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/ Michael Neller | ||
Michael Neller | |||
Senior Vice President and Global Controller | |||
Date: | January 31, 2020 |
Investor Relations |
• | Total revenue increased 4% to $2.9 billion, including organic revenue growth of 7% |
• | Operating margin increased to 18.2%, and operating margin, adjusted for certain items, increased 210 basis points to 27.9% |
• | EPS increased to $1.58, and EPS, adjusted for certain items, increased 17% to $2.53 |
• | Repurchased 2.3 million Class A Ordinary Shares for approximately $450 million |
• | Subsequent to the close of the fourth quarter, the Company completed its acquisition of CoverWallet, expanding its position in the fast-growing commercial insurance market for small and medium-sized businesses, as well as the opportunity to leverage CoverWallet's platform to develop and scale innovative digital client experiences |
• | Total revenue increased 2% to $11.0 billion, including organic revenue growth of 6% |
• | Operating margin increased to 19.7%, and operating margin, adjusted for certain items, increased 250 basis points to 27.5% |
• | EPS increased to $6.37, and EPS, adjusted for certain items, increased 12% to $9.17 |
• | Cash flows from operations increased 9% to $1,835 million and free cash flow increased 11% to $1,610 million |
• | Repurchased 10.5 million Class A Ordinary Shares for approximately $2.0 billion |
• | Completed all charges related to the restructuring program. The Company expects to deliver $580 million of annualized savings in 2020, reflecting a 39% return on investment prior to any reinvestment |
Three Months Ended | |||||||||||||||||||||||
(millions) | Dec 31, 2019 | Dec 31, 2018 | % Change | Less: Currency Impact | Less: Fiduciary Investment Income | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth | ||||||||||||||||
Commercial Risk Solutions | $ | 1,331 | $ | 1,273 | 5 | % | (2 | )% | — | % | — | % | 7 | % | |||||||||
Reinsurance Solutions | 187 | 162 | 15 | (1 | ) | 1 | (2 | ) | 17 | ||||||||||||||
Retirement Solutions | 494 | 509 | (3 | ) | (1 | ) | — | (5 | ) | 3 | |||||||||||||
Health Solutions | 585 | 558 | 5 | (1 | ) | — | 1 | 5 | |||||||||||||||
Data & Analytic Services | 291 | 271 | 7 | (2 | ) | — | 3 | 6 | |||||||||||||||
Elimination | (3 | ) | (3 | ) | N/A | N/A | N/A | N/A | N/A | ||||||||||||||
Total revenue | $ | 2,885 | $ | 2,770 | 4 | % | (1 | )% | — | % | (2 | )% | 7 | % |
Three Months Ended | |||||||||||||||
(millions, except percentages) | Dec 31, 2019 | Dec 31, 2018 | $ Change | % Change | |||||||||||
Expenses | |||||||||||||||
Compensation and benefits | $ | 1,601 | $ | 1,601 | $ | — | — | % | |||||||
Information technology | 131 | 121 | 10 | 8 | |||||||||||
Premises | 91 | 87 | 4 | 5 | |||||||||||
Depreciation of fixed assets | 48 | 50 | (2 | ) | (4 | ) | |||||||||
Amortization and impairment of intangible assets | 97 | 101 | (4 | ) | (4 | ) | |||||||||
Other general expense | 393 | 311 | 82 | 26 | |||||||||||
Total operating expenses | $ | 2,361 | $ | 2,271 | $ | 90 | 4 | % |
Three Months Ended | |||||||||||
(millions, except percentages) | Dec 31, 2019 | Dec 31, 2018 | % Change | ||||||||
Revenue | $ | 2,885 | $ | 2,770 | 4 | % | |||||
Expenses | 2,361 | 2,271 | 4 | ||||||||
Operating income | $ | 524 | $ | 499 | 5 | % | |||||
Operating margin | 18.2 | % | 18.0 | % | |||||||
Operating income - as adjusted | $ | 804 | $ | 716 | 12 | % | |||||
Operating margin - as adjusted | 27.9 | % | 25.8 | % |
Investor Contact: | Media Contact: | |
Investor Relations | Will Dunn | |
