

The company's Q1 non-GAAP EPS of $5.17 misses by $0.15 and revenue of $3.9B (+5.4% Y/Y) beats by $50M.

The non-GAAP EPS includes an unfavorable impact of $0.14 per share on account of foreign currency translation, the company said in its earnings release.

The increase in revenue was driven by 7% organic revenue growth and a 1% favorable impact from fiduciary investment income, but was partially offset by a 3% unfavorable impact from foreign currency translation.

Q1 revenue from commercial risk solutions increased by 3% from last year to $1.78B, while reinsurance solutions revenue rose by 10% to $1.01B.

Health solutions segment saw an increase of 5% in revenue to $671M and wealth solutions of 1% to $350M.

The company expects foreign currency translation to hit Q2 EPS by ~$0.04 per share and FY23 EPS by ~$0.14 per share.

The unfavorable impact from changes in foreign currency is driven by a weaker Euro versus the U.S. dollar, and Q1 is the company's seasonally largest quarter for Euro denominated revenues, according to CFO Christa Davies.

Also, Aon reported a 4% Y/Y increase in operating expenses to $2.40B.

The expenses saw a $0.19 per share unfavorable impact, including a $0.05 per share unfavorable impact from an increase in non-cash net periodic pension costs.

"We expect the $0.05 per share unfavorable impact from increased net periodic pension costs to continue for each quarter this year," Davies said during the company's Q1 earnings call.

Read more on Aon plc 2023 Q1 - Results - Earnings Call Presentation

For further details see: