LONDON, May 4, 2018 /PRNewswire/ --
First Quarter Key Metrics as Reported under U.S.
GAAP(1)
- Total revenue increased 30% to $3.1
billion, including an increase of $365 million, or 17%, related to FASB's new
revenue recognition standard
- Operating margin increased 1,180 basis points to 25.9%,
including 860 basis points related to FASB's new revenue
recognition standard
- EPS increased 150% to $2.35,
including $0.90, or 96%, related to
FASB's new revenue recognition standard
First Quarter Key Metrics as Comparable to Pro Forma
Financials and Highlights(1)
- Total revenue increased 13% to $3.1
billion, including 3% organic revenue growth
- Operating margin increased to 25.9%, and operating margin,
adjusted for certain items, increased 230 basis points to
31.8%
- EPS increased to $2.35, and EPS,
adjusted for certain items, increased 26% to $2.97
- For the first three months of 2018, cash flow from operations
decreased to $140 million, and
adjusted free cash flow increased 16% to $208 million, when excluding certain near-term
impacts related to the divestiture of the outsourcing
businesses
- Repurchased 3.9 million Class A Ordinary Shares for
approximately $550 million
- Subsequent to the close of the first quarter, Aon announced an
11% increase to its quarterly cash dividend
- Aon Securities, as part of Reinsurance Solutions, launched an
unprecedented $1.4 billion
catastrophe bond on behalf of the World Bank, a transaction that
brings emergency funding and disaster support to certain Latin
American countries if and when an earthquake occurs
Aon plc (NYSE: AON) today reported results for the three months
ended March 31, 2018.
Net income from continuing operations attributable to
Aon shareholders on a reported basis was $588 million, or $2.35 per share, compared to $251 million, or $0.94 per share, in the prior year period. This
includes $239 million, or
$0.90 per share, of favorable impact
from adoption of the new revenue recognition standard. Net
income per share from continuing operations on a comparable
basis, adjusted for certain items and the impact of adoption of
the new revenue recognition standard, increased 26% to $2.97, compared to $2.35 in the prior year period. Certain items
that impacted first quarter results and comparisons with the prior
year period are detailed in the "Reconciliation of Non-GAAP
Measures Adjusted for Changes in Accounting Guidance - Operating
Income from Continuing Operations and Diluted Earnings Per Share"
on page 11 of this press release.
"Our first quarter results reflect a strong start to the year
with positive performance across each of our key metrics,
highlighted by strong organic revenue growth in Reinsurance and
Commercial Risk Solutions, substantial operational improvement, 26%
growth in earnings per share and double-digit adjusted free cash
flow growth," said Greg Case,
President and Chief Executive Officer. "An unmatched level of
investment in client-serving capabilities, combined with improved
operational performance through our Aon United operating model and
effective capital management, we believe place us on track to
exceed $7.97 of earnings per share in
2018 and unlock significant shareholder value through double-digit
free cash flow growth over the long-term."
FIRST QUARTER 2018 FINANCIAL SUMMARY
The first quarter
2018 financial results discussed herein represent performance from
continuing operations unless otherwise noted. Adoption of the
FASB's new revenue recognition standard on January 1, 2018 is not reflected in reported 2017
financials. A comparable year-over-year view of reported 2018
results to unaudited pro forma 2017 results incorporating the
impact of adoption of the new revenue recognition standard is
provided in detail on pages 11-15 of this press release.
Total revenue in the first quarter increased 30%
to $3.1 billion on a reported basis
compared to the prior year period, including an increase of
$365 million, or 17%, related to
adoption of the new revenue recognition standard. Excluding this
impact, comparable revenue increased $344
million, or 13%, compared to the prior year period driven by
a 5% increase related to acquisitions, net of divestitures, a 5%
favorable impact from foreign currency translation, and 3% organic
revenue growth.
Total operating expenses in the first quarter increased
12% to $2.3 billion on a reported
basis compared to the prior year period, including an increase of
$78 million, or 4%, related to
adoption of the new revenue recognition standard. Excluding this
impact, comparable expenses increased $167
million, or 8%, compared to the prior year period due
primarily to a $99 million
unfavorable impact from foreign currency translation, a
$66 million increase in operating
expenses related to acquisitions, net of divestitures, $54 million of accelerated amortization related
to tradenames, a $12 million increase
in expense related to certain hedging programs, and an increase in
expense associated with 3% organic revenue growth, partially offset
by a $70 million decrease in
restructuring charges and $52 million
of incremental savings related to restructuring and other
operational improvement initiatives.
Restructuring expenses were $74
million in the first quarter, primarily driven by workforce
reductions and other general initiatives. As previously announced,
the Company expects to invest $1,175
million in total cash over a three-year period and incur
$50 million of non-cash charges in
driving one operating model across the firm. This includes an
estimated investment of $975 million
of cash restructuring charges and $200
million of capital expenditures. To date, the Company has
incurred $571 million, or 56%, of the
total estimated restructuring charges. An analysis of restructuring
and related costs by type is detailed on page 18 of this press
release.
Restructuring savings in the first quarter related to
restructuring and other operational improvement initiatives are
estimated at $63 million before any
reinvestment. Before any potential reinvestment of savings,
restructuring and other operational improvement initiatives are
expected to deliver run-rate savings of $450
million annually in 2019. To date, the Company has
achieved $228 million, or 51%, of the
total estimated annualized savings.
Foreign currency exchange rates in the first quarter had
a $33 million, or $0.11 per share, favorable impact on reported net
income if the Company were to translate prior year quarter results
at current quarter foreign exchange rates. On a comparable basis,
net income adjusted for certain items and the impact of adoption of
the new revenue recognition standard includes a $57 million, or $0.19 per share, favorable impact from foreign
currency translation. The Company also incurred $10 million, or $0.03 per share, of net losses due to the
unfavorable impact of exchange rates on the remeasurement of assets
and liabilities in non-functional currencies recorded in other
expense. In addition, the prior year quarter benefited by a
$12 million, or $0.04 per share, reduction in expense related to
certain hedging programs.
Effective tax rate reflected in the reported financial
statements in the first quarter was 15.9%, compared to the prior
year period of 0.1%. After adjusting for the impact from
adoption of the new revenue recognition standard and to exclude the
applicable tax impact associated with certain non-GAAP adjustments,
the adjusted effective tax rate on a comparable basis for the first
quarter of 2018 was 16.5% compared to 13.3% in the prior year
quarter. The increase was primarily driven by changes in
geographical distribution of income and the various impacts of U.S.
Tax Reform. The adjusted effective tax rate in both periods
includes a net favorable impact from certain discrete items.
Certain items that impacted first quarter results and comparisons
with the prior year period are detailed in the "Reconciliation of
Non-GAAP Measures Adjusted for Changes in Accounting Guidance -
Operating Income from Continuing Operations and Diluted Earnings
Per Share" on page 11 of this press release.
