England and Wales | 1-7933 | 98-1030901 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
122 Leadenhall Street | , | London | , | England | EC3V 4AN | ||
(Address of Principal Executive Offices) | (Zip Code) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
Class A Ordinary Shares, $0.01 nominal value | AON | New York Stock Exchange |
Exhibit Number | Description of Exhibit | ||
99.1 |
Aon plc | |||
By: | /s/ Michael Neller | ||
Michael Neller | |||
Senior Vice President and Global Controller | |||
Date: | October 25, 2019 |
Investor Relations |
• | Total revenue increased 1% to $2.4 billion, with organic revenue growth of 5% |
• | Operating margin increased from 11.2% to 15.1%, and operating margin, adjusted for certain items, increased 350 basis points to 22.0% |
• | EPS increased from $0.61 to $0.93, and EPS, adjusted for certain items, increased 11% to $1.45 |
• | For the first nine months of 2019, cash flow from operations increased 19% to $1,163 million, and free cash flow increased 25% to $996 million |
• | Repurchased 1.8 million Class A Ordinary Shares for approximately $350 million |
• | Recently announced two key actions to accelerate our Aon United growth strategy which we believe will further accelerate organic growth and support sustainable margin expansion. Delivering Aon United program expands globally to further improve sales effectiveness, strengthen segmentation strategy and increase collaboration across solution lines to create more value for clients. Aon Business Services will establish client service hubs that use technology platforms and new capabilities to deliver more consistent client service and improve operational leverage for the firm |
• | Received an Innovation Award from Business Insurance, recognizing our unique intellectual property insurance liability offering that was developed through the use of proprietary data and analytics to address an area of growing client demand |
Three Months Ended | |||||||||||||||||||||||
(millions) | Sep 30, 2019 | Sep 30, 2018 | % Change | Less: Currency Impact | Less: Fiduciary Investment Income | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth | ||||||||||||||||
Revenue | |||||||||||||||||||||||
Commercial Risk Solutions | $ | 1,057 | $ | 1,029 | 3 | % | (2 | )% | — | % | (2 | )% | 7 | % | |||||||||
Reinsurance Solutions | 291 | 279 | 4 | (1 | ) | 1 | (1 | ) | 5 | ||||||||||||||
Retirement Solutions | 484 | 501 | (3 | ) | (2 | ) | — | (4 | ) | 3 | |||||||||||||
Health Solutions | 279 | 278 | — | (3 | ) | — | 1 | 2 | |||||||||||||||
Data & Analytic Services | 271 | 263 | 3 | (2 | ) | — | 2 | 3 | |||||||||||||||
Elimination | (3 | ) | (1 | ) | N/A | N/A | N/A | N/A | N/A | ||||||||||||||
Total revenue | $ | 2,379 | $ | 2,349 | 1 | % | (2 | )% | — | % | (2 | )% | 5 | % |
Three Months Ended | |||||||||||||||
(millions) | Sep 30, 2019 | Sep 30, 2018 | $ Change | % Change | |||||||||||
Expenses | |||||||||||||||
Compensation and benefits | $ | 1,368 | $ | 1,392 | $ | (24 | ) | (2 | )% | ||||||
Information technology | 120 | 125 | (5 | ) | (4 | ) | |||||||||
Premises | 76 | 94 | (18 | ) | (19 | ) | |||||||||
Depreciation of fixed assets | 44 | 40 | 4 | 10 | |||||||||||
Amortization and impairment of intangible assets | 101 | 100 | 1 | 1 | |||||||||||
Other general expenses | 310 | 336 | (26 | ) | (8 | ) | |||||||||
Total operating expenses | $ | 2,019 | $ | 2,087 | $ | (68 | ) | (3 | )% |
Three Months Ended | |||||||||||
(millions) | Sep 30, 2019 | Sep 30, 2018 | % Change | ||||||||
Revenue | $ | 2,379 | $ | 2,349 | 1 | % | |||||
Expenses | 2,019 | 2,087 | (3 | ) | |||||||
Operating income | $ | 360 | $ | 262 | 37 | % | |||||
Operating margin | 15.1 | % | 11.2 | % | |||||||
Operating income - as adjusted | $ | 524 | $ | 434 | 21 | % | |||||