312-381-3310 | 212-441-1819 | |
investor.relations@aon.com | will.dunn@aon.com |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||
(millions, except per share data) | Dec 31, 2019 | Dec 31, 2018 | % Change | Dec 31, 2019 | Dec 31, 2018 | % Change | ||||||||||||||||
Revenue | ||||||||||||||||||||||
Total revenue | $ | 2,885 | $ | 2,770 | 4 | % | $ | 11,013 | $ | 10,770 | 2 | % | ||||||||||
Expenses | ||||||||||||||||||||||
Compensation and benefits | 1,601 | 1,601 | — | % | 6,054 | 6,103 | (1 | )% | ||||||||||||||
Information technology | 131 | 121 | 8 | % | 494 | 484 | 2 | % | ||||||||||||||
Premises | 91 | 87 | 5 | % | 339 | 370 | (8 | )% | ||||||||||||||
Depreciation of fixed assets | 48 | 50 | (4 | )% | 172 | 176 | (2 | )% | ||||||||||||||
Amortization and impairment of intangible assets | 97 | 101 | (4 | )% | 392 | 593 | (34 | )% | ||||||||||||||
Other general expense | 393 | 311 | 26 | % | 1,393 | 1,500 | (7 | )% | ||||||||||||||
Total operating expenses | 2,361 | 2,271 | 4 | % | 8,844 | 9,226 | (4 | )% | ||||||||||||||
Operating income | 524 | 499 | 5 | % | 2,169 | 1,544 | 40 | % | ||||||||||||||
Interest income | 4 | — | 100 | % | 8 | 5 | 60 | % | ||||||||||||||
Interest expense | (80 | ) | (70 | ) | 14 | % | (307 | ) | (278 | ) | 10 | % | ||||||||||
Other income (expense) | (7 | ) | (8 | ) | (13 | )% | 1 | (25 | ) | (104 | )% | |||||||||||
Income from continuing operations before income taxes | 441 | 421 | 5 | % | 1,871 | 1,246 | 50 | % | ||||||||||||||
Income tax expense (1) | 59 | 137 | (57 | )% | 297 | 146 | 103 | % | ||||||||||||||
Net income from continuing operations | 382 | 284 | 35 | % | 1,574 | 1,100 | 43 | % | ||||||||||||||
Net income (loss) from discontinued operations | — | 69 | (100 | )% | (1 | ) | 74 | (101 | )% | |||||||||||||
Net income | 382 | 353 | 8 | % | 1,573 | 1,174 | 34 | % | ||||||||||||||
Less: Net income attributable to noncontrolling interests | 8 | 8 | — | % | 41 | 40 | 3 | % | ||||||||||||||
Net income attributable to Aon shareholders | $ | 374 | $ | 345 | 8 | % | $ | 1,532 | $ | 1,134 | 35 | % | ||||||||||
Basic net income per share attributable to Aon shareholders | ||||||||||||||||||||||
Continuing operations | $ | 1.59 | $ | 1.14 | 39 | % | $ | 6.42 | $ | 4.32 | 49 | % | ||||||||||
Discontinued operations | — | 0.28 | (100 | )% | — | 0.30 | (100 | )% | ||||||||||||||
Net income | $ | 1.59 | $ | 1.42 | 12 | % | $ | 6.42 | $ | 4.62 | 39 | % | ||||||||||
Diluted net income per share attributable to Aon shareholders | ||||||||||||||||||||||
Continuing operations | $ | 1.58 | $ | 1.13 | 40 | % | $ | 6.37 | $ | 4.29 | 48 | % | ||||||||||
Discontinued operations | — | 0.28 | (100 | )% | — | 0.30 | (100 | )% | ||||||||||||||
Net income | $ | 1.58 | $ | 1.41 | 12 | % | $ | 6.37 | $ | 4.59 | 39 | % | ||||||||||
Weighted average ordinary shares outstanding - basic | 234.7 | 242.4 | (3 | )% | 238.6 | 245.2 | (3 | )% | ||||||||||||||
Weighted average ordinary shares outstanding - diluted | 237.0 | 245.0 | (3 | )% | 240.6 | 247.0 | (3 | )% |
(1) | The effective tax rate was 13.4% and 32.5% for the three months ended December 31, 2019 and 2018, respectively, and 15.9% and 11.7% for the twelve months ended December 31, 2019 and 2018, respectively. |
Three Months Ended | ||||||||||||||||||
(millions) | Dec 31, 2019 | Dec 31, 2018 | % Change | Less: Currency Impact (1) | Less: Fiduciary Investment Income (2) | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth (3) | |||||||||||
Commercial Risk Solutions | $ | 1,331 | $ | 1,273 | 5% | (2)% | —% | —% | 7% | |||||||||
