10-Q 1 q12018aonplc.htm 10-Q Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
ý      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED March 31, 2018
 
OR
 
o        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission file number 1-7933

Aon plc
(Exact Name of Registrant as Specified in Its Charter)
 
ENGLAND AND WALES
 
98-1030901
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
 
122 LEADENHALL STREET, LONDON, ENGLAND
 
EC3V 4AN
(Address of Principal Executive Offices)
 
(Zip Code)
+44 20 7623 5500
(Registrant’s Telephone Number,
Including Area Code)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES  ý  NO  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES  ý  NO  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
Non-accelerated filer o
 
Smaller reporting company o
(Do not check if a smaller reporting company)
 
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o NO ý
 
Number of Class A Ordinary Shares of Aon plc, $0.01 nominal value, outstanding as of May 3, 2018244,512,517
 



Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Part I Financial Information
Item 1. Financial Statements
 
Aon plc
Condensed Consolidated Statements of Income
(Unaudited) 
 
 
Three Months Ended
(millions, except per share data)
 
March 31, 2018
 
March 31, 2017
Revenue
 
 

 
 

Total revenue
 
$
3,090

 
$
2,381

Expenses
 
 

 
 

Compensation and benefits
 
1,616

 
1,469

Information technology
 
115

 
88

Premises
 
93

 
84

Depreciation of fixed assets
 
39

 
54

Amortization and impairment of intangible assets
 
110

 
43

Other general expenses
 
318

 
308

Total operating expenses
 
2,291

 
2,046

Operating income
 
799

 
335

Interest income
 
4

 
2

Interest expense
 
(70
)
 
(70
)
Other income (expense)
 
(15
)
 
(2
)
Income from continuing operations before income taxes
 
718

 
265

Income taxes
 
114

 

Net income from continuing operations
 
604

 
265

Net income from discontinued operations
 
6

 
40

Net income
 
610

 
305

Less: Net income attributable to noncontrolling interests
 
16

 
14

Net income attributable to Aon shareholders
 
$
594

 
$
291

 
 
 
 
 
Basic net income per share attributable to Aon shareholders
 
 
 
 
Continuing operations
 
$
2.37

 
$
0.95

Discontinued operations
 
0.02

 
0.15

Net income
 
$
2.39

 
$
1.10

Diluted net income per share attributable to Aon shareholders
 
 
 
 
Continuing operations
 
$
2.35

 
$
0.94

Discontinued operations
 
0.02

 
0.15

Net income
 
$
2.37

 
$
1.09

Cash dividends per share paid on ordinary shares
 
$
0.36

 
$
0.33

Weighted average ordinary shares outstanding - basic
 
248.5

 
264.8

Weighted average ordinary shares outstanding - diluted
 
250.2

 
267.0

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

2



Aon plc
Condensed Consolidated Statements of Comprehensive Income
(Unaudited) 
 
 
Three Months Ended
(millions)
 
March 31, 2018
 
March 31, 2017
Net income
 
$
610

 
$
305

Less: Net income attributable to noncontrolling interests
 
16

 
14

Net income attributable to Aon shareholders
 
594

 
291

Other comprehensive income (loss), net of tax:
 
 

 
 

Change in fair value of financial instruments
 
14

 
(2
)
Foreign currency translation adjustments
 
247

 
147

Postretirement benefit obligation
 
48

 
18

Total other comprehensive income
 
309

 
163

Less: Other comprehensive income attributable to noncontrolling interests
 
3

 
1

Total other comprehensive income attributable to Aon shareholders
 
306

 
162

Comprehensive income attributable to Aon shareholders
 
$
900

 
$
453

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

3



Aon plc
Condensed Consolidated Statements of Financial Position
 
 
(Unaudited)
 
 
(millions, except nominal value)
 
March 31,
2018
 
December 31,
2017
ASSETS
 
 

 
 

CURRENT ASSETS
 
 

 
 

Cash and cash equivalents
 
$
597

 
$
756

Short-term investments
 
118

 
529

Receivables, net
 
3,053

 
2,478

Fiduciary assets 
 
10,738

 
9,625

Other current assets
 
609

 
289

Total Current Assets
 
15,115

 
13,677

Goodwill
 
8,550

 
8,358

Intangible assets, net
 
1,662

 
1,733

Fixed assets, net
 
578

 
564

Deferred tax assets
 
296

 
389

Prepaid pension
 
1,207

 
1,060

Other non-current assets
 
439

 
307

TOTAL ASSETS
 
$
27,847

 
$
26,088

 
 
 
 
 
LIABILITIES AND EQUITY
 
 

 
 

LIABILITIES
 
 

 
 

CURRENT LIABILITIES
 
 

 
 

Accounts payable and accrued liabilities
 
$
1,545

 
$
1,961

Short-term debt and current portion of long-term debt
 
403

 
299

Fiduciary liabilities
 
10,738

 
9,625

Other current liabilities
 
972

 
870

Total Current Liabilities
 
13,658

 
12,755

Long-term debt
 
5,697

 
5,667

Deferred tax liabilities
 
243

 
127

Pension, other postretirement, and postemployment liabilities
 
1,759

 
1,789

Other non-current liabilities
 
1,105

 
1,102

TOTAL LIABILITIES
 
22,462

 
21,440

 
 
 
 
 
EQUITY
 
 

 
 

Ordinary shares - $0.01 nominal value
Authorized: 750 shares (issued: 2018 - 245.2; 2017 - 247.6)
 
2

 
2

Additional paid-in capital
 
5,743

 
5,775

Retained earnings
 
2,747

 
2,302

Accumulated other comprehensive loss
 
(3,191
)
 
(3,496
)
TOTAL AON SHAREHOLDERS' EQUITY
 
5,301

 
4,583

Noncontrolling interests
 
84

 
65

TOTAL EQUITY
 
5,385

 
4,648

TOTAL LIABILITIES AND EQUITY
 
$
27,847

 
$
26,088

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

4



Aon plc
Condensed Consolidated Statement of Shareholders’ Equity
(Unaudited) 
(millions)
 
Shares
 
Ordinary
Shares and
Additional
Paid-in Capital
 
Retained
Earnings
 
Accumulated Other
Comprehensive
Loss, Net of Tax
 
Non-
controlling
Interests
 
Total
Balance at December 31, 2017
 
247.6

 
$
5,777

 
$
2,302

 
$
(3,496
)
 
$
65

 
$
4,648

Adoption of new accounting guidance
 

 

 
493

 
(1
)
 

 
492

Balance at January 1, 2018
 
247.6

 
5,777

 
2,795

 
(3,497
)
 
65

 
5,140

Net income
 

 

 
594

 

 
16

 
610

Shares issued - employee stock compensation plans
 
1.5

 
(109
)
 

 

 

 
(109
)
Shares purchased
 
(3.9
)
 

 
(553
)
 

 

 
(553
)
Share-based compensation expense
 

 
77

 

 

 

 
77

Dividends to shareholders
 

 

 
(89
)
 

 

 
(89
)
Net change in fair value of financial instruments
 

 

 

 
14

 

 
14

Net foreign currency translation adjustments
 

 

 

 
244

 
3

 
247

Net postretirement benefit obligation
 

 

 

 
48

 

 
48

Balance at March 31, 2018
 
245.2

 
$
5,745

 
$
2,747

 
$
(3,191
)
 
$
84

 
$
5,385

(millions)
 
Shares
 
Ordinary
Shares and
Additional
Paid-in Capital
 
Retained
Earnings
 
Accumulated Other
Comprehensive
Loss, Net of Tax
 
Non-
controlling
Interests
 
Total
Balance at December 31, 2016
 
262.0

 
$
5,580

 
$
3,807

 
$
(3,912
)
 
$
57

 
$
5,532

Adoption of new accounting guidance
 

 

 
49

 

 

 
49

Balance at January 1, 2017
 
262.0

 
5,580

 
3,856

 
(3,912
)
 
57

 
5,581

Net income
 

 

 
291

 

 
14

 
305

Shares issued - employee stock compensation plans
 
1.9

 
(85
)
 

 

 

 
(85
)
Shares purchased
 
(1.1
)
 

 
(126
)
 

 

 
(126
)
Share-based compensation expense
 

 
75

 

 

 

 
75

Dividends to shareholders
 

 

 
(87
)
 

 

 
(87
)
Net change in fair value of financial instruments
 

 

 

 
(2
)
 

 
(2
)
Net foreign currency translation adjustments
 

 

 