Operating margin - as adjusted | 22.0 | % | 18.5 | % |
Investor Contact: | Media Contact: | |
Investor Relations | Will Dunn | |
312-381-3310 | 212-441-1819 | |
investor.relations@aon.com | will.dunn@aon.com |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||
(millions, except per share data) | Sep 30, 2019 | Sep 30, 2018 | % Change | Sep 30, 2019 | Sep 30, 2018 | % Change | ||||||||||||||||
Revenue | ||||||||||||||||||||||
Total revenue | $ | 2,379 | $ | 2,349 | 1 | % | $ | 8,128 | $ | 8,000 | 2 | % | ||||||||||
Expenses | ||||||||||||||||||||||
Compensation and benefits | 1,368 | 1,392 | (2 | )% | 4,453 | 4,502 | (1 | )% | ||||||||||||||
Information technology | 120 | 125 | (4 | )% | 363 | 363 | — | % | ||||||||||||||
Premises | 76 | 94 | (19 | )% | 248 | 283 | (12 | )% | ||||||||||||||
Depreciation of fixed assets | 44 | 40 | 10 | % | 124 | 126 | (2 | )% | ||||||||||||||
Amortization and impairment of intangible assets | 101 | 100 | 1 | % | 295 | 492 | (40 | )% | ||||||||||||||
Other general expenses | 310 | 336 | (8 | )% | 1,000 | 1,189 | (16 | )% | ||||||||||||||
Total operating expenses | 2,019 | 2,087 | (3 | )% | 6,483 | 6,955 | (7 | )% | ||||||||||||||
Operating income | 360 | 262 | 37 | % | 1,645 | 1,045 | 57 | % | ||||||||||||||
Interest income | 1 | — | — | % | 4 | 5 | (20 | )% | ||||||||||||||
Interest expense | (78 | ) | (69 | ) | 13 | % | (227 | ) | (208 | ) | 9 | % | ||||||||||
Other income (expense) | 2 | 1 | 100 | % | 8 | (17 | ) | (147 | )% | |||||||||||||
Income from continuing operations before income taxes | 285 | 194 | 47 | % | 1,430 | 825 | 73 | % | ||||||||||||||
Income tax expense | 56 | 39 | 44 | % | 238 | 9 | 2,544 | % | ||||||||||||||
Net income from continuing operations | 229 | 155 | 48 | % | 1,192 | 816 | 46 | % | ||||||||||||||
Net income (loss) from discontinued operations | (1 | ) | (2 | ) | (50 | )% | (1 | ) | 5 | (120 | )% | |||||||||||
Net income | 228 | 153 | 49 | % | 1,191 | 821 | 45 | % | ||||||||||||||
Less: Net income attributable to noncontrolling interests | 6 | 6 | — | % | 33 | 32 | 3 | % | ||||||||||||||
Net income attributable to Aon shareholders | $ | 222 | $ | 147 | 51 | % | $ | 1,158 | $ | 789 | 47 | % | ||||||||||
Basic net income per share attributable to Aon shareholders | ||||||||||||||||||||||
Continuing operations | $ | 0.94 | $ | 0.61 | 54 | % | $ | 4.83 | $ | 3.18 | 52 | % | ||||||||||
Discontinued operations | — | (0.01 | ) | (100 | )% | — | 0.02 | (100 | )% | |||||||||||||
Net income | $ | 0.94 | $ | 0.60 | 57 | % | $ | 4.83 | $ | 3.20 | 51 | % | ||||||||||
Diluted net income per share attributable to Aon shareholders | ||||||||||||||||||||||
Continuing operations | $ | 0.93 | $ | 0.61 | 52 | % | $ | 4.79 | $ | 3.17 | 51 | % | ||||||||||
Discontinued operations | — | (0.01 | ) | (100 | )% | — | 0.02 | (100 | )% | |||||||||||||
Net income | $ | 0.93 | $ | 0.60 | 55 | % | $ | 4.79 | $ | 3.19 | 50 | % | ||||||||||
Weighted average ordinary shares outstanding - basic | 236.9 | 244.0 | (3 | )% | 239.9 | 246.2 | (3 | )% | ||||||||||||||
Weighted average ordinary shares outstanding - diluted | 239.1 | 245.6 | (3 | )% | 241.9 | 247.7 | (2 | )% |
(1) | The effective tax rate was 19.6% and 20.1% for the three months ended September 30, 2019 and 2018, respectively, and 16.6% and 1.1% for the nine months ended September 30, 2019 and 2018, respectively. |
Three Months Ended | |||||||||||||||||||||||
(millions) | Sep 30, 2019 | Sep 30, 2018 | % Change | Less: Currency Impact (1) | Less: Fiduciary Investment Income (2) | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth (3) | ||||||||||||||||
Revenue | |||||||||||||||||||||||
Commercial Risk Solutions | $ | 1,057 | $ | 1,029 | 3 | % | (2 | )% | — | % | (2 | )% | 7 | % | |||||||||