Reinsurance Solutions | 187 | 162 | 15 | (1) | 1 | (2) | 17 | |||||||||||
Retirement Solutions | 494 | 509 | (3) | (1) | — | (5) | 3 | |||||||||||
Health Solutions | 585 | 558 | 5 | (1) | — | 1 | 5 | |||||||||||
Data & Analytic Services | 291 | 271 | 7 | (2) | — | 3 | 6 | |||||||||||
Elimination | (3 | ) | (3 | ) | N/A | N/A | N/A | N/A | N/A | |||||||||
Total revenue | $ | 2,885 | $ | 2,770 | 4% | (1)% | —% | (2)% | 7% |
Twelve Months Ended | ||||||||||||||||||
(millions) | Dec 31, 2019 | Dec 31, 2018 | % Change | Less: Currency Impact (1) | Less: Fiduciary Investment Income (2) | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth (3) | |||||||||||
Commercial Risk Solutions | $ | 4,673 | $ | 4,652 | —% | (3)% | —% | (4)% | 7% | |||||||||
Reinsurance Solutions | 1,686 | 1,563 | 8 | (2) | 1 | (1) | 10 | |||||||||||
Retirement Solutions | 1,817 | 1,865 | (3) | (2) | — | (3) | 2 | |||||||||||
Health Solutions | 1,667 | 1,596 | 4 | (3) | — | 2 | 5 | |||||||||||
Data & Analytic Services | 1,184 | 1,105 | 7 | (3) | — | 6 | 4 | |||||||||||
Elimination | (14 | ) | (11 | ) | N/A | N/A | N/A | N/A | N/A | |||||||||
Total revenue | $ | 11,013 | $ | 10,770 | 2% | (3)% | —% | (1)% | 6% |
(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, 2019 and 2018, respectively, was $16 million and $16 million. Fiduciary investment income for the twelve months ended December 31, 2019 and 2018, respectively, was $74 million and $53 million. |
(3) | Organic revenue growth includes the impact of intercompany activity and excludes the impact of changes in foreign exchange rates, fiduciary investment income, acquisitions, divestitures, transfers between revenue lines, and gains and losses on derivatives accounted for as hedges. |
Twelve Months Ended | |||||||||||
(millions) | Dec 31, 2019 | Dec 31, 2018 | % Change | ||||||||
Cash Provided By Continuing Operating Activities | $ | 1,835 | $ | 1,686 | 9 | % | |||||
Capital Expenditures Used for Continuing Operations | (225 | ) | (240 | ) | (6 | ) | |||||
Free Cash Flow Provided by Continuing Operations (1) | $ | 1,610 | $ | 1,446 | 11 | % |
(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, 2019 | Dec 31, 2018 | % Change | Dec 31, 2019 | Dec 31, 2018 | % Change | ||||||||||||||||
Revenue from continuing operations | $ | 2,885 | $ | 2,770 | 4 | % | $ | 11,013 | $ | 10,770 | 2 | % | ||||||||||
Operating income from continuing operations | $ | 524 | $ | 499 | 5 | % | $ | 2,169 | $ | 1,544 | 40 | % | ||||||||||
Amortization and impairment of intangible assets (2) | 97 | 101 | 392 | 593 | ||||||||||||||||||
Restructuring | 170 | 119 | 451 | 485 | ||||||||||||||||||
Legacy Litigation (3) | 13 | (3 | ) | 13 | 75 | |||||||||||||||||
Operating income from continuing operations - as adjusted | $ | 804 | $ | 716 | 12 | % | $ | 3,025 | $ | 2,697 | 12 | % | ||||||||||
Operating margin from continuing operations | 18.2 | % | 18.0 | % | 19.7 | % | 14.3 | % | ||||||||||||||
Operating margin from continuing operations - as adjusted | 27.9 | % | 25.8 | % | 27.5 | % | 25.0 | % |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||
(millions, except per share data) | Dec 31, 2019 | Dec 31, 2018 | % Change | Dec 31, 2019 | Dec 31, 2018 | % Change | ||||||||||||||||
Operating income from continuing operations - as adjusted | $ | 804 | $ | 716 | 12 | % | $ | 3,025 | $ | 2,697 | 12 | % | ||||||||||
Interest income | 4 | — | 100 | % | 8 | 5 | 60 | % | ||||||||||||||
Interest expense | (80 | ) | (70 | ) | 14 | % | (307 | ) | (278 | ) | 10 | % | ||||||||||
Other income (expense): | ||||||||||||||||||||||
