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Aon Reports First Quarter 2017 Results

LONDON, May 9, 2017 /PRNewswire/ -- 

First Quarter Key Metrics From Continuing Operations

  • Reported revenue increased 5% to $2.4 billion, with organic revenue growth of 4%
  • Operating margin decreased 410 basis points to 14.4%, and operating margin, adjusted for certain items, increased 220 basis points to 22.3%
  • EPS decreased 15% to $0.94, and EPS, adjusted for certain items, increased 20% to $1.45
  • For the first three months of 2017, cash flow from operations increased $38 million, or 26%, to $182 million, and free cash flow increased $41 million, or 38%, to $148 million

First Quarter Highlights

  • Repurchased 1.1 million Class A Ordinary Shares for approximately $125 million
  • Subsequent to the close of the quarter, the Company closed its sale of the Benefits Administration and HR Business Process Outsourcing (BPO) platform for cash consideration of $4.3 billion and additional consideration of up to $500 million
  • Subsequent to the close of the quarter, the company announced a 9% increase to its quarterly cash dividend

Aon plc (NYSE: AON) today reported results for the three months ended March 31, 2017.

Net income attributable to Aon shareholders was $291 million, or $1.09 per share, compared to $325 million, or $1.19 per share, in the prior year period. Net income per share attributable to Aon shareholders, adjusted for certain items, increased 17% to $1.63, compared to $1.39 in the prior year period. Net income from continuing operations was $265 million, or $0.94 per share, compared to $312 million, or $1.10 per share, in the prior year period.  Net income per share from continuing operations, adjusted for certain items, increased 20% to $1.45, compared to $1.21 in the prior year period. Certain items that impacted first quarter results and comparisons with the prior year period are detailed in the "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share" on page 10 of this press release. 

"Our first quarter results reflect a strong start to the year driven by investments in our client-serving capabilities and operating model.  Organic growth of 4% is the strongest start to the year since 2012, adjusted operating margins expanded by 220 basis points, and earnings per share from continuing operations increased 20% driven by effective operational and capital management," said Greg Case, President and Chief Executive Officer.  "With the recently completed divestiture of our outsourcing platform, we have taken another meaningful step in a decade long strategy that has produced exceptional results for clients and shareholders.  As a leading global professional services firm, we are operating from a position of strength.  With strong free cash flow generation and roughly $3 billion of incremental transaction proceeds, we have significant financial flexibility to invest in high-growth high-margin areas across our industry-leading portfolio, invest in our operating model and to return capital to shareholders."

FIRST QUARTER FINANCIAL SUMMARY
The first quarter financial results discussed herein represent performance from continuing operations unless otherwise noted.

Total revenue in the first quarter increased 5% to $2.4 billion, compared to the prior year period driven primarily by 4% organic revenue growth in commissions and fees and 3% increase in commissions and fees related to acquisitions, net of divestitures, partially offset by a 2% unfavorable impact from foreign currency translation.

Total operating expenses increased 10% to $2.0 billion compared to the prior year period due primarily to $144 million of restructuring costs, a $60 million increase in operating expenses related to acquisitions, net of divestitures, and an increase in expense to support 4% organic revenue growth, partially offset by a $42 million favorable impact from currency translation, a $12 million decrease in expense related to certain hedging programs, and $11 million of savings related to restructuring activities and operational initiatives.

Restructuring expenses were $144 million primarily driven by workforce reductions. The Company expects to invest $900 million in total cash over a three-year period, excluding $50 million of non-cash charges, in driving one operating model across the firm. This includes an estimated investment of $700 million of cash restructuring charges and $200 million of capital expenditures. To date, the Company has incurred 19% of the total estimated restructuring charges. An analysis of restructuring-related costs by type is detailed on page 13 of this press release.

Restructuring savings in the first quarter related to restructuring activities and other operational initiatives are estimated at $11 million. Before any potential reinvestment of savings, restructuring activities and other operational initiatives are expected to deliver run-rate savings of $400 million annually by the end of 2019.  To date, the Company has achieved 3% of the total estimated restructuring related savings.

Foreign currency exchange rates in the first quarter had an immaterial impact per share, or $1 million pretax unfavorable impact on U.S. GAAP net income, and a $0.01 per share, or $3 million pretax, unfavorable impact on adjusted net income if the Company were to translate prior year quarter results at current quarter foreign exchange rates.

Effective tax rate used in the U.S. GAAP financial statements in the first quarter was 0.1%, compared to the prior year quarter of 15.9%.  After adjusting to exclude the applicable tax impact associated with intangible asset amortization, restructuring charges and anticipated non-cash pension settlements in the fourth quarter, the adjusted effective tax rate for the first quarter of 2017 was 11.1% compared to 15.7% in the prior year quarter, primarily due to a $29 million, or $0.11 per share benefit from the required change in accounting for share-based compensation. The new guidance for share-based compensation requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement and treated as discrete items in the reporting period. These adjustments are discussed in "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share" on page 10 of this press release.

Average diluted shares outstanding decreased to 267.0 million in the first quarter compared to 273.7 million in the prior year quarter. The Company repurchased 1.1 million Class A Ordinary Shares for approximately $125 million in the quarter.  As of March 31, 2017, the Company had $7.7 billion of remaining authorization under its share repurchase program.

FIRST QUARTER CASH FLOW SUMMARY
Cash flow from operations for the first three months of 2017 increased 26%, or $38 million, to $182 million compared to the prior year period, primarily driven by operational improvement, partially offset by $31 million of cash restructuring charges.

Free cash flow, defined as cash flow from operations less capital expenditures, increased 38%, or $41 million, to $148 million for the first three months of 2017 compared to the prior year period, reflecting growth in cash flow from operations and a $3 million decrease in capital expenditures.  A reconciliation of free cash flow to cash flow from operations can be found in "Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow" on page 9 of this press release.

FIRST QUARTER REVENUE REVIEW
The first quarter revenue reviews provided below include supplemental information related to organic revenue, which is described in detail in "Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow" on page 9 of this press release. A description of the businesses included in each of the revenue lines below is included in the Appendix of the earnings conference call presentation slides.