Weighted average diluted shares outstanding decreased to
250.2 million in the first quarter compared to 267.0 million in the
prior year period. The Company repurchased 3.9 million Class A
Ordinary Shares for approximately $550
million in the quarter. As of March 31, 2018, the Company had $4.9 billion of remaining authorization under its
share repurchase program.
FIRST QUARTER 2018 CASH FLOW SUMMARY
Cash flow from
operations for the first three months of 2018 decreased 23%, or
$42 million, to $140 million compared to the prior year period,
primarily reflecting $98 million of
cash restructuring charges, partially offset by operational
improvement.
Free cash flow, defined as cash flow from operations less
capital expenditures, decreased 36%, or $53
million, to $95 million for
the first three months of 2018 compared to the prior year quarter,
reflecting a decline in cash flow from operations and an
$11 million increase in capital
expenditures, including investments in our operating model.
Adjusted free cash flow, defined as free cash flow
excluding certain near-term impacts resulting from the divestiture
of the outsourcing businesses, including restructuring initiatives,
increased $28 million, or 16%, to
$208 million compared to the prior
year period. A reconciliation of free cash flow and adjusted free
cash flow to cash flow from operations can be found in
"Reconciliation of Non-GAAP Measures - Organic Revenue and Free
Cash Flow" on page 10 of this press release.
FIRST QUARTER 2018 REVENUE REVIEW
The first quarter
revenue reviews provided below include supplemental information
related to organic revenue, which is a non-GAAP measure that is
described in detail in "Reconciliation of Non-GAAP Measures -
Organic Revenue and Free Cash Flow" on page 10 of this press
release.
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
|
Mar 31,
2018
|
|
Mar 31,
2017
|
|
%
Change
|
|
Revenue
Recognition (1)
|
|
Less:
Currency
Impact (2)
|
|
Less:
Fiduciary
Investment
Income (3)
|
|
Less:
Acquisitions,
Divestitures
& Other
|
|
Organic
Revenue
Growth (4)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
|
1,184
|
|
$
|
984
|
|
20%
|
|
—%
|
|
6%
|
|
—%
|
|
10%
|
|
4%
|
Reinsurance
Solutions
|
|
742
|
|
371
|
|
100
|
|
89
|
|
4
|
|
—
|
|
1
|
|
6
|
Retirement
Solutions
|
|
424
|
|
386
|
|
10
|
|
—
|
|
6
|
|
—
|
|
4
|
|
—
|
Health
Solutions
|
|
451
|
|
372
|
|
21
|
|
16
|
|
4
|
|
—
|
|
1
|
|
—
|
Data & Analytic
Services
|
|
294
|
|
268
|
|
10
|
|
2
|
|
4
|
|
—
|
|
3
|
|
1
|
Elimination
|
|
(5)
|
|
—
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Total
revenue
|
|
$
|
3,090
|
|
$
|
2,381
|
|
30%
|
|
17%
|
|
5%
|
|
—%
|
|
5%
|
|
3%
|
Total revenue increased 30%, or $709
million, on a reported basis, including an increase of
$365 million, or 17%, related to
adoption of the new revenue recognition standard. Excluding this
impact, revenue on a comparable basis increased $344 million, or 13%, compared to the prior year
period, including organic revenue of 3% primarily driven by strong
growth in Reinsurance and Commercial Risk Solutions.
Commercial Risk Solutions organic revenue increased 4%
compared to the prior year period driven by strong growth globally
across most geographies, highlighted by particular strength in the
Americas and EMEA regions, driven by double-digit new business
generation and strong management of the renewal book portfolio.
Reinsurance Solutions organic revenue increased 6%
compared to the prior year period driven by strong growth across
every major product line, including particular strength in treaty
placements driven by net new business generation and a modest
favorable market impact, as well as growth in both facultative
placements and capital markets transactions.
Retirement Solutions organic revenue was flat compared to
the prior year period driven by growth in investment consulting,
primarily for delegated investment management, and in the talent
practice for assessment services, offset by a modest decline in
project-related work and an unfavorable impact from the timing of
certain revenue.
Health Solutions organic revenue was flat compared to the
prior year period driven by solid growth in health and benefits
brokerage, highlighted by strong growth across Asia and the EMEA region, offset by a decline
in project-related work that benefited the prior year period in the
health care exchange business.
Data & Analytic Services organic revenue increased 1%
compared to the prior year period driven by continued solid growth
across core Affinity, with particular strength in the U.S., offset
by unfavorable impacts from certain client contracts that were
anticipated.
FIRST QUARTER 2018 EXPENSE REVIEW
|
|
Three Months
Ended
|
|
|
|
|
(millions)
|
|
Mar 31,
2018
|
|
Mar 31,
2017
|
|
$ Change
|
|
% Change
|
Expenses
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
$
|
1,616
|
|
$
|
1,469
|
|
$
|
147
|
|
10%
|
Information
technology
|
|
115
|
|
88
|
|
27
|
|
31
|
Premises
|
|
93
|
|
84
|
|
9
|
|
11
|
Depreciation of fixed
assets
|
|
39
|
|
54
|
|
(15)
|
|
(28)
|
Amortization and
impairment of intangible assets
|
|
110
|
|
43
|
|
67
|
|
156
|
Other general
expenses
|
|
318
|
|
308
|
|
10
|
|
3
|
Total operating
expenses
|
|
$
|
2,291
|
|
$
|
2,046
|
|
$
|
245
|
|
12%
|
Compensation and benefits expense increased $147 million, or 10%, on a reported basis,
including $79 million, or 5%, related
to adoption of the new revenue recognition standard. Excluding this
impact, compensation and benefits expense on a comparable basis
increased $68 million, or 5%,
compared to the prior year period due primarily to a $78 million unfavorable impact from foreign
currency translation, a $51 million
increase in expenses related to acquisitions, net of divestitures,
a $12 million increase in expense
related to certain hedging programs, and an increase in expense
associated with 3% organic revenue growth, partially offset by a
$70 million decrease in restructuring
costs and $50 million of incremental
savings related to restructuring and other operational improvement
initiatives.
Information technology expense increased $27 million, or 31%, compared to the prior year
period due primarily to a $7 million
increase in restructuring costs, a $5
million increase in expenses related to acquisitions, net of
divestitures, a $3 million
unfavorable impact from foreign currency translation, as well as
investments in growth.
Premises expense increased $9
million, or 11%, compared to the prior year period due
primarily to a $5 million unfavorable
impact from foreign currency translation and a $3 million increase related to acquisitions, net
of divestitures, partially offset by $2
million of incremental savings related to restructuring and
other operational improvement initiatives.
Depreciation of fixed assets decreased $15 million, or 28%, compared to the prior year
period primarily due to a $12 million
decrease in restructuring costs related to fixed asset
write-offs.
