EX-99.1 2 a13-10792_1ex99d1.htm EX-99.1

Exhibit 99.1

 

Investor Relations

 

News from Aon

 

Aon Reports First Quarter 2013 Results

 

- Total revenue was $2.9 billion with organic revenue growth of 2% -

- EPS from continuing operations was $1.11 -

 

First Quarter Summary

 

·                  EPS from continuing operations, adjusted for certain items, increased 13% to $1.11

·                  Risk Solutions revenue increased 3% to $2.0 billion with organic revenue growth of 3%

·                  Risk Solutions operating margin was 20.4% and the operating margin, adjusted for certain items, increased 110 basis points to 22.5%

·                  HR Solutions revenue increased 1% to $954 million with organic revenue growth of 1%

·                  HR Solutions operating margin was 5.3% and the operating margin, adjusted for certain items, decreased 220 basis points to 14.3%

·                  Cash flow from operations increased $69 million to $54 million

·                  Repurchased 5.0 million Class A Ordinary Shares for approximately $300 million

·                  Subsequent to the close of the first quarter, Aon announced an 11% increase to the annual cash dividend

 

LONDON — April 26, 2013 - Aon plc (NYSE: AON) today reported results for the three months ended March 31, 2013.

 

Net income attributable to Aon shareholders from continuing operations was $261 million, or $0.82 per share, compared to $238 million, or $0.71 per share, for the prior year quarter.  Net income per share attributable to Aon shareholders from continuing operations, adjusted for certain items, was $1.11, a 13% increase compared to $0.98 in the prior year quarter.  Certain items that impacted first quarter results and comparisons with the prior year quarter are detailed in the “Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share” on page 12 of this press release.

 

“Our first quarter results reflect a solid start to the year with double-digit earnings growth driven by a strong performance in our Risk Solutions business and effective capital management, as highlighted by the repurchase of $300 million of ordinary shares in the quarter,” said Greg Case, president and chief executive officer.

 



 

FIRST QUARTER FINANCIAL SUMMARY

 

Total revenue increased 3% to $2.9 billion compared to the prior year quarter primarily driven by a 2% increase in organic revenue and a 1% increase in commissions and fees resulting from acquisitions, net of divestitures, partially offset by a 42% decline in investment income due to lower average interest rates.

 

Total operating expenses for the first quarter increased 3% to $2.5 billion compared to the prior year quarter at $2.4 billion due primarily to a 2% increase in organic revenue, the inclusion of $10 million of expenses from acquisitions, and a $6 million increase in restructuring costs, partially offset by an $18 million favorable impact from foreign currency translation, a $5 million decrease in intangible asset amortization expense, and savings related to the restructuring programs.

 

Depreciation expense increased 7%, or $4 million, to $59 million compared to the prior year quarter.

 

Intangible asset amortization expense decreased 5%, or $5 million, to $99 million compared to the prior year quarter due primarily to a $4 million decrease in HR Solutions relating to assets associated with the merger with Hewitt.

 

Restructuring expenses increased $6 million to $26 million compared to $20 million in the prior year quarter driven by workforce reduction.  In the first quarter, the Company incurred $15 million of costs in the HR Solutions segment and $11 million of costs in the Risk Solutions segment related to the Aon Hewitt restructuring program.  An analysis of restructuring-related costs by type and segment are detailed on page 13 of this press release.

 

Restructuring savings in the first quarter related to the Aon Hewitt restructuring program are estimated at $69 million compared to $48 million in the prior year quarter.  Of the estimated savings in the first quarter, approximately $13 million were related to the Risk Solutions segment compared to $8 million in the prior year quarter.  The Company expects to deliver cumulative expense savings of $355 million in 2013 related to the Aon Hewitt restructuring program, including $280 million related to the restructuring program and $75 million in additional synergy savings from areas such as information technology, procurement and public company costs.

 

Associated with the transfer of the Health and Benefits business effective January 1, 2012, approximately $52 million of the estimated savings under the Aon Hewitt restructuring program will be achieved in Risk Solutions.  As of the first quarter, an estimated $45 million of cumulative savings have been achieved in Risk Solutions.

 

Foreign currency exchange rates in the first quarter had a $0.02 per share, or $9 million pretax ($7 million in Risk Solutions and $2 million in HR Solutions), favorable impact on adjusted net income from continuing operations if the Company were to translate prior year quarter results at current quarter foreign exchange rates.