 
146

 
1

 
147

Net postretirement benefit obligation
 

 

 

 
18

 

 
18

Balance at March 31, 2017
 
262.8

 
$
5,570

 
$
3,934

 
$
(3,750
)
 
$
72

 
$
5,826

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

5



Aon plc
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
Three Months Ended
(millions)
 
March 31, 2018
 
March 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
610

 
$
305

Less: Income from discontinued operations, net of income taxes
 
6

 
40

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

 
 

Loss from sales of businesses, net
 
1

 
2

Depreciation of fixed assets
 
39

 
54

Amortization and impairment of intangible assets
 
110

 
43

Share-based compensation expense
 
77

 
78

Deferred income taxes
 
26

 
(2
)
Change in assets and liabilities:
 
 

 
 

Fiduciary receivables
 
(605
)
 
337

Short-term investments — funds held on behalf of clients
 
(195
)
 
(330
)
Fiduciary liabilities
 
800

 
(7
)
Receivables, net
 
(269
)
 
38

Accounts payable and accrued liabilities
 
(439
)
 
(390
)
Restructuring reserves
 
(24
)
 
99

Current income taxes
 
30

 
(56
)
Pension, other postretirement and other postemployment liabilities
 
(53
)
 
(41
)
Other assets and liabilities
 
38

 
92

Cash provided by operating activities - continuing operations
 
140

 
182

Cash provided by operating activities - discontinued operations
 

 
58

CASH PROVIDED BY OPERATING ACTIVITIES
 
140

 
240

CASH FLOWS FROM INVESTING ACTIVITIES
 
 

 
 

Proceeds from investments
 
17

 
25

Payments for investments
 
(11
)
 
(9
)
Net sale of short-term investments — non-fiduciary
 
415

 
94

Acquisition of businesses, net of cash acquired
 
(29
)
 
(46
)
Sale of businesses, net of cash sold
 
(1
)
 
(2
)
Capital expenditures
 
(45
)
 
(34
)
Cash provided by investing activities - continuing operations
 
346

 
28

Cash used for investing activities - discontinued operations
 

 
(15
)
CASH PROVIDED BY INVESTING ACTIVITIES
 
346

 
13

CASH FLOWS FROM FINANCING ACTIVITIES
 
 

 
 

Share repurchase
 
(569
)
 
(126
)
Issuance of shares for employee benefit plans
 
(109
)
 
(85
)
Issuance of debt
 
808

 
992

Repayment of debt
 
(704
)
 
(950
)
Cash dividends to shareholders
 
(89
)
 
(87
)
Noncontrolling interests and other financing activities
 

 
(2
)
Cash used for financing activities - continuing operations
 
(663
)
 
(258
)
Cash used for financing activities - discontinued operations
 

 

CASH USED FOR FINANCING ACTIVITIES
 
(663
)
 
(258
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
 
18

 
25

NET INCREASE IN CASH AND CASH EQUIVALENTS
 
(159
)
 
20

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
 
756

 
431

CASH AND CASH EQUIVALENTS AT END OF PERIOD
 
$
597

 
$
451

Supplemental disclosures:
 
 

 
 

Interest paid
 
$
58

 
$
58

Income taxes paid, net of refunds
 
$
58

 
$
58

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

6



Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements and Notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).  The Condensed Consolidated Financial Statements include the accounts of Aon plc and all of its controlled subsidiaries (“Aon” or the “Company”).  All intercompany accounts and transactions have been eliminated.  The Condensed Consolidated Financial Statements include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for all periods presented.
Certain information and disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.  These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.  The results for the three months ended March 31, 2018 are not necessarily indicative of operating results that may be expected for the full year ending December 31, 2018.
Use of Estimates
The preparation of the accompanying Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of reserves and expenses. These estimates and assumptions are based on management’s best estimates and judgments.  Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Management believes its estimates to be reasonable given the current facts available.  Aon adjusts such estimates and assumptions when facts and circumstances dictate.  Illiquid credit markets, volatile equity markets, and foreign currency exchange rate movements increase the uncertainty inherent in such estimates and assumptions.  As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.  Changes in estimates resulting from continuing changes in the economic environment would, if applicable, be reflected in the financial statements in future periods.
2. Accounting Principles and Practices
Adoption of New Accounting Standards
Presentation of Net Periodic Pension and Postretirement Benefit Costs
In March 2017, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. Additionally, only the service cost component is eligible for capitalization, when applicable. The Company has applied the new guidance retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the Condensed Consolidated Statement of Income and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension costs and net periodic postretirement benefit cost in assets. The new guidance allows a practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The Company has not applied the practical expedient upon adoption of this guidance. The new guidance was effective for Aon in the first quarter of 2018. The adoption of this guidance had no impact on the net income of the Company. 
Upon adoption of the guidance, the presentation of the results reflect a change in Operating income offset by an equal and offsetting change in Other income (expense) for the period ended March 31, 2017 as follows:
 
 
Three Months Ended
March 31, 2017
 
 
As Reported
 
Adjustments
 
As Adjusted
Operating income (1)
 
$
343

 
$
(8
)
 
$
335

Other income (expense)
 
$
(10
)
 
$
8

 
$
(2
)
(1)
Reclassification from Operating income is recorded in Compensation and benefits.

7



Income Tax Consequences of Intercompany Transactions
In October 2016, the FASB issued new accounting guidance on the income tax consequences of intra-entity asset transfers other than inventory.  The guidance requires that the seller and buyer recognize the consolidated current and deferred income tax consequences of a transaction in the period the transaction occurs rather than deferring to a future period and recognizing those consequences when the asset has been sold to an outside party or otherwise recovered through use (i.e. depreciated, amortized, or impaired).  The Company has applied the new guidance on a modified retrospective basis with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption.  The new guidance was effective for Aon in the first quarter of 2018.  Upon the adoption of this guidance on January 1, 2018, the Company recognized an increase to Deferred tax assets of $23 million, an increase to Deferred tax liabilities of $12 million, and a decrease to Other non-current assets of $26 million on the Condensed Consolidated Statement of Financial Position through a cumulative adjustment of $15 million decrease to Retained earnings. For the three months ended March 31, 2018, the impact of adopting this standard on the Condensed Consolidated Statement of Income was insignificant.
Statement of Cash Flows
In August 2016, the FASB issued new accounting guidance on the classification of certain cash receipts and cash payments. Under the new guidance, an entity no longer has discretion to choose the classification for a number of transactions, including contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investees. The new standard was effective for the Company in the first quarter of 2018. The adoption of this guidance had no impact on the Company’s Condensed Consolidated Statements of Cash Flows.
Financial Assets and Liabilities
In January 2016, the FASB issued new accounting guidance on recognition and measurement of financial assets and financial liabilities. The amendments in the new guidance make targeted improvements, which include the requirement to measure equity investments with readily determinable fair values at fair value through net income, simplification of the impairment assessment for equity investments without readily determinable fair values, adjustments to existing and additional disclosure requirements, and additional tax considerations. The Company applied the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with the exception of the amendments related to equity securities without readily determinable fair values, including disclosure requirements, which were applied prospectively. Upon the adoption of this guidance on January 1, 2018, the Company recognized an increase to Accumulated other comprehensive loss of $1 million on the Condensed Consolidated Statement of Financial Position through a cumulative adjustment of $1 million increase to Retained earnings. For the three months ended March 31, 2018, the impact of adopting this standard on the Condensed Consolidated Statement of Income was insignificant.
Revenue Recognition
In May 2014, the FASB issued a new accounting standard on revenue from contracts with customers (the “Standard” or “ASC 606”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP (“ASC 605”).  The core principal of the Standard is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The Standard also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments, changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. Two methods of transition were permitted upon adoption: full retrospective and modified retrospective. The Company elected to apply the modified retrospective adoption approach to all contracts. Under this approach, prior periods were not restated. Rather, revenues and other disclosures for prior periods were provided in the notes to the financial statements as previously reported under ASC 605, and the cumulative effect of initially applying the guidance was recognized as an adjustment to Retained earnings.
The following summarizes the significant changes to the Company as a result of the adoption of ASC 606 on January 1, 2018.
The Company previously recognized revenue either at a point in time or over a period of time based on the transfer of value to customers or as the remuneration became determinable. Under ASC 606, the revenue related to certain brokerage services recognized over a period of time is recognized on the effective date of the associated policies when control of the policy transfers to the customer. As a result, revenue from these arrangements are typically recognized in earlier periods under ASC 606 in comparison to ASC 605, changing the timing and amount of revenue recognized for annual and interim periods. This change resulted in a significant shift in timing of interim revenue for the Reinsurance Solutions revenue line and, to a lesser extent, certain other brokerage services.