 

   

Three Months Ended

   

(millions)

 

March 31,
2017

 

March 31,
2016

 

%
Change

 

Less:
Currency
Impact

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,
Divestitures &
Other

 

Organic
Revenue
Growth

Revenue

                               

Commercial Risk Solutions

 

$

984

 

$

961

 

2%

 

(2)%

 

—%

 

2%

 

2%

Reinsurance Solutions

 

371

 

371

 

 

(1)

 

 

(1)

 

2

Retirement Solutions

 

386

 

395

 

(2)

 

(4)

 

 

(1)

 

3

Health Solutions

 

372

 

292

 

27

 

(2)

 

 

15

 

14

Data & Analytic Services

 

268

 

259

 

3

 

(1)

 

 

(1)

 

5

Elimination

 

 

(2)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,381

 

$

2,276

 

5%

 

(2)%

 

—%

 

3%

 

4%

 

Total organic revenue increased 4% compared to the prior year period primarily driven by strong growth in Health Solutions and Data & Analytic Services.

Commercial Risk Solutions organic revenue increased 2% compared to the prior year period driven by solid growth across the U.S., EMEA, Asia, and Pacific regions, partially offset by a decline in Latin America.

Reinsurance Solutions organic revenue increased 2% compared to the prior year period driven by growth across every product line, including treaty, facultative, and capital markets, partially offset by a modest unfavorable market impact globally.

Retirement Solutions organic revenue increased 3% compared to the prior year period driven by continued growth in investment consulting, primarily for delegated investment management, as well as growth in talent, primarily for compensation and engagement services.

Health Solutions organic revenue increased 14% compared to the prior year period driven by solid growth globally in health & benefits brokerage, including double-digit growth across Asia and EMEA, as well as double-digit growth in health care exchanges driven by follow-on enrollments on the retiree exchange and certain project-related work.

Data & Analytic Services organic revenue increased 5% compared to the prior year period driven by strong growth across Affinity, with particular strength in the U.S. across all product lines.

FIRST QUARTER EXPENSE REVIEW

   

Three Months Ended

       

(millions, except per share data)

 

March
31, 2017

 

March
31, 2016

 

$
Change

 

%
Change

Expenses

               

Compensation and benefits

 

$

1,461

 

$

1,345

 

$

116

 

9%

Information technology

 

88

 

83

 

5

 

6

Premises

 

84

 

82

 

2

 

2

Depreciation of fixed assets

 

54

 

38

 

16

 

42

Amortization of intangible assets

 

43

 

37

 

6

 

16

Other general expenses

 

308

 

271

 

37

 

14

Total operating expenses

 

$

2,038

 

$

1,856

 

$

182

 

10%

Compensation and benefits expense increased 9%, or $116 million, compared to the prior year period due primarily to $103 million of restructuring costs, a $38 million increase in operating expenses related to acquisitions, net of divestitures, and an increase in expense associated with 4% organic revenue growth, partially offset by a $29 million favorable impact from currency translation, a $12 million decrease in expense related to certain hedging programs resulting from actions undertaken in consideration of reduced ongoing transactional exposure to the Indian Rupee, and $6 million of savings related to restructuring activities and operational initiatives.

Information technology expense increased 6%, or $5 million, compared to the prior year period due primarily to $3 million of restructuring costs, as well as other infrastructure investments, partially offset by $5 million of savings related to restructuring activities and operational initiatives.

Premises expense increased 2%, or $2 million, compared to the prior year period due primarily to $3 million of restructuring costs.

Depreciation of fixed assets expense increased 42%, or $16 million, compared to the prior year period primarily due to $13 million restructuring costs related to of fixed asset write-offs.

Amortization of intangible assets expense increased 16%, or $6 million, compared to the prior year period primarily due to an increase in intangible asset amortization from previous acquisitions.

Other general expenses increased 14%, or $37 million, compared to the prior year period due primarily to $22 million of restructuring costs and a $13 million increase in operating expenses related to acquisitions, net of divestitures.

FIRST QUARTER INCOME SUMMARY
Certain noteworthy items impacted operating income and operating margins in the first quarters of 2017 and 2016.  The first quarter information provided below includes supplemental information related to adjusted operating income and adjusted operating margin, which is described in detail in "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share" on page 10 of this press release.

   

Three Months Ended

   

(millions)

 

March 31,
 2017

 

March 31,
 2016

 

%
Change

Revenue

 

$

2,381

 

$

2,276

 

5%

Expenses

 

2,038

 

1,856

 

10

Operating income

 

$

343

 

$

420

 

(18)%

Operating margin

 

14.4%

 

18.5%

   

Operating income - adjusted

 

$

530

 

$

457

 

16%

Operating margin - adjusted

 

22.3%

 

20.1%

   

Operating income decreased $77 million, or 18%, compared to the prior year period. Adjusting for certain items detailed on page 10 of this press release, operating income increased 16%, or $73 million, and operating margin increased 220 basis points to 22.3%, each compared to the prior year period. The increase in adjusted operating margin was primarily driven by strong organic revenue growth, return on investments across the portfolio, and $11 million of savings related to restructuring activities and operational initiatives, as well as $12 million, or +50 basis points, favorable impact from reduced expenses related to certain hedging programs, and a +30 basis point favorable impact from foreign currency translation.

   

Three Months Ended

 

(millions)

 

March 31,
 2017

 

March 31,
 2016

 

%
Change

Operating income

 

$

343

 

$

420

 

(18)%

Interest income

 

2

 

2

 

Interest expense

 

(70)

 

(69)

 

1

Other income (expense)

 

(10)

 

18

 

(156)

Income from continuing operations before income taxes

 

$

265

 

$

371

 

(29)%

Interest income was flat at $2 million compared to the prior year period.  Interest expense increased $1 million to $70 million compared to the prior year period driven by a modest increase in total debt outstanding. Other expense of $10 million primarily includes losses related to the unfavorable impact of exchange rates on the remeasurement of assets and liabilities in non-functional currencies. Other income of $18 million in the prior year period primarily includes gains related to the favorable impact of exchange rates on the remeasurement of assets and liabilities in non-functional currencies.

DISCONTINUED OPERATIONS
Net income from discontinued operations was $40 million, or $0.15 per share, compared to $25 million, or $0.09 per share, in the prior year period.  Net income per share from discontinued operations, adjusted for certain items, was $48 million, or $0.18 per share, similar to the prior year period. Certain items that impacted first quarter results and comparisons with the prior year period are detailed in "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share" on page 10 of this press release.  

