England and Wales | 1-7933 | 98-1030901 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
122 Leadenhall Street, London, England (Address of Principal Executive Offices) | EC3V 4AN (Zip Code) |
Exhibit Number | Description of Exhibit | ||
99.1 |
Aon plc | |||
By: | /s/ Christa Davies | ||
Christa Davies | |||
Executive Vice President and Chief Financial Officer | |||
Date: | February 2, 2018 |
Exhibit Number | Description of Exhibit | |
99.1 | Press Release issued by Aon plc on February 2, 2018. |
Investor Relations |
• | Reported revenue increased 10% to $2.9 billion with organic revenue growth of 6% |
• | Operating margin decreased to 16.8%, and operating margin, adjusted for certain items, increased to 27.5% |
• | EPS decreased to $0.04, and EPS, adjusted for certain items, increased to $2.35 |
• | Repurchased 3.5 million Class A Ordinary Shares for approximately $500 million |
• | The Company closed its acquisition of the Townsend Group, a leading global real estate and investment management firm, bringing greater depth of expertise in real estate assets to Aon's distribution scale and increasing Aon's ability to provide alternative private market assets |
• | The Company closed its acquisition of Unirobe Meeùs Groep, strengthening Aon's position as a top leading insurance broker and risk advisor in all business-to-business market segments in the Netherlands |
• | Reported revenue increased 6% to $10.0 billion with organic revenue growth of 4% |
• | Operating margin decreased to 9.8%, and operating margin, adjusted for certain items, increased to 23.4% |
• | EPS decreased to $1.53, and EPS, adjusted for certain items, increased to $6.52 |
• | Cash flow from operations was $669 million and free cash flow was $486 million |
• | Closed more than $1.0 billion of mergers and acquisitions in high-growth, high-margin areas across the portfolio |
• | Repurchased 18.0 million Class A Ordinary Shares for approximately $2.4 billion |
Three Months Ended | |||||||||||||||||||||||
Dec 31, 2017 | Dec 31, 2016 | % Change | Less: Currency Impact | Less: Fiduciary Investment Income | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth | |||||||||||||||||
Commercial Risk Solutions | $ | 1,226 | $ | 1,094 | 12 | % | 3 | % | — | % | 4 | % | 5 | % | |||||||||
Reinsurance Solutions | 359 | 329 | 9 | 1 | — | — | 8 | ||||||||||||||||
Retirement Solutions | 489 | 441 | 11 | 3 | — | 4 | 4 | ||||||||||||||||
Health Solutions | 538 | 532 | 1 | 1 | — | (6 | ) | 6 | |||||||||||||||
Data & Analytic Services | 298 | 256 | 16 | 2 | — | 2 | 12 | ||||||||||||||||
Elimination | (1 | ) | (2 | ) | NA | NA | NA | NA | NA | ||||||||||||||
Total revenue | $ | 2,909 | $ | 2,650 | 10 | % | 2 | % | — | % | 2 | % | 6 | % |
Three Months Ended | |||||||||||||||
(millions) | Dec 31, 2017 | Dec 31, 2016 | $ Change | % Change | |||||||||||
Expenses | |||||||||||||||
Compensation and benefits | $ | 1,752 | $ | 1,646 | $ | 106 | 6 | % | |||||||
Information technology | 124 | 105 | 19 | 18 | |||||||||||
Premises | 89 | 86 | 3 | 3 | |||||||||||
Depreciation of fixed assets | 39 | 44 | (5 | ) | (11 | ) | |||||||||
Amortization and impairment of intangible assets | 100 | 40 | 60 | 150 | |||||||||||
Other general expenses | 316 | 266 | 50 | 19 | |||||||||||
Total operating expenses | $ | 2,420 | $ | 2,187 | $ | 233 | 11 | % |
Three Months Ended | |||||||||||
(millions) | Dec 31, 2017 | Dec 31, 2016 | % Change | ||||||||
Revenue | $ | 2,909 | $ | 2,650 | 10 | % | |||||
Expenses | 2,420 | 2,187 | 11 | ||||||||
Operating income - as reported | $ | 489 | $ | 463 | 6 | % | |||||
Operating margin - as reported | 16.8 | % | 17.5 | % | |||||||
Operating income - as adjusted | $ | 799 | $ | 676 | 18 | % | |||||
Operating margin - as adjusted | 27.5 | % | 25.5 | % |
Three Months Ended | |||||||||||
(millions) | Dec 31, 2017 | Dec 31, 2016 | % Change | ||||||||
Operating income - as reported | $ | 489 | $ | 463 | 6 | % | |||||
Interest income | 7 | 3 | 133 | ||||||||
Interest expense | (71 | ) | (70 | ) | 1 | ||||||
Other income (expense) | (19 | ) | 9 | (311 | ) | ||||||
Income from continuing operations before income taxes | $ | 406 | $ | 405 | — | % |
Investor Contact: | Media Contact: | |
Investor Relations | Donna Mirandola | |
+1 312-381-3310 | Vice President, Global External Communications | |
investor.relations@aon.com | +1 312-381-1532 |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||
(millions, except per share data) | Dec 31, 2017 | Dec 31, 2016 | % Change | Dec 31, 2017 | Dec 31, 2016 | % Change | ||||||||||||||||
Revenue | ||||||||||||||||||||||
Total revenue | $ | 2,909 | $ | 2,650 | 10 | % | $ | 9,998 | $ | 9,409 | 6 | % | ||||||||||
Expenses | ||||||||||||||||||||||
Compensation and benefits | 1,752 | 1,646 | 6 | 6,089 | 5,687 | 7 | ||||||||||||||||
Information technology | 124 | 105 | 18 | 419 | 386 | 9 | ||||||||||||||||
Premises | 89 | 86 | 3 | 348 | 343 | 1 | ||||||||||||||||
Depreciation of fixed assets | 39 | 44 | (11 | ) | 187 | 162 | 15 | |||||||||||||||
Amortization and impairment of intangible assets | 100 | 40 | 150 | 704 | 157 | 348 | ||||||||||||||||
Other general expenses | 316 | 266 | 19 | 1,272 | 1,036 | 23 | ||||||||||||||||
Total operating expenses | 2,420 | 2,187 | 11 | 9,019 | 7,771 | 16 | ||||||||||||||||
Operating income | 489 | 463 | 6 | 979 | 1,638 | (40 | ) | |||||||||||||||
Interest income | 7 | 3 | 133 | 27 | 9 | 200 | ||||||||||||||||
Interest expense | (71 | ) | (70 | ) | 1 | (282 | ) | (282 | ) | — | ||||||||||||
Other income (expense) | (19 | ) | 9 | (311 | ) | (39 | ) | 36 | (208 | ) | ||||||||||||
Income from continuing operations before income taxes | 406 | 405 | — | 685 | 1,401 | (51 | ) | |||||||||||||||
Income taxes (1) | 389 | 21 | 1,752 | 250 | 148 | 69 | ||||||||||||||||
Net income from continuing operations | 17 | 384 | (96 | ) | 435 | 1,253 | (65 | ) | ||||||||||||||
Income from discontinued operations, net of tax (2) | (29 | ) | 75 | (139 | ) | 828 | 177 | 368 | ||||||||||||||
Net income | (12 | ) | 459 | (103 | ) | 1,263 | 1,430 | (12 | ) | |||||||||||||
Less: Net income attributable to noncontrolling interests | 7 | 7 | — | 37 | 34 | 9 | ||||||||||||||||
Net income attributable to Aon shareholders | $ | (19 | ) | $ | 452 | (104 | )% | $ | 1,226 | $ | 1,396 | (12 | )% | |||||||||
Basic net income per share attributable to Aon shareholders | ||||||||||||||||||||||
Continuing operations | $ | 0.04 | $ | 1.42 | (97 | )% | $ | 1.54 | $ | 4.55 | (66 | )% | ||||||||||
Discontinued operations (3) | (0.12 | ) | 0.28 | (143 | ) | 3.20 | 0.66 | 385 | ||||||||||||||
Net income | $ | (0.08 | ) | $ | 1.70 | (105 | )% | $ | 4.74 | $ | 5.21 | (9 | )% | |||||||||
Diluted net income per share attributable to Aon shareholders | ||||||||||||||||||||||
Continuing operations | $ | 0.04 | $ | 1.40 | (97 | ) | $ | 1.53 | $ | 4.51 | (66 | ) | ||||||||||
Discontinued operations (3) | (0.11 | ) | 0.28 | (139 | ) | 3.17 | 0.65 | 388 | ||||||||||||||
Net income | $ | (0.07 | ) | $ | 1.68 | (104 | )% | $ | 4.70 | $ | 5.16 | (9 | )% | |||||||||