8



The Standard provides guidance on accounting for certain revenue-related costs including when to capitalize costs associated with obtaining and fulfilling a contract. The majority of these costs were previously expensed as incurred under ASC 605. Assets recognized for the costs to obtain a contract, which includes certain sales commissions, are amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates, considering anticipated renewals when applicable. For situations where the renewal period is one year or less and renewal costs are commensurate with the initial contract, the Company applied a practical expedient and recognizes the costs of obtaining a contract as an expense when incurred. Assets recognized as costs to fulfill a contract, which includes internal costs related to pre-placement broking activities, as well as other costs, are amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates, which is generally less than one year.

As a result of applying the modified retrospective method to adopt ASC 606, the following adjustments were made to the Condensed Consolidated Statement of Financial position as of January 1, 2018:
 
 
December 31,
2017
 
 
 
January 1,
2018
(millions)
 
As Reported
 
Adjustments
 
As Adjusted
ASSETS
 
 

 
 
 
 

Receivables, net
 
$
2,478

 
$
252

 
$
2,730

Other current assets
 
$
289

 
$
298

 
$
587

Deferred tax assets
 
389

 
(128
)
 
261

Other non-current assets
 
$
307

 
$
145

 
$
452

 
 
 
 
 
 
 
LIABILITIES
 
 

 
 
 
 

Accounts payable and accrued liabilities
 
$
1,961

 
$
8

 
$
1,969

Other current liabilities
 
$
870

 
$
13

 
$
883

Deferred tax liabilities
 
$
127

 
$
42

 
$
169

Other non-current liabilities
 
$
1,102

 
$
(3
)
 
$
1,099

 
 
 
 
 
 
 
EQUITY
 
 

 
 
 
 

Total equity
 
$
4,648

 
$
507

 
$
5,155

The following tables summarize the impacts of adopting ASC 606 on the Company’s Condensed Consolidated Statement of Income, Financial Position, and Cash Flows as of and for the three months ended March 31, 2018.
Condensed Consolidated Statement of Income
 
 
Three Months Ended March 31, 2018
(millions)
 
As Reported
 
Adjustments
 
Balances Without Adoption of ASC 606
Revenue
 
 

 
 
 
 

Total revenue
 
$
3,090

 
$
(413
)
 
$
2,677

Expenses
 
 

 
 
 
 

Compensation and benefits
 
$
1,616

 
$
(65
)
 
$
1,551

Other income (expense)
 
$
(15
)
 
$
1

 
$
(14
)
Income taxes
 
$
114

 
$
(82
)
 
$
32

Adoption of ASC 606 for the first quarter of 2018 was an impact of $265 million on net income from continuing operations, or $1.06 per share.

9



Condensed Consolidated Statement of Financial Position
 
 
As of March 31, 2018
(millions)
 
As Reported
 
Adjustments
 
Balances Without Adoption of ASC 606
ASSETS
 
 

 
 
 
 

Receivables, net
 
$
3,053

 
$
(644
)
 
$
2,409

Other current assets
 
$
609

 
$
(239
)
 
$
370

Deferred tax assets
 
$
296

 
$
130

 
$
426

Other non-current assets
 
$
439

 
$
(143
)
 
$
296

 
 
 
 
 
 
 
LIABILITIES
 
 

 
 
 
 

Other current liabilities
 
$
972

 
$
(52
)
 
$
920

Deferred tax liabilities
 
$
243

 
$
(68
)
 
$
175

Other non-current liabilities
 
$
1,105

 
$
3

 
$
1,108

 
 
 
 
 
 
 
EQUITY
 
 

 
 
 
 

Total equity
 
$
5,385

 
$
(779
)
 
$
4,606

Condensed Consolidated Statement of Cash Flows
 
 
Three Months Ended March 31, 2018
(millions)
 
As Reported
 
Adjustments
 
Balances Without Adoption of ASC 606
CASH FLOWS FROM OPERATING ACTIVITIES
 
 

 
 
 
 

Net income
 
$
610

 
$
(265
)
 
$
345

Deferred income taxes
 
$
26

 
$
(28
)
 
$
(2
)
Receivables, net
 
$
(269
)
 
$
400

 
$
131

Accounts payable and accrued liabilities
 
$
(439
)
 
$
8

 
$
(431
)
Current income taxes
 
$
30

 
$
(54
)
 
$
(24
)
Other assets and liabilities
 
$
38

 
$
(61
)
 
$
(23
)
The adoption of ASC 606 had no impact on total Cash Provided by Operating Activities.
Refer to Note 3 “Revenue from Contracts with Customers” to the Condensed Consolidated Financial Statements for further information.
Accounting Standards Issued But Not Yet Adopted
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the FASB issued amendments related to reclassification of certain tax effects from accumulated other comprehensive income. The amendments allow a reclassification from accumulated comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. In addition, the entity is required to provide certain disclosures regarding stranded tax effects. The amendments are effective for Aon in the first quarter of 2019 and early adoption is permitted, including adoption in any interim period. The amendments should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company is currently evaluating the impact that the amendments will have on the Condensed Consolidated Financial Statements and the period in which it plans to adopt.  
Targeted Improvements to Accounting for Hedging Activities
In August 2017, the FASB issued new accounting guidance on targeted improvements to accounting for hedging activities. The new guidance amends its hedge accounting model to enable entities to better portray their risk management activities in the financial statements. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and requires the effect

10



of a hedging instrument to be presented in the same income statement line as the hedged item. An entity will apply the new guidance on a modified retrospective basis with a cumulative effect adjustment to accumulated other comprehensive income with a corresponding adjustment to retained earnings as of the beginning of the period of adoption. Changes to income statement presentation and financial statement disclosures will be applied prospectively. The new guidance is effective for Aon in the first quarter of 2019 and early adoption is permitted. The Company is currently evaluating the impact that the standard will have on the Condensed Consolidated Financial Statements and the period in which it plans to adopt.  
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued new accounting guidance on simplifying the test for goodwill impairment. Currently the standard requires an entity to perform a two-step test to determine the amount, if any, of goodwill impairment. In Step 1, an entity compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the entity performs Step 2 and compares the implied fair value of goodwill with the carrying amount of that goodwill for that reporting unit. An impairment charge equal to the amount by which the carrying amount of goodwill for the reporting unit exceeds the implied fair value of that goodwill is recorded, limited to the amount of goodwill allocated to that reporting unit. The new guidance removes Step 2. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. An entity will apply the new guidance on a prospective basis. The new guidance is effective for Aon in the first quarter of 2020 and early adoption is permitted. The Company is currently evaluating the impact that the standard will have on the Condensed Consolidated Financial Statements and the period in which it plans to adopt.
Credit Losses
In June 2016, the FASB issued new accounting guidance on the measurement of credit losses on financial instruments. The new guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. An entity will apply the new guidance through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The guidance is effective for Aon in the first quarter of 2020 and early adoption is permitted beginning in the first quarter of 2019. Aon is currently evaluating the impact that the standard will have on its Condensed Consolidated Financial Statements, as well as the method of transition and period of adoption.
Leases
In February 2016, the FASB issued new accounting guidance on leases, which requires lessees to recognize assets and liabilities for most leases. Under the new guidance, a lessee should recognize in the Condensed Consolidated Statement of Financial Position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current U.S. GAAP standards. The new standard will be effective for the Company in the first quarter of 2019, with early application permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. The Company is currently evaluating the period of adoption.
A preliminary assessment to determine the impacts of the new accounting standard has been performed, including its impact on accounting and operational processes.   The Company expects to recognize significant right of use assets and lease liabilities on its Condensed Consolidated Statements of Financial Position, but is unable to provide quantitative impacts at this time.  Additionally, the Company expects to expand its disclosures around lease arrangements.  The Company expects to adopt the new accounting standard in the first quarter of 2019 and is currently evaluating the practical expedients that will be applied.
3. Revenue from Contracts with Customers
The Company generates revenues primarily through commissions, compensation from insurance and reinsurance companies for services provided to them, and fees from clients. Commissions and fees for brokerage services vary depending upon several factors, which may include the amount of premium, the type of insurance or reinsurance coverage provided, the particular services provided to a client, insurer, or reinsurer, and the capacity in which we act. Compensation from insurance and reinsurance companies includes fees for consulting and analytics services and fees and commissions for administrative and other services provided to or on behalf of insurers. Fees from clients for advice and consulting services are dependent on the extent and value of the services provided. Payment terms are consistent with current industry practices.