 

Effective tax rate on net income from continuing operations decreased to 26.1% in the first quarter compared to 28.0% in the prior year quarter due primarily to changes in the geographical distribution of income.  The Company currently anticipates an effective tax rate on net income from continuing operations of approximately 26.0% in 2013.

 

2



 

Average diluted shares outstanding decreased to 320.0 million in the first quarter compared to 336.6 million in the prior year quarter.  The Company repurchased 5.0 million Class A Ordinary Shares for approximately $300 million in the first quarter.  The Company has $3.7 billion of remaining authorization under its share repurchase program.

 

Cash flow from operations increased $69 million to $54 million in the first quarter due primarily to improved working capital and 9% growth in net income, partially offset by a $106 million increase in cash taxes and an $86 million increase in pension contributions.  Free cash flow, as defined by cash flow from operations less capital expenditures, increased 93% to a use of $6 million in the first quarter driven by improved cash flow from operations and a 15%, or $11 million, decline in capital expenditures. A reconciliation of free cash flow to cash flow from operations can be found on the “Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow” on page 11 of this press release.

 

FIRST QUARTER SEGMENT REVIEW

 

Certain noteworthy items impacted operating income and operating margins in the first quarters of 2013 and 2012.  The first quarter segment reviews provided below include supplemental information related to organic revenue, adjusted operating income and operating margin, which is described in detail on the “Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow” on page 11 and “Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share” on page 12 of this press release.

 

RISK SOLUTIONS

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

(millions)

 

Three Months Ended

 

 

 

Less:

 

Acquisitions,

 

 

 

Commissions,
Fees and Other

 

Mar 31,
2013

 

Mar 31,
2012

 

%
Change

 

Currency
Impact

 

Divestitures,
Other

 

Organic
Revenue

 

Retail

 

$

1,562

 

$

1,494

 

5

%

%

1

%

4

%

Reinsurance

 

402

 

399

 

1

 

 

 

1

 

Subtotal

 

$

1,964

 

$

1,893

 

4

%

%

1

%

3

%

Investment Income

 

7

 

12

 

(42

)

 

 

 

 

 

 

Total Revenue

 

$

1,971

 

$

1,905

 

3

%

 

 

 

 

 

 

 

Risk Solutions total revenue increased 3% to $2.0 billion compared to the prior year quarter at $1.9 billion due to 3% organic growth in commissions and fees and a 1% increase in commissions and fees resulting from acquisitions, net of divestitures, partially offset by a 42% decline in investment income.

 

Retail Brokerage organic revenue increased 4% reflecting revenue growth in both the Americas and International businesses.  Americas organic revenue increased 6% in the first quarter reflecting improved growth across all regions, including strong growth in Latin America and US Retail driven by new business generation and management of the renewal book portfolio.  International organic revenue increased 3% driven by strong growth across Asia and New Zealand, and modest growth in Australia, partially offset by a decline in Germany.  Reinsurance organic revenue increased 1% due primarily to growth in capital market transactions and advisory business and global facultative placements.

 

3



 

 

 

Three Months Ended

 

 

 

(millions)

 

Mar 31,
2013

 

Mar 31,
2012

 

%
Change

 

Revenue

 

$

1,971

 

$

1,905

 

3

%

Expenses

 

 

 

 

 

 

 

Compensation and benefits

 

1,110

 

1,071

 

4

 

Other general expenses

 

458

 

468

 

(2

)

Total operating expenses

 

1,568

 

1,539

 

2

%

Operating income

 

$

403

 

$

366

 

10

%

Operating margin

 

20.4

%

19.2

%

 

 

 

 

 

 

 

 

 

 

Operating income - adjusted

 

$

443

 

$

407

 

9

%

Operating margin - adjusted

 

22.5

%

21.4

%

 

 

 

Compensation and benefits for the first quarter increased 4%, or $39 million, compared to the prior year quarter due primarily to 3% organic revenue growth and restructuring-related costs for certain projects in Europe, partially offset by a $7 million favorable impact from foreign currency translation and savings related to the restructuring programs.