Weighted average ordinary shares outstanding - basic | 251.3 | 265.2 | (5 | )% | 258.5 | 268.1 | (4 | )% | ||||||||||||||
Weighted average ordinary shares outstanding - diluted | 254.5 | 268.3 | (5 | )% | 260.7 | 270.3 | (4 | )% |
(1) | The effective tax rate was 95.8% and 5.2% for the three months ended December 31, 2017 and 2016, respectively, and 36.5% and 10.6% for the twelve months ended December 31, 2017 and 2016, respectively. |
(2) | Income from discontinued operations, net of tax, includes a $779 million gain on the sale of the Divested Business. |
(3) | Upon triggering held for sale criteria in February 2017, Aon ceased depreciating and amortizing all long-lived assets included in discontinued operations. No depreciation or amortization expense was recognized during the three months ended December 31, 2017. Included within total operating expenses for the three months ended December 31, 2016 was $17 million of depreciation of fixed assets and $30 million of intangible asset amortization. Total operating expenses for the twelve months ended December 31, 2017 and 2016 include, respectively, $8 million and $70 million of depreciation of fixed assets and, respectively, $11 million and $120 million of intangible asset amortization. |
Three Months Ended | ||||||||||||||||||
(millions) | Dec 31, 2017 | Dec 31, 2016 | % Change | Less: Currency Impact (1) | Less: Fiduciary Investment Income (2) | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth (3) | |||||||||||
Commercial Risk Solutions | $ | 1,226 | $ | 1,094 | 12% | 3% | —% | 4% | 5% | |||||||||
Reinsurance Solutions | 359 | 329 | 9 | 1 | — | — | 8 | |||||||||||
Retirement Solutions | 489 | 441 | 11 | 3 | — | 4 | 4 | |||||||||||
Health Solutions | 538 | 532 | 1 | 1 | — | (6) | 6 | |||||||||||
Data & Analytic Services | 298 | 256 | 16 | 2 | — | 2 | 12 | |||||||||||
Elimination | (1 | ) | (2 | ) | NA | NA | NA | NA | NA | |||||||||
Total revenue | $ | 2,909 | $ | 2,650 | 10% | 2% | —% | 2% | 6% |
Twelve Months Ended | ||||||||||||||||||
(millions) | Dec 31, 2017 | Dec 31, 2016 | % Change | Less: Currency Impact (1) | Less: Fiduciary Investment Income (2) | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth (3) | |||||||||||
Commercial Risk Solutions | $ | 4,169 | $ | 3,929 | 6% | —% | —% | 4% | 2% | |||||||||
Reinsurance Solutions | 1,429 | 1,361 | 5 | — | — | (1) | 6 | |||||||||||
Retirement Solutions | 1,755 | 1,707 | 3 | (1) | — | 1 | 3 | |||||||||||
Health Solutions | 1,515 | 1,370 | 11 | — | — | 4 | 7 | |||||||||||
Data & Analytic Services | 1,140 | 1,050 | 9 | — | — | 3 | 6 | |||||||||||
Elimination | (10 | ) | (8 | ) | NA | NA | NA | NA | NA | |||||||||
Total revenue | $ | 9,998 | $ | 9,409 | 6% | —% | —% | 2% | 4% |
(1) | Currency impact is determined by translating last year's revenue at this year's foreign exchange rates. |
(2) | Fiduciary Investment Income for the three months ended December 31, 2017 and 2016, respectively, was $9 million and $6 million. Fiduciary Investment Income for the twelve months ended December 31, 2017 and 2016, respectively, was $32 million and $22 million. |
(3) | Organic revenue growth includes the impact of intercompany activity and excludes the impact of foreign exchange rate changes, acquisitions, divestitures, transfers between business units, fiduciary investment income, and reimbursable expenses. |
Twelve Months Ended | |||||||||||
(millions) | Dec 31, 2017 | Dec 31, 2016 | % Change | ||||||||
Cash Provided By Continuing Operating Activities | $ | 669 | $ | 1,829 | (63 | )% | |||||
Capital Expenditures Used for Continuing Operations | (183 | ) | (156 | ) | 17 | ||||||
Free Cash Flow Provided by Continuing Operations (1) | $ | 486 | $ | 1,673 | (71 | )% |
(1) | 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. |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||
(millions, except percentages) | Dec 31, 2017 | Dec 31, 2016 | % Change | Dec 31, 2017 | Dec 31, 2016 | % Change | ||||||||||||||||
Revenue | $ | 2,909 | $ | 2,650 | 10 | % | $ | 9,998 | $ | 9,409 | 6 | % | ||||||||||
Operating income - as reported | $ | 489 | $ | 463 | 6 | % | $ | 979 | $ | 1,638 | (40 | )% | ||||||||||
Amortization and impairment of intangible assets | 100 | 40 | 704 | 157 | ||||||||||||||||||
Restructuring | 96 | — | 497 | — | ||||||||||||||||||
Regulatory and compliance matters | (14 | ) | — | 28 | — | |||||||||||||||||
Pension settlement | 128 | 158 | 128 | 220 | ||||||||||||||||||
Transaction costs | — | 15 | — | 15 | ||||||||||||||||||
Operating income - as adjusted | $ | 799 | $ | 676 | 18 | % | $ | 2,336 | $ | 2,030 | 15 | % | ||||||||||
Operating margin - as reported | 16.8 | % | 17.5 | % | 9.8 | % | 17.4 | % | ||||||||||||||
Operating margin - as adjusted | 27.5 | % | 25.5 | % | 23.4 | % | 21.6 | % |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||
(millions, except per share data) | Dec 31, 2017 | Dec 31, 2016 | % Change | 2017 | 2016 | % Change | ||||||||||||||||
Operating income - as adjusted | $ | 799 | $ | 676 | 18 | % | $ | 2,336 | $ | 2,030 | 15 | % | ||||||||||
Interest income | 7 | 3 | 133 | 27 | 9 | 200 | ||||||||||||||||
Interest expense | (71 | ) | (70 | ) | 1 | (282 | ) | (282 | ) | — | ||||||||||||
Other income (expense) | (19 | ) | 9 | (311 | ) | (39 | ) | 36 | (208 | ) | ||||||||||||
Income before income taxes from continuing operations - as adjusted | 716 | 618 | 16 | 2,042 | 1,793 | 14 | ||||||||||||||||
Income taxes - as adjusted (2) | 111 | 74 | 50 | 305 | 250 | 22 | ||||||||||||||||
Net income from continuing operations - as adjusted | 605 | 544 | 11 | 1,737 | 1,543 | 13 | ||||||||||||||||
Less: Net income attributable to noncontrolling interests | 7 | 7 | — | 37 | 34 | 9 | ||||||||||||||||
Net income attributable to Aon shareholders from continuing operations - as adjusted | $ | 598 | $ | 537 | 11 | % | $ | 1,700 | $ | 1,509 | 13 | % | ||||||||||
Adjusted income from discontinued operations, net of tax (3) | $ | (4 | ) | $ | 100 | (104 | )% | $ | 56 | $ | 271 | (79 | )% | |||||||||
Net income attributable to Aon shareholders - as adjusted | $ | 594 | $ | 637 | (7 | )% | $ | 1,756 | $ | 1,780 | (1 | )% | ||||||||||
Diluted net income per share attributable to Aon shareholders | ||||||||||||||||||||||
Continuing operations - as adjusted | $ | 2.35 | $ | 2.00 | 18 | % | $ | 6.52 | $ | 5.58 | 17 | % | ||||||||||
Discontinued operations - as adjusted | (0.01 | ) | 0.37 | (103 | ) | 0.22 | 1.01 | (78 | ) | |||||||||||||
Net income - as adjusted | $ | 2.34 | $ | 2.37 | (1 | )% | $ | 6.74 | $ | 6.59 | 2 | % | ||||||||||
Weighted average ordinary shares outstanding - diluted | 254.5 | 268.3 | (5 | )% | 260.7 | 270.3 | (4 | )% | ||||||||||||||
Effective Tax Rates (2) | ||||||||||||||||||||||
Continuing Operations - U.S. GAAP | 95.8 | % | 5.2 | % | 36.5 | % | 10.6 | % | ||||||||||||||
Continuing Operations - Non-GAAP | 15.5 | % | 12.0 | % | 14.9 | % | 13.9 | % | ||||||||||||||
Discontinued Operations - U.S. GAAP | 17.7 | % | 28.6 | % | 58.9 | % | 34.0 | % | ||||||||||||||