11



The Company recognizes revenue when control of the promised services are transfered to the customer in the amount that best reflects the consideration to which the Company expects to be entitled in exchange for those services. For arrangements where control is transferred over time, an input or output method is applied that represents a faithful depiction of the progress towards completion of the performance obligation. For arrangements that include variable consideration, the Company assesses whether any amounts should be constrained. For arrangements that include multiple performance obligations, the Company allocates consideration based on their relative fair values.

Costs incurred by the Company in obtaining a contract are capitalized and amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates, considering anticipated renewals when applicable. Certain contract related costs, including pre-placement brokerage costs, are capitalized as a cost to fulfill and are amortized on a systematic basis consistent with the transfer of services to which the asset relates, which is generally less than one year.

The Company has elected to apply practical expedients to not disclose the revenue related to unsatisfied performance obligations if 1) the contract has an original duration of 1 year or less, 2) the Company has recognized revenue for the amount in which it has the right to bill, and 3) the variable consideration is allocated entirely to an unsatisfied performance obligation which is recognized as a series of distinct goods or services that form a single performance obligation.

Disaggregation of Revenue
The following is a description of principal service lines from which the Company generates its revenue:
Commercial Risk Solutions includes retail brokerage, cyber solutions, global risk consulting, and captives.  Revenue primarily includes insurance commissions and fees for services rendered. Revenues will generally be recognized at a point in time upon the effective date of the underlying policy (or policies), or over the term of the arrangement to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenues are recorded net of allowances for estimated policy cancellations, which are determined based on an evaluation of historical and current cancellation data.
Reinsurance Solutions includes treaty and facultative reinsurance brokerage and capital markets.  Revenue primarily includes reinsurance commissions and fees for services rendered. Revenues will generally be recognized at a point in time upon the effective date of the underlying policy (or policies), or over the term of the arrangement to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
Retirement Solutions includes core retirement, investment consulting, and talent, rewards & performance.  Revenue consists primarily of fees paid by clients for consulting services, such as risk management strategies, health and benefits, and human capital consulting services. Revenue recognized for these arrangements are typically recognized at a point-in-time upon completion of the service or over time to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. For consulting arrangements recognized over-time, revenue will be recognized based on a measure of progress that depicts the transfer of control of the goods or services to the customer, utilizing an appropriate input or output measure. Fees paid by clients for consulting services are typically charged on an hourly, project or fixed-fee basis. Revenues from time-and-materials or cost-plus arrangements are recognized as services are performed. Reimbursements received for out-of-pocket expenses are recorded as a component of revenues.
Health Solutions includes health and benefits brokerage and healthcare exchanges.  Revenue primarily includes insurance commissions and fees for services rendered. For brokerage commissions, revenue is typically recognized at the effective date of the underlying policy (or policies), or over the term of the arrangement to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenues from health care exchange arrangements are typically recognized upon successful enrollment of participants, net of a reserve for estimated cancellations, assuming all five steps to recognize revenue have been met.
Data & Analytic Services includes Affinity, Aon InPoint, and ReView.  Revenue consists primarily of fees for services rendered and is generally recognized over the term of the arrangement to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. For Data & Analytic Services arrangements recognized over-time, revenue will be recognized based on a measure of progress that depicts the transfer of control of the goods or services to the customer, utilizing an appropriate input or output measure.

12



The following table summarizes revenue from contracts with customers by principal service line (in millions):
 
 
Three months ended March 31, 2018
Commercial Risk Solutions
 
$
1,184

Reinsurance Solutions
 
742

Retirement Solutions
 
424

Health Solutions
 
451

Data & Analytic Services
 
294

Elimination
 
(5
)
Total revenue
 
$
3,090

Consolidated Revenue by geographic area, which is attributed on the basis of where the services are performed, is as follows (in millions):
 
 
Three months ended March 31, 2018
United States
 
$
1,116

Americas other than United States
 
237

United Kingdom
 
484

Europe, Middle East, & Africa other than United Kingdom
 
979

Asia Pacific
 
274

Total revenue
 
$
3,090


Contract Costs

The Company recognizes an asset for costs incurred to fulfill a contract for costs that are specifically identified and relate to a contract or anticipated contract, generate or enhance resources used in satisfying the Company’s performance obligations, and are expected to be recovered. Assets recognized as costs to fulfill a contract, which includes internal costs related to pre-placement broking activities, as well as other costs, will be amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates. The amortization is primarily included in Compensation and benefits on the Condensed Consolidated Statements of Income.

The changes in the net carrying amount of capitalized cost to fulfill contracts with customers are as follows (in millions):
 
 
Three months ended March 31, 2018
Balance at beginning of period
 
$
298

Additions
 
370

Amortization
 
(432
)
Impairment
 

Foreign currency translation and other
 
4

Balance at end of period
 
$
240


The Company capitalizes incremental costs to obtain a contract with a customer that are expected to be recovered. Assets recognized for the costs to obtain a contract, which includes certain sales commissions, will be amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates, considering anticipated renewals when applicable. For situations where the renewal period is one year or less and renewal costs are commensurate with the initial contract, the Company has applied a practical expedient and recognized the costs of obtaining a contract as an expense when incurred. The amortization is included in Compensation and benefits on the Condensed Consolidated Statements of Income.

13




The changes in the net carrying amount of capitalized cost to obtain contracts with customers are as follows (in millions):
 
 
Three months ended March 31, 2018
Balance at beginning of period
 
$
145

Additions
 
8

Amortization
 
(10
)
Impairment
 

Foreign currency translation and other
 
1

Balance at end of period
 
$
144

4. Discontinued Operations
On February 9, 2017, the Company entered into a Purchase Agreement with Tempo Acquisition, LLC (the “Purchase Agreement”) to sell its benefits administration and business process outsourcing business (the “Divested Business”) to an entity formed and controlled by affiliates of The Blackstone Group L.P. (the “Buyer”) and certain designated purchasers that are direct or indirect subsidiaries of the Buyer.
On May 1, 2017, the Buyer purchased all of the outstanding equity interests of the Divested Business, plus certain related assets and liabilities, for a purchase price of $4.3 billion in cash paid at closing, subject to customary adjustments set forth in the Purchase Agreement, and deferred consideration of up to $500 million (the “Transaction”). Cash proceeds after customary adjustments and before taxes due were $4.2 billion.
Aon and the Buyer entered into certain transaction related agreements at the closing, including two commercial agreements, a transition services agreement, certain intellectual property license agreements, sub-leases, and other customary agreements. Aon expects to continue to be a significant client of the Divested Business and the Divested Business has agreed to use Aon for its broking and other services for a specified period of time.
The financial results of the Divested Business for the three months ended March 31, 2018 and 2017 are presented as Income from discontinued operations on the Company’s Condensed Consolidated Statements of Income. The following table presents the financial results of the Divested Business (in millions):
 
 
Three months ended March 31

 
2018
 
2017
Revenue
 
 
 
 
Total revenue
 
$

 
$
527

Expenses
 
 
 
 
Total operating expenses
 
3

 
470

Income (loss) from discontinued operations before income taxes
 
(3
)
 
57

Income tax expense (benefit)
 
(1
)
 
17

Income (loss) from discontinued operations excluding gain, net of tax
 
(2
)
 
40

Gain on sale of discontinued operations, net of tax
 
8

 

Net income from discontinued operations
 
$
6

 
$
40

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 March 31, 2018. Total operating expenses for the three months ended March 31, 2017 include $8 million of depreciation of fixed assets and $11 million of intangible asset amortization.
The Company’s Condensed Consolidated Statements of Cash Flows present the operating, investing, and financing cash flows of the Divested Business as discontinued operations.  Aon uses a centralized approach to cash management and financing of its operations. Prior to the closing of the Transaction, portions of the Divested Business’s cash were transferred to Aon daily, and Aon would fund the Divested Business as needed. Cash and cash equivalents of discontinued operations at March 31, 2017 was $18 million. Total proceeds received for the sale of the divested business and taxes paid as a result of the sale are recognized on the