 

Other general expenses for the first quarter decreased 2%, or $10 million, compared to the prior year quarter due primarily to an $8 million favorable impact from foreign currency translation and a $5 million decline in Glenrand M-I-B restructuring-related costs, partially offset by 3% organic revenue growth.

 

First quarter operating income increased 10% to $403 million.  Adjusting for certain items detailed on page 12 of this press release, operating income increased 9%, or $36 million, compared to the prior year quarter, and operating margin increased 110 basis points to 22.5% primarily driven by organic revenue growth, savings related to the restructuring programs and a 40 basis point favorable impact from foreign currency translation, partially offset by a 20 basis point unfavorable impact from a significant decline in investment income.

 

HR SOLUTIONS

 

(millions)

 

Three Months Ended

 

 

 

Less:

 

Less:
Acquisitions,

 

 

 

Commissions,
Fees and Other

 

Mar 31,
2013

 

Mar 31,
2012

 

%
Change

 

Currency
Impact

 

Divestitures,
Other

 

Organic
Revenue

 

Consulting Services

 

$

382

 

$

380

 

1

%

%

%

1

%

Outsourcing

 

581

 

568

 

2

 

 

1

 

1

 

Intersegment

 

(9

)

(3

)

N/A

 

N/A

 

N/A

 

N/A

 

Subtotal

 

$

954

 

$

945

 

1

%

%

%

1

%

Investment Income

 

 

 

N/A

 

 

 

 

 

 

 

Total Revenue

 

$

954

 

$

945

 

1

%

 

 

 

 

 

 

 

HR Solutions total revenue increased 1% to $954 million compared to the prior year quarter driven by 1% organic growth in commissions and fees.

 

4



 

Organic revenue in Consulting Services increased 1% driven primarily by modest growth in communications and investment consulting, partially offset by a decline in continental Europe.  Organic revenue in Outsourcing increased 1% due primarily to growth in net new client wins and demand for discretionary services in HR BPO and healthcare exchanges, partially offset by a modest decline in benefits administration.

 

 

 

Three Months Ended

 

 

 

 

 

Mar 31,

 

Mar 31,

 

%

 

(millions)

 

2013

 

2012

 

Change

 

Revenue

 

$

954

 

$

945

 

1

%

Expenses

 

 

 

 

 

 

 

Compensation and benefits

 

590

 

569

 

4

 

Other general expenses

 

313

 

303

 

3

 

Total operating expenses

 

903

 

872

 

4

%

Operating income

 

$

51

 

$

73

 

(30

)%

Operating margin

 

5.3

%

7.7

%

 

 

 

 

 

 

 

 

 

 

Operating income - adjusted

 

$

136

 

$

156

 

(13

)%

Operating margin - adjusted

 

14.3

%

16.5

%

 

 

 

Compensation and benefits for the first quarter increased 4%, or $21 million, compared to the prior year quarter due primarily to 1% organic revenue growth, a $9 million increase in restructuring costs and a $4 million unfavorable impact from the timing of certain expenses, partially offset by savings related to the Aon Hewitt restructuring program.

 

Other general expenses for the first quarter increased 3%, or $10 million, from the prior year quarter due primarily to 1% organic revenue growth and $6 million of expenses related to legacy litigation, partially offset by a $4 million decrease in intangible asset amortization, and savings related to the Aon Hewitt restructuring program.

 

First quarter operating income decreased 30% to $51 million.  Adjusting for certain items detailed on page 12 of this press release, operating income decreased 13%, or $20 million, to $136 million, and operating margin decreased 220 basis points to 14.3% versus the prior year quarter due primarily to a $10 million, or roughly 100 basis point, unfavorable impact from the timing of certain expenses and expenses related to legacy litigation, as well as an unfavorable revenue mix shift and investments in long-term growth opportunities, partially offset by savings related to the Aon Hewitt restructuring program.