Discontinued Operations - Non-GAAP (3) | 72.9 | % | 26.0 | % | 11.7 | % | 30.2 | % |
(1) | Certain noteworthy items impacting operating income in 2017 and 2016 are described in this schedule. The items shown with the caption "as adjusted" are non-GAAP measures. |
(2) | Tax expense was adjusted to exclude the estimated impact of the Tax Cuts and Jobs Act, including the impact of the transition tax imposed on our accumulated foreign earnings and the remeasurement of the carrying value of our U.S. net deferred tax assets due to the lower corporate tax rate. The provisional estimate of the impact of U.S. Tax Reform is based on Aon’s initial analysis of the Tax Cuts and Jobs Act and may be adjusted in future periods due to, among other things, additional analysis performed by Aon and additional guidance that may be issued by the U.S. Department of Treasury. Further, adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with estimated restructuring expenses, accelerated tradename amortization, impairment charges, regulatory and compliance provisions, and non-cash pension settlement charges, which are adjusted at the related jurisdictional rate. |
(3) | Adjusted income from discontinued operations, net of tax, excludes the gain on sale and intangible asset amortization on discontinued operations of $(19) million and $0 million, respectively, for the three months ended December 31, 2017 and $1,964 million and $11 million, respectively, for the twelve months ended December 31, 2017. Adjusted income from discontinued operations, net of tax, excludes intangible asset amortization on discontinued operations of $30 million and $120 million for the three and twelve months ended December 31, 2016. The effective tax rate was further adjusted for the applicable tax impact associated with the gain on sale and intangible asset amortization, as applicable. |
As of | ||||||||
(millions) | December 31, 2017 | December 31, 2016 | ||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 756 | $ | 426 | ||||
Short-term investments | 529 | 290 | ||||||
Receivables, net | 2,478 | 2,106 | ||||||
Fiduciary assets (1) | 9,625 | 8,959 | ||||||
Other current assets | 289 | 247 | ||||||
Current assets of discontinued operations | — | 1,118 | ||||||
Total Current Assets | 13,677 | 13,146 | ||||||
Goodwill | 8,358 | 7,410 | ||||||
Intangible assets, net | 1,733 | 1,890 | ||||||
Fixed assets, net | 564 | 550 | ||||||
Deferred tax assets | 389 | 325 | ||||||
Prepaid pension | 1,060 | 858 | ||||||
Other non-current assets | 307 | 360 | ||||||
Non-current assets of discontinued operations | — | 2,076 | ||||||
TOTAL ASSETS | $ | 26,088 | $ | 26,615 | ||||
LIABILITIES AND EQUITY | ||||||||
LIABILITIES | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued liabilities | $ | 1,961 | $ | 1,604 | ||||
Short-term debt and current portion of long-term debt | 299 | 336 | ||||||
Fiduciary liabilities | 9,625 | 8,959 | ||||||
Other current liabilities | 870 | 656 | ||||||
Current liabilities of discontinued operations | — | 940 | ||||||
Total Current Liabilities | 12,755 | 12,495 | ||||||
Long-term debt | 5,667 | 5,869 | ||||||
Deferred tax liabilities | 127 | 101 | ||||||
Pension, other post retirement, and post employment liabilities | 1,789 | 1,760 | ||||||
Other non-current liabilities | 1,102 | 719 | ||||||
Non-current liabilities of discontinued operations | — | 139 | ||||||
TOTAL LIABILITIES | 21,440 | 21,083 | ||||||
EQUITY | ||||||||
Ordinary shares - $0.01 nominal value | 2 | 3 | ||||||
Additional paid-in capital | 5,775 | 5,577 | ||||||
Retained earnings | 2,302 | 3,807 | ||||||
Accumulated other comprehensive loss | (3,496 | ) | (3,912 | ) | ||||
TOTAL AON SHAREHOLDERS' EQUITY | 4,583 | 5,475 | ||||||
Noncontrolling interests | 65 | 57 | ||||||
TOTAL EQUITY | 4,648 | 5,532 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 26,088 | $ | 26,615 |
(1) | Includes cash and short-term investments of $3,743 million and $3,290 million for the periods ended December 31, 2017 and 2016, respectively. |
Year ended December 31 | ||||||||
(millions) | 2017 | 2016 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 1,263 | $ | 1,430 | ||||
Less: Income from discontinued operations, net of income taxes | 828 | 177 | ||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Loss (gain) from sales of businesses and investments, net | 16 | (39 | ) | |||||
Depreciation of fixed assets | 187 | 162 | ||||||
Amortization and impairment of intangible assets | 704 | 157 | ||||||
Share-based compensation expense | 319 | 306 | ||||||
Deferred income taxes | (8 | ) | (24 | ) | ||||
Change in assets and liabilities: | ||||||||
Fiduciary receivables | 171 | 595 | ||||||
Short-term investments — funds held on behalf of clients | (135 | ) | (540 | ) | ||||
Fiduciary liabilities | (36 | ) | (55 | ) | ||||
Receivables, net | (254 | ) | (105 | ) | ||||
Accounts payable and accrued liabilities | 96 | 53 | ||||||
Restructuring reserves | 172 | — | ||||||
Current income taxes | (924 | ) | (42 | ) | ||||
Pension, other postretirement and other postemployment liabilities | (66 | ) | 42 | |||||
Other assets and liabilities | (8 | ) | 66 | |||||
Cash provided by operating activities - continuing operations | 669 | 1,829 | ||||||
Cash provided by operating activities - discontinued operations | 65 | 497 | ||||||
CASH PROVIDED BY OPERATING ACTIVITIES | 734 | 2,326 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Proceeds from investments | 68 | 43 | ||||||
Payments for investments | (64 | ) | (64 | ) | ||||
Net sales (purchases) of short-term investments — non-fiduciary | (232 | ) | 61 | |||||
Acquisition of businesses, net of cash acquired | (1,029 | ) | (879 | ) | ||||
Sale of business, net of cash sold | 4,246 | 107 | ||||||
Capital expenditures | (183 | ) | (156 | ) | ||||
Cash provided by investing activities - continuing operations | 2,806 | (888 | ) | |||||
Cash provided by investing activities - discontinued operations | (19 | ) | (66 | ) | ||||
CASH USED FOR INVESTING ACTIVITIES | 2,787 | (954 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Share repurchase | (2,399 | ) | (1,257 | ) | ||||
Issuance of shares for employee benefit plans | (121 | ) | (129 | ) | ||||
Issuance of debt | 1,654 | 3,467 | ||||||
Repayment of debt | (1,999 | ) | (2,945 | ) | ||||
Cash dividends to shareholders | (364 | ) | (345 | ) | ||||
Noncontrolling interests and other financing activities | (36 | ) | (77 | ) | ||||
Cash used for financing activities - continuing operations | (3,265 | ) | (1,286 | ) | ||||
Cash used for financing activities - discontinued operations | — | — | ||||||
CASH USED FOR FINANCING ACTIVITIES | (3,265 | ) | (1,286 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 69 | (39 | ) | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 325 | 47 | ||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 431 | 384 | ||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR (1) | $ | 756 | $ | 431 |