Amortization and impairment of intangible assets
increased $67 million, or 156%,
compared to the prior year period primarily due to $54 million of accelerated amortization related
to tradenames and an increase in intangible asset amortization from
previous acquisitions.
Other general expenses increased $10 million, or 3% on a reported basis, including
a $1 million decrease related to
adoption of the new revenue recognition standard. Excluding this
impact, other general expenses on a comparable basis increased
$11 million, or 3%, compared to the
prior year period due primarily to a $9
million unfavorable impact from foreign currency
translation, a $5 million increase in
operating expenses related to acquisitions, net of divestitures,
and a $5 million increase in
restructuring costs, partially offset by expense discipline.
FIRST QUARTER 2018 INCOME SUMMARY
The first quarter
2018 financial results discussed herein represent performance from
continuing operations unless otherwise noted. Adoption of the
FASB's new revenue recognition standard on January 1, 2018 is not reflected in reported 2017
financials. A comparable year-over-year view of reported 2018
results to unaudited pro forma 2017 results incorporating the
impact of adoption of the new revenue recognition standard is
provided in detail on pages 11-15 of this press release. In
addition, certain noteworthy items impacted adjusted operating
income and adjusted operating margins in the first quarters of 2018
and 2017, which are also described in detail in "Reconciliation of
Non-GAAP Measures Adjusted for Changes in Accounting Guidance -
Operating Income from Continuing Operations and Diluted Earnings
Per Share" on page 11 of this press release.
AS REPORTED
|
|
Three Months Ended
|
|
|
(millions)
|
|
Mar
31, 2018
|
|
Mar
31, 2017
|
|
% Change
|
Revenue
|
|
$
|
3,090
|
|
$
|
2,381
|
|
30%
|
Expenses
|
|
2,291
|
|
2,046
|
|
12
|
Operating income -
as reported
|
|
$
|
799
|
|
$
|
335
|
|
139%
|
Operating margin -
as reported
|
|
25.9%
|
|
14.1%
|
|
|
Operating income increased $464
million, or 139%, on a reported basis compared to the prior
year period, including an increase of $287
million, or 86%, related to adoption of the new revenue
recognition standard. Operating margin increased 1,180 basis points
on a reported basis compared to the prior year period, including
860 basis points related to adoption of the new revenue recognition
standard.
AS COMPARABLE TO 2017 UNAUDITED PRO FORMA FINANCIALS
|
|
Three Months Ended
|
|
|
|
|
|
|
(Pro
Forma)
|
|
|
(millions)
|
|
Mar
31, 2018
|
|
Mar
31, 2017
|
|
% Change
|
Revenue
|
|
$
|
3,090
|
|
$
|
2,746
|
|
13%
|
Expenses
|
|
2,291
|
|
2,124
|
|
8
|
Operating income -
as reported
|
|
$
|
799
|
|
$
|
622
|
|
28%
|
Operating margin -
as reported
|
|
25.9%
|
|
22.7%
|
|
|
Operating income -
as adjusted
|
|
$
|
983
|
|
$
|
809
|
|
22%
|
Operating margin -
as adjusted
|
|
31.8%
|
|
29.5%
|
|
|
Adjusting for certain items and the impact of adoption of the
new revenue recognition standard detailed on page 11 of this press
release, adjusted operating income on a comparable basis increased
$174 million, or 22%, and adjusted
operating margin on a comparable basis increased 230 basis points
to 31.8%, each compared to the prior year period. The increase in
adjusted operating margin on a comparable basis was primarily
driven by $52 million, or 160 basis
points, of incremental savings from restructuring and other
operational initiatives, as well as underlying operational
improvement driven by return on investments and increased operating
leverage, partially offset by a 20 basis points net unfavorable
impact from foreign currency translation and certain hedging
programs.
Interest income increased $2
million to $4 million compared
to the prior year period primarily due to modestly higher cash
balances compared to the prior year period. Interest expense
was flat at $70 million compared to
the prior year period. Other pension income decreased
$6 million to $2 million compared to the prior year period,
including $9 million of pension
income, partially offset by $7
million of non-cash expenses related to pension settlements.
Excluding the non-cash expenses related to pension settlements,
pension income of $9 million compares
to $8 million in the prior year
period. Other expense was $17
million, including $10 million
of net losses due to the unfavorable impact of exchange rates on
the remeasurement of assets and liabilities in non-functional
currencies and $7 million of losses
primarily related to certain long-term investments. The prior year
period included $10 million of losses
related to the unfavorable impact of exchange rates on the
remeasurement of assets and liabilities in non-functional
currencies.
DISCONTINUED OPERATIONS
Net income from
discontinued operations on a reported basis was $6 million, or $0.02 per share, compared to net income of
$40 million, or $0.15 per share, in the prior year period.
Conference Call, Presentation Slides and Webcast
Details
The Company will host a conference call on
Friday, May 4, 2018 at 7:30 a.m., central time. Interested parties
can listen to the conference call via a live audio webcast and view
the presentation slides at www.aon.com.
About Aon
Aon plc (NYSE:AON) Aon is a
leading global professional services firm providing a broad range
of risk, retirement and health solutions. Our 50,000
colleagues in 120 countries empower results for clients by using
proprietary data and analytics to deliver insights that reduce
volatility and improve performance.
Safe Harbor Statement
This communication
contains certain statements related to future results, or states
our intentions, beliefs and expectations or predictions for the
future which are forward-looking statements as that term is defined
in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from either historical or anticipated results depending on a
variety of factors. These forward-looking statements include
information about possible or assumed future results of our
operations. All statements, other than statements of historical
facts that address activities, events or developments that we
expect or anticipate may occur in the future, including such things
as our outlook, future capital expenditures, growth in commissions
and fees, changes to the composition or level of our revenues, cash
flow and liquidity, expected tax rates, business strategies,
competitive strengths, goals, the benefits of new initiatives,
growth of our business and operations, plans and references to
future successes, are forward-looking statements. Also, when we use
the words such as "anticipate", "believe", "estimate", "expect",
"intend", "plan", "probably", "potential", "looking forward", or
similar expressions, we are making forward-looking statements.
