Loading

Aon Media Center

Aon Reports Fourth Quarter and Full Year 2017 Results

LONDON, Feb. 2, 2018 /PRNewswire/ --

Fourth Quarter Key Metrics From Continuing Operations and Highlights

  • 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

Full Year Key Metrics From Continuing Operations and Highlights

  • 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

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

Net income from continuing operations attributable to Aon shareholders in the fourth quarter was $10 million, or $0.04 per share, compared to $377 million, or $1.40 per share, in the prior year period. Net income per share from continuing operations, adjusted for certain items, increased 18% to $2.35, including $19 million, or  $0.06, of other expenses primarily related to a loss on the sale of certain businesses and an unfavorable impact of exchange rates on the remeasurement of assets and liabilities in non-functional currencies, compared to $2.00 in the prior year period. Certain items that impacted fourth 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 from Continuing Operations" on page 11 of this press release.

"Our fourth quarter results reflect a strong finish to a solid year, highlighted by 6% organic growth, substantial operational improvement driven by our Aon United operating model initiative, and effective capital management, highlighted by the return of a record amount of capital to shareholders in 2017," said Greg Case, President and Chief Executive Officer.  "The long-term growth profile of our firm is increasing, driven by an unmatched level of investment and an industry-leading portfolio focused around our highest value solutions and our clients' greatest needs. Combined with core operational performance and savings from the Aon United operating model, we believe we are on track to exceed $7.97 of adjusted earnings per share in 2018, and deliver double-digit free cash flow growth over the long-term."

FOURTH QUARTER 2017 FINANCIAL SUMMARY
The fourth quarter financial results discussed herein represent performance from continuing operations.

Total revenue in the fourth quarter increased 10% to $2.9 billion compared to the prior year period driven primarily by 6% organic revenue growth, a 2% increase related to acquisitions, net of divestitures, and a 2% favorable impact if the company were to hold foreign currency exchange rates constant, translating prior year period results at current period foreign exchange rates ("foreign currency translation").

Total operating expenses in the fourth quarter increased 11% to $2.4 billion compared to the prior year period driven primarily by $96 million of restructuring costs, a $75 million  increase in expenses related to acquisitions, net of divestitures, $54 million of accelerated amortization related to tradenames, a $42 million unfavorable impact from foreign currency translation, and an increase in expense associated with  6% organic revenue growth, partially offset by $56 million of savings related to restructuring and other operational improvement initiatives, a $30 million decrease in expenses related to certain pension settlements, a $14 million decrease in expected costs related to regulatory and compliance matters, and approximately a $12 million decrease in transaction related costs.

Restructuring expenses were $96 million in the fourth quarter, primarily driven by workforce reductions and other general initiatives. Upon evaluating the current progress of the restructuring program and further opportunities to improve our Aon United operating model, the Company has increased its estimated investment from $900 million to $1,175 million in total cash over a three-year period, in addition to incurring $50 million of non-cash charges. This includes an estimated investment of $975 million of cash restructuring charges and $200 million of incremental capital expenditures. To date, the Company has incurred $497 million, or 48% of the total estimated restructuring charges. An analysis of restructuring and related costs by type is detailed on page 14 of this press release.

Restructuring savings in the fourth quarter related to restructuring and other operational improvement initiatives were $56 million, before any potential reinvestment. Before any potential reinvestment of savings, restructuring and other operational improvement initiatives are now expected to deliver run-rate savings of $450 million annually in 2019, an increase of $50 million from the original estimated savings of $400 million. To date, the Company has achieved $165 million, or 37%, of the total estimated annualized savings.

Foreign currency exchange rates in the fourth quarter had a $0.06 per share, or $16 million, favorable impact on U.S. GAAP net income, and a $0.06 per share, or $17 million, favorable 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 for the fourth quarter was 95.8%, including $345 million of additional tax expense as a result of the provisional estimate of the impact of U.S. tax reform based on Aon's initial analysis of the Tax Cuts and Jobs Act, compared to the prior year quarter of 5.2%. After adjusting to exclude the provisional estimate of the impact of U.S. tax reform based on Aon's initial analysis of the Tax Cuts and Jobs Act, as well as the applicable tax impact associated with estimated restructuring expenses, accelerated tradename amortization, impairment charges, regulatory and compliance provisions, and non-cash pension expenses, the adjusted effective tax rate for the fourth quarter of 2017 was 15.5% compared to 12.0% in the prior year quarter. Both periods benefited from a net favorable impact of certain discrete items. These adjustments are discussed in the "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings Per Share from Continuing Operations" on page 11 of this press release.