(1) | Includes $0 million and $5 million of discontinued operations at December 31, 2017 and 2016, respectively. |
Three months ended December 31, 2017 | Twelve months ended December 31, 2017 | Estimated Remaining Costs | Estimated Total Cost (2) | |||||||||||||
Workforce reduction | $ | 42 | $ | 299 | $ | 151 | $ | 450 | ||||||||
Technology rationalization | 11 | 33 | 97 | 130 | ||||||||||||
Lease consolidation | — | 8 | 77 | 85 | ||||||||||||
Asset impairments | — | 26 | 24 | 50 | ||||||||||||
Other costs associated with restructuring and separation (3) | 43 | 131 | 179 | 310 | ||||||||||||
Total restructuring and related expenses | $ | 96 | $ | 497 | $ | 528 | $ | 1,025 |
(1) | In the Consolidated Statements of Income, Workforce reductions are included in "Compensation and benefits," Technology rationalization is included in "Information technology," Lease consolidations are included in "Premises," Asset impairments are included in "Depreciation of fixed assets," and Other costs associated with restructuring and separation are included in "Other general expenses" depending on the nature of the expense. |
(2) | Actual costs, when incurred, may vary due to changes in the assumptions built into the plan. Significant assumptions that may change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in assumptions underlying sublease loss calculation due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives. Estimated allocations between categories may be revised in future periods as these assumptions are updated. |
(3) | Other costs associated with the Restructuring Plan include those to separate the Divested Business, as well as moving costs, and consulting and legal fees. These costs are generally recognized when incurred. |
Three Months Ended (5) | Full Year 2016 (5) | Three Months Ended (6) | Full Year 2017 (6) | |||||||||||||||||||||||||||||||||||||
(millions, except per share data) | Mar 31, 2016 | Jun 30, 2016 | Sep 30, 2016 | Dec 31, 2016 | Mar 31, 2017 | Jun 30, 2017 | Sep 30, 2017 | Dec 31, 2017 | ||||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||||||||
Commercial Risk Solutions | $ | 969 | $ | 990 | $ | 884 | $ | 1,088 | $ | 3,931 | $ | 989 | $ | 1,041 | $ | 915 | $ | 1,218 | $ | 4,163 | ||||||||||||||||||||
Reinsurance Solutions | 667 | 335 | 234 | 131 | 1,367 | 671 | 345 | 257 | 153 | 1,426 | ||||||||||||||||||||||||||||||
Retirement Solutions | 396 | 405 | 465 | 441 | 1,707 | 385 | 388 | 492 | 489 | 1,754 | ||||||||||||||||||||||||||||||
Health Solutions | 338 | 253 | 245 | 522 | 1,358 | 428 | 281 | 277 | 526 | 1,512 | ||||||||||||||||||||||||||||||
Data & Analytic Services | 263 | 271 | 260 | 256 | 1,050 | 273 | 281 | 287 | 299 | 1,140 | ||||||||||||||||||||||||||||||
Elimination | (2 | ) | (1 | ) | (3 | ) | (2 | ) | (8 | ) | — | (4 | ) | (5 | ) | (1 | ) | (10 | ) | |||||||||||||||||||||
Total revenue | $ | 2,631 | $ | 2,253 | $ | 2,085 | $ | 2,436 | $ | 9,405 | $ | 2,746 | $ | 2,332 | $ | 2,223 | $ | 2,684 | $ | 9,985 | ||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||
Compensation and benefits | 1,444 | 1,372 | 1,293 | 1,417 | 5,526 | 1,548 | 1,471 | 1,420 | 1,568 | 6,007 | ||||||||||||||||||||||||||||||
Information technology | 83 | 99 | 99 | 105 | 386 | 88 | 98 | 109 | 124 | 419 | ||||||||||||||||||||||||||||||
Premises | 82 | 89 | 86 | 86 | 343 | 84 | 86 | 89 | 89 | 348 | ||||||||||||||||||||||||||||||
Depreciation of fixed assets | 38 | 41 | 39 | 44 | 162 | 54 | 54 | 40 | 39 | 187 | ||||||||||||||||||||||||||||||
Amortization of intangible assets | 37 | 38 | 42 | 40 | 157 | 43 | 460 | 101 | 100 | 704 | ||||||||||||||||||||||||||||||
Other general expenses | 270 | 230 | 257 | 279 | 1,036 | 307 | 330 | 307 | 328 | 1,272 | ||||||||||||||||||||||||||||||
Total operating expenses | 1,954 | 1,869 | 1,816 | 1,971 | 7,610 | 2,124 | 2,499 | 2,066 | 2,248 | 8,937 | ||||||||||||||||||||||||||||||
Operating income | 677 | 384 | 269 | 465 | 1,795 | 622 | (167 | ) | 157 | 436 | 1,048 | |||||||||||||||||||||||||||||
Amortization of intangible assets | 37 | 38 | 42 | 40 | 157 | 43 | 460 | 101 | 100 | 704 | ||||||||||||||||||||||||||||||
Restructuring | — | — | — | — | — | 144 | 155 | 102 | 96 | 497 | ||||||||||||||||||||||||||||||
Regulatory and compliance matters | — | — | — | — | — | — | 34 | 8 | (14 | ) | 28 | |||||||||||||||||||||||||||||
Transaction costs | — | — | — | 15 | 15 | — | — | — | — | |||||||||||||||||||||||||||||||
Operating income - as adjusted | 714 | 422 | 311 | 520 | 1,967 | 809 | 482 | 368 | 618 | 2,277 | ||||||||||||||||||||||||||||||
Operating margin from continuing operations - as adjusted | 27.1 | % | 18.7 | % | 14.9 | % | 21.3 | % | 20.9 | % | 29.5 | % | 20.7 | % | 16.6 | % | 23.0 | % | 22.8 | % | ||||||||||||||||||||
Interest income | 2 | 3 | 1 | 3 | 9 | 2 | 8 | 10 | 7 | 27 | ||||||||||||||||||||||||||||||
Interest expense | (69 | ) | (73 | ) | (70 | ) | (70 | ) | (282 | ) | (70 | ) | (71 | ) | (70 | ) | (71 | ) | (282 | ) | ||||||||||||||||||||
Other income (expense) - as adjusted (3) (4) | 29 | 10 | 22 | 22 | 83 | (2 | ) | 4 | 4 | (3 | ) | 3 | ||||||||||||||||||||||||||||
Income before income taxes from continuing operations - as adjusted | 676 | 362 | 264 | 475 | 1,777 | 739 | 423 | 312 | 551 | 2,025 | ||||||||||||||||||||||||||||||
Income taxes | 107 | 53 | 35 | 49 | 244 | 98 | 68 | 54 | 81 | 301 | ||||||||||||||||||||||||||||||
Income from continuing operations - as adjusted | 569 | 309 | 229 | 426 | 1,533 | 641 | 355 | 258 | 470 | 1,724 | ||||||||||||||||||||||||||||||
Less: Net income attributable to noncontrolling interests | 12 | 8 | 7 | 7 | 34 | 14 | 9 | 7 | 7 | 37 | ||||||||||||||||||||||||||||||
Net income attributable to Aon shareholders from continuing operations - as adjusted | $ | 557 | $ | 301 | $ | 222 | $ | 419 | $ | 1,499 | $ | 627 | $ | 346 | $ | 251 | $ | 463 | $ | 1,687 | ||||||||||||||||||||
Diluted earnings per share from continuing operations - as adjusted | $ | 2.04 | $ | 1.12 | $ | 0.82 | $ | 1.56 | $ | 5.55 | $ | 2.35 | $ | 1.31 | $ | 0.98 | $ | 1.82 | $ | 6.47 | ||||||||||||||||||||
Weighted average ordinary shares outstanding - diluted | 273.7 | 269.8 | 269.6 | 268.3 | 270.3 | 267.0 | 264.3 | 257.3 | 254.5 | 260.7 |
(1) | Certain noteworthy items impacting operating income in 2016 and 2017 are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures. |
(2) | The historical periods presented above have been adjusted retrospectively to reflect changes in accounting guidance related to revenue recognition and pensions, effective for Aon in the first quarter of 2018. |
(3) | For illustrative purposes, the impact of the total foreign currency related to the new revenue accounting guidance is excluded from the Pro Forma financial statements. The impact on Other income (expense) of foreign currency due to this new guidance was $(3) million, $5 million, $1 million, and $4 million, respectively, for the three months ended March 31, 2016, June 30, 2016, September 30, 2016, and December 31, 2016 and $7 million for the twelve months ended December 31, 2016. The impact on Other income (expense) of foreign currency due to this new guidance was $(2) million, $(4) million, $(6) million, and $1 million, respectively, for the three months ended March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017, and $(11) million for the twelve months ended December 31, 2017. |