Reinsurance Solutions | 291 | 279 | 4 | (1 | ) | 1 | (1 | ) | 5 | ||||||||||||||
Retirement Solutions | 484 | 501 | (3 | ) | (2 | ) | — | (4 | ) | 3 | |||||||||||||
Health Solutions | 279 | 278 | — | (3 | ) | — | 1 | 2 | |||||||||||||||
Data & Analytic Services | 271 | 263 | 3 | (2 | ) | — | 2 | 3 | |||||||||||||||
Elimination | (3 | ) | (1 | ) | N/A | N/A | N/A | N/A | N/A | ||||||||||||||
Total revenue | $ | 2,379 | $ | 2,349 | 1 | % | (2 | )% | — | % | (2 | )% | 5 | % |
Nine Months Ended | |||||||||||||||||||||||
(millions) | Sep 30, 2019 | Sep 30, 2018 | % Change | Less: Currency Impact (1) | Less: Fiduciary Investment Income (2) | Less: Acquisitions, Divestitures & Other | Organic Revenue Growth (3) | ||||||||||||||||
Revenue | |||||||||||||||||||||||
Commercial Risk Solutions | $ | 3,342 | $ | 3,379 | (1 | )% | (3 | )% | — | % | (4 | )% | 6 | % | |||||||||
Reinsurance Solutions | 1,499 | 1,401 | 7 | (2 | ) | 1 | (1 | ) | 9 | ||||||||||||||
Retirement Solutions | 1,323 | 1,356 | (2 | ) | (3 | ) | — | (1 | ) | 2 | |||||||||||||
Health Solutions | 1,082 | 1,038 | 4 | (4 | ) | — | 3 | 5 | |||||||||||||||
Data & Analytic Services | 893 | 834 | 7 | (3 | ) | — | 6 | 4 | |||||||||||||||
Elimination | (11 | ) | (8 | ) | N/A | N/A | N/A | N/A | N/A | ||||||||||||||
Total revenue | $ | 8,128 | $ | 8,000 | 2 | % | (3 | )% | — | % | (1 | )% | 6 | % |
(1) | Currency impact is determined by translating last year’s revenue at this year’s foreign exchange rates. |
(2) | Fiduciary investment income for the three months ended September 30, 2019 and 2018 was $21 million and $15 million, respectively. Fiduciary investment income for the nine months ended September 30, 2019 and 2018 was $58 million and $37 million, respectively. |
(3) | Organic revenue growth includes the impact of intercompany activity and excludes the impact of changes in foreign exchange rates, fiduciary investment income, acquisitions, divestitures, transfers between revenue lines, and gains or losses on derivatives accounted for as hedges. |
Nine Months Ended | |||||||||||
(millions) | Sep 30, 2019 | Sep 30, 2018 | % Change | ||||||||
Cash Provided by Operating Activities | $ | 1,163 | $ | 975 | 19 | % | |||||
Capital Expenditures Used for Operations | (167 | ) | (179 | ) | (7 | ) | |||||
Free Cash Flow Provided by Operations (1) | $ | 996 | $ | 796 | 25 | % |
(1) | Free cash flow is defined as cash flow from operations less capital expenditures. This non-GAAP measure does not imply or represent a precise calculation of residual cash flow available for discretionary expenditures. |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||
(millions, except percentages) | Sep 30, 2019 | Sep 30, 2018 | % Change | Sep 30, 2019 | Sep 30, 2018 | % Change | ||||||||||||||||
Revenue from continuing operations | $ | 2,379 | $ | 2,349 | 1 | % | $ | 8,128 | $ | 8,000 | 2 | % | ||||||||||
Operating income from continuing operations | $ | 360 | $ | 262 | 37 | % | $ | 1,645 | $ | 1,045 | 57 | % | ||||||||||
Amortization and impairment of intangible assets (2) | 101 | 100 | 295 | 492 | ||||||||||||||||||
Restructuring | 63 | 97 | 281 | 366 | ||||||||||||||||||
Legacy Litigation | — | (25 | ) | — | 78 | |||||||||||||||||
Operating income from continuing operations - as adjusted | $ | 524 | $ | 434 | 21 | % | $ | 2,221 | $ | 1,981 | 12 | % | ||||||||||
Operating margin from continuing operations | 15.1 | % | 11.2 | % | 20.2 | % | 13.1 | % | ||||||||||||||
Operating margin from continuing operations - as adjusted | 22.0 | % | 18.5 | % | 27.3 | % | 24.8 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||
(millions, except percentages) | Sep 30, 2019 | Sep 30, 2018 | % Change | Sep 30, 2019 | Sep 30, 2018 | % Change | ||||||||||||||||
Operating income from continuing operations - as adjusted | $ | 524 | $ | 434 | 21 | % | $ | 2,221 | $ | 1,981 | 12 | % | ||||||||||