Additionally, as a result of the initial analysis of the Tax Cuts and Jobs Act, the Company expects that U.S. tax reform will have modest upward pressure on its effective tax rate.  Based on initial interpretation of changes in legislation, current assumptions of geographic mix of income and the potential impact of discrete items, we believe the best estimate of our full-year non-GAAP global effective tax rate to be approximately 19%.

Weighted average diluted shares outstanding decreased to 254.5 million in the fourth quarter compared to 268.3 million in the prior year period.  The Company repurchased 3.5 million Class A Ordinary Shares for approximately $500 million in the fourth quarter. As of December 31, 2017, the Company had $5.4 billion of remaining authorization under its share repurchase program.

FOURTH QUARTER 2017 CASH FLOW SUMMARY
Cash flow from operations for 2017 decreased 63%, or $1,160 million, to $669 million compared to the prior year period, primarily reflecting an estimated $940 million of cash tax payments associated with the divestiture of our outsourcing businesses in the second quarter ("divested business"), $280 million of cash restructuring charges, and $45 million of transaction costs related to the divested business, partially offset by operational improvement.

Free cash flow, defined as cash flow from operations less capital expenditures, decreased 71%, or $1,187 million, to $486 million compared to the prior year period, reflecting a decline in cash flow from operations and a $27 million increase in capital expenditures, including investments in our operating model.  A reconciliation of free cash flow to cash flow from operations can be found on the "Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow" on page 10 of this press release.

FOURTH QUARTER 2017 REVENUE REVIEW
The fourth quarter revenue reviews provided below include supplemental information related to organic revenue, which is a non-GAAP measure that is described in detail in "Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow" on page 10 of this press release.



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%

Total organic revenue increased 6% compared to prior year period, reflecting organic growth of 5% or greater in four of the five revenue lines, highlighted by double-digit growth in Data & Analytic Services.

Commercial Risk Solutions organic revenue increased 5% compared to the prior year period driven primarily by strong growth in U.S. retail and solid growth internationally led by the Asia and Pacific regions, as well as new client wins in the captive management business.

Reinsurance Solutions organic revenue increased 8% compared to the prior year period driven by strong growth across all major product lines, highlighted by particular strength in treaty placements, reflecting net new business generation and growth in both facultative placements and capital markets transactions.

Retirement Solutions organic revenue increased 4% compared to the prior year period driven by growth across every major business and geography, with particular strength in our Talent, Rewards, and Performance practice primarily in Rewards, assessment services, and in investment consulting, primarily for delegated investment management.

Health Solutions organic revenue increased 6% compared to the prior year period driven by strong growth globally in health & benefits brokerage, reflecting continued strength both in the U.S. and internationally. The prior year period benefited from certain project-related work in the retiree exchange business

Data & Analytic Services organic revenue increased 12% compared to the prior year period driven by continued strength across U.S. Affinity, as well as increased claims activity in the flood business following certain catastrophic events earlier in the year.

FOURTH QUARTER 2017 EXPENSE REVIEW




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%

Compensation and benefits expense increased 6%, or $106 million, compared to the prior year period due primarily to a $44 million increase in expenses related to acquisitions, net of divestitures, $42 million of restructuring costs, a $33 million unfavorable impact from foreign currency translation, and an increase in expense associated with  6% organic revenue growth, partially offset by $42 million of savings related to restructuring and other operational improvement initiatives and a $30 million decrease in expenses related to certain pension settlements.

Information technology expense increased 18%, or $19 million, compared to the prior year period due primarily to $11 million of restructuring costs, a $4 million increase in expenses associated with acquisitions, net of divestitures, as well as investments in future growth, partially offset by $8 million of savings related to restructuring and other operational improvement initiatives.

Premises expense increased 3%, or $3 million, compared to the prior year period due primarily to a $3 million unfavorable impact from foreign currency translation and a $2 million increase in expenses related to acquisitions, net of divestitures, partially offset by $1 million of savings related to restructuring and other operational improvement initiatives.