14



Consolidated Statements of Cash Flows in Cash provided by investing activities - continuing operations and Cash provided by operating activities - continuing operations, respectively.
5. Cash and Cash Equivalents and Short-term Investments
Cash and cash equivalents include cash balances and all highly liquid instruments with initial maturities of three months or less.  Short-term investments consist of money market funds. The estimated fair value of cash and cash equivalents and short-term investments approximates their carrying values.
At March 31, 2018, Cash and cash equivalents and Short-term investments were $715 million compared to $1,285 million at December 31, 2017, a decrease of $570 million. Of the total balances, $102 million and $96 million was restricted as to its use at March 31, 2018 and December 31, 2017, respectively. Included within the March 31, 2018 and December 31, 2017 balances, respectively, was £42.7 million ($60.8 million at March 31, 2018 exchange rates and $57.1 million at December 31, 2017 exchange rates) of operating funds required to be held by the Company in the United Kingdom by the Financial Conduct Authority, a U.K.-based regulator, which were included in Short-term investments.
6. Other Financial Data
Condensed Consolidated Statements of Income Information
Other Income (Expense)
Other income (expense) consists of the following (in millions):
 
Three months ended March 31
 
2018
 
2017
Foreign currency remeasurement gain (loss)
$
(16
)
 
$
(10
)
Loss on disposal of business
(1
)
 
(2
)
Pension and other postretirement income
2

 
8

Equity earnings (losses)
1

 
6

Gain (loss) on financial instruments

 
(4
)
Other
(1
)
 

Total
$
(15
)
 
$
(2
)
Condensed Consolidated Statements of Financial Position Information
Allowance for Doubtful Accounts
An analysis of the allowance for doubtful accounts are as follows (in millions):
 
Three months ended March 31
 
2018
 
2017
Balance at beginning of period
$
59

 
$
56

Provision charged to Other general expenses
8

 
6

Accounts written off, net of recoveries
(3
)
 
(3
)
Foreign currency translation
1

 
2

Balance at end of period
$
65

 
$
61


15



Other Current Assets
The components of Other current assets are as follows (in millions):
As of
March 31,
2018
 
December 31,
2017
Taxes receivable
$
118

 
$
114

Prepaid expenses
142

 
126

Receivables from the Divested Business (1)
6

 
28

Cost to fulfill contracts with customers (2)
240

 

Other
103

 
21

Total
$
609

 
$
289

(1)
Refer to Note 4 “Discontinued Operations” for additional information.
(2)
Refer to Note 3 “Revenue from Contracts with Customers” for additional information.
Other Non-Current Assets
The components of Other non-current assets are as follows (in millions):
As of
March 31,
2018
 
December 31,
2017
Investments
$
58

 
$
57

Taxes receivable
83

 
84

Cost to obtain contracts with customers (1)
144

 

Other
154

 
166

Total
$
439

 
$
307

(1)
Refer to Note 3 “Revenue from Contracts with Customers” for additional information.
Other Current Liabilities
The components of Other current liabilities are as follows (in millions):
As of
March 31,
2018
 
December 31,
2017
Deferred revenue (1)
$
329

 
$
311

Taxes payable (2)
164

 
139

Other
479

 
420

Total
$
972

 
$
870

(1)
During the three months ended March 31, 2018, $100 million was recognized in the Condensed Consolidated Statement of Income.
(2)
Includes a provisional estimate of $42 million for the current portion of the Transition Tax as of March 31, 2018 and December 31, 2017.

16



Other Non-Current Liabilities
The components of Other non-current liabilities are as follows (in millions):
As of
March 31,
2018
 
December 31,
2017
Taxes payable (1)
$
538

 
$
529

Deferred revenue
56

 
49

Leases
156

 
153

Compensation and benefits
62

 
67

Other
293

 
304

Total
$
1,105

 
$
1,102

(1) Includes a provisional estimate of $222 million for the non-current portion of the Transition Tax as of March 31, 2018 and December 31, 2017.
7. Acquisitions and Dispositions of Businesses
Acquisitions
The Company completed three acquisitions during the three months ended March 31, 2018 and seventeen acquisitions during the twelve months ended December 31, 2017. The following table includes the fair values of consideration transferred, assets acquired, and liabilities assumed as a result of the Company’s acquisitions (in millions):
 
 
Three months ended March 31, 2018
Cash
 
$
26

Deferred and contingent consideration
 
3

Aggregate consideration transferred
 
$
29

 
 
 
Assets acquired:
 
 
Receivables, net
 
2

Goodwill
 
12

Intangible assets, net
 
16

Other assets
 
3

Total assets acquired
 
33

Liabilities assumed:
 
 
Current liabilities
 
4

Total liabilities assumed
 
4

Net assets acquired
 
$
29

The results of operations of these acquisitions are included in the Condensed Consolidated Financial Statements as of the respective acquisition dates.  The Company’s results of operations would not have been materially different if these acquisitions had been reported from the beginning of the period in which they were acquired.
2018 Acquisitions
On March 1, 2018, the Company completed the transaction to acquire the business and assets of the trade credit business of Niche International Business Proprietary Limited, a trade credit brokerage based in Johannesburg, South Africa.
On March 1, 2018, the Company completed the transaction to acquire Affinity Risk Partners (Brokers) Pty. Ltd., an insurance broker in Victoria, Australia.
On January 19, 2018, the Company completed the transaction to acquire substantially all of the assets of The Burchfield Group, a provider in pharmacy benefit consulting, auditing, and health plan compliance services based in the United States.

17



2017 Acquisitions
On December 29, 2017, the Company completed the transaction to acquire the Townsend Group, a U.S.-based provider of global investment management and advisory services primarily focused on real estate.
 
On December 29, 2017, the Company completed the transaction to acquire Baltolink UADBB, a regional broker based in Lithuania.
 
On December 19, 2017, the Company completed the transaction to acquire a client register of Grant Liddell Financial Advisor Services Pty Ltd in Australia.
 
On December 1, 2017, the Company completed the transaction to acquire Henderson Insurance Brokers Limited, an independent insurance broking firm based in the United Kingdom.
 
On November 30, 2017, the Company completed the transaction to acquire Unidelta AG, an insurance broker located in Switzerland.

On October 31, 2017, the Company completed the transaction to acquire Unirobe Meeùs Groep, an insurance broker based in the Netherlands.
 
On October 31, 2017, the Company completed the transaction to acquire Lenzi Paolo Broker di Assicurazioni S.r.l., an insurance broker based in Italy.
 
On October 26, 2017, the Company completed the transaction to acquire Nauman Insurance Brokers Limited, an insurance broker based in New Zealand.
 
On October 2, 2017, the Company completed the transaction to acquire Portus Consulting, an independent employee benefits firm based in the United Kingdom.
On August 31, 2017, the Company completed the transaction to acquire Mark Kelly Insurance and Financial Services PTY LTD, an Australia-based broker servicing the insurance needs of commercial clients in and around the Townsville regional center.
On August 28, 2017, the Company completed the transaction to acquire a certain portfolio in the Charlotte office of The Hays Group, Inc. d/b/a Hays Companies.
On July 27, 2017, the Company completed the transaction to acquire Grupo Innovac Sociedad de Correduría de Seguros, S.A, an insurance broker based in Valencia, Spain.
On July 3, 2017, the Company completed the transaction to acquire PWZ AG, an independent insurance broker based in Zurich, Switzerland.
On May 31, 2017, the Company completed the transaction to acquire SchneiderGolling IFFOXX Assekuranzmakler AG and SchneiderGolling Industrie Assekuranzmaklergesellschaft mbH from SchneiderGolling Gruppe, a property and casualty broker based in Southern Germany.
On May 2, 2017, the Company completed the transaction to acquire cut-e Assessment Global Holdings Limited, a high-volume online psychometric assessments provider based in Ireland.
On March 3, 2017, the Company completed the transaction to acquire Finaccord Limited, a market research, publishing and consulting company based in the United Kingdom.
On January 19, 2017, the Company completed the transaction to acquire VERO Management AG, an insurance broker and risk advisor based in Austria.
Dispositions
The Company completed no dispositions during the three months ended March 31, 2018 and three dispositions during the three months ended March 31, 2017.
Total pretax losses recognized were $1 million for the three months ended March 31, 2018 related to prior period transactions. Total pretax losses recognized were $2 million for the three months ended March 31, 2017. Gains and losses recognized as a result of a disposition are included in Other income (expense) in the Condensed Consolidated Statements of Income.