Conference Call, Presentation Slides and Webcast Details
The Company will host a conference call on Tuesday, May 9, 2017 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) Aon is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

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, changes to the composition or level of our revenues, cash flow and liquidity, expected tax rates, 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", "potential", "looking forward", or similar expressions, we are making forward-looking statements.

The following factors, among others, could cause actual results to differ from those set forth in the forward looking statements:  general economic and political conditions in different countries in which Aon does business around the world; changes in the competitive environment; fluctuations in exchange and interest rates, including negative yields in some jurisdictions, that could influence revenue and expense; 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; the level of Aon's debt limiting financial flexibility; rating agency actions that could affect Aon's ability to borrow funds; the effect of the change in global headquarters and jurisdiction of incorporation, including differences in the anticipated benefits; changes in estimates or assumptions on our financial statements; limits on Aon's subsidiaries to make dividend and other payments to Aon; the impact of lawsuits and other contingent liabilities and loss contingencies arising from errors and omissions and other claims against Aon; 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 impact of any investigations brought by regulatory authorities in the U.S., U.K. and other countries; the impact of 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; failure to protect intellectual property rights or allegations that we infringe on the intellectual property rights of others; the effects of English law on our operating flexibility and the enforcement of judgments against Aon; the failure to retain and attract qualified personnel; international risks associated with Aon's global operations; the effect of natural or man-made disasters; the potential of a system or network breach or disruption resulting in operational interruption or improper disclosure of personal data; Aon's ability to develop and implement new technology; damage to our reputation among clients, markets or third parties; the actions taken by third parties that preform aspects of our business operations and client services; the extent to which Aon manages risks associated with the various services, including fiduciary and investments and other advisory services and business process outsourcing services, among others, that Aon provides or will provide to clients; Aon's ability to grow, develop and integrate companies or new lines of business that it acquires; changes in commercial property and casualty markets, commercial premium rates or methods of compensation; changes in the health care system or our relationships with insurance carriers; and Aon's ability to implement initiatives intended to yield cost savings, and the ability to achieve those cost savings.

Any or all of Aon's forward-looking statements may turn out to be inaccurate, and there are no guarantees about Aon's performance.  The factors identified above are not exhaustive.  Aon and its subsidiaries operate in a dynamic business environment in which new risks may emerge frequently.  Further information concerning Aon and its businesses, 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 for the year ended December 31, 2016 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 for a further discussion of these and other risks and uncertainties applicable to Aon's businesses. These factors may be revised or supplemented in subsequent reports.  Aon is under no obligation, and expressly disclaims any obligation, to update or alter any forward-looking statement that it may make from time to time, whether as a result of new information, future events or otherwise.

Explanation of Non-GAAP Measures
This communication includes supplemental information related to organic revenue, free cash flow, adjusted operating margin, and adjusted earnings per share that exclude the effects of intangible asset amortization, capital expenditures, and certain other noteworthy items that affected results for the comparable periods.   Organic revenue includes the impact of intersegment and intrasegment activity and excludes the impact of foreign exchange rate changes, acquisitions, divestitures, transfers between business units, fiduciary investment income, and reimbursable expenses.  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 appendices.  Supplemental organic revenue information and additional measures that exclude the effects of certain items noted above that 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

 

Donna Mirandola

Senior Vice President, Investor Relations

 

Senior Director, External Communications - Americas

+44 (0) 20 7086 0100

 

312-381-1532

 

 

 

Aon plc
Condensed Consolidated Statements of Income (Unaudited)

 
   

Three Months Ended

   

(millions, except per share data)

 

March 31,
 2017

 

March 31,
 2016

 

Percent
Change

Revenue

           

Total revenue

 

2,381

 

2,276

 

5%

Expenses

           

Compensation and benefits

 

1,461

 

1,345

 

9%

Information technology

 

88

 

83

 

6%

Premises

 

84

 

82

 

2%

Depreciation of fixed assets

 

54

 

38

 

42%

Amortization of intangible assets

 

43

 

37

 

16%

Other general expenses

 

308

 

271

 

14%

Total operating expenses

 

2,038

 

1,856

 

10%

Operating income

 

343

 

420

 

(18)%

Interest income

 

2

 

2

 

—%

Interest expense

 

(70)

 

(69)

 

1%

Other income (expense)

 

(10)

 

18

 

(156)%

Income from continuing operations before income taxes

 

265

 

371

 

(29)%

Income taxes (1)

 

 

59

 

(100)%

Income from continuing operations

 

265

 

312

 

(15)%

Income from discontinued operations, net of tax

 

40

 

25

 

60%

Net income

 

305

 

337

 

(9)%

Less: Net income attributable to noncontrolling interests

 

14

 

12

 

17%

Net income attributable to Aon shareholders

 

$

291

 

$

325

 

(10)%

             

Basic net income per share attributable to Aon shareholders

           

Continuing operations

 

$

0.95

 

$

1.11

 

(14)%

Discontinued operations (2)

 

$

0.15

 

$

0.09

 

67%

Net income

 

$

1.10

 

$

1.20

 

(8)%

Diluted net income per share attributable to Aon shareholders

           

Continuing operations

 

$

0.94

 

$

1.10

 

(15)%

Discontinued operations (2)

 

$

0.15

 

$

0.09

 

67%

Net income

 

$

1.09

 

$

1.19

 

(8)%

Weighted average ordinary shares outstanding - basic

 

264.8

 

271.7

 

(3)%

Weighted average ordinary shares outstanding - diluted

 

267.0

 

273.7

 

(2)%

 

   

(1)

The effective tax rate was 0.1% and 15.9% for the three months ended March 31, 2017 and 2016, respectively.

(2)

Upon triggering held for sale criteria on February 9, 2017, Aon ceased depreciating and amortizing all long-lived assets included in discontinued operations.  Specifically, included within Total operating expenses was $8 million and $18 million, respectively, of depreciation of fixed assets and $11 million and $30 million, respectively, of intangible asset amortization for the three months ended March 31, 2017 and 2016.