Depreciation of fixed assets expense decreased 11%, or $5 million, compared to the prior year period primarily due to $1 million of savings related to restructuring and other operational improvement initiatives, as well as a decrease in overall expense as we continue to optimize our real estate and IT portfolio.

Amortization and impairment of intangible assets expense increased 150%, or $60 million, compared to the prior year period primarily due to $54 million of accelerated amortization related to tradenames and an increase from acquisitions, net of divestitures.

Other general expenses increased 19%, or $50 million, compared to the prior year period primarily due to $43 million of restructuring costs, a $22 million increase in expenses associated with acquisitions, net of divestitures, and an increase in expense associated with 6% organic revenue growth, partially offset by a $14 million decrease in expected costs related to regulatory and compliance matters and a $12 million net decrease in transaction related costs.

FOURTH QUARTER 2017 INCOME SUMMARY
Certain noteworthy items impacted operating income and operating margins in the fourth quarters of 2017 and 2016.  The fourth quarter information provided below includes supplemental information related to adjusted operating income and adjusted operating margin, which are non-GAAP measures that are described in detail in "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings Per Share from Continuing Operations" on page 11 of this press release.




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%



Operating income increased 6%, or $26 million, compared to the prior year period. Adjusting for certain items detailed on page 11 of this press release, operating income increased 18%, or $123 million, and operating margin increased 200 basis points to 27.5%, each compared to the prior year period.  The increase in adjusted operating margin was driven primarily by strong organic revenue growth of 6%, core operational improvement, and $56 million of savings from restructuring and other operational improvement initiatives, partially offset by $3 million, or -10 basis points, of transaction costs related to recent acquisitions.




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


—%

Interest income increased $4 million to $7 million compared to the prior year period primarily due to additional income earned on the remaining proceeds from the sale of the divested business. Interest expense was similar to the prior year period. Other expense was $19 million and primarily included a loss on the sale of certain businesses and losses due to the unfavorable impact of exchange rates on the remeasurement of assets and liabilities in non-functional currencies. The prior year period primarily includes net gains due to the favorable impact of exchange rates on the remeasurement of assets and liabilities in non-functional currencies.

DISCONTINUED OPERATIONS
Net loss from discontinued operations was $(29) million, or $(0.11) per share, compared to net income of $75 million, or $0.28 per share, in the prior year period. Net loss from discontinued operations, adjusted for certain items, was $(4) million, or $(0.01) per share, compared to net income of $100 million, or $0.37 in the prior year period. Certain items that impacted fourth quarter results and comparisons with the prior year period are detailed in "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings Per Share from Continuing Operations" on page 11 on this press release.

2017 FULL YEAR SUMMARY
Total revenue for 2017 increased 6% to $10.0 billion compared to the prior year period driven by 4% organic revenue growth and a 2% increase related to acquisitions, net of divestitures.

Net income from continuing operations was $435 million, or $1.53 per share, compared to $1.3 billion, or $4.51 per share, in the prior year. Net income per share from continuing operations, adjusted for certain items, increased 17% to $6.52, compared to $5.58 in the prior year. Certain items that impacted full year results and comparisons against the prior year are detailed in the "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings Per Share from Continuing Operations" on page 11 of this press release.

During 2017, the Company repurchased approximately 18.0 million Class A Ordinary Shares for a record $2.4 billion at an average price of $133.67 per share.

PRO FORMA HISTORICAL FINANCIALS
In the first quarter of 2018, Aon will adopt new accounting guidance related to the treatment of revenue from contracts with customers that will be applied prospectively on its U.S. GAAP financial statements and therefore comparable periods will not be restated.  In the same quarter, Aon will adopt new accounting guidance related to the presentation of costs associated with pensions and other postretirement benefits that will be applied retrospectively for its U.S. GAAP financial statements and therefore comparable periods will be restated.  On pages 15 through 21 of this press release, the Company has included unaudited pro forma consolidated results that present the retrospective impact of each of these standards on fiscal years 2016 and 2017.

Conference Call, Presentation Slides and Webcast Details

The Company will host a conference call on Friday, February 2, 2018 at 7:30 a.m., central time.  Interested parties can listen to the conference call via a live audio webcast and view the presentation slides at www.aon.com.