The following factors, among others, could cause actual results
to differ from those set forth in the forward looking
statements: general economic and political conditions in
different countries in which Aon does business around the world;
changes in the competitive environment; fluctuations in exchange
and interest rates that could influence revenue and expense;
changes in global equity and fixed income markets that could affect
the return on invested assets; changes in the funding status of
Aon's various defined benefit pension plans and the impact of any
increased pension funding resulting from those changes; the level
of Aon's debt limiting financial flexibility; rating agency actions
that could affect Aon's ability to borrow funds; the effect of the
change in global headquarters and jurisdiction of incorporation,
including differences in the anticipated benefits; changes in
estimates or assumptions on our financial statements; limits on
Aon's subsidiaries to make dividend and other payments to Aon; the
impact of lawsuits and other contingent liabilities and loss
contingencies arising from errors and omissions and other claims
against Aon; the impact of, and potential challenges in complying
with, legislation and regulation in the jurisdictions in which Aon
operates, particularly given the global scope of Aon's
businesses and the possibility of conflicting regulatory
requirements across jurisdictions in which Aon does business; the
impact of any investigations brought by regulatory authorities in
the U.S., U.K. and other countries; the impact of any inquiries
relating to compliance with the U.S. Foreign Corrupt Practices Act
and non-U.S. anti-corruption laws and with U.S. and non-U.S. trade
sanctions regimes; failure to protect intellectual property rights
or allegations that we infringe on the intellectual property rights
of others; the effects of English law on our operating flexibility
and the enforcement of judgments against Aon; the failure to retain
and attract qualified personnel; international risks associated
with Aon's global operations; the effect or natural or man-made
disasters; the potential of a system or network breach or
disruption resulting in operational interruption or improper
disclosure of personal data; Aon's ability to develop and implement
new technology; the damage to our reputation among clients, markets
or third parties; the actions taken by third parties that preform
aspects of our business operations and client services; the
extent to which Aon manages certain risks created in connection
with the various services, including fiduciary and investments and
other advisory services and business process outsourcing services,
among others, that Aon currently provides, or will provide in the
future, to clients; Aon's ability to grow, develop and integrate
companies that it acquires or new lines of business; changes in
commercial property and casualty markets, commercial premium rates
or methods of compensation; changes in the health care system or
our relationships with insurance carriers; and Aon's ability to
implement initiatives intended to yield cost savings, and the
ability to achieve those cost savings.
Any or all of Aon's forward-looking statements may turn out to
be inaccurate, and there are no guarantees about Aon's
performance. The factors identified above are not
exhaustive. Aon and its subsidiaries operate in a dynamic
business environment in which new risks may emerge
frequently. Further information concerning Aon and its
businesses, including factors that potentially could materially
affect Aon's financial results, is contained in Aon's filings with
the SEC. See Aon's Annual Report on
Form 10-K for the year ended December 31,
2017 and its Quarterly Report on Form 10-Q for the quarters
ended March 31, 2018 for a further
discussion of these and other risks and uncertainties applicable to
Aon's businesses. These factors may be revised or supplemented in
subsequent reports. Aon is under no obligation, and expressly
disclaims any obligation, to update or alter any forward-looking
statement that it may make from time to time, whether as a result
of new information, future events or otherwise.
Explanation of Non-GAAP Measures
This
communication includes supplemental information related to organic
revenue, free cash flow, adjusted free cash flow, adjusted
operating margin, and adjusted earnings per share for continuing
operations that exclude the effects of intangible asset
amortization, capital expenditures, and certain other noteworthy
items that affected results for the comparable periods.
Organic revenue includes the impact of intercompany activity and
excludes the impact of foreign exchange rate changes, acquisitions,
divestitures, transfers between business units, and fiduciary
investment income. The impact of foreign exchange is
determined by translating last year's revenue, expense or net
income at this year's foreign exchange rates. Reconciliations
are provided in the attached appendices. Supplemental organic
revenue information and additional measures that exclude the
effects of certain items noted above that do not affect net income
or any other U.S. GAAP reported amounts. Free cash flow is
cash flow from operating activity less capital expenditures.
Adjusted free cash flow is free cash flow excluding certain
near-term impacts resulting from the divestiture of the outsourcing
businesses, including restructuring initiatives. The effective tax
rate, as adjusted, excludes the applicable tax impact associated
with expenses for estimated restructuring expenses, accelerated
tradename amortization, impairment charges, regulatory and
compliance provisions, and non-cash pension settlement related
charges. Management believes that these measures are important to
make meaningful period-to-period comparisons and that this
supplemental information is helpful to investors. They should
be viewed in addition to, not in lieu of, the Company's
Consolidated Financial Statements. Industry peers provide
similar supplemental information regarding their performance,
although they may not make identical adjustments.
(1) For additional information refer to pages 11-15 of
this press release
#
Investor
Contact:
|
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Media
Contact:
|
Investor
Relations
|
|
Donna
Mirandola
|
312-381-3310
|
|
Vice President,
Global External Communications
|
investor.relations@aon.com
|
|
312-381-1532
|
Aon
plc
|
Condensed
Consolidated Statements of Income (Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
(millions, except per
share data)
|
|
Mar
31, 2018
|
|
Mar
31, 2017
|
|
%
Change
|
Revenue
|
|
|
|
|
|
|
Total
revenue
|
|
$
|
3,090
|
|
$
|
2,381
|
|
30%
|
Expenses
|
|
|
|
|
|
|
Compensation and
benefits
|
|
1,616
|
|
1,469
|
|
10%
|
Information
technology
|
|
115
|
|
88
|
|
31%
|
Premises
|
|
93
|
|
84
|
|
11%
|
Depreciation of fixed
assets
|
|
39
|
|
54
|
|
(28)%
|
Amortization and
impairment of intangible assets
|
|
110
|
|
43
|
|
156%
|
Other general
expenses
|
|
318
|
|
308
|
|
3%
|
Total operating
expenses
|
|
2,291
|
|
2,046
|
|
12%
|
Operating
income
|
|
799
|
|
335
|
|
139%
|
Interest
income
|
|
4
|
|
2
|
|
100%
|
Interest
expense
|
|
(70)
|
|
(70)
|
|
—%
|
Other income
(expense)
|
|
(15)
|
|
(2)
|
|
650%
|
Income from
continuing operations before income taxes
|
|
718
|
|
265
|
|
171%
|
Income taxes
(1)
|
|
114
|
|
—
|
|
100%
|
Net income from
continuing operations
|
|
604
|
|
265
|
|
128%
|
Income from
discontinued operations, net of tax
|
|
6
|
|
40
|
|
(85)%
|
Net
income
|
|
610
|
|
305
|
|
100%
|
Less: Net income
attributable to noncontrolling interests
|
|
16
|
|
14
|
|
14%
|
Net income
attributable to Aon shareholders
|
|
$
|
594
|
|
$
|
291
|
|
104%
|
|
|
|
|
|
|
|
Basic net income
per share attributable to Aon shareholders
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
2.37
|
|
$
|
0.95
|
|
149%
|
Discontinued
operations
|
|
0.02
|
|
0.15
|
|
(87)%
|
Net income
|
|
$
|
2.39
|
|
$
|
1.10
|
|
117%
|
Diluted net income
per share attributable to Aon shareholders
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
2.35
|
|
$
|
0.94
|
|
150%
|
Discontinued
operations (2)
|
|
0.02
|
|
0.15
|
|
(87)%
|
Net income
|
|
$
|
2.37
|
|
$
|
1.09
|
|
117%
|
Weighted average
ordinary shares outstanding - basic
|
|
248.5
|
|
264.8
|
|
(6)%
|
Weighted average
ordinary shares outstanding - diluted
|
|
250.2
|
|
267.0
|
|
(6)%
|
|
|
(1)
|
The effective tax
rate was 15.9% and 0.1% for the three months ended March 31,
2018 and 2017.
|
(2)
|
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.