18



8. Restructuring
In 2017, Aon initiated a global restructuring plan (the “Restructuring Plan”) in connection with the sale of the Divested Business. The Restructuring Plan is intended to streamline operations across the organization and deliver greater efficiency, insight, and connectivity. The Company expects these restructuring activities and related expenses to affect continuing operations through 2019, including an estimated 4,200 to 4,800 role eliminations. The Restructuring Plan is expected to result in cumulative costs of approximately $1,025 million through the end of the plan, consisting of approximately $450 million in employee termination costs, $130 million in technology rationalization costs, $85 million in lease consolidation costs, $50 million in non-cash asset impairments, and $310 million in other costs, including certain separation costs associated with the sale of the Divested Business.
From the inception of the Restructuring Plan through March 31, 2018, the Company has eliminated 3,123 positions and incurred total expenses of $571 million for restructuring and related separation costs.  These charges are included in Compensation and benefits, Information technology, Premises, Depreciation of fixed assets, and Other general expenses in the accompanying Condensed Consolidated Statements of Income.
The following table summarizes restructuring and separation costs by type that have been incurred through March 31, 2018 and are estimated to be incurred through the end of the Restructuring Plan (in millions). Estimated costs may be revised in future periods as these assumptions are updated:
 
 
Three months ended March 31, 2018
 
Inception to Date
 
Estimated Remaining Costs
 
Estimated Total Cost (1)
Workforce reduction
 
$
33

 
$
332

 
$
118

 
$
450

Technology rationalization (2)
 
10

 
43

 
87

 
130

Lease consolidation (2)
 
3

 
11

 
74

 
85

Asset impairments
 
1

 
27

 
23

 
50

Other costs associated with restructuring and separation (2) (3)
 
27

 
158

 
152

 
310

Total restructuring and related expenses
 
$
74

 
$
571

 
$
454

 
$
1,025

(1)
Actual costs, when incurred, may vary due to changes in the assumptions built into the Restructuring 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.
(2)
Contract termination costs included within Technology rationalization were $1 million for the three months ended March 31, 2018 and $2 million since inception. Contract termination costs included within Lease consolidations were $2 million for the three months ended March 31, 2018 and $10 million since inception. Contract termination costs included within Other costs associated with restructuring and separation were $4 million for the three months ended March 31, 2018 and $7 million since inception. Total estimated contract termination costs to be incurred under the Restructuring Plan associated with Technology rationalizations, Lease consolidations, and Other costs associated with restructuring and separation, respectively, are $15 million, $80 million, and $80 million.
(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.
The changes in the Company’s liabilities for the Restructuring Plan as of March 31, 2018 are as follows (in millions):
 
 
 
Balance as of December 31, 2017
 
$
186

Expensed
 
74

Cash payments
 
(98
)
Foreign currency translation and other
 
(2
)
Balance as of March 31, 2018
 
$
160


19



9. Goodwill and Other Intangible Assets
The changes in the net carrying amount of goodwill for the three months ended March 31, 2018 are as follows (in millions):
Balance as of December 31, 2017
$
8,358

Goodwill related to current year acquisitions
12

Goodwill related to prior year acquisitions
4

Foreign currency translation and other
176

Balance as of March 31, 2018
$
8,550

Other intangible assets by asset class are as follows (in millions):
 
March 31, 2018
 
December 31, 2017
 
Gross Carrying Amount
 
Accumulated
Amortization and Impairment
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated
Amortization and Impairment
 
Net Carrying Amount
Customer related and contract based
$
2,615

 
$
1,496

 
$
1,119

 
$
2,550

 
$
1,415

 
$
1,135

Tradenames
1,052

 
589

 
463

 
1,047

 
533

 
514

Technology and other
426

 
346

 
80

 
416

 
332

 
84

 Total
$
4,093

 
$
2,431

 
$
1,662

 
$
4,013

 
$
2,280

 
$
1,733

In the second quarter of 2017 and in connection with the completion of the sale of the Divested Business, the Company recognized a non-cash impairment charge to the associated tradenames of $380 million. The fair value of the tradenames was determined using the Relief from Royalty Method. This impairment was included in Amortization and impairment of intangible assets on the Condensed Consolidated Statement of Income.
The estimated future amortization for finite lived intangible assets as of March 31, 2018 is as follows (in millions):
Remainder of 2018
$
332

2019
430

2020
252

2021
151

2022
101

Thereafter
396

 Total
$
1,662

10. Debt
Notes
On March 8, 2018, the Company’s CAD 375 million ($291 million at March 8, 2018 Exchange Rates) 4.76% Senior Note due March 2018 issued by a Canadian subsidiary of Aon Corporation matured and were repaid in full.
Revolving Credit Facilities
As of March 31, 2018, Aon plc had two primary committed credit facilities outstanding: its $900 million multi-currency U.S. credit facility expiring in February 2021 (the “2021 Facility”) and its $400 million multi-currency U.S. credit facility expiring in October 2022 (the “2022 Facility”).
Each of these facilities includes customary representations, warranties and covenants, including financial covenants that require Aon to maintain specified ratios of adjusted consolidated earnings before interest, taxes, depreciation, and amortization (“EBITDA”) to consolidated interest expense and consolidated debt to adjusted consolidated EBITDA, in each case, tested quarterly. At March 31, 2018, Aon did not have borrowings under the 2021 Facility or the 2022 Facility, and was in compliance with all covenants contained therein during the three months ended March 31, 2018.

20



Commercial Paper
Aon Corporation, a wholly-owned subsidiary of Aon plc, has established a U.S. commercial paper program and Aon plc has established a European multi-currency commercial paper program (collectively, the “CP Programs”). Commercial paper may be issued in aggregate principal amounts of up to $900 million under the U.S. program and €300 million under the European program , not to exceed the amount of committed credit, which was $1.3 billion at March 31, 2018. The U.S. commercial paper program is fully and unconditionally guaranteed by Aon plc and the European commercial paper program is fully and unconditionally guaranteed by Aon Corporation.
Commercial paper outstanding, which is included in Short-term debt and current portion of long-term debt in the Company’s Condensed Consolidated Statements of Financial Position, is as follows (in millions):
As of
 
March 31, 2018
 
December 31, 2017
Commercial paper outstanding
 
$
399

 
$

The weighted average commercial paper outstanding and its related interest rates are as follows (in millions except percentages):
 
 
Three months ended March 31
 
 
2018
 
2017
Weighted average commercial paper outstanding
 
$
125

 
$
367

Weighted average interest rate of commercial paper outstanding
 
(0.50
)%
 
0.12
%
11. Income Taxes
The effective tax rate on net income from continuing operations was 15.9% for the three months ended March 31, 2018. The effective tax rate on net income from continuing operations was 0.1% for the three months ended March 31, 2017. For the three months ended March 31, 2018, the tax rate was primarily driven by the geographical distribution of income, changes to tax laws as a result of the Tax Cuts and Jobs Act (“U.S. Tax Reform”), and certain discrete items including the impact of share-based payments and the recognition of previously unrecognized tax benefits related to the statute of limitations expiration following an audit. For the three months ended March 31, 2017, the tax rate was primarily driven by the geographical distribution of income, including the estimated impact of the Restructuring Program and accelerated amortization of tradenames, and the impact of share-based payments.
On December 22, 2017, U.S. Tax Reform was enacted which significantly changed U.S. corporate income tax laws. Also on December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant did not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of U.S. Tax Reform in the period of enactment. SAB 118 allowed registrants to record provisional amounts during a one year measurement period.

In the fourth quarter of 2017, a net provisional charge of $345 million was recorded which included the transition tax, the re-measurement of existing deferred tax balances, as well as local country income taxes, state income taxes and withholding taxes expected to be due upon repatriation of the earnings subject to the transition tax. In addition, the Company was unable to estimate the allocation between continuing and discontinued operations of the tax benefit from foreign tax credits generated in 2017 and related valuation allowance release. In the first quarter of 2018, the Company continued to analyze the impacts of U.S. Tax Reform and did not record any significant adjustments to its provisional estimates. The Company will finalize the provisional estimates by the end of 2018 after completing its reviews, analyzing guidance issued during the measurement period, and evaluating the local tax rules where the Company has pools of undistributed earnings within our complex legal entity structure.