 

5



 

INCOME FROM CONTINUING OPERATIONS

 

 

 

Three Months Ended

 

 

 

 

 

Mar 31,

 

Mar 31,

 

%

 

(millions)

 

2013

 

2012

 

Change

 

Risk Solutions

 

$

403

 

$

366

 

10

%

HR Solutions

 

51

 

73

 

(30

)

Unallocated expenses

 

(44

)

(37

)

19

 

Operating income from continuing operations before tax

 

$

410

 

$

402

 

2

%

Interest income

 

1

 

3

 

(67

)

Interest expense

 

(52

)

(59

)

(12

)

Other income

 

9

 

 

100

 

Income from continuing operations before tax

 

$

368

 

$

346

 

6

%

 

Unallocated expenses increased $7 million to $44 million due primarily to an increase in expenses related to the Company’s redomicile to the UK.  Interest income decreased $2 million to $1 million due to lower average interest rates and lower average cash balances.  Interest expense decreased $7 million to $52 million due primarily to both a decline in the average rate and the total amount of debt outstanding.  Other income of $9 million includes a $6 million net gain due to the favorable impact of exchange rates on remeasurement of assets and liabilities in non-functional currencies and $3 million of net gains on certain long-term investments.

 

Conference Call, Presentation Slides and Webcast Details

 

The Company will host a conference call on Friday, April 26, 2013 at 7:30 a.m. central time.  Interested parties can listen to the conference call via a live audio webcast and view the presentation slides at www.aon.com.

 

About Aon

 

Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 65,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon’s global partnership and shirt sponsorship with Manchester United.

 

Safe Harbor Statement

 

This communication contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. These forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts that address activities, events or developments that we expect or anticipate may occur in the future, including such things as our outlook, future capital expenditures, growth in commissions and fees, business strategies, competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, plans and references to future successes, are forward-looking statements. Also, when we use the words such as ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘plan’, ‘probably’, or similar expressions, we are making forward-looking statements.

 

6



 

The following factors, among others, could cause actual results to differ from those set forth in the forward looking statements:  general economic conditions in different countries in which Aon does business around the world, including conditions is the European Union relating to sovereign debt and the Euro; changes in the competitive environment; changes in global equity and fixed income markets that could affect the return on invested assets; changes in the funding status of Aon’s various defined benefit pension plans and the impact of any increased pension funding resulting from those changes; rating agency actions that could affect Aon’s ability to borrow funds; fluctuations in exchange and interest rates that could influence revenue and expense; the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions and ERISA class actions; the impact of any investigations brought by regulatory authorities in the U.S., U.K. and other countries;  the cost of resolution of other contingent liabilities and loss contingencies, including potential liabilities arising from error and omissions claims against Aon; the failure to retain and attract qualified personnel;  the impact of, and potential challenges in complying with, legislation and regulation in the jurisdictions in which Aon operates, particularly given the global scope of Aon’s  businesses and the possibility of conflicting regulatory requirements across jurisdictions in which Aon does business; the effect of the change in global headquarters and jurisdiction of incorporation, including the failure to realize some of the anticipated benefits; the extent to which Aon retains existing clients and attracts new businesses and Aon’s ability to incentivize and retain key employees; the extent to which Aon manages certain risks created in connection with the various services, including fiduciary and advisory services and business process outsourcing services, among others, that Aon currently provides, or will provide in the future, to clients;  the possibility that the expected efficiencies and cost savings from the merger with Hewitt Associates Inc. (“Hewitt”) will not be realized, or will not be realized within the expected time period; the risk that the Aon and Hewitt businesses will not be integrated successfully;  Aon’s ability to implement restructuring initiatives and other initiatives intended to yield cost savings, and the ability to achieve those cost savings;  the potential of a system or network disruption resulting in operational interruption or improper disclosure of personal data; any inquiries relating to compliance with the U.S. Foreign Corrupt Practices Act and non-U.S. anti-corruption laws and with U.S. and non-U.S. trade sanctions regimes; and Aon’s ability to grow, develop and integrate companies that it acquires or new lines of business.

 

Further information concerning Aon and its business, including factors that potentially could materially affect Aon’s financial results, is contained in Aon’s filings with the SEC. See Aon’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q for a further discussion of these and other risks and uncertainties applicable to Aon’s businesses. Aon does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in their respective expectations, except as required by law.