Other income (expense) - pensions - as adjusted (4) | (3 | ) | 11 | (127 | )% | 9 | 38 | (76 | )% | |||||||||||||
Other income (expense) - other | (4 | ) | (14 | ) | (71 | )% | (8 | ) | (26 | ) | (69 | )% | ||||||||||
Total Other income (expense) - as adjusted (4) | (7 | ) | (3 | ) | 133 | % | 1 | 12 | (92 | )% | ||||||||||||
Income before income taxes from continuing operations - as adjusted | 721 | 643 | 12 | % | 2,727 | 2,436 | 12 | % | ||||||||||||||
Income tax expense (5) | 113 | 106 | 7 | % | 478 | 379 | 26 | % | ||||||||||||||
Net income from continuing operations - as adjusted | 608 | 537 | 13 | % | 2,249 | 2,057 | 9 | % | ||||||||||||||
Less: Net income attributable to noncontrolling interests | 8 | 8 | — | % | 41 | 40 | 3 | % | ||||||||||||||
Net income attributable to Aon shareholders from continuing operations - as adjusted | $ | 600 | $ | 529 | 13 | % | $ | 2,208 | $ | 2,017 | 9 | % | ||||||||||
Net income (loss) from discontinued operations - as adjusted(6) | $ | — | $ | (4 | ) | (100 | )% | $ | (1 | ) | $ | (8 | ) | (88 | )% | |||||||
Net income attributable to Aon shareholders - as adjusted | $ | 600 | $ | 525 | 14 | % | $ | 2,207 | $ | 2,009 | 10 | % | ||||||||||
Diluted net income (loss) per share attributable to Aon shareholders | ||||||||||||||||||||||
Continuing operations - as adjusted | $ | 2.53 | $ | 2.16 | 17 | % | $ | 9.17 | $ | 8.16 | 12 | % | ||||||||||
Discontinued operations - as adjusted | — | (0.02 | ) | (100 | )% | — | (0.03 | ) | (100 | )% | ||||||||||||
Net income attributable to Aon shareholders - as adjusted | $ | 2.53 | $ | 2.14 | 18 | % | $ | 9.17 | $ | 8.13 | 13 | % | ||||||||||
Weighted average ordinary shares outstanding - diluted | 237.0 | 245.0 | (3 | )% | 240.6 | 247.0 | (3 | )% | ||||||||||||||
Effective Tax Rates (5) | ||||||||||||||||||||||
Continuing Operations - U.S. GAAP | 13.4 | % | 32.5 | % | 15.9 | % | 11.7 | % | ||||||||||||||
Continuing Operations - Non-GAAP | 15.7 | % | 16.5 | % | 17.5 | % | 15.6 | % | ||||||||||||||
Discontinued Operations - U.S. GAAP | 17.6 | % | 1,437.2 | % | 47.4 | % | 15,949.3 | % | ||||||||||||||
Discontinued Operations - Non-GAAP (6) | 17.6 | % | 20.1 | % | 47.4 | % | 29.7 | % |
(1) | Certain noteworthy items impacting operating income in 2019 and 2018 are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures. |
(2) | Included in the twelve months ended December 30, 2018 was a $176 million non-cash impairment charge taken on certain assets and liabilities held for sale. |
(3) | During the fourth quarter of 2019 we settled legacy litigation that had been reported in a prior year as an adjustment to GAAP earnings. In connection with the settlement, we recorded a $13 million charge in the quarter, which represents the difference between the amount accrued in the prior year and the final settlement amount of the legacy litigation. |
(4) | Adjusted Other income (expense) excludes pension settlement charges of $5 million and $37 million for the three and twelve months ended December 31, 2018, respectively. |
(5) | Adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with estimated restructuring plan expenses, legacy litigation, accelerated tradename amortization, impairment charges and non-cash pension settlement charges, which are adjusted at the related jurisdictional rate. In addition, tax expense excludes the tax impacts of the sale of the disposal group and enactment date impacts of U.S. Tax Reform. |
(6) | Adjusted net income from discontinued operations excludes the gain on sale of discontinued operations of $73 million and $82 million for the three and twelve months ended December 31, 2018, respectively. The effective tax rate was further adjusted for the applicable tax impact associated with the sale, as applicable. |