Interest income | 1 | — | 100 | % | 4 | 5 | (20 | )% | ||||||||||||||
Interest expense | (78 | ) | (69 | ) | 13 | % | (227 | ) | (208 | ) | 9 | % | ||||||||||
Other income (expense): | ||||||||||||||||||||||
Other income (expense) - pensions - as adjusted (3) | 3 | 9 | (67 | )% | 12 | 27 | (56 | )% | ||||||||||||||
Other income (expense) - other | (1 | ) | 1 | (200 | )% | (4 | ) | (12 | ) | (67 | )% | |||||||||||
Total Other income (expense) - as adjusted (3) | 2 | 10 | (80 | )% | 8 | 15 | (47 | )% | ||||||||||||||
Income before income taxes from continuing operations - as adjusted | 449 | 375 | 20 | % | 2,006 | 1,793 | 12 | % | ||||||||||||||
Income tax expense (4) | 96 | 48 | 100 | % | 365 | 273 | 34 | % | ||||||||||||||
Net income from continuing operations - as adjusted | 353 | 327 | 8 | % | 1,641 | 1,520 | 8 | % | ||||||||||||||
Less: Net income attributable to noncontrolling interests | 6 | 6 | — | % | 33 | 32 | 3 | % | ||||||||||||||
Net income attributable to Aon shareholders from continuing operations - as adjusted | 347 | 321 | 8 | % | 1,608 | 1,488 | 8 | % | ||||||||||||||
Net income (loss) from discontinued operations - as adjusted (5) | (1 | ) | (2 | ) | (50 | )% | (1 | ) | (4 | ) | (75 | )% | ||||||||||
Net income attributable to Aon shareholders - as adjusted | $ | 346 | $ | 319 | 8 | % | $ | 1,607 | $ | 1,484 | 8 | % | ||||||||||
Diluted net income (loss) per share attributable to Aon shareholders | ||||||||||||||||||||||
Continuing operations - as adjusted | $ | 1.45 | $ | 1.31 | 11 | % | $ | 6.64 | $ | 6.01 | 10 | % | ||||||||||
Discontinued operations - as adjusted | — | (0.01 | ) | (100 | )% | — | (0.02 | ) | (100 | )% | ||||||||||||
Net income attributable to Aon shareholders - as adjusted | $ | 1.45 | $ | 1.30 | 12 | % | $ | 6.64 | $ | 5.99 | 11 | % | ||||||||||
Weighted average ordinary shares outstanding - diluted | 239.1 | 245.6 | (3 | )% | 241.9 | 247.7 | (2 | )% | ||||||||||||||
Effective Tax Rates (4) | ||||||||||||||||||||||
Continuing Operations - U.S. GAAP | 19.6 | % | 20.1 | % | 16.6 | % | 1.1 | % | ||||||||||||||
Continuing Operations - Non-GAAP | 21.4 | % | 12.8 | % | 18.2 | % | 15.2 | % | ||||||||||||||
Discontinued Operations - U.S. GAAP | 26.0 | % | 21.3 | % | 50.4 | % | 8.8 | % | ||||||||||||||
Discontinued Operations - Non-GAAP | 26.0 | % | 26.7 | % | 50.4 | % | 36.5 | % |
(1) | Certain noteworthy items impacting operating income in 2019 and 2018 are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures. |
(2) | Included in the nine months ended September 30, 2018 was a $176 million non-cash impairment charge taken on certain assets and liabilities held for sale. |
(3) | Adjusted Other income (expense) excludes Pension settlement charges of $9 million and $32 million for three and nine months ended September 30, 2018, respectively. |
(4) | Adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with estimated restructuring plan expenses, legacy litigation, accelerated tradename amortization, impairment charges and non-cash pension settlement charges, which are adjusted at the related jurisdictional rate. In addition, tax expense excludes the tax impacts of the sale of the disposal group and enactment date impacts of U.S. Tax Reform. |
(5) | Adjusted income from discontinued operations, net of tax, excludes the gain on sale of discontinued operations of $9 million for the nine months ended September 30, 2018. The effective tax rate was further adjusted for the applicable tax impact associated with the gain on sale, as applicable. |
Pro Forma Periods | Reported Periods | |||||||||||||||||||||||||||||||||||||||
Three Months Ended (5) | Full Year 2017 (5) | Three Months Ended (6) | Full Year 2018 (6) | Three Months Ended (7) | ||||||||||||||||||||||||||||||||||||