 

Explanation of Non-GAAP Measures

 

This communication includes supplemental information related to organic revenue, free cash flow and several additional measures including expenses, margins and income per share, that exclude the effects of restructuring charges, intangible asset amortization, capital expenditures, transaction and integration costs and certain other noteworthy items that affected results for the comparable periods.  Organic revenue excludes from reported revenues the impact of foreign exchange, acquisitions, divestitures, transfers between business units, reimbursable expenses and unusual items.  The impact of foreign exchange is determined by translating last year’s revenue, expense or net income at this year’s foreign exchange rates.  Reconciliations are provided in the attached schedules.  Supplemental organic revenue information and additional measures that exclude the effects of the restructuring charges and certain other items do not affect net income or any other GAAP reported amounts.  Free cash flow is cash flow from operating activity less capital expenditures.  Management believes that these measures are important to make meaningful period-to-period comparisons and that this supplemental information is helpful to investors.  They should be viewed in addition to, not in lieu of, the Company’s Consolidated Financial Statements.  Industry peers provide similar supplemental information regarding their performance, although they may not make identical adjustments.

 

#

 

Investor Contact:

 

Media Contact:

Scott Malchow

 

David Prosperi

Senior Vice President, Investor Relations

 

Vice President, Global Public Relations

+44-207-086-0100

 

312-381-2485

 

7



 

Aon plc

Condensed Consolidated Statements of Income (Unaudited)

 

 

 

Three Months Ended

 

(millions, except per share data)

 

Mar. 31,
2013

 

Mar. 31,
2012

 

Percent
Change

 

Revenue

 

 

 

 

 

 

 

Commissions, fees and other

 

$

2,908

 

$

2,829

 

3

%

Fiduciary investment income

 

7

 

12

 

(42

)

Total revenue

 

2,915

 

2,841

 

3

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Compensation and benefits

 

1,725

 

1,661

 

4

 

Other general expenses

 

780

 

778

 

 

Total operating expenses

 

2,505

 

2,439

 

3

 

Operating income

 

410

 

402

 

2

 

 

 

 

 

 

 

 

 

Interest income

 

1

 

3

 

(67

)

Interest expense

 

(52

)

(59

)

(12

)

Other income

 

9

 

 

100

 

Income before income taxes

 

368

 

346

 

6

 

Income taxes (1) 

 

96

 

97

 

(1

)

Net income

 

272

 

249

 

9

 

Less: Net income attributable to the noncontrolling interests

 

11

 

11

 

 

Net income attributable to Aon shareholders

 

$

261

 

$

238

 

10

%

 

 

 

 

 

 

 

 

Basic net income per share attributable to Aon shareholders

 

$

0.82

 

$

0.72

 

14

%

 

 

 

 

 

 

 

 

Diluted net income per share attributable to Aon shareholders

 

$

0.82

 

$

0.71

 

15

%

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding - diluted

 

320.0

 

336.6

 

(5

)%

 


(1)   The effective tax rate is 26.1% and 28.0% for the three months ended March 31, 2013 and 2012, respectively.

 

8



 

Aon plc

Revenue from Continuing Operations (Unaudited)

 

 

 

Three Months Ended

 

(millions)

 

Mar. 31,
2013

 

Mar. 31,
2012

 

Percent
Change

 

Organic
Revenue
Growth (1)

 

Commissions, Fees and Other

 

 

 

 

 

 

 

 

 

Risk Solutions

 

$

1,964

 

$

1,893

 

4

%

3

%

HR Solutions

 

954

 

945

 

1

 

1

 

Total Operating Segments

 

$

2,918

 

$

2,838

 

3

%

2

%

 

 

 

 

 

 

 

 

 

 

Fiduciary Investment Income

 

 

 

 

 

 

 

 

 

Risk Solutions

 

$

7

 

$

12

 

(42

)%

 

 

HR Solutions

 

 

 

N/A

 

 

 

Total Operating Segments

 

$

7

 

$

12

 

(42

)%

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

 

 

 

 

 

 

 

 

Risk Solutions

 

$

1,971

 

$

1,905

 

3

%

 

 

HR Solutions

 

954

 

945

 

1

 

 

 

Intersegment

 

(10

)

(9

)

11

 

 

 

Total

 

$

2,915

 

$

2,841

 

3

%

 

 

 


(1)         Organic revenue excludes the impact of foreign exchange, acquisitions, divestitures, transfers, reimbursable expenses and unusual items. Change in organic revenue, a non-GAAP measure, is reconciled to the corresponding U.S. GAAP percent change in revenue on page 11 of this release.