Pro Forma Periods | Reported Periods | |||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended (5) | Full Year 2017 (5) | Three Months Ended (6) | Full Year 2018 (6) | Three Months Ended (7) | Full Year 2019 (7) | |||||||||||||||||||||||||||||||||||||||||
(millions, except per share data) | Mar 31, 2017 | Jun 30, 2017 | Sep 30, 2017 | Dec 31, 2017 | Mar 31, 2018 | Jun 30, 2018 | Sep 30, 2018 | Dec 31, 2018 | Mar 31, 2019 | Jun 30, 2019 | Sep 30, 2019 | Dec 31, 2019 | ||||||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||||||||||||||
Commercial Risk Solutions | $ | 989 | $ | 1,041 | $ | 915 | $ | 1,218 | $ | 4,163 | $ | 1,184 | $ | 1,166 | $ | 1,029 | $ | 1,273 | $ | 4,652 | $ | 1,118 | $ | 1,167 | $ | 1,057 | $ | 1,331 | $ | 4,673 | ||||||||||||||||
Reinsurance Solutions | 671 | 345 | 257 | 153 | 1,426 | 742 | 380 | 279 | 162 | 1,563 | 788 | 420 | 291 | 187 | 1,686 | |||||||||||||||||||||||||||||||
Retirement Solutions | 385 | 388 | 492 | 489 | 1,754 | 424 | 431 | 501 | 509 | 1,865 | 420 | 419 | 484 | 494 | 1,817 | |||||||||||||||||||||||||||||||
Health Solutions | 428 | 281 | 277 | 526 | 1,512 | 451 | 309 | 278 | 558 | 1,596 | 486 | 317 | 279 | 585 | 1,667 | |||||||||||||||||||||||||||||||
Data & Analytic Services | 273 | 281 | 287 | 299 | 1,140 | 294 | 277 | 263 | 271 | 1,105 | 336 | 286 | 271 | 291 | 1,184 | |||||||||||||||||||||||||||||||
Elimination | — | (4 | ) | (5 | ) | (1 | ) | (10 | ) | (5 | ) | (2 | ) | (1 | ) | (3 | ) | (11 | ) | (5 | ) | (3 | ) | (3 | ) | (3 | ) | (14 | ) | |||||||||||||||||
Total revenue | $ | 2,746 | $ | 2,332 | $ | 2,223 | $ | 2,684 | $ | 9,985 | $ | 3,090 | $ | 2,561 | $ | 2,349 | $ | 2,770 | $10,770 | $ | 3,143 | $ | 2,606 | $ | 2,379 | $ | 2,885 | $ | 11,013 | |||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||
Compensation and benefits | 1,548 | 1,471 | 1,420 | 1,568 | 6,007 | 1,616 | 1,494 | 1,392 | 1,601 | 6,103 | 1,584 | 1,501 | 1,368 | 1,601 | 6,054 | |||||||||||||||||||||||||||||||
Information technology | 88 | 98 | 109 | 124 | 419 | 115 | 123 | 125 | 121 | 484 | 117 | 126 | 120 | 131 | 494 | |||||||||||||||||||||||||||||||
Premises | 84 | 86 | 89 | 89 | 348 | 93 | 96 | 94 | 87 | 370 | 87 | 85 | 76 | 91 | 339 | |||||||||||||||||||||||||||||||
Depreciation of fixed assets | 54 | 54 | 40 | 39 | 187 | 39 | 47 | 40 | 50 | 176 | 40 | 40 | 44 | 48 | 172 | |||||||||||||||||||||||||||||||
Amortization of intangible assets | 43 | 460 | 101 | 100 | 704 | 110 | 282 | 100 | 101 | 593 | 97 | 97 | 101 | 97 | 392 | |||||||||||||||||||||||||||||||
Other general expenses | 307 | 330 | 307 | 328 | 1,272 | 318 | 535 | 336 | 311 | 1,500 | 346 | 344 | 310 | 393 | 1,393 | |||||||||||||||||||||||||||||||
Total operating expenses | 2,124 | 2,499 | 2,066 | 2,248 | 8,937 | 2,291 | 2,577 | 2,087 | 2,271 | 9,226 | 2,271 | 2,193 | 2,019 | 2,361 | 8,844 | |||||||||||||||||||||||||||||||
Operating income | 622 | (167 | ) | 157 | 436 | 1,048 | 799 | (16 | ) | 262 | 499 | 1,544 | 872 | 413 | 360 | 524 | 2,169 | |||||||||||||||||||||||||||||
Amortization of intangible assets | 43 | 460 | 101 | 100 | 704 | 110 | 282 | 100 | 101 | 593 | 97 | 97 | 101 | 97 | 392 | |||||||||||||||||||||||||||||||
Restructuring | 144 | 155 | 102 | 96 | 497 | 74 | 195 | 97 | 119 | 485 | 91 | 127 | 63 | 170 | 451 | |||||||||||||||||||||||||||||||
Legacy Litigation | — | — | — | — | — | — | 103 | (25 | ) | (3 | ) | 75 | — | — | — | 13 | 13 | |||||||||||||||||||||||||||||