(4) | Adjusted Other income (expense) excludes pension settlement charges taken within each respective period. Pension settlement charges were $62 million for the three months ended June 30, 2016, and $158 million and $220 million for the three and twelve months ended December 31, 2016. Pension settlement charges were $128 million for the three and twelve months ended December 31, 2017. |
(5) | The non-GAAP effective tax rates reported were 15.7%, 14.9%, 14.2%, and 12.0%, respectively, for the three months ended March 31, 2016, June 30, 2016, September 30, 2016, and December 31, 2016 and 13.9% for the twelve months ended December 31, 2016. Adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with non-cash pension settlements and transaction costs which are adjusted at the related jurisdictional rate. The non-GAAP effective tax rates for continuing operations, adjusted for the change in accounting guidance were 15.8%, 14.6%, 13.3%, and 10.3% for the three months ended March 31, 2016, June 30, 2016, September 30, 2016, and December 31, 2016, and 13.7% for the twelve months ended December 31, 2016. |
(6) | The non-GAAP effective tax rates reported were 11.1%, 15.6%, 17.5%, and 15.5%, respectively, for the three months ended March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017, and 14.9% for the twelve months ended December 31, 2017. Adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with non-cash pension settlements and transaction costs which are adjusted at the related jurisdictional rate. The non-GAAP effective tax rates for continuing operations, adjusted for the change in accounting guidance were 13.3%, 16.1%, 17.3%, and 14.7% for the three months ended March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017, and 14.9% for the twelve months ended December 31, 2017. |
Three Months Ended March 31 | ||||||||||||||||||||||||||
2016 | 2017 | |||||||||||||||||||||||||
(millions, except per share data) | As Reported | Revenue Recognition | Pension | Pro Forma | As Reported | Revenue Recognition | Pension | Pro Forma | ||||||||||||||||||
Revenue | ||||||||||||||||||||||||||
Commercial Risk Solutions | $ | 961 | $ | 8 | $ | — | $ | 969 | $ | 984 | $ | 5 | $ | — | $ | 989 | ||||||||||
Reinsurance Solutions | 371 | 296 | — | 667 | 371 | 300 | — | 671 | ||||||||||||||||||
Retirement Solutions | 395 | 1 | — | 396 | 386 | (1 | ) | — | 385 | |||||||||||||||||
Health Solutions | 292 | 46 | — | 338 | 372 | 56 | — | 428 | ||||||||||||||||||
Data & Analytic Services | 259 | 4 | — | 263 | 268 | 5 | — | 273 | ||||||||||||||||||
Elimination | (2 | ) | — | — | (2 | ) | — | — | — | — | ||||||||||||||||
Total revenue | $ | 2,276 | $ | 355 | $ | — | $ | 2,631 | $ | 2,381 | $ | 365 | $ | — | $ | 2,746 | ||||||||||
Expenses | ||||||||||||||||||||||||||
Compensation and benefits | 1,345 | 88 | 11 | 1,444 | 1,461 | 79 | 8 | 1,548 | ||||||||||||||||||
Information technology | 83 | — | — | 83 | 88 | — | — | 88 | ||||||||||||||||||
Premises | 82 | — | — | 82 | 84 | — | — | 84 | ||||||||||||||||||
Depreciation of fixed assets | 38 | — | — | 38 | 54 | — | — | 54 | ||||||||||||||||||
Amortization and impairment of intangible assets | 37 | — | — | 37 | 43 | — | — | 43 | ||||||||||||||||||
Other general expenses | 271 | (1 | ) | — | 270 | 308 | (1 | ) | — | 307 | ||||||||||||||||
Total operating expenses | 1,856 | 87 | 11 | 1,954 | 2,038 | 78 | 8 | 2,124 | ||||||||||||||||||
Operating income | 420 | 268 | (11 | ) | 677 | 343 | 287 | (8 | ) | 622 | ||||||||||||||||
Amortization and impairment of intangible assets | 37 | — | — | 37 | 43 | — | — | 43 | ||||||||||||||||||
Restructuring | — | — | — | — | 144 | — | — | 144 | ||||||||||||||||||
Operating income - as adjusted | 457 | 268 | (11 | ) | 714 | 530 | 287 | (8 | ) | 809 | ||||||||||||||||
Operating margin from continuing operations - as adjusted | 20.1 | % | 27.1 | % | 22.3 | % | 29.5 | % | ||||||||||||||||||
Interest income | 2 | — | — | 2 | 2 | — | — | 2 | ||||||||||||||||||
Interest expense | (69 | ) | — | — | (69 | ) | (70 | ) | — | — | (70 | ) | ||||||||||||||
Other income (expense) (3) | 18 | — | 11 | 29 | (10 | ) | — | 8 | (2 | ) | ||||||||||||||||
Income before income taxes from continuing operations - as adjusted | 408 | 268 | — | 676 | 452 | 287 | — | 739 | ||||||||||||||||||
Income taxes | 64 | 43 | 107 | 50 | 48 | 98 | ||||||||||||||||||||
Income from continuing operations - as adjusted | 344 | 225 | — | 569 | 402 | 239 | — | 641 | ||||||||||||||||||
Less: Net income attributable to noncontrolling interests | 12 | — | — | 12 | 14 | — | — | 14 | ||||||||||||||||||
Net income from continuing operations attributable to Aon shareholders - as adjusted | $ | 332 | $ | 225 | $ | — | $ | 557 | $ | 388 | $ | 239 | $ | — | $ | 627 | ||||||||||
Diluted earnings per share from continuing operations - as adjusted | $ | 1.21 | $ | 0.82 | $ | — | $ | 2.04 | $ | 1.45 | $ | 0.90 | $ | — | $ | 2.35 | ||||||||||
Weighted average ordinary shares outstanding - diluted | 273.7 | 273.7 | 273.7 | 273.7 | 267.0 | 267.0 | 267.0 | 267.0 |
(1) | Certain noteworthy items impacting operating income in 2016 and 2017 are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures. |
(2) | The historical periods presented above have been adjusted retrospectively to reflect changes in accounting guidance related to revenue recognition and pensions, effective for Aon in the first quarter of 2018. |
(3) | For illustrative purposes, the impact of the total foreign currency related to the new revenue accounting guidance is excluded from the Pro Forma financial statements. Had the Company included it, Other income (expense) in the Revenue Recognition column would have been $(3) million and $(2) million, respectively, for the three months ended March 31, 2016 and 2017. |
Three Months Ended June 30 | ||||||||||||||||||||||||||
2016 | 2017 | |||||||||||||||||||||||||
(millions, except per share data) | As Reported | Revenue Recognition | Pension | Pro Forma | As Reported | Revenue Recognition | Pension | Pro Forma | ||||||||||||||||||
Revenue | ||||||||||||||||||||||||||
Commercial Risk Solutions | $ | 990 | $ | — | $ | — | $ | 990 | $ | 1,042 | $ | (1 | ) | $ | — | $ | 1,041 | |||||||||
Reinsurance Solutions | 332 | 3 | — | 335 | 344 | 1 | — | 345 | ||||||||||||||||||
Retirement Solutions | 405 | — | — | 405 | 389 | (1 | ) | — | 388 | |||||||||||||||||
Health Solutions | 281 | (28 | ) | — | 253 | 312 | (31 | ) | — | 281 | ||||||||||||||||
Data & Analytic Services | 275 | (4 | ) | — | 271 | 285 | (4 | ) | — | 281 | ||||||||||||||||
Elimination | (1 | ) | — | — | (1 | ) | (4 | ) | — | — | (4 | ) | ||||||||||||||