21



12. Shareholders’ Equity
Ordinary Shares
Aon has a share repurchase program authorized by the Company’s Board of Directors (the “Repurchase Program”). The Repurchase Program was established in April 2012 with up to $5.0 billion in authorized repurchases, and was increased by $5.0 billion in authorized repurchases in each of November 2014 and February 2017 for a total of $15.0 billion in repurchase authorizations.
Under the Repurchase Program, Class A Ordinary Shares may be repurchased through the open market or in privately negotiated transactions, from time to time, based on prevailing market conditions, and will be funded from available capital.
In the three months ended March 31, 2018, the Company repurchased 3.9 million shares at an average price per share of $140.94, for a total cost of approximately $550 million and recorded an additional $2.8 million of costs associated with the repurchases to retained earnings. In the three months ended March 31, 2017, the Company repurchased 1.1 million shares at an average price per share of $114.46 for a total cost of approximately $125 million and recorded an additional $0.6 million of costs associated with the repurchases to retained earnings.
At March 31, 2018, the remaining authorized amount for share repurchase under the Repurchase Program was $4.9 billion. Under the Repurchase Program, the Company has repurchased a total of 112.1 million shares for an aggregate cost of approximately $10.1 billion.

Net Income Per Share
Weighted average ordinary shares outstanding are as follows (in millions):
 
Three months ended March 31
 
2018
 
2017
Basic weighted average ordinary shares outstanding
248.5

 
264.8

Dilutive effect of potentially issuable shares
1.7

 
2.2

Diluted weighted average ordinary shares outstanding
250.2

 
267.0

Potentially issuable shares are not included in the computation of diluted net income per share if their inclusion would be antidilutive. There were 0.1 million shares excluded from the calculation for the three months ended March 31, 2018 and no shares excluded from the calculation for the three months ended March 31, 2017.

22



Accumulated Other Comprehensive Loss
Changes in Accumulated other comprehensive loss by component, net of related tax, are as follows (in millions):
 
Change in Fair Value of Financial Instruments (1) 
 
Foreign Currency Translation Adjustments
 
Post-Retirement Benefit Obligation (2)
 
Total
Balance at December 31, 2017
$
(25
)
 
$
(879
)
 
$
(2,592
)
 
$
(3,496
)
Adoption of new accounting guidance (3)
(1
)
 

 

 
(1
)
Balance at January 1, 2018
(26
)
 
(879
)
 
(2,592
)
 
(3,497
)
Other comprehensive income before reclassifications, net
11

 
244

 
22

 
277

Amounts reclassified from accumulated other comprehensive loss:
 
 


 


 


Amounts reclassified from accumulated other comprehensive income
4

 

 
34

 
38

Tax expense
(1
)
 

 
(8
)
 
(9
)
Amounts reclassified from accumulated other comprehensive income, net
3

 

 
26

 
29

Net current period other comprehensive income
14

 
244

 
48

 
306

Balance at March 31, 2018
$
(12
)
 
$
(635
)
 
$
(2,544
)
 
$
(3,191
)
(1)
Reclassifications from this category included in Accumulated other comprehensive loss are recorded in Other income (expense), Other general expenses, and Compensation and benefits. See Note 15 “Derivatives and Hedging” for additional information regarding the Company’s derivative and hedging activity.
(2)
Reclassifications from this category included in Accumulated other comprehensive loss are recorded in Other income (expense).
(3)
Refer to Note 2 “Accounting Principles and Practices” for further information.
13. Employee Benefits
The following table provides the components of the net periodic cost (benefit) recognized in the Condensed Consolidated Statements of Income for Aon’s material U.K., U.S., and other significant international pension plans located in the Netherlands and Canada. Service cost is reported in Compensation and benefits and all other components are reported in Other income (expense) as follows (in millions):
 
Three months ended March 31
 
U.K.
 
U.S.
 
Other
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Service cost
$

 
$

 
$

 
$

 
$

 
$

Interest cost
29

 
30

 
25

 
24

 
7

 
6

Expected return on plan assets, net of administration expenses
(51
)
 
(48
)
 
(36
)
 
(35
)
 
(12
)
 
(11
)
Amortization of net actuarial loss
8

 
7

 
15

 
13

 
3

 
3

Net periodic cost (benefit)
(14
)
 
(11
)
 
4

 
2

 
(2
)
 
(2
)
Loss on pension settlement
7

 

 

 

 

 

Total net periodic cost (benefit)
$
(7
)

$
(11
)

$
4


$
2


$
(2
)

$
(2
)
In March 2017, the Company approved a plan to offer a voluntary one-time lump sum payment option to certain eligible employees of the Company’s U.K. pension plans that, if accepted, would settle the Company’s pension obligations to them. The lump sum cash payment offer will close during 2018. In total for 2018, lump sum payments from plan assets of £48 million ($68 million using March 31, 2018 exchange rates) were paid. As a result of this settlement, the Company remeasured the assets and liabilities of the U.K. pension plan during the first quarter of 2018, which in aggregate resulted in a reduction to the projected benefit obligation of £44 million ($63 million using March 31, 2018 exchange rates) as well as a non-cash settlement charge of £5 million ($7 million using average March 31, 2018 exchange rate) in the first quarter of 2018. Additional non-cash settlement charges are expected in 2018.

23



Contributions
The Company expects to make cash contributions of approximately $92 million, $63 million, and $22 million, based on exchange rates as of December 31, 2017, to its significant U.K., U.S., and other significant international pension plans, respectively, during 2018.  During the three months ended March 31, 2018, cash contributions of $23 million, $17 million, and $8 million were made to the Company’s significant U.K., U.S., and other significant international pension plans, respectively.
During the three months ended March 31, 2017, cash contributions of $16 million, $13 million, and $2 million were made to the Company’s significant U.K., U.S., and other significant international pension plans, respectively.
14. Share-Based Compensation Plans
The following table summarizes share-based compensation expense recognized in the Condensed Consolidated Statements of Income in Compensation and benefits (in millions):
 
Three months ended March 31
 
2018
 
2017
Restricted share units (“RSUs”)
$
58

 
$
55

Performance share awards (“PSAs”)
16

 
19

Employee share purchase plans
3

 
4

Total share-based compensation expense 
$
77

 
$
78

Restricted Share Units
RSUs generally vest between three and five years. The fair value of RSUs is based upon the market value of Aon plc ordinary shares at the date of grant. With certain limited exceptions, any break in continuous employment will cause the forfeiture of all non-vested awards. Compensation expense associated with RSUs is recognized on a straight-line basis over the requisite service period. Dividend equivalents are paid on certain RSUs, based on the initial grant amount.
The following table summarizes the status of the Company’s RSUs, including shares related to the Divested Business (shares in thousands, except fair value):
 
2018
 
2017
 
Shares
 
Fair Value at Date of Grant
 
Shares
 
Fair Value at Date of Grant
Non-vested at beginning of period
4,849

 
$
104

 
6,195

 
$
89

Granted
505

 
144

 
614

 
119

Vested
(806
)
 
101

 
(960
)
 
90

Forfeited
(63
)
 
105

 
(50
)
 
91

Non-vested at end of period
4,485

 
$
109

 
5,799

 
$
92

Unamortized deferred compensation expense amounted to $352 million as of March 31, 2018, with a remaining weighted-average amortization period of approximately 2.0 years.
Performance Share Awards
The vesting of PSAs is contingent upon meeting a cumulative level of earnings per share related performance over a three-year period. The actual issue of shares may range from 0-200% of the target number of PSAs granted, based on the terms of the plan and level of achievement of the related performance target. The grant date fair value of PSAs is based upon the market price of Aon plc ordinary shares at the date of grant. The performance conditions are not considered in the determination of the grant date fair value for these awards. Compensation expense is recognized over the performance period based on management’s estimate of the number of units expected to vest. Management evaluates its estimate of the actual number of shares expected to be issued at the end of the programs on a quarterly basis. The cumulative effect of the change in estimate is recognized in the period of change as an adjustment to Compensation and benefits in the Condensed Consolidated Statements of Income, if necessary. Dividend equivalents are not paid on PSAs.