(millions, except per share data) | Mar 31, 2017 | Jun 30, 2017 | Sep 30, 2017 | Dec 31, 2017 | Mar 31, 2018 | Jun 30, 2018 | Sep 30, 2018 | Dec 31, 2018 | Mar 31, 2019 | Jun 30, 2019 | Sep 30, 2019 | |||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||||||||
Commercial Risk Solutions | $ | 989 | $ | 1,041 | $ | 915 | $ | 1,218 | $ | 4,163 | $ | 1,184 | $ | 1,166 | $ | 1,029 | $ | 1,273 | $ | 4,652 | $ | 1,118 | $ | 1,167 | $ | 1,057 | ||||||||||||||
Reinsurance Solutions | 671 | 345 | 257 | 153 | 1,426 | 742 | 380 | 279 | 162 | 1,563 | 788 | 420 | 291 | |||||||||||||||||||||||||||
Retirement Solutions | 385 | 388 | 492 | 489 | 1,754 | 424 | 431 | 501 | 509 | 1,865 | 420 | 419 | 484 | |||||||||||||||||||||||||||
Health Solutions | 428 | 281 | 277 | 526 | 1,512 | 451 | 309 | 278 | 558 | 1,596 | 486 | 317 | 279 | |||||||||||||||||||||||||||
Data & Analytic Services | 273 | 281 | 287 | 299 | 1,140 | 294 | 277 | 263 | 271 | 1,105 | 336 | 286 | 271 | |||||||||||||||||||||||||||
Elimination | — | (4 | ) | (5 | ) | (1 | ) | (10 | ) | (5 | ) | (2 | ) | (1 | ) | (3 | ) | (11 | ) | (5 | ) | (3 | ) | (3 | ) | |||||||||||||||
Total revenue | $ | 2,746 | $ | 2,332 | $ | 2,223 | $ | 2,684 | $ | 9,985 | $ | 3,090 | $ | 2,561 | $ | 2,349 | $ | 2,770 | $10,770 | $ | 3,143 | $ | 2,606 | $ | 2,379 | |||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||
Compensation and benefits | 1,548 | 1,471 | 1,420 | 1,568 | 6,007 | 1,616 | 1,494 | 1,392 | 1,601 | 6,103 | 1,584 | 1,501 | 1,368 | |||||||||||||||||||||||||||
Information technology | 88 | 98 | 109 | 124 | 419 | 115 | 123 | 125 | 121 | 484 | 117 | 126 | 120 | |||||||||||||||||||||||||||
Premises | 84 | 86 | 89 | 89 | 348 | 93 | 96 | 94 | 87 | 370 | 87 | 85 | 76 | |||||||||||||||||||||||||||
Depreciation of fixed assets | 54 | 54 | 40 | 39 | 187 | 39 | 47 | 40 | 50 | 176 | 40 | 40 | 44 | |||||||||||||||||||||||||||
Amortization of intangible assets | 43 | 460 | 101 | 100 | 704 | 110 | 282 | 100 | 101 | 593 | 97 | 97 | 101 | |||||||||||||||||||||||||||
Other general expenses | 307 | 330 | 307 | 328 | 1,272 | 318 | 535 | 336 | 311 | 1,500 | 346 | 344 | 310 | |||||||||||||||||||||||||||
Total operating expenses | 2,124 | 2,499 | 2,066 | 2,248 | 8,937 | 2,291 | 2,577 | 2,087 | 2,271 | 9,226 | 2,271 | 2,193 | 2,019 | |||||||||||||||||||||||||||
Operating income | 622 | (167 | ) | 157 | 436 | 1,048 | 799 | (16 | ) | 262 | 499 | 1,544 | 872 | 413 | 360 | |||||||||||||||||||||||||
Amortization of intangible assets | 43 | 460 | 101 | 100 | 704 | 110 | 282 | 100 | 101 | 593 | 97 | 97 | 101 | |||||||||||||||||||||||||||
Restructuring | 144 | 155 | 102 | 96 | 497 | 74 | 195 | 97 | 119 | 485 | 91 | 127 | 63 | |||||||||||||||||||||||||||
Legacy Litigation | — | — | — | — | — | — | 103 | (25 | ) | (3 | ) | 75 | — | — | — | |||||||||||||||||||||||||
Regulatory and compliance matters | — | 34 | 8 | (14 | ) | 28 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Operating income - as adjusted | 809 | 482 | 368 | 618 | 2,277 | 983 | 564 | 434 | 716 | 2,697 | 1,060 | 637 | 524 | |||||||||||||||||||||||||||
Operating margin from continuing operations - as adjusted | 29.5 | % | 20.7 | % | 16.6 | % | 23.0 | % | 22.8 | % | 31.8 | % | 22.0 | % | 18.5 | % | 25.8 | % | 25.0 | % | 33.7 | % | 24.4 | % | 22.0 | % | ||||||||||||||
Interest income | 2 | 8 | 10 | 7 | 27 | 4 | 1 | — | — | 5 | 2 | 1 | 1 | |||||||||||||||||||||||||||
Interest expense | (70 | ) | (71 | ) | (70 | ) | (71 | ) | (282 | ) | (70 | ) | (69 | ) | (69 | ) | (70 | ) | (278 | ) | (72 | ) | (77 | ) | (78 | ) | ||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||||||||||
Other income (expense) - pensions - as adjusted (3) | 8 | 9 | 9 | 16 | 42 | 9 | 9 | 9 | 11 | 38 | 4 | 5 | 3 | |||||||||||||||||||||||||||