Included within total operating expenses for the three months ended
March 31, 2017 was $8 million of depreciation of fixed assets
and $11 million of intangible asset amortization.
|
Aon
plc
|
Reconciliation of
Non-GAAP Measures - Organic Revenue Growth and Free Cash Flow
(Unaudited)
|
Organic Revenue
Growth From Continuing Operations (Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
|
Mar 31,
2018
|
|
Mar 31,
2017
|
|
%
Change
|
|
Revenue
Recognition (1)
|
|
Less:
Currency
Impact (2)
|
|
Less:
Fiduciary
Investment
Income (3)
|
|
Less:
Acquisitions,
Divestitures
& Other
|
|
Organic
Revenue
Growth (4)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
|
1,184
|
|
$
|
984
|
|
20%
|
|
—%
|
|
6%
|
|
—%
|
|
10%
|
|
4%
|
Reinsurance
Solutions
|
|
742
|
|
371
|
|
100
|
|
89
|
|
4
|
|
—
|
|
1
|
|
6
|
Retirement
Solutions
|
|
424
|
|
386
|
|
10
|
|
—
|
|
6
|
|
—
|
|
4
|
|
—
|
Health
Solutions
|
|
451
|
|
372
|
|
21
|
|
16
|
|
4
|
|
—
|
|
1
|
|
—
|
Data & Analytic
Services
|
|
294
|
|
268
|
|
10
|
|
2
|
|
4
|
|
—
|
|
3
|
|
1
|
Elimination
|
|
(5)
|
|
—
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Total
revenue
|
|
$
|
3,090
|
|
$
|
2,381
|
|
30%
|
|
17%
|
|
5%
|
|
—%
|
|
5%
|
|
3%
|
|
|
(1)
|
Revenue Recognition
represents the impact of Aon's adoption of new revenue recognition
standard, effective for Aon in the first quarter of
2018.
|
(2)
|
Currency impact is
determined by translating last year's revenue at this year's
foreign exchange rates.
|
(3)
|
Fiduciary Investment
Income for the three months ended March 31, 2018 and 2017 was
$10 million and $6 million, respectively,.
|
(4)
|
Organic revenue
growth includes the impact of intercompany activity and excludes
the impact of the adoption of the new revenue recognition standard,
changes in foreign exchange rates, acquisitions, divestitures,
transfers between business units, and fiduciary investment
income.
|
Free Cash Flow
from Continuing Operations (Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
(millions)
|
|
Mar 31,
2018
|
|
Mar 31,
2017
|
|
Percent Change
|
Cash Provided by
Continuing Operating Activities
|
|
$
|
140
|
|
$
|
182
|
|
(23)%
|
Capital Expenditures
Used for Continuing Operations
|
|
(45)
|
|
(34)
|
|
32
|
Free
Cash Flow Provided by Continuing Operations
(1)
|
|
$
|
95
|
|
$
|
148
|
|
(36)%
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
Restructuring Plan
Initiatives (2)
|
|
113
|
|
32
|
|
253
|
Free
Cash Flow Provided by Continuing Operations - as adjusted
(3)
|
|
$
|
208
|
|
$
|
180
|
|
16%
|
|
|
(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.
|
(2)
|
Restructuring plan
cash payments include cash used to settle restructuring liabilities
as well as payments made on capital expenditures under the
program.
|
(3)
|
Certain noteworthy
items impacting free cash flow from operating activities in 2018
and 2017 are described in this schedule. This non-GAAP measure does
not imply or represent a precise calculation of residual cash flow
available for discretionary expenditures.
|
Aon
plc
|
Reconciliation of
Non-GAAP Measures Adjusted for Changes in Accounting Guidance -
Operating Income from Continuing Operations and Diluted Earnings
Per Share (Unaudited) (1)
|
|
|
|
Three Months
Ended
|
|
|
(millions,
except percentages)
|
|
Mar 31,
2018
|
|
Mar 31,
2017 (2)
|
|
Percent
Change
|
Revenue from
continuing operations
|
|
$
|
3,090
|
|
$
|
2,746
|
|
13%
|
|
|
|
|
|
|
|
Operating income
from continuing operations
|
|
$
|
799
|
|
$
|
622
|
|
28%
|
Amortization and
impairment of intangible assets
|
|
110
|
|
43
|
|
|
Restructuring
|
|
74
|
|
144
|
|
|
Operating income
from continuing operations - as adjusted
|
|
$
|
983
|
|
$
|
809
|
|
22%
|
Operating margin
from continuing operations
|
|
25.9%
|
|
22.7%
|
|
|
Operating margin
from continuing operations - as adjusted
|
|
31.8%
|
|
29.5%
|
|
|
|
|
|
Three Months
Ended
|
|
|
(millions,
except percentages)
|
|
Mar 31,
2018
|
|
Mar 31,
2017 (2)
|
|
Percent
Change
|
Operating income
from continuing operations - as adjusted
|
|
$
|
983
|
|
$
|
809
|
|
22%
|
Interest
income
|
|
4
|
|
2
|
|
100%
|
Interest
expense
|
|
(70)
|
|
(70)
|
|
—%
|
Other income
(expense):
|
|
|
|
|
|
|
Other income
(expense) - pensions - as adjusted (3)
|
|
9
|
|
8
|
|
13%
|
Other income
(expense) - other
|
|
(17)
|
|
(10)
|
|
70%
|
Total Other income
(expense) - as adjusted (3)
|
|
(8)
|
|
(2)
|
|
300%
|
Income before
income taxes from continuing operations - as
adjusted
|
|
909
|
|
739
|
|
23%
|
Income taxes
(2)
|
|
150
|
|
98
|
|
53%
|
Net income from
continuing operations - as adjusted
|
|
759
|
|
641
|
|
18%
|
Less: Net income
attributable to noncontrolling interests
|
|
16
|
|
14
|
|
14%
|
Net income
attributable to Aon shareholders from continuing operations - as
adjusted
|
|
743
|
|
627
|
|
19%
|
Adjusted income
(loss) from discontinued operations, net of tax
(4)
|
|
(2)
|
|
48
|
|
(104)%
|
Net income
attributable to Aon shareholders - as adjusted
|
|
$
|
741
|
|
$
|
675
|
|
10%
|
Diluted net income
(loss) per share attributable to Aon shareholders
|
|
|
|
|
|
|
Continuing operations
- as adjusted
|
|
$
|
2.97
|
|
$
|
2.35
|
|
26%
|
Discontinued
operations - as adjusted
|
|
(0.01)
|
|
0.18
|
|
(106)%
|
Net income - as
adjusted
|
|
$
|
2.96
|
|
$
|
2.53
|
|
17%
|
Weighted average
ordinary shares outstanding - diluted
|
|
250.2
|
|
267.0
|
|
(6)%
|
Effective Tax
Rates (4)
|
|
|
|
|
|
|
Continuing Operations
- U.S. GAAP
|
|
15.9%
|
|
0.1%
|
|
|
Continuing Operations
- Non-GAAP
|
|
16.5%
|
|
13.3%
|
|
|
Discontinued
Operations - U.S. GAAP
|
|
17.2%
|
|
29.8%
|
|
|
Discontinued
Operations - Non-GAAP (5)
|
|
46.5%
|
|
29.4%
|
|
|
|
|
(1)
|
Certain noteworthy
items impacting operating income in 2018 and 2017 are described in
this schedule. The items shown with the caption "as adjusted" are
non-GAAP measures. In the first quarter of 2018, Aon adopted new
accounting guidance related to the treatment of revenue from
contracts with customers that was applied prospectively on its U.S.