 

 

 

 

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

 

Organic Revenue Growth From Continuing Operations (Unaudited)

 
   

Three Months Ended

                   

(millions)

 

March 31,
2017

 

March 31,
2016

 

Percent
Change

 

Less:
Currency
Impact (1)

 

Less: Fiduciary
Investment
Income(2)

 

Less: Acquisitions,
Divestitures &
Other

 

Organic
Revenue
Growth (3)

Revenue

                           

Commercial Risk Solutions

 

$

984

 

$

961

 

2%

 

(2)%

 

—%

 

2%

 

2%

Reinsurance Solutions

 

371

 

371

 

 

(1)

 

 

(1)

 

2

Retirement Solutions

 

386

 

395

 

(2)

 

(4)

 

 

(1)

 

3

Health Solutions

 

372

 

292

 

27

 

(2)

 

 

15

 

14

Data & Analytic Services

 

268

 

259

 

3

 

(1)

 

 

(1)

 

5

Elimination

 

 

(2)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,381

 

$

2,276

 

5%

 

(2)%

 

—%

 

3%

 

4%

 

 Free Cash Flow from Continuing Operations (Unaudited)

 
   

Three Months Ended

   

(millions)

 

March 31, 2017

 

March 31, 2016

 

Percent
Change

Cash Provided By Continuing Operating Activities

 

$

182

 

$

144

 

26%

Capital Expenditures for Continuing Operations

 

(34)

 

(37)

 

(8)

Free Cash Flow for Continuing Operations (4)

 

$

148

 

$

107

 

38%

   

(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 March 31, 2017 and 2016, respectively, was $6 million and $5 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.

(4)

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.

 

 

 

Aon plc
Reconciliation of Non-GAAP Measures - Operating Income from Continuing Operations and Diluted Earnings Per Share (Unaudited) (1)

 
   

Three Months Ended

 

(millions, except percentage data)

 

March 31,
 2017

 

March 31,
 2016

 

Percent
Change

Revenue from continuing operations

 

$

2,381

 

$

2,276

 

5%

             

Operating income from continuing operations - as reported

 

$

343

 

$

420

 

(18)%

Amortization of intangible assets

 

43

 

37

 

16%

Restructuring

 

144

 

 

100%

Operating income from continuing operations - as adjusted

 

$

530

 

$

457

 

16%

             

Operating margin from continuing operations - as reported

 

14.4%

 

18.5%

   

Operating margin from continuing operations - as adjusted

 

22.3%

 

20.1%

   
   

Three Months Ended

   

(millions, except per share data)

 

March 31,
 2017

 

March 31,
 2016

 

Percent
Change

Operating income from continuing operations - as adjusted

 

$

530

 

$

457

 

16%

Interest income

 

2

 

2

 

—%

Interest expense

 

(70)

 

(69)

 

1%

Other income (expense)

 

(10)

 

18

 

(156)%

           

Income before income taxes from continuing operations - as adjusted

 

452

 

408

 

11%

Income taxes (2)

 

50

 

64

 

(22)%

Income from continuing operations - as adjusted

 

402

 

344

 

17%

Adjusted income from discontinued operations, net of tax (3)

 

48

 

48

 

—%

Net income - as adjusted

 

450

 

392

 

15%

Less: Net income attributable to noncontrolling interests

 

14

 

12

 

17%

Net income attributable to Aon shareholders - as adjusted

 

$

436

 

$

380

 

15%

             

Diluted earnings per share attributable to Aon shareholders

           

Continuing operations - as adjusted

 

$

1.45

 

$

1.21

 

20%

Discontinued operations - as adjusted

 

$

0.18

 

$

0.18

 

—%

Net income - as adjusted

 

$

1.63

 

$

1.39

 

17%

             

Weighted average ordinary shares outstanding - diluted

 

267.0

 

273.7

   
   

(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)

The effective tax rates used in the U.S. GAAP financial statements for continuing operations were 0.1% and 15.9% for the three months ended March 31, 2017 and 2016, respectively. After adjusting to exclude the applicable tax impact associated with restructuring, anticipated non-cash pension settlements in the fourth quarter, and amortization, the adjusted effective tax rates for continuing operations were 11.1% and 15.7% for the three months ended March 31, 2017 and 2016, respectively.

(3)

 Adjusted income from discontinued operations, net of tax, excludes intangible asset amortization on discontinued operations of $11 million and $30 million, respectively, for the three months ended March 31, 2017 and 2016.  The effective tax rates used in the U.S. GAAP financial statements for discontinued operation were 29.8% and 41.9% for the three months ended March 31, 2017 and 2016, respectively. After adjusting to exclude the applicable tax impact associated with amortization, the adjusted effective tax rates for discontinued operations were 29.4% and 34.2% for the three months ended March 31, 2017 and 2016, respectively.

 

Aon plc
Condensed Consolidated Statements of Financial Position (Unaudited)

 
   

As of

(millions)

 

March 31,
 2017

 

December 31,
 2016

ASSETS

       

CURRENT ASSETS

       

Cash and cash equivalents

 

$

433

 

$

426

Short-term investments

 

200

 

290

Receivables, net

 

2,103

 

2,106

Fiduciary assets (1)

 

9,162

 

8,959

Other current assets

 

309

 

247

Current assets of discontinued operations

 

3,186

 

1,118

Total Current Assets

 

15,393

 

13,146

Goodwill

 

7,544

 

7,410

Intangible assets, net

 

1,886

 

1,890

Fixed assets, net

 

536

 

550

Deferred tax assets

 

351

 

325

Prepaid pension

 

893

 

858

Other non-current assets

 

379

 

360

Non-current assets of discontinued operations

 

 

2,076

TOTAL ASSETS

 

$

26,982

 

$

26,615

         

LIABILITIES AND EQUITY

       

LIABILITIES

       

CURRENT LIABILITIES

       

Accounts payable and accrued liabilities

 

$

1,332

 

$

1,604

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

 

667

 

336

Fiduciary liabilities

 

9,162

 

8,959

Other current liabilities

 

773

 

656

Current liabilities of discontinued operations

 

1,036

 

940

Total Current Liabilities

 

12,970

 

12,495

Long-term debt

 

5,610

 

5,869

Deferred tax liabilities

 

112

 

101

Pension, other postretirement and postemployment liabilities

 

1,731

 

1,760

Other non-current liabilities

 

733

 

719

Non-current liabilities of discontinued operations

 

 

139

TOTAL LIABILITIES

 

21,156

 

21,083

         

EQUITY

       

Ordinary shares - $0.01 nominal value

 

3

 

3

Additional paid-in capital

 

5,567

 

5,577

Retained earnings

 

3,934

 

3,807

Accumulated other comprehensive loss

 

(3,750)

 

(3,912)

TOTAL AON SHAREHOLDERS' EQUITY

 

5,754

 

5,475

Noncontrolling interests

 

72

 

57

TOTAL EQUITY

 

5,826

 

5,532

TOTAL LIABILITIES AND EQUITY

 

$

26,982

 

$

26,615

   

(1)

Includes cash and short-term investments of $3,691 million and $3,290 million for the periods ended March 31, 2017 and December 31, 2016, respectively.