Other income (expense) - other - as adjusted (4) | (10 | ) | (5 | ) | (5 | ) | (19 | ) | (39 | ) | (17 | ) | 4 | 1 | (14 | ) | (26 | ) | (4 | ) | 1 | (1 | ) | |||||||||||||||||
Total Other income (expense) - as adjusted (3)(4) | (2 | ) | 4 | 4 | (3 | ) | 3 | (8 | ) | 13 | 10 | (3 | ) | 12 | — | 6 | 2 | |||||||||||||||||||||||
Income before income taxes from continuing operations - as adjusted | 739 | 423 | 312 | 551 | 2,025 | 909 | 509 | 375 | 643 | 2,436 | 990 | 567 | 449 | |||||||||||||||||||||||||||
Income taxes | 98 | 68 | 54 | 81 | 301 | 150 | 75 | 48 | 106 | 379 | 167 | 102 | 96 | |||||||||||||||||||||||||||
Income from continuing operations - as adjusted | 641 | 355 | 258 | 470 | 1,724 | 759 | 434 | 327 | 537 | 2,057 | 823 | 465 | 353 | |||||||||||||||||||||||||||
Less: Net income attributable to noncontrolling interests | 14 | 9 | 7 | 7 | 37 | 16 | 10 | 6 | 8 | 40 | 17 | 10 | 6 | |||||||||||||||||||||||||||
Net income attributable to Aon shareholders from continuing operations - as adjusted | $ | 627 | $ | 346 | $ | 251 | $ | 463 | $ | 1,687 | $ | 743 | $ | 424 | $ | 321 | $ | 529 | $ | 2,017 | $ | 806 | $ | 455 | $ | 346 | ||||||||||||||
Diluted earnings per share from continuing operations - as adjusted | $ | 2.35 | $ | 1.31 | $ | 0.98 | $ | 1.82 | $ | 6.47 | $ | 2.97 | $ | 1.71 | $ | 1.31 | $ | 2.16 | $ | 8.16 | $ | 3.31 | $ | 1.87 | $ | 1.45 | ||||||||||||||
Weighted average ordinary shares outstanding - diluted | 267.0 | 264.3 | 257.3 | 254.5 | 260.7 | 250.2 | 247.4 | 245.6 | 245.0 | 247.0 | 243.7 | 242.8 | 239.1 |
(1) | Certain noteworthy items impacting operating income in 2017, 2018, and 2019, are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures. |
(2) | The 2017 historical periods presented above have been adjusted retrospectively to reflect Aon’s adoption of the new revenue recognition standard in the first quarter of 2018. For a complete reconciliation of prior period reported balances to the pro forma adjusted balances above, please refer to our press release issued on February 2, 2018. |
(3) | Adjusted Other income (expense) excludes pension settlement charges taken within each respective period. Pension settlement charges were $128 million for the three and twelve months ended December 31, 2017. Pension settlement charges were $7 million, $16 million, $9 million, and $5 million, respectively, for the three months ended March 31, 2018, June 30, 2018, September 30, 2018, and December 31, 2018, and $37 million for the twelve months ended December 31, 2018. |
(4) | For illustrative purposes, the impact of the total foreign currency related to the new revenue accounting guidance is excluded from the Pro Forma financial statements. The impact on Other income (expense) of foreign currency due to this new guidance was $(2) million, $(4) million, $(6) million, and $1 million, respectively, for the three months ended March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017, and $(11) million for the twelve months ended December 31, 2017. |
(5) | The non-GAAP effective tax rates reported were 11.1%, 15.6%, 17.5%, and 15.5%, respectively, for the three months ended March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017, and 14.9% for the twelve months ended December 31, 2017. Adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with estimated restructuring expenses, accelerated tradename amortization, impairment charges, regulatory and compliance provisions, and non-cash pension settlements, which are adjusted at the related jurisdictional rate. In addition, tax expense excludes the provisional estimates of the impact of U.S. Tax Reform. The non-GAAP effective tax rates for continuing operations, adjusted for the change in accounting guidance were 13.3%, 16.1%, 17.3%, and 14.7% for the three months ended March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017, and 14.9% for the twelve months ended December 31, 2017. |
