Restructuring

9 Months Ended

Sep. 30, 2011

Restructuring

Restructuring

7.  Restructuring

Aon Hewitt Restructuring Plan

On October 14, 2010, Aon announced a global restructuring plan (“Aon Hewitt Plan”) in connection with the acquisition of Hewitt.  The Aon Hewitt Plan is intended to streamline operations across the combined Aon Hewitt organization and includes an estimated 1,500 to 1,800 job eliminations. The Company expects these restructuring activities and related expenses to affect continuing operations into 2013.  The Aon Hewitt Plan is expected to result in cumulative costs of approximately $325 million through the end of the plan, consisting of approximately $180 million in employee termination costs and approximately $145 million in real estate realization costs.

From the inception of the Aon Hewitt Plan through September 30, 2011, approximately 1,030 jobs have been eliminated and total expenses of $132 million have been incurred.  The Company recorded $26 million and $80 million of restructuring and related charges in the three and nine months ended September 30, 2011, respectively.  All costs associated with the Aon Hewitt Plan are included in the HR Solutions segment.  Charges related to the restructuring are included in Compensation and benefits and Other general expenses in the accompanying Condensed Consolidated Statements of Income.

The following summarizes restructuring and related costs by type that have been incurred and are estimated to be incurred through the end of the restructuring initiative related to the Aon Hewitt Plan (in millions):

	2010		Third Quarter 2011		Nine Months 2011		Total Inception to Date		Estimated Total Cost for Restructuring Plan (1)
Workforce reduction	$	49	$	15	$	39	$	88	$	180
Lease consolidation	3		8		33		36		95
Asset impairments	—		3		7		7		47
Other costs associated with restructuring (2)	—		—		1		1		3
Total restructuring and related expenses	$	52	$	26	$	80	$	132	$	325

(1) Actual costs, when incurred, will vary due to changes in the assumptions built into this plan.  Significant assumptions likely to change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in the assumptions underlying sublease loss calculations due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives.

(2) Other costs associated with restructuring initiatives, including moving costs and consulting and legal fees, are recognized when incurred.

Following the Hewitt acquisition and the associated increase in personnel and property portfolio, the Company continues to review the propriety of its existing leasehold restructuring accruals based on its current plans.  In the second quarter of 2011, the Company reoccupied some of its previously vacated leasehold space and therefore determined that certain amounts previously accrued for this space were no longer necessary.  The reversal of these accruals for each of the Company’s restructuring plans is discussed below.  In addition, the reoccupation of this space resulted in expenses that had previously been included as part of lease consolidation costs being reversed and included within Other general expenses.  The impact on each of the Company’s restructuring plans is discussed below.

Aon Benfield Restructuring Plan

The Company announced a global restructuring plan (“Aon Benfield Plan”) in conjunction with its acquisition of Benfield in 2008.  The Aon Benfield Plan is intended to integrate and streamline operations across the combined Aon Benfield organization.  The Aon Benfield Plan includes an estimated 875 job eliminations. Additionally, duplicate space and assets will be abandoned.  The Company originally estimated that the Aon Benfield Plan would result in cumulative costs totaling approximately $185 million over a three-year period, of which $104 million was recorded as part of the Benfield purchase price allocation and $81 million of which was expected to result in future charges to earnings. The Company currently estimates the Aon Benfield Plan will result in cumulative costs totaling approximately $160 million, of which $53 million was recorded as part of the purchase price allocation, $79 million has been recorded in earnings from inception to date, and an estimated additional $28 million will be recorded in future earnings. The Company expects to incur all remaining costs for the Aon Benfield Plan in the fourth quarter 2011.

The Company recorded $3 million of restructuring and related charges in the three months ended September 30, 2011, and a net restructuring benefit of $2 million in the nine months ended September 30, 2011. Included in this nine month net benefit is $18 million related to the reversal of accruals associated with reoccupying leasehold space. In addition, in the three and nine months ended September 30, 2011, a benefit of $2 million and charges of $4 million, respectively, related to lease expenses were recorded as part of Other general expenses that were previously included as lease restructuring consolidation costs.

The Company recorded $5 million and $20 million of restructuring and related charges in the three and nine months ended September 30, 2010, respectively.

As of September 30, 2011, approximately 715 jobs have been eliminated under the Aon Benfield Plan. Total payments of $119 million have been made under the Aon Benfield Plan, from inception to date.

All costs associated with the Aon Benfield Plan are included in the Risk Solutions segment.  Charges related to the restructuring are included in Compensation and benefits and Other general expenses in the accompanying Condensed Consolidated Statements of Income.

The following summarizes the restructuring and related costs by type that have been incurred and are estimated to be incurred through the end of the restructuring initiative related to the Aon Benfield Plan (in millions):

	Purchase Price Allocation		2009		2010		Third Quarter 2011			Nine Months 2011			Total Inception to Date		Estimated Total Cost for Restructuring Period (1)
Workforce reduction	$	32	$	38	$	15	$	3		$	14		$	99	$	125
Lease consolidation	20		14		7		(1		)	(17		)	24		26
Asset impairments	—		2		2		—			—			4		4
Other costs associated with restructuring (2)	1		1		2		1			1			5		5
Total restructuring and related expenses	$	53	$	55	$	26	$	3		$	(2	)	$	132	$	160

(1) Actual costs, when incurred, will vary due to changes in the assumptions built into this plan.  Significant assumptions likely to change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in the assumptions underlying sublease loss calculations due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives.

(2) Other costs associated with restructuring initiatives, including moving costs and consulting and legal fees, are recognized when incurred.

2007 Restructuring Plan

In 2007, the Company announced a global restructuring plan intended to create a more streamlined organization and reduce future expense growth to better serve clients (“2007 Plan”).  The plan was completed in the fourth quarter of 2010 and the Company does not expect to incur any further expenses.  In the three and nine months ended September 30, 2011, the Company recorded a restructuring benefit of $3 million and $8 million, respectively, related to the reversal of accruals associated with reoccupied leasehold space.  In addition, in the three and nine months ended September 30, 2011, $2 million and $5 million, respectively, of lease expenses were recorded as part of Other general expenses that were previously included as restructuring lease consolidation costs.

The Company recorded $3 million and $95 million of restructuring and related charges in the three and nine months ended September 30, 2010, respectively.

The total cumulative pretax charges for the 2007 Plan are $740 million including costs related to workforce reduction, lease consolidation costs, asset impairments, as well as other expenses necessary to implement the restructuring.

As of September 30, 2011, the Company’s liabilities for its restructuring plans are as follows (in millions):

	Aon Hewitt Plan			Aon Benfield Plan			2007 Plan			Other			Total
Balance at January 1, 2010	$	—		$	45		$	202		$	16		$	263
Assumed Hewitt restructuring liability (1)	43			—			—			—			43
Expensed	52			24			92			—			168
Cash payments	(8		)	(38		)	(178		)	(8		)	(232		)
Foreign exchange translation and other	1			(5		)	(3		)	2			(5		)
Balance at December 31, 2010	88			26			113			10			237
Expensed (2)	73			(2		)	(8		)	—			63
Cash payments	(70		)	(14		)	(45		)	(2		)	(131		)
Foreign exchange translation and other	1			(1		)	6			—			6
Balance at September 30, 2011	$	92		$	9		$	66		$	8		$	175

(1) The Company assumed a $43 million net real estate related restructuring liability in connection with the Hewitt acquisition.

(2) Includes impact of reoccupying previously vacated leased properties.

Aon’s restructuring liabilities are included in both Accounts payable and accrued liabilities and Other non-current liabilities in the Condensed Consolidated Statements of Financial Position.