Regulatory and compliance matters | — | 34 | 8 | (14 | ) | 28 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Operating income - as adjusted | 809 | 482 | 368 | 618 | 2,277 | 983 | 564 | 434 | 716 | 2,697 | 1,060 | 637 | 524 | 804 | 3,025 | |||||||||||||||||||||||||||||||
Operating margin from continuing operations - as adjusted | 29.5 | % | 20.7 | % | 16.6 | % | 23.0 | % | 22.8 | % | 31.8 | % | 22.0 | % | 18.5 | % | 25.8 | % | 25.0 | % | 33.7 | % | 24.4 | % | 22.0 | % | 27.9 | % | 27.5 | % | ||||||||||||||||
Interest income | 2 | 8 | 10 | 7 | 27 | 4 | 1 | — | — | 5 | 2 | 1 | 1 | 4 | 8 | |||||||||||||||||||||||||||||||
Interest expense | (70 | ) | (71 | ) | (70 | ) | (71 | ) | (282 | ) | (70 | ) | (69 | ) | (69 | ) | (70 | ) | (278 | ) | (72 | ) | (77 | ) | (78 | ) | (80 | ) | (307 | ) | ||||||||||||||||
Other income (expense): | — | |||||||||||||||||||||||||||||||||||||||||||||
Other income (expense) - pensions - as adjusted (3) | 8 | 9 | 9 | 16 | 42 | 9 | 9 | 9 | 11 | 38 | 4 | 5 | 3 | (3 | ) | 9 | ||||||||||||||||||||||||||||||
Other income (expense) - other - as adjusted (4) | (10 | ) | (5 | ) | (5 | ) | (19 | ) | (39 | ) | (17 | ) | 4 | 1 | (14 | ) | (26 | ) | (4 | ) | 1 | (1 | ) | (4 | ) | (8 | ) | |||||||||||||||||||
Total Other income (expense) - as adjusted (3)(4) | (2 | ) | 4 | 4 | (3 | ) | 3 | (8 | ) | 13 | 10 | (3 | ) | 12 | — | 6 | 2 | (7 | ) | 1 | ||||||||||||||||||||||||||
Income before income taxes from continuing operations - as adjusted | 739 | 423 | 312 | 551 | 2,025 | 909 | 509 | 375 | 643 | 2,436 | 990 | 567 | 449 | 721 | 2,727 | |||||||||||||||||||||||||||||||
Income taxes | 98 | 68 | 54 | 81 | 301 | 150 | 75 | 48 | 106 | 379 | 167 | 102 | 96 | 113 | 478 | |||||||||||||||||||||||||||||||
Income from continuing operations - as adjusted | 641 | 355 | 258 | 470 | 1,724 | 759 | 434 | 327 | 537 | 2,057 | 823 | 465 | 353 | 608 | 2,249 | |||||||||||||||||||||||||||||||
Less: Net income attributable to noncontrolling interests | 14 | 9 | 7 | 7 | 37 | 16 | 10 | 6 | 8 | 40 | 17 | 10 | 6 | 8 | 41 | |||||||||||||||||||||||||||||||
Net income attributable to Aon shareholders from continuing operations - as adjusted | $ | 627 | $ | 346 | $ | 251 | $ | 463 | $ | 1,687 | $ | 743 | $ | 424 | $ | 321 | $ | 529 | $ | 2,017 | $ | 806 | $ | 455 | $ | 347 | $ | 600 | $ | 2,208 | ||||||||||||||||
Diluted earnings per share from continuing operations - as adjusted | $ | 2.35 | $ | 1.31 | $ | 0.98 | $ | 1.82 | $ | 6.47 | $ | 2.97 | $ | 1.71 | $ | 1.31 | $ | 2.16 | $ | 8.16 | $ | 3.31 | $ | 1.87 | $ | 1.45 | $ | 2.53 | $ | 9.17 | ||||||||||||||||
Weighted average ordinary shares outstanding - diluted | 267.0 | 264.3 | 257.3 | 254.5 | 260.7 | 250.2 | 247.4 | 245.6 | 245.0 | 247.0 | 243.7 | 242.8 | 239.1 | 237.0 | 240.6 |
(1) | Certain noteworthy items impacting operating income in 2017, 2018, and 2019, are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures. |
(2) | The 2017 historical periods presented above have been adjusted retrospectively to reflect Aon’s adoption of the new revenue recognition standard in the first quarter of 2018. For a complete reconciliation of prior period reported balances to the pro forma adjusted balances above, please refer to our press release issued on February 2, 2018. |
(3) | Adjusted Other income (expense) excludes pension settlement charges taken within each respective period. Pension settlement charges were $128 million for the three and twelve months ended December 31, 2017. Pension settlement charges were $7 million, $16 million, $9 million, and $5 million, respectively, for the three months ended March 31, 2018, June 30, 2018, September 30, 2018, and December 31, 2018, and $37 million for the twelve months ended December 31, 2018. |
