February 3, 2012 / 11:49 AM / 6 years ago

Aon Q4 profit rises, but margin pressures persist

(Reuters) - Aon Corp (AON.N) posted a higher quarterly profit that narrowly beat market estimates, but the world’s largest insurance broker continued to face margin pressures in its Aon Hewitt segment for the second-straight quarter.

In 2010, Aon bought human resources specialist Hewitt Associates Inc for $4.9 billion in a bid to leapfrog rivals and create the world’s largest human resource services company.

On an adjusted basis, operating income in the HR solutions segment fell 6 percent from the year-ago period to $147 million, while operating margins fell 120 basis points to 12.4 percent.

In the previous quarter, HR solutions’ operating margins had fallen 590 basis points to 11.2 percent on higher costs.

“We were much more pessimistic on their margins (in the HR solutions segment)... the third quarter was very weak, but I don’t think it was representative of capabilities and probably what we saw in this quarter is a better guide to how well it’s doing despite the weak economy,” Stifel Nicolaus analyst Meyer Shields told Reuters.

Aon Chief Executive Greg Case said in a statement that the company was firmly on track to deliver improved growth in 2012 despite challenging macro economic conditions.

On a post-earnings conference call, Aon, which competes with Willis WSH.N and Marsh & McLennan (MMC.N) in negotiating insurance and reinsurance policies for corporate clients, said it is targeting long-term operating margins of 26 percent in its risk solutions segment and 22 percent in its HR solutions segment.

October-December net income attributable to shareholders from continuing operations was $277 million, or 82 cents a share, compared with $232 million, or 67 cents a share, a year ago.

    Excluding items, Aon, which sponsors English Premier League football club Manchester United, earned 97 cents a share from continuing operations.

    Analysts expected a profit of 96 cents a share on revenue of $3 billion, according to Thomson Reuters I/B/E/S.

    Earlier this month, Chicago-based Aon said it would move its headquarters to London to improve its access to fast-growing emerging markets and boost its presence in the British Capital’s global insurance centre.

    Shares of the company, which hit a life-high of $54.58 on April 7, 2011, lost more than a quarter of their value by September, but have since jumped more than 20 percent.

    They were trading down about 2 percent at $48.48 in early trade on the New York Stock Exchange on Friday.

    Reporting by Aman Shah in Bangalore; Editing by Sriraj Kalluvila

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