AON - Aon Q4 earnings top consensus helped by lower tax rate

Aon ( NYSE: AON ) shares dipped 3.2% as the insurer's Q4 earnings beat the Wall Street consensus as the insurer's effective tax rate dropped more than analysts expected.

Q4 adjusted EPS of $3.89, vs. Wall Street consensus of $3.66, rose from $2.02 in Q3 and from $3.71 in Q4 2021.

Evercore ISI analyst David Motemaden said in a note that a lower tax rate, 9% vs. 18% estimate, drove the Q4 earnings beat. Meanwhile, Aon's ( AON ) 5% organic growth and 33.2% adjusted operating margin were in line with EISI's estimates.

Q4 revenue of $3.13B,  in line with the $3.13B consensus, increased from $2.70B in the prior quarter and from $3.08B in the year-ago quarter.

"In the fourth quarter, our colleagues delivered 5% organic revenue growth, to finish a very strong year, contributing to full year organic revenue growth of 6%, margin expansion of 70 basis points to 30.8%, EPS growth of 12% to $13.39, and over $3B of free cash flow, an all-time high," said CEO Greg Case.

Q4 non-GAAP effective tax rate of 9.0% fell from 19.1% in Q3 and from 12.2% in Q4 2021.

Operating margin, adjusted for certain items, was 33.2% vs. 23.1% in the prior quarter and 32.8% in the year-ago quarter.

Commercial Risk Solutions revenue of $1.82B fell 1% Y/Y. The division's organic growth of 4% missed Evercore ISI's 6% growth estimate and consensus estimate of 5%.

Reinsurance Solutions revenue of $281M increased 27% Y/Y.

Health Solutions revenue of $678M increased 4% Y/Y.

Wealth Solutions revenue of $353M declined 3% Y/Y.

Total operating expenses, at $2.11B, were roughly flat against both the prior quarter and the year-ago period.

Operating income of $1.01B vs. $590M in the prior quarter and $974M in the year-ago quarter.

Free cash flow for full-year 2022 was $3.02B, up 48% Y/Y.

Earlier, Aon ( AON ) non-GAAP EPS of $3.89 beats by $0.23

SA contributor Wolf Report in December issued an update on its Hold rating.

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