 

9



 

Aon plc

Segments (Unaudited)

 

Risk Solutions

 

 

 

Three Months Ended

 

(millions)

 

Mar. 31,
2013

 

Mar. 31,
2012

 

Percent
Change

 

Revenue

 

 

 

 

 

 

 

Commissions, fees and other

 

$

1,964

 

$

1,893

 

4

%

Fiduciary investment income

 

7

 

12

 

(42

)

Total revenue

 

1,971

 

1,905

 

3

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Compensation and benefits

 

1,110

 

1,071

 

4

 

Other general expenses

 

458

 

468

 

(2

)

Total operating expenses

 

1,568

 

1,539

 

2

 

 

 

 

 

 

 

 

 

Operating income

 

$

403

 

$

366

 

10

%

 

 

 

 

 

 

 

 

Operating margin

 

20.4

%

19.2

%

 

 

 

HR Solutions

 

 

 

Three Months Ended

 

(millions)

 

Mar. 31,
2013

 

Mar. 31,
2012

 

Percent
Change

 

Revenue

 

 

 

 

 

 

 

Commissions, fees and other

 

$

954

 

$

945

 

1

%

Fiduciary investment income

 

 

 

N/A

 

Total revenue

 

954

 

945

 

1

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Compensation and benefits

 

590

 

569

 

4

 

Other general expenses

 

313

 

303

 

3

 

Total operating expenses

 

903

 

872

 

4

 

 

 

 

 

 

 

 

 

Operating income

 

$

51

 

$

73

 

(30

)%

 

 

 

 

 

 

 

 

Operating margin

 

5.3

%

7.7

%

 

 

 

Total Operating Income (Loss)

 

 

 

Three Months Ended

 

(millions)

 

Mar. 31,
2013

 

Mar. 31,
2012

 

Percent
Change

 

Risk Solutions

 

$

403

 

$

366

 

10

%

HR Solutions

 

51

 

73

 

(30

)

Unallocated

 

(44

)

(37

)

19

 

Total operating income

 

$

410

 

$

402

 

2

%

 

 

 

 

 

 

 

 

Total operating margin

 

14.1

%

14.1

%

 

 

 

10



 

Aon plc

Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow (Unaudited)

 

Organic Revenue (Unaudited)

 

 

 

Three Months Ended

 

(millions)

 

Mar. 31,
2013

 

Mar. 31,
2012

 

Percent
Change

 

Less:
Currency
Impact (1)

 

Less:
Acquisitions,
Divestitures &
Other

 

Organic
Revenue
Growth (2)

 

Commissions, Fees and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Solutions Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail brokerage

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

686

 

$

651

 

5

%

(1

)%

%

6

%

International

 

876

 

843

 

4

 

 

1

 

3

 

Total Retail brokerage

 

1,562

 

1,494

 

5

 

 

1

 

4

 

Reinsurance brokerage

 

402

 

399

 

1

 

 

 

1

 

Total Risk Solutions

 

1,964

 

1,893

 

4

 

 

1

 

3

 

HR Solutions Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting services

 

382

 

380

 

1

 

 

 

1

 

Outsourcing

 

581

 

568

 

2

 

 

1

 

1

 

Intrasegment

 

(9

)

(3

)

N/A

 

N/A

 

N/A

 

N/A

 

Total HR Solutions

 

954

 

945

 

1

 

 

 

1

 

Total Operating Segments

 

$

2,918

 

$

2,838

 

3

%

%

1

%

2

%

 

Free Cash Flow (Unaudited)

 

 

 

Three Months Ended

 

(millions)

 

Mar. 31,
2013

 

Mar. 31,
2012

 

Percent
Change

 

Cash Provided By (Used For) Operations

 

$

54

 

$

(15

)

460

%

Less: Capital Expenditures

 

(60

)

(71

)

(15

)

Free Cash Flow (3)

 

$

(6

)

$

(86

)

(93

)%

 


(1)         Currency impact is determined by translating last year’s revenue at this year’s foreign exchange rates.

 

(2)         Organic revenue excludes the impact of foreign exchange, acquisitions, divestitures, transfers, reimbursable expenses and unusual items.

 

(3)         Free cash flow is defined as cash flow from operations less capital expenditures. This non-GAAP measure does not imply or represent a precise calculation of residual cash flow available for discretionary expenditures.