Total revenue | $ | 2,282 | $ | (29 | ) | $ | — | $ | 2,253 | $ | 2,368 | $ | (36 | ) | $ | — | $ | 2,332 | ||||||||
Expenses | ||||||||||||||||||||||||||
Compensation and benefits | 1,396 | 27 | (51 | ) | 1,372 | 1,457 | 5 | 9 | 1,471 | |||||||||||||||||
Information technology | 99 | — | — | 99 | 98 | — | — | 98 | ||||||||||||||||||
Premises | 89 | — | — | 89 | 86 | — | — | 86 | ||||||||||||||||||
Depreciation of fixed assets | 41 | — | — | 41 | 54 | — | — | 54 | ||||||||||||||||||
Amortization and impairment of intangible assets | 38 | — | — | 38 | 460 | — | — | 460 | ||||||||||||||||||
Other general expenses | 232 | (2 | ) | — | 230 | 331 | (1 | ) | — | 330 | ||||||||||||||||
Total operating expenses | 1,895 | 25 | (51 | ) | 1,869 | 2,486 | 4 | 9 | 2,499 | |||||||||||||||||
Operating income | 387 | (54 | ) | 51 | 384 | (118 | ) | (40 | ) | (9 | ) | (167 | ) | |||||||||||||
Amortization and impairment of intangible assets | 38 | — | — | 38 | 460 | — | — | 460 | ||||||||||||||||||
Restructuring | — | — | — | — | 155 | — | — | 155 | ||||||||||||||||||
Regulatory and compliance matters | — | — | — | — | 34 | — | — | 34 | ||||||||||||||||||
Pension settlement | 62 | — | (62 | ) | — | — | — | — | — | |||||||||||||||||
Operating income - as adjusted | 487 | (54 | ) | (11 | ) | 422 | 531 | (40 | ) | (9 | ) | 482 | ||||||||||||||
Operating margin from continuing operations - as adjusted | 21.3 | % | 18.7 | % | 22.4 | % | 20.7 | % | ||||||||||||||||||
Interest income | 3 | — | — | 3 | 8 | — | — | 8 | ||||||||||||||||||
Interest expense | (73 | ) | — | — | (73 | ) | (71 | ) | — | — | (71 | ) | ||||||||||||||
Other income (expense) - as adjusted (3) (4) | (1 | ) | — | 11 | 10 | (5 | ) | — | 9 | 4 | ||||||||||||||||
Income before income taxes from continuing operations - as adjusted | 416 | (54 | ) | — | 362 | 463 | (40 | ) | — | 423 | ||||||||||||||||
Income taxes | 62 | (9 | ) | 53 | 72 | (4 | ) | 68 | ||||||||||||||||||
Income from continuing operations - as adjusted | 354 | (45 | ) | — | 309 | 391 | (36 | ) | — | 355 | ||||||||||||||||
Less: Net income attributable to noncontrolling interests | 8 | — | — | 8 | 9 | — | — | 9 | ||||||||||||||||||
Net income from continuing operations attributable to Aon shareholders - as adjusted | $ | 346 | $ | (45 | ) | $ | — | $ | 301 | $ | 382 | $ | (36 | ) | $ | — | $ | 346 | ||||||||
Diluted earnings per share from continuing operations - as adjusted | $ | 1.28 | $ | (0.17 | ) | $ | — | $ | 1.12 | $ | 1.45 | $ | (0.14 | ) | $ | — | $ | 1.31 | ||||||||
Weighted average ordinary shares outstanding - diluted | 269.8 | 269.8 | 269.8 | 269.8 | 264.3 | 264.3 | 264.3 | 264.3 |
(1) | Certain noteworthy items impacting operating income in 2016 and 2017 are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures. |
(2) | The historical periods presented above have been adjusted retrospectively to reflect changes in accounting guidance related to revenue recognition and pensions, effective for Aon in the first quarter of 2018. |
(3) | For illustrative purposes, the impact of the total foreign currency related to the new revenue accounting guidance is excluded from the Pro Forma financial statements. Had the Company included it, Other income (expense) in the Revenue Recognition column would have been $5 million and $(4) million, respectively, for the three months ended June 30, 2016 and 2017. |
(4) | Other income (expense) is adjusted to exclude the pension settlement charge taken within the period. The adjustment was previously taken within operating income prior to the adoption of the new pension guidance. |
Three Months Ended September 30 | ||||||||||||||||||||||||||
2016 | 2017 | |||||||||||||||||||||||||
(millions, except per share data) | As Reported | Revenue Recognition | Pension | Pro Forma | As Reported | Revenue Recognition | Pension | Pro Forma | ||||||||||||||||||
Revenue | ||||||||||||||||||||||||||
Commercial Risk Solutions | $ | 884 | $ | — | $ | — | $ | 884 | $ | 917 | $ | (2 | ) | $ | — | $ | 915 | |||||||||
Reinsurance Solutions | 329 | (95 | ) | — | 234 | 355 | (98 | ) | — | 257 | ||||||||||||||||
Retirement Solutions | 466 | (1 | ) | — | 465 | 491 | 1 | — | 492 | |||||||||||||||||
Health Solutions | 265 | (20 | ) | — | 245 | 293 | (16 | ) | — | 277 | ||||||||||||||||
Data & Analytic Services | 260 | — | — | 260 | 289 | (2 | ) | — | 287 | |||||||||||||||||
Elimination | (3 | ) | — | — | (3 | ) | (5 | ) | — | — | (5 | ) | ||||||||||||||
Total revenue | $ | 2,201 | $ | (116 | ) | $ | — | $ | 2,085 | $ | 2,340 | $ | (117 | ) | $ | — | $ | 2,223 | ||||||||
Expenses | ||||||||||||||||||||||||||
Compensation and benefits | 1,300 | (19 | ) | 12 | 1,293 | 1,419 | (8 | ) | 9 | 1,420 | ||||||||||||||||
Information technology | 99 | — | — | 99 | 109 | — | — | 109 | ||||||||||||||||||
Premises | 86 | — | — | 86 | 89 | — | — | 89 | ||||||||||||||||||
Depreciation of fixed assets | 39 | — | — | 39 | 40 | — | — | 40 | ||||||||||||||||||
Amortization and impairment of intangible assets | 42 | — | — | 42 | 101 | — | — | 101 | ||||||||||||||||||
Other general expenses | 267 | (10 | ) | — | 257 | 317 | (10 | ) | — | 307 | ||||||||||||||||
Total operating expenses | 1,833 | (29 | ) | 12 | 1,816 | 2,075 | (18 | ) | 9 | 2,066 | ||||||||||||||||
Operating income | 368 | (87 | ) | (12 | ) | 269 | 265 | (99 | ) | (9 | ) | 157 | ||||||||||||||
Amortization and impairment of intangible assets | 42 | — | — | 42 | 101 | — | — | 101 | ||||||||||||||||||
Restructuring | — | — | — | — | 102 | — | — | 102 | ||||||||||||||||||
Regulatory and compliance matters | — | — | — | — | 8 | — | — | 8 | ||||||||||||||||||
Operating income - as adjusted | 410 | (87 | ) | (12 | ) | 311 | 476 | (99 | ) | (9 | ) | 368 | ||||||||||||||
Operating margin from continuing operations - as adjusted | 18.6 | % | 14.9 | % | 20.3 | % | 16.6 | % | ||||||||||||||||||
Interest income | 1 | — | — | 1 | 10 | — | — | 10 | ||||||||||||||||||
Interest expense | (70 | ) | — | — | (70 | ) | (70 | ) | — | — | (70 | ) | ||||||||||||||
Other income (expense) (3) | 10 | — | 12 | 22 | (5 | ) | — | 9 | 4 | |||||||||||||||||
Income before income taxes from continuing operations - as adjusted | 351 | (87 | ) | — | 264 | 411 | (99 | ) | — | 312 | ||||||||||||||||
Income taxes | 50 | (15 | ) | 35 | 72 | (18 | ) | 54 | ||||||||||||||||||
Income from continuing operations - as adjusted | 301 | (72 | ) | — | 229 | 339 | (81 | ) | — | 258 | ||||||||||||||||
Less: Net income attributable to noncontrolling interests | 7 | — | — | 7 | 7 | — | — | 7 | ||||||||||||||||||
Net income from continuing operations attributable to Aon shareholders - as adjusted | $ | 294 | $ | (72 | ) | $ | — | $ | 222 | $ | 332 | $ | (81 | ) | $ | — | $ | 251 | ||||||||
Diluted earnings per share from continuing operations - as adjusted | $ | 1.09 | $ | (0.27 | ) | $ | — | $ | 0.82 | $ | 1.29 | $ | (0.31 | ) | $ | — | $ | 0.98 | ||||||||
Weighted average ordinary shares outstanding - diluted | 269.6 | 269.6 | 269.6 | 269.6 | 257.3 | 257.3 | 257.3 | 257.3 |