GAAP financial statements in accordance with FASB standards, and
therefore comparable prior periods were not restated. On pages 11
through 15 of this press release, the Company has included
unaudited pro forma consolidated results that present the
retrospective impact of the new standard as if it were in effect
for the comparable period ended March 31, 2017. We use this
supplemental information to help us and our investors evaluate
business growth from core operations. Please see the U.S. GAAP
financial statements included as Exhibit 99.2 to the Company's Form
8-K filed on May 4, 2018 for a reconciliation according to FASB
standards.
|
(2)
|
The historical period
presented above has been adjusted retrospectively to reflect
changes in accounting guidance related to revenue recognition,
effective for Aon in the first quarter of 2018.
|
(3)
|
Adjusted Other income
(expense) excludes Pension settlement charges of $7 million for
three months ended March 31, 2018.
|
(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, accelerated tradename amortization,
and non-cash pension settlement charges, which are adjusted at the
related jurisdictional rate. In addition, tax expense
excludes adjustments to the provisional estimates of the impact of
US Tax Reform recorded pursuant to SAB 118.
|
(5)
|
Adjusted income from
discontinued operations, net of tax, excludes the gain on sale of
discontinued operations of $8 million for the three months ended
March 31, 2018 and $11 million of intangible asset
amortization for the three months ended March 31, 2017. The
effective tax rate was further adjusted for the applicable tax
impact associated with the gain on sale and intangible asset
amortization, as applicable.
|
Aon
plc
|
Pro Forma Historical
Reconciliation of Reported Non-GAAP Measures to Non-GAAP Measures
Adjusted for Changes in Accounting Guidance
(Unaudited)(1)(2)
|
|
|
|
Three Months Ended
March 31
|
|
|
2017
|
(millions, except per
share data)
|
|
As
Reported(1)
|
Revenue Recognition
|
Pro
Forma
|
Revenue
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
|
984
|
$
|
5
|
$
|
989
|
Reinsurance
Solutions
|
|
371
|
300
|
671
|
Retirement
Solutions
|
|
386
|
(1)
|
385
|
Health
Solutions
|
|
372
|
56
|
428
|
Data & Analytic
Services
|
|
268
|
5
|
273
|
Elimination
|
|
—
|
—
|
—
|
Total
revenue
|
|
$
|
2,381
|
$
|
365
|
$
|
2,746
|
Expenses
|
|
|
|
|
Compensation and
benefits
|
|
1,469
|
79
|
1,548
|
Information
technology
|
|
88
|
—
|
88
|
Premises
|
|
84
|
—
|
84
|
Depreciation of fixed
assets
|
|
54
|
—
|
54
|
Amortization and
impairment of intangible assets
|
|
43
|
—
|
43
|
Other general
expenses
|
|
308
|
(1)
|
307
|
Total operating
expenses
|
|
2,046
|
78
|
2,124
|
Operating
income
|
|
335
|
287
|
622
|
Amortization and
impairment of intangible assets
|
|
43
|
—
|
43
|
Restructuring
|
|
144
|
—
|
144
|
Operating income -
as adjusted
|
|
522
|
287
|
809
|
Operating margin
from continuing operations - as adjusted
|
|
21.9%
|
|
29.5%
|
Interest
income
|
|
2
|
—
|
2
|
Interest
expense
|
|
(70)
|
—
|
(70)
|
Other income
(expense):
|
|
|
|
|
Other income
(expense) - pensions
|
|
8
|
—
|
8
|
Other income
(expense) - other (4)
|
|
(10)
|
—
|
(10)
|
Total Other income
(expense)
|
|
(2)
|
—
|
(2)
|
Income before
income taxes from continuing operations - as
adjusted
|
|
452
|
287
|
739
|
Income taxes - as
adjusted (5)
|
|
50
|
48
|
98
|
Income from
continuing operations - as adjusted
|
|
402
|
239
|
641
|
Less: Net income
attributable to noncontrolling interests
|
|
14
|
—
|
14
|
Net income from
continuing operations attributable to Aon shareholders - as
adjusted
|
|
$
|
388
|
$
|
239
|
$
|
627
|
Diluted earnings
per share from continuing operations - as adjusted
|
|
$
|
1.45
|
$
|
0.90
|
$
|
2.35
|
Weighted average
ordinary shares outstanding - diluted
|
|
267.0
|
267.0
|
267.0
|
|
Notes
|
|
|
(1)
|
Certain noteworthy
items impacting operating income in 2017 are described in this
schedule. The items shown with the caption "as adjusted" are
non-GAAP measures.
|
(2)
|
The historical period
presented above have been adjusted retrospectively to reflect Aon's
adoption of new revenue recognition standard in the first quarter
of 2018.
|
(3)
|
Reported results
above reflect the retrospective adoption of the new pension
accounting guidance effective for Aon in the first quarter of
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. Had the Company included it, Other
income (expense) in the Revenue Recognition column would have been
$(2) million, respectively, for the three months ended
2017.
|
(5)
|
The non-GAAP
effective tax rate reported was 11.1% for the three months ended
March 31, 2017. Adjusted items are generally taxed at the
estimated annual effective tax rate, except for the applicable tax
impact associated with restructuring, anticipated non-cash pension
settlements in the fourth quarter, and amortization, which are
adjusted at the related jurisdictional rate. The non-GAAP
effective tax rate for continuing operations, adjusted for the
change in accounting guidance was 13.3% for the three months ended
March 31, 2017.