 

11



 

Aon plc

Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings Per Share (Unaudited) (1)

 

 

 

Three Months Ended March 31, 2013

 

(millions)

 

Risk
Solutions

 

HR
Solutions

 

Unallocated
Income &
Expense

 

Total

 

Revenue

 

$

1,971

 

$

954

 

$

(10

)

$

2,915

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) - as reported

 

$

403

 

$

51

 

$

(44

)

$

410

 

Restructuring charges

 

11

 

15

 

 

26

 

Intangible asset amortization

 

29

 

70

 

 

99

 

Headquarters relocation costs

 

 

 

3

 

3

 

Operating income (loss) - as adjusted

 

$

443

 

$

136

 

$

(41

)

$

538

 

 

 

 

 

 

 

 

 

 

 

Operating margins - as adjusted

 

22.5

%

14.3

%

N/A

 

18.5

%

 

 

 

Three Months Ended March 31, 2012

 

(millions)

 

Risk
Solutions

 

HR
Solutions

 

Unallocated
Income &
Expense

 

Total

 

Revenue

 

$

1,905

 

$

945

 

$

(9

)

$

2,841

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) - as reported

 

$

366

 

$

73

 

$

(37

)

$

402

 

Restructuring charges

 

11

 

9

 

 

20

 

Intangible asset amortization

 

30

 

74

 

 

104

 

Headquarters relocation costs

 

 

 

3

 

3

 

Operating income (loss) - as adjusted

 

$

407

 

$

156

 

$

(34

)

$

529

 

 

 

 

 

 

 

 

 

 

 

Operating margins - as adjusted

 

21.4

%

16.5

%

N/A

 

18.6

%

 

 

 

Three Months Ended
March 31,

 

(millions except per share data)

 

2013

 

2012

 

Operating income - as adjusted

 

$

538

 

$

529

 

Interest income

 

1

 

3

 

Interest expense

 

(52

)

(59

)

Other income

 

9

 

 

 

 

 

 

 

 

Income before income taxes - as adjusted

 

496

 

473

 

Income taxes (2)

 

129

 

132

 

Net income - as adjusted

 

367

 

341

 

Less: Net income attributable to noncontrolling interests

 

11

 

11

 

Net income attributable to Aon shareholders - as adjusted

 

$

356

 

$

330

 

 

 

 

 

 

 

Diluted net income per share attributable to Aon shareholders - as adjusted

 

$

1.11

 

$

0.98

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding - diluted

 

320.0

 

336.6

 

 


(1)         Certain noteworthy items impacting operating income in 2013 and 2012 are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures.

 

(2)         The effective tax rate is 26.1% and 28.0% for the three months ended March 31, 2013 and 2012, respectively. Adjusting items are generally taxed at the effective tax rate.

 

12



 

Aon plc

Restructuring Plans (Unaudited) (1)

 

Aon Hewitt Restructuring Plan

By Type:

 

 

 

Actual

 

 

 

(millions)

 

Full Year
2010

 

Full Year
2011

 

Full Year
2012

 

First
Quarter
2013

 

Total to
Date

 

Estimated
Total

 

Workforce reduction

 

$

49

 

$

64

 

$

74

 

$

24

 

$

211

 

$

213

 

Lease consolidation

 

3

 

32

 

18

 

2

 

55

 

86

 

Asset impairments

 

 

7

 

4

 

 

11

 

21

 

Other costs associated with restructuring

 

 

2

 

2

 

 

4

 

5

 

Total restructuring and related expenses

 

$

52

 

$

105

 

$

98

 

$

26

 

$

281

 

$

325

 

 

By Segment: (2)

 

HR Solutions

 

52

 

49

 

66

 

15

 

182

 

213

 

Risk Solutions

 

 

56

 

32

 

11

 

99

 

112

 

Total restructuring and related expenses

 

$

52

 

$

105

 

$

98

 

$

26

 

$

281

 

$

325

 

 


(1)         In the Condensed Consolidated Statements of Income, workforce reductions are included in “Compensation and benefits”;  lease consolidations, asset impairments, and other costs associated with restructuring are included in “Other general expenses”.

 

(2)         Costs included in the Risk Solutions segment are associated with the transfer of the Health and Benefits Consulting business from HR Solutions to Risk Solutions effective January 1, 2012. Costs incurred in 2011 in the HR Solutions segment of $41 million related to the Health and Benefits Consulting business have been reclassified and presented in the Risk Solutions segment.

