Aon reported results for the three months ended September 30, 2023. Net income attributable to Aon shareholders increased 12% to $456 million, or $2.23 per share on a diluted basis, compared to $408 million, or $1.92 per share on a diluted basis, in the prior year period.
Net income per share attributable to Aon shareholders, adjusted for certain items, increased 15% to $2.32 on a diluted basis, including an unfavorable impact of $0.01 per share if prior year period results were translated at current period foreign exchange rates, compared to $2.02 in the prior year period.
- Total revenue increased 10% to $3 billion, including organic revenue growth of 6%
- Operating margin increased 150 basis points to 23.4%, and operating margin, adjusted for certain items, increased 120 basis points to 24.3%
- EPS increased 16% to $2.23, and EPS, adjusted for certain items, increased 15% to $2.32
- For the first nine months of 2023, cash flows from operations was $2,174 million, and free cash flow decreased 4% to $1,971 million
Global team delivered strong operating results in the third quarter, including 6% organic revenue growth and 120 basis points of adjusted operating margin improvement, contributing to 7% organic revenue growth and 80 basis points of adjusted margin expansion year to date, demonstrating the strength of our Aon United strategy.
We see an ongoing evolution in client demand that will require new and integrated solutions, powered by better analytics, and delivered through Aon Business Services across Risk Capital and Human Capital.
Greg Case, Aon Chief Executive Officer
Total revenue in the third quarter increased 10% to $3.0 billion compared to the prior year period reflecting 6% organic revenue growth, a 2% favorable impact from fiduciary investment income and a 2% favorable impact from foreign currency translation.
Total operating expenses in the third quarter increased 7% to $2.3 billion compared to the prior year period due primarily to an increase in expense associated with 6% organic revenue growth, investments in long-term growth, and a $45 million unfavorable impact from foreign currency translation.
Foreign currency translation in the third quarter had a $2 million, or $0.01 per share, unfavorable impact on U.S. GAAP net income and a $2 million, or $0.01 per share, unfavorable impact on adjusted net income.
To capture this opportunity, we are accelerating our strategy to take Aon Business Services to the next level to enable sustainable value creation for clients, colleagues, and shareholders.
If currency were to remain stable at today’s rates, the Company would expect a favorable impact of $0.03 per share in the fourth quarter of 2023, and an unfavorable impact of approximately $0.17 per share, or an approximately $51 million decrease in adjusted operating income for full year 2023.
Effective tax rate was 16.6% in the third quarter compared to 18.0% 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 2023 was 17.2% compared to 19.1% in the prior year period. The primary drivers of the change in the adjusted effective tax rate were the geographical distribution of income and a net favorable impact from discrete items.
Weighted average diluted shares outstanding decreased to 204.6 million in the third quarter compared to 212.6 million in the prior year period.
The Company repurchased 2.6 million class A ordinary shares for approximately $850 million in the third quarter. As of September 30, 2023, the Company had approximately $4.1 billion of remaining authorization under its share repurchase program.
Cash flows provided by operations for the first nine months of 2023 decreased $3 million to $2,174 million compared to the prior year period, primarily due to higher cash tax payments and a negative impact to working capital due to temporary invoicing delays associated with the implementation of a new system, partially offset by strong operating income growth.
Free cash flow, defined as cash flows from operations less capital expenditures, decreased 4%, to $1,971 million for the first nine months of 2023 compared to the prior year period, reflecting a decrease in cash flows provided by operations and a $77 million increase in capital expenditures. Capital expenditures were elevated compared to the prior year period as we executed a number of projects across technology to drive long-term growth.