 

 

 

Aon plc
Condensed Consolidated Statements of Cash Flows (Unaudited)

 
   

Three Months Ended

(millions)

 

March 31, 2017

 

March 31, 2016

CASH FLOWS FROM OPERATING ACTIVITIES

       

Net income

 

$

305

 

$

337

Less: Income from discontinued operations, net of income taxes

 

40

 

25

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

       

Loss (gain) from sales of businesses and investments, net

 

2

 

(35)

Depreciation of fixed assets

 

54

 

38

Amortization of intangible assets

 

43

 

37

Share-based compensation expense

 

78

 

79

Deferred income taxes

 

(2)

 

23

Change in assets and liabilities:

       

Fiduciary receivables

 

337

 

399

Short-term investments — funds held on behalf of clients

 

(330)

 

(242)

Fiduciary liabilities

 

(7)

 

(157)

Receivables, net

 

38

 

33

Accounts payable and accrued liabilities

 

(390)

 

(307)

Restructuring reserves

 

99

 

Current income taxes

 

(56)

 

(45)

Pension, other postretirement and other postemployment liabilities

 

(41)

 

(50)

Other assets and liabilities

 

92

 

59

Net cash provided by operating activities - continuing operations

 

182

 

144

Net cash provided by operating activities - discontinued operations

 

58

 

129

CASH PROVIDED BY OPERATING ACTIVITIES

 

240

 

273

         

CASH FLOWS FROM INVESTING ACTIVITIES

       

Proceeds from investments

 

25

 

13

Purchases of investments

 

(9)

 

(14)

Net sale (purchases) of short-term investments — non-fiduciary

 

94

 

(227)

Acquisition of businesses, net of cash acquired

 

(46)

 

(16)

Sale of businesses, net of cash sold

 

(2)

 

97

Capital expenditures

 

(34)

 

(37)

Net cash provided by (used for) investing activities - continuing operations

 

28

 

(184)

Net cash used for investing activities - discontinued operations

 

(15)

 

(15)

CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES

 

13

 

(199)

         

CASH FLOWS FROM FINANCING ACTIVITIES

       

Share repurchase

 

(126)

 

(685)

Issuance of shares for employee benefit plans

 

(85)

 

(65)

Issuance of debt

 

992

 

1,045

Repayment of debt

 

(950)

 

(175)

Cash dividends to shareholders

 

(87)

 

(82)

Noncontrolling interests and other financing activities

 

(2)

 

(42)

Net cash provided by financing activities - continuing operations

 

(258)

 

(4)

Net cash provided by financing activities - discontinued operations

 

 

CASH USED FOR FINANCING ACTIVITIES

 

(258)

 

(4)

         

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

25

 

11

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

20

 

81

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

431

 

384

CASH AND CASH EQUIVALENTS AT END OF PERIOD (1)

 

$

451

 

$

465

   

(1)

Includes $18 million and $3 million of discontinued operations at March 31, 2017 and March 31, 2016, respectively.

 

Aon plc
Restructuring Plan (Unaudited)(1)

   

Actuals

       
   

First Quarter
2017

 

Estimated
Remaining Costs

 

Estimated Total
Cost (2)

Workforce reduction

 

$

103

 

$

104

 

$

207

IT rationalization

 

3

 

143

 

146

Lease consolidation

 

3

 

173

 

176

Asset impairments

 

13

 

27

 

40

Other costs associated with restructuring (3)

 

22

 

159

 

181

Total restructuring and related expenses

 

144

 

606

 

750

   

(1)

In the Condensed Consolidated Statements of Income, workforce reductions are included in "Compensation and benefits," IT 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 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 this plan.  Significant assumptions that may change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in the assumptions underlying sublease loss calculations due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives.

(3)

Other costs associated with the Restructuring Plan, including costs to separate the Divested Business, as well as moving costs, consulting and legal fees.  These costs are generally recognized when incurred.

 

Aon plc
Historical Revenue and Organic Revenue Reconciliation (Unaudited)

 
   

Three Months Ended

                   

(millions)

 

Mar 31,
 2014

 

Mar 31,
 2013

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

1,107

 

$

1,136

 

(3)%

 

(1)%

 

—%

 

(3)%

 

1%

Reinsurance Solutions

 

410

 

403

 

2%

 

(1)%

 

—%

 

—%

 

3%

Retirement Solutions

 

455

 

434

 

5%

 

1%

 

—%

 

1%

 

3%

Health Solutions

 

260

 

236

 

10%

 

(1)%

 

—%

 

7%

 

4%

Data & Analytic Services

 

241

 

224

 

8%

 

(1)%

 

—%

 

(1)%

 

10%

Elimination

 

(6)

 

(7)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,467

 

$

2,426

 

2%

 

(1)%

 

—%

 

—%

 

3%

   
   

Three Months Ended

                   

(millions)

 

Jun 30,
 2014

 

Jun 30,
 2013

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

1,135

 

$

1,150

 

(1)%

 

—%

 

—%

 

(2)%

 

1%

Reinsurance Solutions

 

361

 

379

 

(5)%

 

—%

 

—%

 

(1)%

 

(4)%

Retirement Solutions

 

461

 

441

 

5%

 

2%

 

—%

 

—%

 

3%

Health Solutions

 

249

 

224

 

11%

 

1%

 

—%

 

5%

 

5%

Data & Analytic Services

 

241

 

230

 

5%

 