(6) | The non-GAAP effective tax rates reported were 16.5%, 14.7%, 12.8%, and 16.5% respectively, for the three months ended March 31, 2018, June 30, 2018, September 30, 2018, and December 31, 2018 and 15.6% for the twelve months ended December 31, 2018. Adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with estimated restructuring expenses, legacy litigation, accelerated tradename amortization, impairment charges, and non-cash pension settlement charges, which are adjusted at the related jurisdictional rate. In addition, tax expense excludes the tax impacts of the sale of certain assets and liabilities previously classified as held for sale, as well as enactment date impacts of US Tax Reform. |
(7) | The non-GAAP effective tax rates reported were 16.9%, 18.0%, and 21.4%, respectively, for the three months ended March 31, 2019, June 30, 2019, and September 30, 2019, and 18.2% for the nine months ended September 30, 2019. Adjusted items are generally taxed at the estimated annual effective tax rate, except for the applicable tax impact associated with estimated restructuring expenses and accelerated tradename amortization, which are adjusted at the related jurisdictional rate. In addition, the tax expense excludes the tax impacts of payment of certain legacy litigation and enactment date impacts of the Tax Cuts and Jobs Act of 2017. |
As of | ||||||||
(millions) | September 30, 2019 | December 31, 2018 | ||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 602 | $ | 656 | ||||
Short-term investments | 177 | 172 | ||||||
Receivables, net | 2,866 | 2,760 | ||||||
Fiduciary assets (1) | 11,041 | 10,166 | ||||||
Other current assets | 631 | 618 | ||||||
Total current assets | 15,317 | 14,372 | ||||||
Goodwill | 8,071 | 8,171 | ||||||
Intangible assets, net | 874 | 1,149 | ||||||
Fixed assets, net | 606 | 588 | ||||||
Operating lease right-of-use assets | 913 | — | ||||||
Deferred tax assets | 611 | 561 | ||||||
Prepaid pension | 1,213 | 1,133 | ||||||
Other non-current assets | 562 | 448 | ||||||
Total assets | $ | 28,167 | $ | 26,422 | ||||
Liabilities and equity | ||||||||
Liabilities | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 1,499 | $ | 1,943 | ||||
Short-term debt and current portion of long-term debt | 1,148 | 251 | ||||||
Fiduciary liabilities | 11,041 | 10,166 | ||||||
Other current liabilities | 1,163 | 936 | ||||||
Total current liabilities | 14,851 | 13,296 | ||||||
Long-term debt | 6,120 | 5,993 | ||||||
Non-current operating lease liabilities | 922 | — | ||||||
Deferred tax liabilities | 209 | 181 | ||||||
Pension, other postretirement, and postemployment liabilities | 1,551 | 1,636 | ||||||
Other non-current liabilities | 953 | 1,097 | ||||||
Total liabilities | 24,606 | 22,203 | ||||||
Equity | ||||||||
Ordinary shares - $0.01 nominal value | 2 | 2 | ||||||
Additional paid-in capital | 6,084 | 5,965 | ||||||
Retained earnings | 1,436 | 2,093 | ||||||
Accumulated other comprehensive loss | (4,030 | ) | (3,909 | ) | ||||
Total Aon shareholders' equity | 3,492 | 4,151 | ||||||
Noncontrolling interests | 69 | 68 | ||||||
Total equity | 3,561 | 4,219 | ||||||
Total liabilities and equity | $ | 28,167 | $ | 26,422 |
(1) | Includes cash and short-term investments of $5,058 million and $3,866 million for the periods ended September 30, 2019 and December 31, 2018, respectively. |
Nine Months Ended | ||||||||
(millions) | September 30, 2019 | September 30, 2018 | ||||||
Cash flows from operating activities | ||||||||
Net income | $ | 1,191 | $ | 821 | ||||
Less: Net income (loss) from discontinued operations | (1 | ) | 5 | |||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
