Shareholders' Equity

6 Months Ended

Jun. 30, 2012

Shareholders' Equity

Shareholders' Equity

10.  Shareholders’ Equity

Redomestication

Prior to the Redomestication, the Company accounted for purchases of its outstanding common stock using the treasury stock method included in U.S. GAAP. Under this method, the Company recorded purchases of its own outstanding common stock as a reduction to Additional paid-in capital based on the cost of the shares acquired. Under U.K. law, when the Company repurchases its outstanding shares, those shares are treated as cancelled. In April 2012, the Company constructively cancelled 60 million shares of treasury stock related to the Redomestication. The impact of the cancellation of all outstanding treasury shares was a decrease in Ordinary shares and Retained earnings of $60 million and $2.4 billion, respectively. The balance of Treasury stock at cost of $2.5 billion was also eliminated as part of the cancellation. Additionally, effective upon the completion of the Redomestication, the par value of Aon’s outstanding equity shares decreased from $1.00 to $0.01. The impact of this change was a decrease in Ordinary shares of $323 million, and an increase in Additional paid-in capital of $323 million.

As a U.K. incorporated company, Aon plc must have “distributable reserves” to make share repurchases or pay dividends to shareholders. Distributable reserves may be created through the earnings of the U.K. parent company and, amongst other methods, through a reduction in share capital approved by the English Companies Court. Distributable reserves are not linked to a U.S. GAAP reported amount. On April 4, 2012, the Company received approval from the English Companies Court to reduce its share premium and in connection with that approval, recognized distributable reserves in the amount of $8 billion.

Ordinary Shares

In January 2010, the Company’s Board of Directors authorized a share repurchase program under which up to $2.0 billion of common stock may be repurchased (“2010 Share Repurchase Program”).  Shares could be repurchased through the open market or in privately negotiated transactions, including structured repurchase programs, from time to time, based on prevailing market conditions, and were to be funded from available capital.  Any repurchased shares were to be available for employee stock plans and for other corporate purposes.

During the three months ended March 31, 2012, the Company repurchased 2.1 million shares at an average price per share of $48.32 for a total cost of $100 million.  Since the inception of the 2010 Share Repurchase Program, the Company has repurchased a total of 18.2 million shares for an aggregate cost of $913 million as of March 31, 2012.

The 2010 Share Repurchase Program, which related to common stock of Aon Corporation and preceded the Redomestication, did not extend to shares of Aon plc. In April 2012, the Company’s Board of Directors therefore authorized a share repurchase program under which up to $5.0 billion of Class A ordinary shares may be repurchased (“2012 Share Repurchase Program”). Under this program, shares may be repurchased through the open market or in privately negotiated transactions, from time to time, based on prevailing market conditions, and will be funded from available capital.

During the three months ended June 30, 2012, the Company repurchased 5.3 million shares at an average price per share of $47.40 for a total cost of $250 million. The remaining authorized amount for share repurchase under the 2012 Share Repurchase Program is $4.7 billion.

Participating Securities

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities, as defined, and therefore, should be included in computing basic and diluted earnings per share using the two class method.  Certain of the Company’s restricted share awards allow the holder to receive a non-forfeitable dividend equivalent.

Income from continuing operations, income (loss) from discontinued operations and net income, attributable to participating securities, were as follows (in millions):

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Income from continuing operations	$	3	$	4	$	6	$	8
Income from discontinued operations	—		—		—		—
Net income	$	3	$	4	$	6	$	8

Weighted average shares outstanding are as follows (in millions):

	Three months ended June 30,		Six months ended June 30,
	2012	2011	2012	2011
Shares for basic earnings per share (1)	332.0	337.7	332.2	338.7
Ordinary share equivalents	3.6	5.0	3.9	5.3
Shares for diluted earnings per share	335.6	342.7	336.1	344.0

(1)  Includes 4.8 million and 5.6 million of participating securities for the three months ended June 30, 2012 and 2011, respectively, and 4.8 million and 5.7 million of participating securities for the six months ended June 30, 2012 and 2011, respectively.

Certain ordinary share equivalents, primarily related to options, were not included in the computation of diluted net income per share because their inclusion would have been antidilutive.  The number of shares excluded from the calculation was 1.1 million and 0.1 million for the three months ended June 30, 2012 and 2011, respectively, and 0.6 million and 0.1 million for the six months ended June 30, 2012 and 2011, respectively.

Accumulated Other Comprehensive Loss

The components of Accumulated other comprehensive loss, net of related tax, are as follows (in millions):

	June 30, 2012			December 31, 2011
Net derivative losses	$	(47	)	$	(37	)
Net foreign exchange translation adjustments	33			124
Net postretirement benefit obligations	(2,418		)	(2,457		)
Accumulated other comprehensive loss, net of tax	$	(2,432	)	$	(2,370	)