1%

 

—%

 

(1)%

 

5%

Elimination

 

(3)

 

(3)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,444

 

$

2,421

 

1%

 

—%

 

—%

 

—%

 

1%

     
   

Three Months Ended

                   

(millions)

 

Sep 30,
 2014

 

Sep 30,
 2013

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

998

 

$

1,025

 

(3)%

 

—%

 

—%

 

(3)%

 

—%

Reinsurance Solutions

 

373

 

390

 

(4)%

 

—%

 

—%

 

1%

 

(5)%

Retirement Solutions

 

517

 

451

 

15%

 

2%

 

—%

 

—%

 

13%

Health Solutions

 

221

 

193

 

15%

 

—%

 

—%

 

9%

 

6%

Data & Analytic Services

 

256

 

223

 

15%

 

1%

 

—%

 

8%

 

6%

Elimination

 

(4)

 

(4)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,361

 

$

2,278

 

4%

 

—%

 

—%

 

1%

 

3%

     
   

Three Months Ended

                   

(millions)

 

Dec 31,
 2014

 

Dec 31,
 2013

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

1,138

 

$

1,188

 

(4)%

 

(5)%

 

—%

 

(1)%

 

2%

Reinsurance Solutions

 

335

 

340

 

(1)%

 

(4)%

 

—%

 

—%

 

3%

Retirement Solutions

 

512

 

505

 

1%

 

(2)%

 

—%

 

(1)%

 

4%

Health Solutions

 

376

 

283

 

33%

 

(3)%

 

—%

 

7%

 

29%

Data & Analytic Services

 

264

 

233

 

13%

 

(3)%

 

—%

 

10%

 

6%

Elimination

 

(5)

 

(4)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,620

 

$

2,545

 

3%

 

(4)%

 

—%

 

1%

 

6%

     
   

Twelve Months Ended

                   

(millions)

 

Dec 31,
 2014

 

Dec 31,
 2013

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

4,378

 

$

4,499

 

(3)%

 

(2)%

 

—%

 

(2)%

 

1%

Reinsurance Solutions

 

1,479

 

1,512

 

(2)%

 

(1)%

 

—%

 

—%

 

(1)%

Retirement Solutions

 

1,945

 

1,831

 

6%

 

1%

 

—%

 

(1)%

 

6%

Health Solutions

 

1,106

 

936

 

18%

 

(1)%

 

—%

 

7%

 

12%

Data & Analytic Services

 

1,002

 

910

 

10%

 

(1)%

 

—%

 

4%

 

7%

Elimination

 

(18)

 

(18)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

9,892

 

$

9,670

 

2%

 

(1)%

 

 

—%

 

3%

   

(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 intrasegment elimination activity and excludes the impact of foreign exchange rate changes, acquisitions, divestitures, transfers between business units, fiduciary investment income, and reimbursable expenses.

 

   

Three Months Ended

                   

(millions)

 

Mar 31,
 2015

 

Mar 31,
 2014

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

1,014

 

$

1,107

 

(8)%

 

(9)%

 

—%

 

(2)%

 

3%

Reinsurance Solutions

 

377

 

410

 

(8)%

 

(6)%

 

—%

 

—%

 

(2)%

Retirement Solutions

 

438

 

455

 

(4)%

 

(6)%

 

—%

 

—%

 

2%

Health Solutions

 

283

 

260

 

9%

 

(8)%

 

—%

 

7%

 

10%

Data & Analytic Services

 

254

 

241

 

5%

 

(7)%

 

—%

 

10%

 

2%

Elimination

 

(8)

 

(6)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,358

 

$

2,467

 

(4)%

 

(8)%

 

—%

 

1%

 

3

     
   

Three Months Ended

                 

(millions)

 

Jun 30,
 2015

 

Jun 30,
 2014

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

1,027

 

$

1,135

 

(10)%

 

(9)%

 

—%

 

(3)%

 

2%

Reinsurance Solutions

 

329

 

361

 

(9)%

 

(7)%

 

—%

 

—%

 

(2)%

Retirement Solutions

 

450

 

461

 

(2)%

 

(6)%

 

—%

 

2%

 

2%

Health Solutions

 

252

 

249

 

1%

 

(7)%

 

—%

 

5%

 

3%

Data & Analytic Services

 

258

 

241

 

7%

 

(7)%

 

—%

 

12%

 

2%

Elimination

 

 

(3)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,316

 

$

2,444

 

(5)%

 

(8)%

 

—%

 

1%

 

2%

   
   

Three Months Ended

                   

(millions)

 

Sep 30,
 2015

 

Sep 30,
 2014

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

883

 

$

998

 

(12)%

 

(10)%

 

—%

 

(2)%

 

—%

Reinsurance Solutions

 

329

 

373

 

(12)%

 

(7)%

 

—%

 

—%

 

(5)%

Retirement Solutions

 

509

 

517

 

(2)%

 

(6)%

 

—%

 

—%

 

4%

Health Solutions

 

233

 

221

 

5%

 

(7)%

 

—%

 

1%

 

11%

Data & Analytic Services

 

254

 

256

 

(1)%

 

(6)%

 

—%

 

1%

 

4%

Elimination

 

(2)

 

(4)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,206

 

$

2,361

 

(7)%

 

(8)%

 

—%

 

(1)%

 

2%

     
   

Three Months Ended

                   

(millions)

 

Dec 31,
 2015

 

Dec 31,
 2014

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures
& Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

1,105

 

$

1,138

 

(3)%

 

(8)%

 

—%

 

(2)%

 

7%

Reinsurance Solutions

 

323

 

335

 

(4)%

 

(5)%

 

—%

 

—%

 

1%

Retirement Solutions

 

519

 

512

 

1%

 

(5)%

 

—%

 

—%

 

6%

Health Solutions

 

399

 

376

 

6%

 

(4)%

 

—%

 

3%

 

7%

Data & Analytic Services

 

255

 

264

 

(3)%

 

(5)%

 

—%

 

—%

 

2%

Elimination

 

(1)

 

(5)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,600

 

$

2,620

 

(1)%

 

(6)%

 

—%

 

(1)%

 

6%

 
   

Twelve Months Ended

                   

(millions)

 

Dec 31,
 2015

 

Dec 31,
 2014

 