(4) | 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 $(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. |
(5) | 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 estimated restructuring expenses, accelerated tradename amortization, impairment charges, regulatory and compliance provisions, and non-cash pension settlements, which are adjusted at the related jurisdictional rate. In addition, tax expense excludes the provisional estimates of the impact of U.S. Tax Reform. 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. |
(6) | The non-GAAP effective tax rates reported were 16.5%, 14.7%, 12.8%, and 16.5% respectively, for the three months ended March 31, 2018, June 30, 2018, September 30, 2018, and December 31, 2018 and 15.6% for the twelve months ended December 31, 2018. Adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with estimated restructuring expenses, legacy litigation, accelerated tradename amortization, impairment charges, and non-cash pension settlement charges, which are adjusted at the related jurisdictional rate. In addition, tax expense excludes the tax impacts of the sale of certain assets and liabilities previously classified as held for sale, as well as enactment date impacts of US Tax Reform. |
(7) | The non-GAAP effective tax rates reported were 16.9%, 18.0%, 21.4%, and 15.7% respectively, for the three months ended March 31, 2019, June 30, 2019, September 30, 2019, and December 31, 2019 and 17.5% for the twelve months ended December 31, 2019. Adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with estimated restructuring expenses and accelerated tradename amortization, which are adjusted at the related jurisdictional rate. In addition, the tax expense excludes the tax impacts of payment of certain legacy litigation and enactment date impacts of the Tax Cuts and Jobs Act of 2017. |
As of | ||||||||
(millions) | December 31, 2019 | December 31, 2018 | ||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 790 | $ | 656 | ||||
Short-term investments | 138 | 172 | ||||||
Receivables, net | 3,112 | 2,760 | ||||||
Fiduciary assets (1) | 11,834 | 10,166 | ||||||
Other current assets | 602 | 618 | ||||||
Total Current Assets | 16,476 | 14,372 | ||||||
Goodwill | 8,165 | 8,171 | ||||||
Intangible assets, net | 783 | 1,149 | ||||||
Fixed assets, net | 621 | 588 | ||||||
Operating lease right-of-use assets | 929 | — | ||||||
Deferred tax assets | 645 | 561 | ||||||
Prepaid pension | 1,216 | 1,133 | ||||||
Other non-current assets | 570 | 448 | ||||||
Total Assets | $ | 29,405 | $ | 26,422 | ||||
Liabilities and equity | ||||||||
Liabilities | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 1,939 | $ | 1,943 | ||||
Short-term debt and current portion of long-term debt | 712 | 251 | ||||||
Fiduciary liabilities | 11,834 | 10,166 | ||||||
Other current liabilities | 1,086 | 936 | ||||||
Total Current Liabilities | 15,571 | 13,296 | ||||||
Long-term debt | 6,627 | 5,993 | ||||||
Non-current operating lease liabilities | 944 | — | ||||||
Deferred tax liabilities | 199 | 181 | ||||||
Pension, other postretirement, and postemployment liabilities | 1,738 | 1,636 | ||||||
Other non-current liabilities | 877 | 1,097 | ||||||
Total Liabilities | 25,956 | 22,203 | ||||||
Equity | ||||||||
Ordinary shares - $0.01 nominal value | 2 | 2 | ||||||
Additional paid-in capital | 6,152 | 5,965 | ||||||