(1) | Certain noteworthy items impacting operating income in 2016 and 2017 are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures. |
(2) | The historical periods presented above have been adjusted retrospectively to reflect changes in accounting guidance related to revenue recognition and pensions, effective for Aon in the first quarter of 2018. |
(3) | For illustrative purposes, the impact of the total foreign currency related to the new revenue accounting guidance is excluded from the Pro Forma financial statements. Had the Company included it, Other income (expense) in the Revenue Recognition column would have been $1 million and $(6) million, respectively, for the three months ended September 30, 2016 and 2017. |
Three Months Ended December 31 | ||||||||||||||||||||||||||
2016 | 2017 | |||||||||||||||||||||||||
(millions, except per share data) | As Reported | Revenue Recognition | Pension | Pro Forma | As Reported | Revenue Recognition | Pension | Pro Forma | ||||||||||||||||||
Revenue | ||||||||||||||||||||||||||
Commercial Risk Solutions | $ | 1,094 | $ | (6 | ) | $ | — | $ | 1,088 | $ | 1,226 | $ | (8 | ) | $ | — | $ | 1,218 | ||||||||
Reinsurance Solutions | 329 | (198 | ) | — | 131 | 359 | (206 | ) | — | 153 | ||||||||||||||||
Retirement Solutions | 441 | — | — | 441 | 489 | — | — | 489 | ||||||||||||||||||
Health Solutions | 532 | (10 | ) | — | 522 | 538 | (12 | ) | — | 526 | ||||||||||||||||
Data & Analytic Services | 256 | — | — | 256 | 298 | 1 | — | 299 | ||||||||||||||||||
Elimination | (2 | ) | — | — | (2 | ) | (1 | ) | — | — | (1 | ) | ||||||||||||||
Total revenue | $ | 2,650 | $ | (214 | ) | $ | — | $ | 2,436 | $ | 2,909 | $ | (225 | ) | $ | — | $ | 2,684 | ||||||||
Expenses | ||||||||||||||||||||||||||
Compensation and benefits | 1,646 | (84 | ) | (145 | ) | 1,417 | 1,752 | (72 | ) | (112 | ) | 1,568 | ||||||||||||||
Information technology | 105 | — | — | 105 | 124 | — | — | 124 | ||||||||||||||||||
Premises | 86 | — | — | 86 | 89 | — | — | 89 | ||||||||||||||||||
Depreciation of fixed assets | 44 | — | — | 44 | 39 | — | — | 39 | ||||||||||||||||||
Amortization and impairment of intangible assets | 40 | — | — | 40 | 100 | — | — | 100 | ||||||||||||||||||
Other general expenses | 266 | 13 | — | 279 | 316 | 12 | — | 328 | ||||||||||||||||||
Total operating expenses | 2,187 | (71 | ) | (145 | ) | 1,971 | 2,420 | (60 | ) | (112 | ) | 2,248 | ||||||||||||||
Operating income | 463 | (143 | ) | 145 | 465 | 489 | (165 | ) | 112 | 436 | ||||||||||||||||
Amortization and impairment of intangible assets | 40 | — | — | 40 | 100 | — | — | 100 | ||||||||||||||||||
Restructuring | — | — | — | — | 96 | — | — | 96 | ||||||||||||||||||
Regulatory and compliance matters | — | — | — | — | (14 | ) | — | — | (14 | ) | ||||||||||||||||
Pension settlement | 158 | — | (158 | ) | — | 128 | — | (128 | ) | — | ||||||||||||||||
Transaction costs | 15 | — | — | 15 | — | — | — | — | ||||||||||||||||||
Operating income - as adjusted | 676 | (143 | ) | (13 | ) | 520 | 799 | (165 | ) | (16 | ) | 618 | ||||||||||||||
Operating margin from continuing operations - as adjusted | 25.5 | % | 21.3 | % | 27.5 | % | 23.0 | % | ||||||||||||||||||
Interest income | 3 | — | — | 3 | 7 | — | — | 7 | ||||||||||||||||||
Interest expense | (70 | ) | — | — | (70 | ) | (71 | ) | — | — | (71 | ) | ||||||||||||||
Other income (expense) - as adjusted (3) (4) | 9 | — | 13 | 22 | (19 | ) | — | 16 | (3 | ) | ||||||||||||||||
Income before income taxes from continuing operations - as adjusted | 618 | (143 | ) | — | 475 | 716 | (165 | ) | — | 551 | ||||||||||||||||
Income taxes | 74 | (25 | ) | 49 | 111 | (30 | ) | 81 | ||||||||||||||||||
Income from continuing operations - as adjusted | 544 | (118 | ) | — | 426 | 605 | (135 | ) | — | 470 | ||||||||||||||||
Less: Net income attributable to noncontrolling interests | 7 | — | — | 7 | 7 | — | — | 7 | ||||||||||||||||||
Net income from continuing operations attributable to Aon shareholders - as adjusted | $ | 537 | $ | (118 | ) | $ | — | $ | 419 | $ | 598 | $ | (135 | ) | $ | — | $ | 463 | ||||||||
Diluted earnings per share from continuing operations - as adjusted | $ | 2.00 | $ | (0.44 | ) | $ | — | $ | 1.56 | $ | 2.35 | $ | (0.53 | ) | $ | — | $ | 1.82 | ||||||||
Weighted average ordinary shares outstanding - diluted | 268.3 | 268.3 | 268.3 | 268.3 | 254.5 | 254.5 | 254.5 | 254.5 |
(1) | Certain noteworthy items impacting operating income in 2016 and 2017 are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures. |
(2) | The historical periods presented above have been adjusted retrospectively to reflect changes in accounting guidance related to revenue recognition and pensions, effective for Aon in the first quarter of 2018. |
(3) | For illustrative purposes, the impact of the total foreign currency related to the new revenue accounting guidance is excluded from the Pro Forma financial statements. Had the Company included it, Other income (expense) in the Revenue Recognition column would have been $4 million and $1 million, respectively, for the three months ended December 31, 2016 and 2017. |
(4) | Other income (expense) is adjusted to exclude the pension settlement charge taken within the period. The adjustment was previously taken within operating income prior to the adoption of the new pension guidance. |
Twelve Months Ended December 31 | ||||||||||||||||||||||||||
2016 | 2017 | |||||||||||||||||||||||||
(millions, except per share data) | As Reported | Revenue Recognition | Pension | Pro Forma | As Reported | Revenue Recognition | Pension | Pro Forma | ||||||||||||||||||
Revenue | ||||||||||||||||||||||||||
Commercial Risk Solutions | $ | 3,929 | $ | 2 | $ | — | $ | 3,931 | $ | 4,169 | $ | (6 | ) | $ | — | $ | 4,163 | |||||||||
Reinsurance Solutions | 1,361 | 6 | — | 1,367 | 1,429 | (3 | ) | — | 1,426 | |||||||||||||||||
Retirement Solutions | 1,707 | — | — | 1,707 | 1,755 | (1 | ) | — | 1,754 | |||||||||||||||||
Health Solutions | 1,370 | (12 | ) | — | 1,358 | 1,515 | (3 | ) | — | 1,512 | ||||||||||||||||
Data & Analytic Services | 1,050 | — | — | 1,050 | 1,140 | — | — | 1,140 | ||||||||||||||||||
Elimination | (8 | ) | — | — | (8 | ) | (10 | ) | — | — | (10 | ) | ||||||||||||||
Total revenue | $ | 9,409 | $ | (4 | ) | $ | — | $ | 9,405 | $ | 9,998 | $ | (13 | ) | $ | — | $ | 9,985 | ||||||||
Expenses | ||||||||||||||||||||||||||
Compensation and benefits | 5,687 | 12 | (173 | ) | 5,526 | 6,089 | 4 | (86 | ) | 6,007 | ||||||||||||||||
Information technology | 386 | — | — | 386 | 419 | — | — | 419 | ||||||||||||||||||
Premises | 343 | — | — | 343 | 348 | — | — | 348 | ||||||||||||||||||
Depreciation of fixed assets | 162 | — | — | 162 | 187 | — | — | 187 | ||||||||||||||||||
Amortization and impairment of intangible assets | 157 | — | — | 157 | 704 | — | — | 704 | ||||||||||||||||||
Other general expenses | 1,036 | — | — | 1,036 | 1,272 | — | — | 1,272 | ||||||||||||||||||
Total operating expenses | 7,771 | 12 | (173 | ) | 7,610 | 9,019 | 4 | (86 | ) | 8,937 | ||||||||||||||||