24



Information as of March 31, 2018 regarding the Company’s target PSAs granted and shares that would be issued at current performance levels for PSAs granted during the three months ended March 31, 2018 and the years ended December 31, 2017 and 2016, respectively, is as follows (shares in thousands and dollars in millions, except fair value):
 
March 31,
2018
 
December 31,
2017
 
December 31,
2016
Target PSAs granted during period
561

 
548

 
750

Weighted average fair value per share at date of grant
$
135

 
$
114

 
$
100

Number of shares that would be issued based on current performance levels
561

 
942

 
745

Unamortized expense, based on current performance levels
$
75

 
$
68

 
$
19

15. Derivatives and Hedging
The Company is exposed to market risks, including changes in foreign currency exchange rates and interest rates.  To manage the risk related to these exposures, the Company enters into various derivative instruments that reduce these risks by creating offsetting exposures.  The Company does not enter into derivative transactions for trading or speculative purposes.
Foreign Exchange Risk Management
The Company is exposed to foreign exchange risk when it earns revenues, pays expenses, enters into monetary intercompany transfers or other transactions denominated in a currency that differs from its functional currency.  The Company uses foreign exchange derivatives, typically forward contracts, options and cross currency swaps, to reduce its overall exposure to the effects of currency fluctuations on cash flows.  These exposures are hedged, on average, for less than two years. These derivatives are accounted for as hedges, and changes in fair value are recorded each period in Other comprehensive income (loss) in the Condensed Consolidated Statements of Comprehensive Income.
The Company also uses foreign exchange derivatives, typically forward contracts and options, to economically hedge the currency exposure of the Company’s global liquidity profile, including monetary assets or liabilities that are denominated in a non-functional currency of an entity, typically on a rolling 30-day basis, but may be for up to one year in the future. These derivatives are not accounted for as hedges, and changes in fair value are recorded each period in Other income (expense) in the Condensed Consolidated Statements of Income.
The notional and fair values of derivative instruments are as follows (in millions):
 
Notional Amount
 
Net Amount of Derivative Assets
 Presented in the Statements of Financial Position (1)
 
Net Amount of Derivative Liabilities
 Presented in the Statements of Financial Position (2)
 
March 31,
2018
 
December 31,
2017
 
March 31,
2018
 
December 31,
2017
 
March 31,
2018
 
December 31,
2017
Foreign exchange contracts
 

 
 

 
 

 
 

 
 

 
 

Accounted for as hedges
$
758

 
$
701

 
$
45

 
$
31

 
$
1

 
$
3

Not accounted for as hedges (3)
329

 
254

 
1

 
1

 
1

 
3

   Total
$
1,087

 
$
955

 
$
46

 
$
32

 
$
2

 
$
6

(1)
Included within Other current assets ($13 million at March 31, 2018 and $9 million at December 31, 2017) or Other non-current assets ($33 million at March 31, 2018 and $23 million at December 31, 2017).
(2)
Included within Other current liabilities ($1 million at March 31, 2018 and $3 million at December 31, 2017) or Other non-current liabilities ($1 million at March 31, 2018 and $3 million at December 31, 2017).
(3)
These contracts typically are for 30 day durations and executed close to the last day of the most recent reporting month, thereby resulting in nominal fair values at the balance sheet date.

25



The amounts of derivative gains (losses) recognized in the Condensed Consolidated Financial Statements are as follows (in millions):
 
 
Three Months Ended
 
 
March 31, 2018
 
March 31, 2017
Gain (Loss) Recognized in Accumulated Other Comprehensive Loss
 
$
14

 
$
6

 
 
 
 
 
Location of future reclassification from Accumulated Other Comprehensive Loss
 
 
 
 
Compensation and benefits
 
$

 
$
8

Other general expenses
 
$
4

 
$
1

Other income (expense)
 
$
10

 
$
(3
)
The amounts of derivative gains (loss) reclassified from Accumulated other comprehensive loss into the Condensed Consolidated Statements of Income (effective portion) are as follows (in millions):
 
 
Three Months Ended
 
 
March 31, 2018
 
March 31, 2017
Compensation and benefits
 
$
1

 
$
13

Other general expenses
 
(1
)
 
(1
)
Interest expense
 
(1
)
 

Other income (expense)
 
(3
)
 
(2
)
Total
 
$
(4
)
 
$
10

The Company estimates that approximately $2 million of pretax losses currently included within Accumulated other comprehensive loss will be reclassified in to earnings in the next twelve months.
The amount of gain (loss) recognized in income on the ineffective portion of derivatives for the three months ended March 31, 2018 and 2017 was insignificant.
During the three months ended March 31, 2018, the Company recorded a gain of $9 million in Other income (expense) for foreign exchange derivatives not designated or qualifying as hedges. During the three months ended March 31, 2017, the Company recorded a gain of $1 million in Other income (expense) for foreign exchange derivatives not designated or qualifying as hedges.
Net Investments in Foreign Operations Risk Management
The Company uses non-derivative financial instruments to protect the value of its investments in a number of foreign subsidiaries. In 2016, the Company designated a portion of its Euro-denominated commercial paper issuances as a non-derivative hedge of the foreign currency exposure of a net investment in its European operations. The change in fair value of the designated portion of the Euro-denominated commercial paper due to changes in foreign currency exchange rates is recorded in Foreign currency translation adjustment, a component of Accumulated other comprehensive loss, to the extent it is effective as a hedge. The foreign currency translation adjustment of the hedged net investments that is also recorded in Accumulated other comprehensive loss. Ineffective portions of net investment hedges, if any, are reclassified from Accumulated other comprehensive loss into earnings during the period of change.
As of March 31, 2018, the Company has €220 million ($274 million at March 31, 2018 exchange rates) of outstanding Euro-denominated commercial paper designated as a hedge of the foreign currency exposure of its net investment in its European operations. As of March 31, 2018, the unrealized loss recognized in Accumulated other comprehensive loss related to the net investment non derivative hedging instrument was $3 million.
The Company did not reclassify any deferred gains or losses related to net investment hedges from Accumulated other comprehensive loss to earnings during the three months ended March 31, 2018 and 2017. In addition, the Company did not incur any ineffectiveness related to net investment hedges during the three months ended March 31, 2018 and 2017.

26



16. Fair Value Measurements and Financial Instruments
Accounting standards establish a three tier fair value hierarchy that prioritizes the inputs used in measuring fair values as follows:
Level 1 — observable inputs such as quoted prices for identical assets in active markets;
Level 2 — inputs other than quoted prices for identical assets in active markets, that are observable either directly or indirectly; and
Level 3 — unobservable inputs in which there is little or no market data which requires the use of valuation techniques and the development of assumptions.
The following methods and assumptions are used to estimate the fair values of the Company’s financial instruments:
Money market funds consist of institutional prime, treasury, and government money market funds. The Company reviews treasury and government money market funds to obtain reasonable assurance that the fund net asset value is $1 per share, and reviews the floating net asset value of institutional prime money market funds for reasonableness. 
Equity investments consist of domestic and international equity securities and equity derivatives valued using the closing stock price on a national securities exchange. Over the counter equity derivatives are valued using observable inputs such as underlying prices of the underlying security and volatility. On a sample basis the Company reviews the listing of Level 1 equity securities in the portfolio and agrees the closing stock prices to a national securities exchange, and independently verifies the observable inputs for Level 2 equity derivatives and securities.
Fixed income investments consist of certain categories of bonds and derivatives. Corporate, government, and agency bonds are valued by pricing vendors who estimate fair value using recently executed transactions and proprietary models based on observable inputs, such as interest rate spreads, yield curves, and credit risk. Asset-backed securities are valued by pricing vendors who estimate fair value using discounted cash flow models utilizing observable inputs based on trade and quote activity of securities with similar features. Fixed income derivatives are valued by pricing vendors using observable inputs such as interest rates and yield curves. The Company obtains an understanding of the models, inputs, and assumptions used in developing prices provided by its vendors through discussions with the fund managers. The Company independently verifies the observable inputs, as well as assesses assumptions used for reasonableness based on relevant market conditions and internal Company guidelines. If an assumption is deemed unreasonable, based on the Company’s guidelines, it is then reviewed by management and the fair value estimate provided by the vendor is adjusted, if deemed appropriate. These adjustments do not occur frequently and historically are not material to the fair value estimates used in the Condensed Consolidated Financial Statements.
Derivatives are carried at fair value, based upon industry standard valuation techniques that use, where possible, current market-based or independently sourced pricing inputs, such as interest rates, currency exchange rates, or implied volatilities.
Debt is carried at outstanding principal balance, less any unamortized discount or premium. Fair value is based on quoted market prices or estimates using discounted cash flow analyses based on current borrowing rates for similar types of borrowing arrangements.

27



The following tables present the categorization of the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2018 and December 31, 2017 (in millions):
 
 
 
Fair Value Measurements Using
 
Balance at March 31, 2018
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
Assets:
 

 
 

 
 

 
 

Money market funds (1)
$
1,502

 
$
1,502

 
$

 
$

Other investments:
 

 
 

 
 

 
 

Government bonds
$
1

 
$

 
$
1

 
$

Equity investments
$
3

 
$

 
$