Retained earnings | 1,254 | 2,093 | ||||||
Accumulated other comprehensive loss | (4,033 | ) | (3,909 | ) | ||||
Total Aon Shareholders' Equity | 3,375 | 4,151 | ||||||
Noncontrolling interests | 74 | 68 | ||||||
Total Equity | 3,449 | 4,219 | ||||||
Total liabilities and equity | $ | 29,405 | $ | 26,422 |
(1) | Includes cash and short-term investments of $5,154 million and $3,866 million for the periods ended December 31, 2019 and 2018, respectively. |
Year ended December 31 | ||||||||
(millions) | 2019 | 2018 | ||||||
Cash flows from operating activities | ||||||||
Net income | $ | 1,573 | $ | 1,174 | ||||
Less: Income from discontinued operations, net of income taxes | (1 | ) | 74 | |||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Loss (gain) from sales of businesses and investments, net | (13 | ) | 6 | |||||
Depreciation of fixed assets | 172 | 176 | ||||||
Amortization and impairment of intangible assets | 392 | 593 | ||||||
Share-based compensation expense | 317 | 338 | ||||||
Deferred income taxes | (36 | ) | (225 | ) | ||||
Change in assets and liabilities: | ||||||||
Fiduciary receivables | (409 | ) | (679 | ) | ||||
Short-term investments — funds held on behalf of clients | (1,246 | ) | (320 | ) | ||||
Fiduciary liabilities | 1,655 | 999 | ||||||
Receivables, net | (371 | ) | (127 | ) | ||||
Accounts payable and accrued liabilities | (28 | ) | 25 | |||||
Restructuring reserves | 3 | 23 | ||||||
Current income taxes | (20 | ) | 34 | |||||
Pension, other postretirement and postemployment liabilities | (156 | ) | (259 | ) | ||||
Other assets and liabilities | 1 | 2 | ||||||
Cash provided by operating activities | 1,835 | 1,686 | ||||||
Cash flows from investing activities | ||||||||
Proceeds from investments | 61 | 71 | ||||||
Payments for investments | (113 | ) | (80 | ) | ||||
Net sales (purchases) of short-term investments — non-fiduciary | 35 | 348 | ||||||
Acquisition of businesses, net of cash acquired | (39 | ) | (58 | ) | ||||
Sale of businesses, net of cash sold | 52 | (10 | ) | |||||
Capital expenditures | (225 | ) | (240 | ) | ||||
Cash provided by (used for) investing activities | (229 | ) | 31 | |||||
Cash flows from financing activities | ||||||||
Share repurchase | (1,960 | ) | (1,470 | ) | ||||
Issuance of shares for employee benefit plans | (131 | ) | (149 | ) | ||||
Issuance of debt | 6,052 | 5,754 | ||||||
Repayment of debt | (4,941 | ) | (5,417 | ) | ||||
Cash dividends to shareholders | (410 | ) | (382 | ) | ||||
Noncontrolling interests and other financing activities | (103 | ) | (35 | ) | ||||
Cash used for financing activities | (1,493 | ) | (1,699 | ) | ||||
Effect of exchange rates on cash and cash equivalents | 21 | (118 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 134 | (100 | ) | |||||
Cash and cash equivalents at beginning of period | 656 | 756 | ||||||
Cash and cash equivalents at end of year(1) | $ | 790 | $ | 656 |
Years ended December 31 | ||||||||||||||||
2019 | 2018 | 2017 | Completed Plan Total | |||||||||||||
Workforce reduction | $ | 205 | $ | 115 | $ | 299 | $ | 619 | ||||||||
Technology rationalization | 39 | 47 | 33 | 119 | ||||||||||||
Lease consolidation | 33 | 28 | 8 | 69 | ||||||||||||
Asset impairments | 14 | 13 | 26 | 53 | ||||||||||||
Other costs associated with restructuring and separation (2) | 160 | 282 | 131 | 573 | ||||||||||||
Total restructuring and related expenses | $ | 451 | $ | 485 | $ | 497 | $ | 1,433 |
(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) | 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 typically recognized when incurred. |