|
Aon
plc
|
Pro Forma Historical
Reconciliation of Non-GAAP Measures - Operating Income and Diluted
Earnings Per Share from Continuing Operations as Adjusted for
Changes in Accounting Guidance (Unaudited)
(1)(2)
|
|
|
|
Pro Forma
Periods
|
|
Reported
Period
|
|
|
Three Months Ended
(5)
|
|
|
|
Three Months Ended
(6)
|
|
|
|
Three Months Ended
(7)
|
(millions, except per
share data)
|
|
Mar
31, 2016
|
|
Jun 30,
2016
|
|
Sep 30,
2016
|
|
Dec 31,
2016
|
|
Full
Year 2016 (5)
|
|
Mar
31, 2017
|
|
Jun 30,
2017
|
|
Sep 30,
2017
|
|
Dec 31,
2017
|
|
Full Year 2017 (6)
|
|
Mar
31, 2018
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
|
969
|
|
$
|
990
|
|
$
|
884
|
|
$
|
1,088
|
|
$
|
3,931
|
|
$
|
989
|
|
$
|
1,041
|
|
$
|
915
|
|
$
|
1,218
|
|
$
|
4,163
|
|
$
|
1,184
|
Reinsurance
Solutions
|
|
667
|
|
335
|
|
234
|
|
131
|
|
1,367
|
|
671
|
|
345
|
|
257
|
|
153
|
|
1,426
|
|
742
|
Retirement
Solutions
|
|
396
|
|
405
|
|
465
|
|
441
|
|
1,707
|
|
385
|
|
388
|
|
492
|
|
489
|
|
1,754
|
|
424
|
Health
Solutions
|
|
338
|
|
253
|
|
245
|
|
522
|
|
1,358
|
|
428
|
|
281
|
|
277
|
|
526
|
|
1,512
|
|
451
|
Data & Analytic
Services
|
|
263
|
|
271
|
|
260
|
|
256
|
|
1,050
|
|
273
|
|
281
|
|
287
|
|
299
|
|
1,140
|
|
294
|
Elimination
|
|
(2)
|
|
(1)
|
|
(3)
|
|
(2)
|
|
(8)
|
|
—
|
|
(4)
|
|
(5)
|
|
(1)
|
|
(10)
|
|
(5)
|
Total
revenue
|
|
$
|
2,631
|
|
$
|
2,253
|
|
$
|
2,085
|
|
$
|
2,436
|
|
$
|
9,405
|
|
$
|
2,746
|
|
$
|
2,332
|
|
$
|
2,223
|
|
$
|
2,684
|
|
$
|
9,985
|
|
$
|
3,090
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
1,444
|
|
1,372
|
|
1,293
|
|
1,417
|
|
5,526
|
|
1,548
|
|
1,471
|
|
1,420
|
|
1,568
|
|
6,007
|
|
1,616
|
Information
technology
|
|
83
|
|
99
|
|
99
|
|
105
|
|
386
|
|
88
|
|
98
|
|
109
|
|
124
|
|
419
|
|
115
|
Premises
|
|
82
|
|
89
|
|
86
|
|
86
|
|
343
|
|
84
|
|
86
|
|
89
|
|
89
|
|
348
|
|
93
|
Depreciation of fixed
assets
|
|
38
|
|
41
|
|
39
|
|
44
|
|
162
|
|
54
|
|
54
|
|
40
|
|
39
|
|
187
|
|
39
|
Amortization of
intangible assets
|
|
37
|
|
38
|
|
42
|
|
40
|
|
157
|
|
43
|
|
460
|
|
101
|
|
100
|
|
704
|
|
110
|
Other general
expenses
|
|
270
|
|
230
|
|
257
|
|
279
|
|
1,036
|
|
307
|
|
330
|
|
307
|
|
328
|
|
1,272
|
|
318
|
Total
operating expenses
|
|
1,954
|
|
1,869
|
|
1,816
|
|
1,971
|
|
7,610
|
|
2,124
|
|
2,499
|
|
2,066
|
|
2,248
|
|
8,937
|
|
2,291
|
Operating
income
|
|
677
|
|
384
|
|
269
|
|
465
|
|
1,795
|
|
622
|
|
(167)
|
|
157
|
|
436
|
|
1,048
|
|
799
|
Amortization of
intangible assets
|
|
37
|
|
38
|
|
42
|
|
40
|
|
157
|
|
43
|
|
460
|
|
101
|
|
100
|
|
704
|
|
110
|
Restructuring
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
144
|
|
155
|
|
102
|
|
96
|
|
497
|
|
74
|
Regulatory and
compliance matters
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
34
|
|
8
|
|
(14)
|
|
28
|
|
—
|
Transaction
costs
|
|
—
|
|
—
|
|
—
|
|
15
|
|
15
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
—
|
Operating income -
as adjusted
|
|
714
|
|
422
|
|
311
|
|
520
|
|
1,967
|
|
809
|
|
482
|
|
368
|
|
618
|
|
2,277
|
|
983
|
Operating margin
from continuing operations - as adjusted
|
|
27.1%
|
|
18.7%
|
|
14.9%
|
|
21.3%
|
|
20.9%
|
|
29.5%
|
|
20.7%
|
|
16.6%
|
|
23.0%
|
|
22.8%
|
|
31.8%
|
Interest
income
|
|
2
|
|
3
|
|
1
|
|
3
|
|
9
|
|
2
|
|
8
|
|
10
|
|
7
|
|
27
|
|
4
|
Interest
expense
|
|
(69)
|
|
(73)
|
|
(70)
|
|
(70)
|
|
(282)
|
|
(70)
|
|
(71)
|
|
(70)
|
|
(71)
|
|
(282)
|
|
(70)
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense) - pensions - as adjusted (3)
|
|
11
|
|
11
|
|
12
|
|
13
|
|
47
|
|
8
|
|
9
|
|
9
|
|
16
|
|
42
|
|
9
|
Other income
(expense) - other - as adjusted (4)
|
|
18
|
|
(1)
|
|
10
|
|
9
|
|
36
|
|
(10)
|
|
(5)
|
|
(5)
|
|
(19)
|
|
(39)
|
|
(17)
|
Total
Other income (expense) - as adjusted (3)(4)
|
|
29
|
|
10
|
|
22
|
|
22
|
|
83
|
|
(2)
|
|
4
|
|
4
|
|
(3)
|
|
3
|
|
(8)
|
Income before
income taxes from continuing operations - as
adjusted
|
|
676
|
|
362
|
|
264
|
|
475
|
|
1,777
|
|
739
|
|
423
|
|
312
|
|
551
|
|
2,025
|
|
909
|
Income
taxes
|
|
107
|
|
53
|
|
35
|
|
49
|
|
244
|
|
98
|
|
68
|
|
54
|
|
81
|
|
301
|
|
150
|
Income from
continuing operations - as adjusted
|
|
569
|
|
309
|
|
229
|
|
426
|
|
1,533
|
|
641
|
|
355
|
|
258
|
|
470
|
|
1,724
|
|
759
|
Less: Net income
attributable to noncontrolling interests
|
|
12
|
|
8
|
|
7
|
|
7
|
|
34
|
|
14
|
|
9
|
|
7
|
|
7
|
|
37
|
|
16
|
Net income
attributable to Aon shareholders from continuing operations - as
adjusted
|
|
$
|
557
|
|
$
|
301
|
|
$
|
222
|
|
$
|
419
|
|
$
|
1,499
|
|
$
|
627
|
|
$
|
346
|
|
$
|
251
|
|
$
|
463
|
|
$
|
1,687
|
|
$
|
743
|
Diluted earnings
per share from continuing operations - as adjusted
|
|
$
|
2.04
|
|
$
|
1.12
|
|
$
|
0.82
|
|
$
|
1.56
|
|
$
|
5.55
|
|
$
|
2.35
|
|
$
|
1.31
|
|
$
|
0.98
|
|
$
|
1.82
|
|
$
|
6.47
|
|
$
|
2.97
|
Weighted average
ordinary shares outstanding - diluted
|
|
273.7
|
|
269.8
|
|
269.6
|
|
268.3
|
|
270.3
|
|
267.0
|
|
264.3
|
|
257.3
|
|
254.5
|
|
260.7
|
|
250.2
|
|
Notes
|
(1)
|
Certain noteworthy
items impacting operating income in 2016 and 2017 are described in
this schedule. The items shown with the caption "as adjusted" are
non-GAAP measures.
