1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Holly LaFon
Holly LaFon
Articles (5968) 

Bill Nygren Comments on AON Plc

July 10, 2012 | About:
From Bill Nygren's second-quarter letter:

AON PLC (AON-$47)
As one of only three insurance brokers with a global platform, AON (NYSE:AON)’s market position should allow the company to directly benefit from global economic growth. AON stock surpassed $50 in 2007 when it earned just over $2 per share. In 2012, after a restructuring that improved margins, AON is expected to earn over $4 per share after adding back goodwill amortization from recent acquisitions. Despite the growth in earnings and the potential for further margin improvement, the stock has been stagnant. As a result, the P/E ratio for AON has fallen from 25 times in 2007 to 11 times now, slightly less than the P/E ratio for the S&P 500. Unlike the insurance business, insurance brokerage is not capital intensive. Therefore, we believe AON has the ability to return most of its earnings to shareholders through share repurchases and dividends. An additional feature we value is AON’s potential to generate meaningful interest income. AON, as a fiduciary, holds its clients’ capital for a short period of time before it is turned over to the insurance companies. With today’s low short-term interest rates, there is little opportunity to generate returns on that capital. We don’t believe short-term rates will stay low forever and like getting the option for more rapid earnings growth when rates increase.

Rating: 2.3/5 (3 votes)

Comments

Please leave your comment:


GuruFocus Mobile App


User Generated Screeners


Wade WisnerScreenSummary 7/16
thanut7thai cash company3
EmiluchoNano 2
DBrizancanada 23Jul2016
DBrizanholdings beater23Jul2016
DBrizantop holdings beater
EmiluchoNano caps
pbarker467 values
roliEarning grwoth
robertgallagherBob

Select portfolio(s):

  • Loading...

Why you are interested?

Your selection and notes will be stored in your portfolio.

Login to add portfolio
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
FEEDBACK