Percent

Change

 

Less:

Currency

Impact(1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures
& Other

 

Organic

Revenue

Growth(2)

Commercial Risk Solutions

 

$

4,029

 

$

4,378

 

(8)%

 

(9)%

 

—%

 

(2)%

 

3%

Reinsurance Solutions

 

1,358

 

1,479

 

(8)%

 

(6)%

 

—%

 

—%

 

(2)%

Retirement Solutions

 

1,916

 

1,945

 

(1)%

 

(6)%

 

—%

 

2%

 

3%

Health Solutions

 

1,167

 

1,106

 

6%

 

(6)%

 

—%

 

4%

 

8%

Data & Analytic Services

 

1,021

 

1,002

 

2%

 

(6)%

 

—%

 

6%

 

2%

Elimination

 

(11)

 

(18)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

9,480

 

$

9,892

 

(4)%

 

(7)%

 

—%

 

—%

 

3%

   

(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 intrasegment elimination activity and excludes the impact of foreign exchange rate changes, acquisitions, divestitures, transfers between business units, fiduciary investment income, and reimbursable expenses.

 

   

Three Months Ended

                   

(millions)

 

Mar 31,
 2016

 

Mar 31,
 2015

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

961

 

$

1,014

 

(5)%

 

(5)%

 

—%

 

(3)%

 

3%

Reinsurance Solutions

 

371

 

377

 

(2)%

 

(2)%

 

—%

 

—%

 

—%

Retirement Solutions

 

395

 

438

 

(10)%

 

(4)%

 

—%

 

(8)%

 

2%

Health Solutions

 

292

 

283

 

3%

 

(4)%

 

—%

 

6%

 

1%

Data & Analytic Services

 

259

 

254

 

2%

 

(3)%

 

—%

 

—%

 

5%

Elimination

 

(2)

 

(8)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,276

 

$

2,358

 

(3)%

 

(4)%

 

—%

 

(1)%

 

2%

       
   

Three Months Ended

                   

(millions)

 

Jun 30,
 2016

 

Jun 30,
 2015

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

990

 

$

1,027

 

(4)%

 

(3)%

 

—%

 

(3)%

 

2%

Reinsurance Solutions

 

332

 

329

 

1%

 

—%

 

—%

 

1%

 

—%

Retirement Solutions

 

405

 

450

 

(10)%

 

(3)%

 

—%

 

(10)%

 

3%

Health Solutions

 

281

 

252

 

12%

 

(3)%

 

—%

 

8%

 

7%

Data & Analytic Services

 

275

 

258

 

7%

 

(1)%

 

—%

 

—%

 

8%

Elimination

 

(1)

 

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,282

 

$

2,316

 

(1)%

 

(2)%

 

—%

 

(2)%

 

3%

 
   

Three Months Ended

                   

(millions)

 

Sep 30,
 2016

 

Sep 30,
 2015

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

884

 

$

883

 

—%

 

(2)%

 

—%

 

(2)%

 

4%

Reinsurance Solutions

 

329

 

329

 

—%

 

(1)%

 

—%

 

1%

 

—%

Retirement Solutions

 

466

 

509

 

(8)%

 

(4)%

 

—%

 

(8)%

 

4%

Health Solutions

 

265

 

233

 

14%

 

(3)%

 

—%

 

10%

 

7%

Data & Analytic Services

 

260

 

254

 

2%

 

(1)%

 

—%

 

(2)%

 

5%

Elimination

 

(3)

 

(2)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,201

 

$

2,206

 

—%

 

(2)%

 

—%

 

(2)%

 

4%

 
   

Three Months Ended

                   

(millions)

 

Dec 31,
 2016

 

Dec 31,
 2015

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

Less:
Acquisitions,

Divestitures &
Other

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

1,094

 

$

1,105

 

(1)%

 

(2)%

 

—%

 

1%

 

—%

Reinsurance Solutions

 

329

 

323

 

2%

 

—%

 

—%

 

1%

 

1%

Retirement Solutions

 

441

 

519

 

(15)%

 

(5)%

 

—%

 

(8)%

 

(2)%

Health Solutions

 

532

 

399

 

33%

 

(2)%

 

—%

 

5%

 

30%

Data & Analytic Services

 

256

 

255

 

—%

 

(2)%

 

—%

 

(2)%

 

4%

Elimination

 

(2)

 

(1)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

2,650

 

$

2,600

 

2%

 

(2)%

 

—%

 

(1)%

 

5%

                         
   

Twelve Months Ended

                   

(millions)

 

Dec 31,
 2016

 

Dec 31,
 2015

 

Percent

Change

 

Less:

Currency

Impact (1)

 

Less: Fiduciary
Investment
Income

 

 

 

Less:
Acquisitions,

Divestitures &
Other

 

 

 

 

Organic

Revenue

Growth (2)

Commercial Risk Solutions

 

$

3,929

 

$

4,029

 

(2)%

 

(3)%

 

—%

 

(1)%

 

2%

Reinsurance Solutions

 

1,361

 

1,358

 

—%

 

(1)%

 

—%

 

—%

 

1%

Retirement Solutions

 

1,707

 

1,916

 

(11)%

 

(4)%

 

—%

 

(9)%

 

2%

Health Solutions

 

1,370

 

1,167

 

17%

 

(3)%

 

—%

 

7%

 

13%

Data & Analytic Services

 

1,050

 

1,021

 

3%

 

(2)%

 

—%

 

(1)%

 

6%

Elimination

 

(8)

 

(11)

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

Total revenue

 

$

9,409

 

$

9,480

 

(1)%

 

(3)%

 

—%

 

(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 intrasegment elimination activity and excludes the impact of foreign exchange rate changes, acquisitions, divestitures, transfers between business units, fiduciary investment income, and reimbursable expenses.