|
(2)
|
The historical period
presented above have been adjusted retrospectively to reflect Aon's
adoption of 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 $62
million for the three months ended June 30, 2016, and $158 million
and $220 million for the three and twelve months ended December 31,
2016. Pension settlement charges were $128 million for the
three and twelve months ended December 31, 2017. Pension
settlement chargers were $7 million for the three months ended
March 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 $(3) million, $5
million, $1 million, and $4 million, respectively, for the three
months ended March 31, 2016, June 30, 2016, September 30, 2016, and
December 31, 2016 and $7 million for the twelve months ended
December 31, 2016. The impact on Other income (expense) of
foreign currency due to this new guidance was $(2) million, $(4)
million, $(6) million, and $1 million, respectively, for the three
months ended March 31, 2017, June 30, 2017, September 30, 2017, and
December 31, 2017, and $(11) million for the twelve months ended
December 31, 2017.
|
(5)
|
The non-GAAP
effective tax rates reported were 15.7%, 14.9%, 14.2%, and 12.0%,
respectively, for the three months ended March 31, 2016, June 30,
2016, September 30, 2016, and December 31, 2016 and 13.9% for the
twelve months ended December 31, 2016. Adjusted items are
generally taxed at the estimated annual effective tax rate, except
for the applicable tax impact associated with non-cash pension
settlements and transaction costs which are adjusted at the related
jurisdictional rate. The non-GAAP effective tax rates for
continuing operations, adjusted for the change in accounting
guidance were 15.8%, 14.6%, 13.3%, and 10.3% for the three months
ended March 31, 2016, June 30, 2016, September 30, 2016, and
December 31, 2016, and 13.7% for the twelve months ended December
31, 2016.
|
(6)
|
The non-GAAP
effective tax rates reported were 11.1%, 15.6%, 17.5%, and 15.5%,
respectively, for the three months ended March 31, 2017, June 30,
2017, September 30, 2017, and December 31, 2017, and 14.9% for the
twelve months ended December 31, 2017. Adjusted items are
generally taxed at the estimated annual effective tax rate, except
for the applicable tax impact associated with non-cash pension
settlements and transaction costs which are adjusted at the related
jurisdictional rate. The non-GAAP effective tax rates for
continuing operations, adjusted for the change in accounting
guidance were 13.3%, 16.1%, 17.3%, and 14.7% for the three months
ended March 31, 2017, June 30, 2017, September 30, 2017, and
December 31, 2017, and 14.9% for the twelve months ended December
31, 2017.
|
(7)
|
The non-GAAP
effective tax rates reported were 16.5%, for the three months ended
March 31, 2018. Adjusted items are generally taxed at the
estimated annual effective tax rate, except for the applicable tax
impact associated with non-cash pension settlements and transaction
costs which are adjusted at the related jurisdictional
rate.
|
Aon
plc
|
Condensed
Consolidated Statements of Financial Position
(Unaudited)
|
|
|
|
As of
|
(millions)
|
|
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
(1)
|
|
10,738
|
|
9,625
|
Other current
assets
|
|
609
|
|
289
|
Current
assets
|
|
—
|
|
—
|
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
|
Non-current
assets
|
|
—
|
|
—
|
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
|
Current
liabilities
|
|
—
|
|
—
|
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
|
Non-current
liabilities
|
|
—
|
|
—
|
TOTAL
LIABILITIES
|
|
22,462
|
|
21,440
|
|
|
|
|
|
EQUITY
|
|
|
|
|
Ordinary shares -
$0.01 nominal value
|
|
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
|
|
|
(1)
|
Includes cash and
short-term investments of $4,064 million and $3,743 million for the
periods ended March 31, 2018 and December 31, 2017,
respectively.
|
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
|
Net cash provided
by operating activities - continuing operations
|
|
140
|
|
182
|
Net 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)
|
Net cash provided
by investing activities - continuing operations
|
|
346
|
|
28
|
Net 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)
|
Net cash provided
by financing activities - continuing operations
|
|
(663)
|
|
(258)
|
Net cash provided
by 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 (1)
|
|
$
|
597
|
|
$
|
451
|
|
|
(1)
|
Includes $3 million
of discontinued operations March 31, 2017.
|
Aon
plc
|
Restructuring Plan
(Unaudited) (1)
|
|
|
|
Three months
ended March 31,
2018
|
|
Inception to
Date
|
|
Estimated
Remaining Costs
|
|
Estimated
Total
Cost (2)
|
Workforce
reduction
|
|
$
|
33
|
|
$
|
332
|
|
$
|
118
|
|
$
|
450
|
Technology
rationalization
|
|
10
|
|
43
|
|
87
|
|
130
|
Lease
consolidation
|
|
3
|
|
11
|
|
74
|
|
85
|
Asset
impairments
|
|
1
|
|
27
|
|
23
|
|
50
|
Other costs
associated with restructuring and separation
(3)
|
|
27
|
|
158
|
|
152
|
|
310
|
Total restructuring
and related expenses
|
|
$
|
74
|
|
571
|
|
$
|
454
|
|
$
|
1,025
|
|
|
(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.
|
|
|
(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.
|
View original
content:http://www.prnewswire.com/news-releases/aon-reports-first-quarter-2018-results-300642784.html
SOURCE Aon plc