 

13



 

Aon plc

Condensed Consolidated Statements of Financial Position (Unaudited)

 

 

 

As of

 

(millions) 

 

March 31,
2013

 

December 31,
2012

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

 

$

408

 

$

291

 

Short-term investments

 

352

 

346

 

Receivables, net

 

2,884

 

3,101

 

Fiduciary assets (1) 

 

12,224

 

12,214

 

Other current assets

 

389

 

430

 

Total Current Assets

 

16,257

 

16,382

 

Goodwill

 

8,786

 

8,943

 

Intangible assets, net

 

2,844

 

2,975

 

Fixed assets, net

 

816

 

820

 

Investments

 

152

 

165

 

Other non-current assets

 

1,174

 

1,201

 

Total Assets

 

$

30,029

 

$

30,486

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Fiduciary liabilities

 

$

12,224

 

$

12,214

 

Short-term debt and current portion of long-term debt

 

802

 

452

 

Accounts payable and accrued liabilities

 

1,440

 

1,853

 

Other current liabilities

 

795

 

831

 

Total Current Liabilities

 

15,261

 

15,350

 

Long-term debt

 

3,770

 

3,713

 

Pension, other post retirement and other post employment liabilities

 

2,027

 

2,276

 

Other non-current liabilities

 

1,338

 

1,342

 

Total Liabilities

 

22,396

 

22,681

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

Ordinary shares ($0.01 nominal value)

 

3

 

3

 

Additional paid-in capital

 

4,507

 

4,436

 

Retained earnings

 

5,844

 

5,933

 

Accumulated other comprehensive loss

 

(2,775

)

(2,610

)

Total Aon Shareholders’ Equity

 

7,579

 

7,762

 

Noncontrolling interests

 

54

 

43

 

Total Equity

 

7,633

 

7,805

 

Total Liabilities and Equity

 

$

30,029

 

$

30,486

 

 


(1) Includes short-term investments:  2013 - $4,254, 2012 - $4,029

 

14



 

Aon plc

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

 

 

Three Months Ended

 

(millions) 

 

March 31,
2013

 

March 31,
2012

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net income

 

$

272

 

$

249

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

Depreciation of fixed assets

 

59

 

55

 

Amortization of intangible assets

 

99

 

104

 

Share-based compensation expense

 

69

 

55

 

Deferred income taxes

 

13

 

16

 

Change in assets and liabilities:

 

 

 

 

 

Fiduciary receivables

 

(42

)

(644

)

Short term investments - funds held on behalf of clients

 

(322

)

(62

)

Fiduciary liabilities

 

364

 

706

 

Receivables, net

 

174

 

61

 

Accounts payable and accrued liabilities

 

(417

)

(451

)

Restructuring reserves

 

(16

)

(16

)

Current income taxes

 

(65

)

41

 

Pension and other post employment liabilities

 

(196

)

(110

)

Other assets and liabilities

 

62

 

(19

)

CASH PROVIDED BY (USED FOR) OPERATIONS

 

54

 

(15

)

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Sales of long-term investments

 

18

 

36

 

Purchases of long-term investments

 

(3

)

(3

)

Net (purchases) sales of short-term investments - non-fiduciary

 

(16

)

283

 

Acquisition of businesses, net of cash acquired

 

(2

)

(23

)

Proceeds from sale of business

 

1

 

 

Capital expenditures

 

(60

)

(71

)

CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES

 

(62

)

222

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Share repurchase

 

(300

)

(100

)

Issuance of shares for employee benefit plans

 

36

 

49

 

Issuance of debt

 

1,150

 

75

 

Repayment of debt

 

(715

)

(140

)

Cash dividends to shareholders

 

(50

)

(49

)

Purchase of shares from noncontrolling interests

 

(1

)

 

Dividends paid to noncontrolling interests

 

 

(1

)

CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES

 

120

 

(166

)

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

5

 

10

 

Net Increase in Cash and Cash Equivalents

 

117

 

51

 

Cash and Cash Equivalents at Beginning of Period

 

291

 

272

 

Cash and Cash Equivalents at End of Period

 

$

408

 

$

323

 

 

15