Operating income | 1,638 | (16 | ) | 173 | 1,795 | 979 | (17 | ) | 86 | 1,048 | ||||||||||||||||
Amortization and impairment of intangible assets | 157 | — | — | 157 | 704 | — | — | 704 | ||||||||||||||||||
Restructuring | — | — | — | — | 497 | — | — | 497 | ||||||||||||||||||
Regulatory and compliance matters | — | — | — | — | 28 | — | — | 28 | ||||||||||||||||||
Pension settlement | 220 | — | (220 | ) | — | 128 | — | (128 | ) | — | ||||||||||||||||
Transaction costs | 15 | — | — | 15 | — | — | — | — | ||||||||||||||||||
Operating income - as adjusted | 2,030 | (16 | ) | (47 | ) | 1,967 | 2,336 | (17 | ) | (42 | ) | 2,277 | ||||||||||||||
Operating margin from continuing operations - as adjusted | 21.6 | % | 20.9 | % | 23.4 | % | 22.8 | % | ||||||||||||||||||
Interest income | 9 | — | — | 9 | 27 | — | — | 27 | ||||||||||||||||||
Interest expense | (282 | ) | — | — | (282 | ) | (282 | ) | — | — | (282 | ) | ||||||||||||||
Other income (expense) - as adjusted (3) (4) | 36 | — | 47 | 83 | (39 | ) | — | 42 | 3 | |||||||||||||||||
Income before income taxes from continuing operations - as adjusted | 1,793 | (16 | ) | — | 1,777 | 2,042 | (17 | ) | — | 2,025 | ||||||||||||||||
Income taxes | 250 | (6 | ) | 244 | 305 | (4 | ) | 301 | ||||||||||||||||||
Income from continuing operations - as adjusted | 1,543 | (10 | ) | — | 1,533 | 1,737 | (13 | ) | — | 1,724 | ||||||||||||||||
Less: Net income attributable to noncontrolling interests | 34 | — | — | 34 | 37 | — | — | 37 | ||||||||||||||||||
Net income from continuing operations attributable to Aon shareholders - as adjusted | $ | 1,509 | $ | (10 | ) | $ | — | $ | 1,499 | $ | 1,700 | $ | (13 | ) | $ | — | $ | 1,687 | ||||||||
Diluted earnings per share from continuing operations - as adjusted | $ | 5.58 | $ | (0.04 | ) | $ | — | $ | 5.55 | $ | 6.52 | $ | (0.05 | ) | $ | — | $ | 6.47 | ||||||||
Weighted average ordinary shares outstanding - diluted | 270.3 | 270.3 | 270.3 | 270.3 | 260.7 | 260.7 | 260.7 | 260.7 |
(1) | Certain noteworthy items impacting operating income in 2016 and 2017 are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures. |
(2) | The historical periods presented above have been adjusted retrospectively to reflect changes in accounting guidance related to revenue recognition and pensions, effective for Aon in the first quarter of 2018. |
(3) | For illustrative purposes, the impact of the total foreign currency related to the new revenue accounting guidance is excluded from the Pro Forma financial statements. Had the Company included it, Other income (expense) in the Revenue Recognition column would have been $7 million and $(11) million, respectively, for the years ended December 31, 2016 and 2017. |
(4) | Other income (expense) is adjusted to exclude the pension settlement charge taken within the period. The adjustment was previously taken within operating income prior to the adoption of the new pension guidance. |
Three Months Ended | ||||||||||||||||||
(millions) | Mar 31, 2017 | Mar 31, 2016 | % Change | Less: Currency Impact (1) | Less: Fiduciary Investment Income | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth (2) | |||||||||||
Commercial Risk Solutions | $ | 989 | $ | 969 | 2% | (2)% | —% | 2% | 2% | |||||||||
Reinsurance Solutions | 671 | 667 | 1 | (3)% | —% | —% | 4% | |||||||||||
Retirement Solutions | 385 | 396 | (3) | (4)% | —% | (1)% | 2% | |||||||||||
Health Solutions | 428 | 338 | 27 | (1)% | —% | 13% | 15% | |||||||||||
Data & Analytic Services | 273 | 263 | 4 | (1)% | —% | (1)% | 6% | |||||||||||
Elimination | — | (2 | ) | N/A | N/A | N/A | N/A | N/A | ||||||||||
Total revenue | $ | 2,746 | $ | 2,631 | 4% | (2)% | —% | 1% | 5% |
Three Months Ended | ||||||||||||||||||
(millions) | Jun 30, 2017 | Jun 30, 2016 | % Change | Less: Currency Impact (1) | Less: Fiduciary Investment Income | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth (2) | |||||||||||
Commercial Risk Solutions | $ | 1,041 | $ | 990 | 5% | (1)% | —% | 4% | 2% | |||||||||
Reinsurance Solutions | 345 | 335 | 3% | (2)% | —% | (1)% | 6% | |||||||||||
Retirement Solutions | 388 | 405 | (4)% | (3)% | —% | (2)% | 1% | |||||||||||
Health Solutions | 281 | 253 | 11% | (2)% | —% | 9% | 4% | |||||||||||
Data & Analytic Services | 281 | 271 | 4% | (1)% | —% | 1% | 4% | |||||||||||
Elimination | (4 | ) | (1 | ) | N/A | N/A | N/A | N/A | N/A | |||||||||
Total revenue | $ | 2,332 | $ | 2,253 | 4% | (2)% | —% | 4% | 2% |
Three Months Ended | ||||||||||||||||||
(millions) | Sep 30, 2017 | Sep 30, 2016 | % Change | Less: Currency Impact (1) | Less: Fiduciary Investment Income | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth (2) | |||||||||||
Commercial Risk Solutions | $ | 915 | $ | 884 | 4% | 1% | —% | 4% | (1)% | |||||||||
Reinsurance Solutions | 257 | 234 | 10% | 1% | 1% | (2)% | 10% | |||||||||||
Retirement Solutions | 492 | 465 | 6% | 1% | —% | (1)% | 6% | |||||||||||
Health Solutions | 277 | 245 | 13% | 1% | —% | 8% | 4% | |||||||||||
Data & Analytic Services | 287 | 260 | 10% | 1% | —% | 7% | 2% | |||||||||||
Elimination | (5 | ) | (3 | ) | N/A | N/A | N/A | N/A | N/A | |||||||||
Total revenue | $ | 2,223 | $ | 2,085 | 7% | 1% | —% | 4% | 2% |
Three Months Ended | ||||||||||||||||||
(millions) | Dec 31, 2017 | Dec 31, 2016 | % Change | Less: Currency Impact (1) | Less: Fiduciary Investment Income | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth (2) | |||||||||||
Commercial Risk Solutions | $ | 1,218 | $ | 1,088 | 12% | 3% | —% | 4% | 5% | |||||||||
Reinsurance Solutions | 153 | 131 | 17% | (3)% | 1% | (1)% | 20% | |||||||||||
Retirement Solutions | 489 | 441 | 11% | 3% | —% | 4% | 4% | |||||||||||
Health Solutions | 526 | 522 | 1% | 1% | —% | (6)% | 6% | |||||||||||
Data & Analytic Services | 299 | 256 | 17% | 2% | —% | 3% | 12% | |||||||||||
Elimination | (1 | ) | (2 | ) | N/A | N/A | N/A | N/A | N/A | |||||||||
Total revenue | $ | 2,684 | $ | 2,436 | 10% | 2% | —% | 1% | 7% |
Twelve Months Ended | ||||||||||||||||||
(millions) | Dec 31, 2017 | Dec 31, 2016 | % Change | Less: Currency Impact (1) | Less: Fiduciary Investment Income | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth (2) | |||||||||||
Commercial Risk Solutions | $ | 4,163 | $ | 3,931 | 6% | —% | —% | 4% | 2% | |||||||||
Reinsurance Solutions | 1,426 | 1,367 | 4% | (2)% | —% | —% | 6% | |||||||||||
Retirement Solutions | 1,754 | 1,707 | 3% | (1)% | —% | 1% | 3% | |||||||||||
Health Solutions | 1,512 | 1,358 | 11% | —% | —% | 4% | 7% | |||||||||||
Data & Analytic Services | 1,140 | 1,050 | 9% | —% | —% | 4% | 5% | |||||||||||
Elimination | (10 | ) | (8 | ) | N/A | N/A | N/A | N/A | N/A | |||||||||
Total revenue | $ | 9,985 | $ | 9,405 | 6% | —% | —% | 2% | 4% |
(1) | Currency impact is determined by translating last year’s revenue at this year’s foreign exchange rates. |
(2) | Organic revenue growth includes the impact of intercompany activity and excludes the impact of foreign exchange rate changes, acquisitions, divestitures, transfers between business units, and fiduciary investment income. |