Aon plc (NYSE: AON)

Sector: Financial Services Industry: Insurance Brokers CIK: 0000315293
Market Cap 74.51 Bn
P/B 9.39
P/E 27.41
P/S 4.38
ROIC (Qtr) 12.92
Div Yield % 0.82
Rev 1y % (Qtr) 7.42
Total Debt (Qtr) 17.44 Bn
Debt/Equity (Qtr) 2.20

About

Aon plc, a prominent player in the global professional services industry, operates under the unified segment of Aon United. This segment comprises four solution lines: Commercial Risk, Reinsurance, Health, and Wealth. Aon's offerings include retail brokerage, specialty solutions, global risk consulting and captives management, and affinity programs. The company's operations span various industries and geographies, providing a broad range of risk and human capital solutions. Aon's Commercial Risk Solutions offer clients risk advice and solutions...

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Price action

Investment thesis

Bull case

  • Operating cash flow of 3.28B provides exceptional 52.97x coverage of minority interest expenses 62M, showing strong core operations.
  • Robust free cash flow of 3.04B exceeds capital expenditure of 244M by 12.46x, indicating strong organic growth funding capability.
  • Robust tangible asset base of 30.11B provides 20.54x coverage of working capital 1.47B, indicating strong operational backing.
  • Operating cash flow of 3.28B fully covers other non-current liabilities 2.63B by 1.25x, showing strong long-term stability.
  • Cash position of 1.09B provides exceptional 17.66x coverage of minority interest expenses 62M, indicating strong liquidity.

Bear case

  • Operating cash flow of 3.28B barely covers its investment activities of (939M), with a coverage ratio of -3.50, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 3.28B provides thin coverage of dividend payments of (614M) with a -5.35 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 1.09B provide limited coverage of acquisition spending of (645M), which is -1.70x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 3.04B represents just -8.13x of debt issuance (374M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Operating cash flow of 3.28B barely covers operating expenses of 3.81B with a 0.86 ratio, suggesting thin operational efficiency margins and limited flexibility.

Segments Breakdown of Revenue (2024)

Peer comparison

Companies in the Insurance Brokers
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 MMC Marsh & Mclennan Companies, Inc. 92.62 Bn 29.47 4.67 21.43 Bn
2 AON Aon plc 74.51 Bn 27.41 4.38 17.44 Bn
3 AJG Arthur J. Gallagher & Co. 55.76 Bn 51.09 5.25 13.69 Bn
4 BRO Brown & Brown, Inc. 22.82 Bn 108.30 13.93 7.97 Bn
5 WTW Willis Towers Watson Plc 22.12 Bn 46.77 5.80 5.91 Bn
6 ERIE Erie Indemnity Co 13.10 Bn 45.46 4.72 0.00 Bn
7 CRVL Corvel Corp 3.53 Bn 33.49 3.78 0.02 Bn
8 ARX Accelerant Holdings 2.62 Bn 96.44 4.35 0.12 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.77 0.83
EV to Cash from Ops. EV/CFO 27.86 26.54
EV to Debt EV to Debt 5.25 10.83
EV to EBIT EV/EBIT 21.74 15.57
EV to EBITDA EV/EBITDA 17.62 12.32
EV to Free Cash Flow [EV/FCF] EV/FCF 30.10 38.93
EV to Market Cap EV to Market Cap 1.23 -1,866.90
EV to Revenue EV/Rev 5.37 2.59
Price to Book Value [P/B] P/B 9.39 3.17
Price to Earnings [P/E] P/E 27.41 24.79
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 4.43 0.83
Dividend Payout Ratio % Div Payout % (Qtr) 22.60 31.35
Dividend per Basic Share Div per Share (Qtr) 2.85 1.08
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 20.19 18.16
Interest Coverage Int. cover (Qtr) 5.07 -4.53
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -15.09 423.33
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -0.73 -3.76
Dividend Growth (1y) % Div 1y % (Qtr) 7.16 -1.10
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 13.36 -9.09
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 28.39 -5.72
EBIT Growth (1y) % EBIT 1y % (Qtr) 9.92 8.13
EBT Growth (1y) % EBT 1y % (Qtr) 8.20 -4.46
EPS Growth (1y) % EPS 1y % (Qtr) 5.36 -68.33
FCF Growth (1y) % FCF 1y % (Qtr) 5.41 -67.66
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 14.08 52.95
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.33 0.62
Cash Payout Ratio Cash Payout (Qtr) 0.17 0.16
Cash Ratio Cash Ratio (Qtr) 0.04 0.54
Current Ratio Curr Ratio (Qtr) 1.06 2.11
Debt to Equity Ratio Debt/Equity (Qtr) 2.20 0.93
Interest Cover Ratio Int Coverage (Qtr) 5.07 -4.53
Times Interest Earned Times Interest Earned (Qtr) 5.07 -4.53
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 30.40 6.16
EBIT Margin % EBIT Margin % (Qtr) 24.72 -108.04
EBT Margin % EBT Margin % (Qtr) 19.84 -14.94
Gross Margin % Gross Margin % (Qtr) 100.00 53.35
Net Profit Margin % Net Margin % (Qtr) 16.00 -17.46