 

 

 

 

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

   
       

Three Months Ended(3)

   

 

Three Months Ended(5)

     

(millions, except per share data)

 

Full Year

2014 (2)

 

Mar 31,

2015 

 

Jun 30,
2015

 

Sep 30,
2015

 

Dec 31,
2015

 

Full Year

2015 (4)

 

Mar 31,
2016

 

Jun 30,
2016

 

Sep 30,
2016

 

Dec 31,
2016

 

Full Year

2016 (5)

Revenue

                                           

Commercial Risk Solutions

 

$

4,378

 

$

1,014

 

$

1,027

 

$

883

 

$

1,105

 

$

4,029

 

$

961

 

$

990

 

$

884

 

$

1,094

 

$

3,929

Reinsurance Solutions

 

1,479

 

377

 

329

 

329

 

323

 

1,358

 

371

 

332

 

329

 

329

 

1,361

Retirement Solutions

 

1,945

 

438

 

450

 

509

 

519

 

1,916

 

395

 

405

 

466

 

441

 

1,707

Health Solutions

 

1,106

 

283

 

252

 

233

 

399

 

1,167

 

292

 

281

 

265

 

532

 

1,370

Data & Analytic Services

 

1,002

 

254

 

258

 

254

 

255

 

1,021

 

259

 

275

 

260

 

256

 

1,050

Elimination

 

(18)

 

(8)

 

 

(2)

 

(1)

 

(11)

 

(2)

 

(1)

 

(3)

 

(2)

 

(8)

Total revenue

 

$

9,892

 

$

2,358

 

$

2,316

 

$

2,206

 

$

2,600

 

$

9,480

 

$

2,276

 

$

2,282

 

$

2,201

 

$

2,650

 

$

9,409

Expenses

                                           

Compensation and benefits

 

5,780

 

1,384

 

1,353

 

1,332

 

1,536

 

5,605

 

1,345

 

1,396

 

1,300

 

1,646

 

5,687

Information technology

 

430

 

92

 

85

 

92

 

99

 

368

 

83

 

89

 

93

 

100

 

365

Premises

 

399

 

97

 

90

 

79

 

88

 

354

 

82

 

85

 

84

 

84

 

335

Depreciation of fixed assets

 

179

 

39

 

43

 

39

 

43

 

164

 

38

 

41

 

39

 

44

 

162

Amortization of intangible assets

 

194

 

45

 

44

 

42

 

42

 

173

 

37

 

38

 

42

 

40

 

157

Other general expenses

 

1,148

 

267

 

441

 

262

 

259

 

1,229

 

271

 

246

 

275

 

273

 

1,065

Total operating expenses

 

8,130

 

1,924

 

2,056

 

1,846

 

2,067

 

7,893

 

1,856

 

1,895

 

1,833

 

2,187

 

7,771

Operating income - as reported

 

1,762

 

434

 

260

 

360

 

533

 

1,587

 

420

 

387

 

368

 

463

 

1,638

Amortization of intangible assets

 

194

 

45

 

44

 

42

 

42

 

173

 

37

 

38

 

42

 

40

 

157

Legacy litigation

 

35

 

 

176

 

 

 

176

 

 

 

 

 

Pension settlements

 

 

 

 

 

 

 

 

62

 

 

158

 

220

Transaction costs

 

 

 

 

 

 

 

 

 

 

15

 

15

Operating income - as adjusted

 

1,991

 

479

 

480

 

402

 

575

 

1,936

 

457

 

487

 

410

 

676

 

2,030

Operating margin from continuing operations - as adjusted

 

20.1%

 

20.3%

 

20.7%

 

18.2%

 

22.1%

 

20.4%

 

20.1%

 

21.3%

 

18.6%

 

25.5%

 

21.6%

Interest income

 

10

 

3

 

4

 

3

 

4

 

14

 

2

 

3

 

1

 

3

 

9

Interest expense

 

(255)

 

(65)

 

(68)

 

(72)

 

(68)

 

(273)

 

(69)

 

(73)

 

(70)

 

(70)

 

(282)

Other income (expense)

 

42

 

42

 

1

 

8

 

49

 

100

 

18

 

(1)

 

10

 

9

 

36

Income before income taxes - as adjusted

 

1,788

 

459

 

417

 

341

 

560

 

1,777

 

408

 

416

 

351

 

618

 

1,793

Income taxes

 

284

 

N/A

 

N/A

 

N/A

 

N/A

 

264

 

64

 

62

 

50

 

74

 

250

Income from continuing operations - as adjusted

 

1,504

 

N/A

 

N/A

 

N/A

 

N/A

 

1,513

 

344

 

354

 

301

 

544

 

1,543

Less: Net income attributable to noncontrolling interests

 

34

 

N/A

 

N/A

 

N/A

 

N/A

 

37

 

12

 

8

 

7

 

7

 

34

Net income from continuing operations attributable to Aon shareholders - as adjusted

 

$

1,470

 

N/A

 

N/A

 

N/A

 

N/A

 

$

1,476

 

$

332

 

$

346

 

$

294

 

$

537

 

$

1,509

Diluted earnings per share from continuing operations - as adjusted

 

$

4.91

 

N/A

 

N/A

 

N/A

 

N/A

 

$

5.20

 

$

1.21

 

$

1.28

 

$

1.09

 

$

2.00

 

$

5.58

Weighted average ordinary shares outstanding - diluted

 

299.6

 

287.1

 

286.7

 

283.8

 

279.3

 

283.8

 

273.7

 

269.8

 

269.6

 

268.3

 

270.3

   

(1)

Certain noteworthy items impacting operating income in 2016, 2015, and 2014 are described in this schedule. The items shown with the caption "as adjusted" are non-GAAP measures.

(2)

The effective tax rate for continuing operations is 15.9% for the twelve months ended December 31, 2014.  Adjusted items are taxed at the estimated annual effective tax rate.

(3)

The non-GAAP effective tax rate is not provided on a quarterly basis for 2015.

(4)

The effective tax rate used in the U.S. GAAP financial statements for continuing operations was 12.3% for the twelve months ended December 31, 2015. Adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with legacy litigation which was adjusted at the related jurisdictional rate.  The non-GAAP effective tax rate for continuing operations, adjusted for these non-GAAP items, was 14.9% for the twelve months ended December 31, 2015.

(5)

The effective tax rates used in the U.S. GAAP financial statements for continuing operations were 15.9%, 13.6%, 8.1%, and 5.2%, respectively, for the three months ended March 31, 2016, June 30, 2016, September 30, 2016, and December 31, 2016, and 10.6% 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 these items, were 15.7%, 14.9%, 14.2%, and 12.0% 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.

 

SOURCE Aon plc



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