(Gain) loss from sales of businesses, net | (8 | ) | 4 | |||||
Depreciation of fixed assets | 124 | 126 | ||||||
Amortization and impairment of intangible assets | 295 | 492 | ||||||
Share-based compensation expense | 252 | 214 | ||||||
Deferred income taxes | (44 | ) | (128 | ) | ||||
Change in assets and liabilities: | ||||||||
Fiduciary receivables | 174 | 766 | ||||||
Short-term investments — funds held on behalf of clients | (1,285 | ) | (731 | ) | ||||
Fiduciary liabilities | 1,111 | (35 | ) | |||||
Receivables, net | (167 | ) | (11 | ) | ||||
Accounts payable and accrued liabilities | (385 | ) | (331 | ) | ||||
Restructuring reserves | (62 | ) | 14 | |||||
Current income taxes | 3 | (137 | ) | |||||
Pension, other postretirement and postemployment liabilities | (127 | ) | (223 | ) | ||||
Other assets and liabilities | 90 | 139 | ||||||
Cash provided by operating activities | 1,163 | 975 | ||||||
Cash flows from investing activities | ||||||||
Proceeds from investments | 33 | 30 | ||||||
Payments for investments | (94 | ) | (65 | ) | ||||
Net sales (purchases) of short-term investments — non-fiduciary | (7 | ) | 356 | |||||
Acquisition of businesses, net of cash acquired | (39 | ) | (50 | ) | ||||
Sale of businesses, net of cash sold | 43 | (8 | ) | |||||
Capital expenditures | (167 | ) | (179 | ) | ||||
Cash provided by (used for) investing activities | (231 | ) | 84 | |||||
Cash flows from financing activities | ||||||||
Share repurchase | (1,507 | ) | (1,272 | ) | ||||
Issuance of shares for employee benefit plans | (133 | ) | (139 | ) | ||||
Issuance of debt | 4,918 | 3,960 | ||||||
Repayment of debt | (3,858 | ) | (3,498 | ) | ||||
Cash dividends to shareholders | (307 | ) | (285 | ) | ||||
Noncontrolling interests and other financing activities | (81 | ) | (21 | ) | ||||
Cash used for financing activities | (968 | ) | (1,255 | ) | ||||
Effect of exchange rates on cash and cash equivalents | (18 | ) | (76 | ) | ||||
Net decrease in cash and cash equivalents | (54 | ) | (272 | ) | ||||
Cash and cash equivalents at beginning of period | 656 | 756 | ||||||
Cash and cash equivalents at end of period | $ | 602 | $ | 484 |
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | Inception to Date | Estimated Remaining Costs | Estimated Total Cost (2) | ||||||||||||||||
Workforce reduction | $ | 9 | $ | 111 | $ | 525 | $ | 25 | $ | 550 | ||||||||||
Technology rationalization | 14 | 29 | 109 | 16 | 125 | |||||||||||||||
Lease consolidation | 3 | 17 | 53 | 27 | 80 | |||||||||||||||
Asset impairments | 5 | 7 | 46 | 4 | 50 | |||||||||||||||
Other costs associated with restructuring and separation (3) | 32 | 117 | 530 | 15 | 545 | |||||||||||||||
Total restructuring and related expenses | $ | 63 | $ | 281 | 1,263 | $ | 87 | $ | 1,350 |
(1) | In the Condensed Consolidated Statements of Income, workforce reductions are included in “Compensation and benefits,” IT rationalization is included in “Information technology,” lease consolidations are included in “Premises,” asset impairments are included in “Depreciation of fixed assets,” and other costs associated with restructuring are included in “Other general expenses” depending on the nature of the expense. |
(2) | Actual costs, when incurred, may vary due to changes in the assumptions built into this plan. Significant assumptions that may change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in the assumptions underlying sublease loss calculations due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives. Estimated allocations between expense categories may be revised in future periods as these assumptions are updated. Estimated Total Cost includes $100 million of non-cash charges. |
(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. |