About Aon

Aon plc (NYSE:AON) is 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 contain 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. Forward-looking statements relate to expectations or forecasts of future events. They use words such as "anticipate," "believe," "estimate," "expect," "forecast," "project," "intend," "plan," "probably," "potential," "looking forward" and other similar terms, and future or conditional tense verbs like "could," "may," "might," "should," "will" and "would." You can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. For example, we may use forward-looking statements when addressing topics such as: market and industry conditions, including competitive and pricing trends; changes in our business strategies and methods of generating revenue; the development and performance of our services and products; changes in the composition or level of our revenues; our cost structure and the outcome of cost-saving or restructuring initiatives; the outcome of contingencies; dividend policy; the expected impact of acquisitions and dispositions; pension obligations; cash flow and liquidity; expected effective tax rate; future actions by regulators; and the impact of changes in accounting rules. 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.

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 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 or 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; the 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 certain risks created in connection with the various services, including fiduciary and investments and other advisory services and business process outsourcing services, among others, that Aon currently provides, or will provide in the future, to clients; Aon's ability to grow, develop and integrate companies that it acquires or new lines of business; 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 Reports on Form 10-Q for the quarters ended March 31, 2017, June 30, 2017, and September 30, 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, adjusted earnings per share, and adjusted effective tax rate that exclude the effects of intangible asset amortization, capital expenditures, transaction costs and certain other noteworthy items that affected results for the comparable periods.  Organic revenue excludes from reported revenues the impact of foreign exchange, acquisitions, divestitures, transfers between business units, 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 schedules.  Supplemental organic revenue information and additional measures that exclude the effects of the restructuring charges and certain other items do not affect net income or any other GAAP reported amounts.  Free cash flow is cash flow from operating activity less capital expenditures. The effective tax rate, as adjusted, excludes the applicable tax impact associated with the provisional estimate of U.S. tax reform based on Aon's initial analysis of the Tax Cuts and Jobs Act and expenses for legacy litigation. 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:

Investor Relations


Donna Mirandola

+1 312-381-3310


Vice President, Global External Communications

investor.relations@aon.com


+1 312-381-1532

 


Aon plc
Consolidated Statements of Income (Unaudited)












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.

 

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)


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.

 

Free Cash Flow from Continuing Operations (Unaudited)








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.

 

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













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.

 

Aon plc
Consolidated Statements of Financial Position (Unaudited)






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. 

 

Aon plc
Consolidated Statements of Cash Flows (Unaudited)






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.

 

Aon plc
Restructuring Plan (Unaudited) (1)




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.

 

Aon plc
Pro Forma Historical Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings Per Share from Continuing Operations as Adjusted for Changes in Accounting Guidance (Unaudited) (1)(2)












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.

 

Aon plc
Pro Forma Historical Reconciliation of Reported Non-GAAP Measures to Non-GAAP Measures Adjusted for Changes in Accounting Guidance (Unaudited)(1)(2)






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.

 

Aon plc
Pro Forma Historical Reconciliation of Reported Non-GAAP Measures to Non-GAAP Measures Adjusted for Changes in Accounting Guidance (Unaudited)(1)(2)






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.

 

Aon plc
Pro Forma Historical Reconciliation of Reported Non-GAAP Measures to Non-GAAP Measures Adjusted for Changes in Accounting Guidance (Unaudited)(1)(2)






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.

 

Aon plc
Pro Forma Historical Reconciliation of Reported Non-GAAP Measures to Non-GAAP Measures Adjusted for Changes in Accounting Guidance (Unaudited)(1)(2)






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.

 

Aon plc
Pro Forma Historical Reconciliation of Reported Non-GAAP Measures to Non-GAAP Measures Adjusted for Changes in Accounting Guidance (Unaudited)(1)(2)






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.

 

Aon plc
Pro Forma Historical Revenue and Organic Revenue Reconciliation as Adjusted for Changes in Accounting Guidance (Unaudited)

















Three Months Ended













Mar 31,
 2017


Mar 31,
 2016


%

Change


Less:

Currency

Impact (1)


Less: Fiduciary
Investment
Income


Less:
Acquisitions,

Divestitures &
Other


Organic

Revenue

Growth (2)

(millions)


















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%



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


$

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.

 

SOURCE Aon plc



If you elect to comment or engage with our content via third-party social media websites, you authorize Aon to have access to certain social media profile information. Please click here to learn more about information that may be collected when using these tools on Aon.com


email Email   print Print   rss