Aon Reports Fourth Quarter and Full Year 2014 Results

Fourth Quarter Key Metrics and Highlights

- Total revenue was $3.3 billion with organic revenue growth of 6%

- Operating margin increased 320 basis points to 19.2%, and operating margin, adjusted for certain items, increased 180 basis points to 23.0%

- EPS increased 37% to $1.56, and EPS, adjusted for certain items, increased 23% to $1.89

- Repurchased 5.4 million Class A Ordinary Shares for approximately $500 million

- On November 17, 2014, the Company announced the authorization of a new $5 billion share repurchase program in addition to the existing program previously authorized in April 2012

Full Year Key Metrics and Highlights

- Total revenue was $12.0 billion with organic revenue growth of 3%

- Operating margin increased 220 basis points to 16.3%, and operating margin, adjusted for certain items, increased 50 basis points to 19.5%

- EPS increased 32% to $4.66, and EPS, adjusted for certain items, increased 17% to $5.71

- Cash flow from operations increased 1% to a record $1.6 billion, and free cash flow decreased 1% to $1.4 billion

- Repurchased 25.8 million Class A Ordinary Shares for approximately $2.25 billion

Feb 06, 2015, 06:30 ET from Aon plc

LONDON, Feb. 6, 2015 /PRNewswire/ -- Aon plc (NYSE: AON) today reported results for the three months and twelve months ended December 31, 2014.

Net income attributable to Aon shareholders was $459 million, or $1.56 per share, compared to $355 million, or $1.14 per share, for the prior year quarter.  Net income per share attributable to Aon shareholders, adjusted for certain items, increased 23% to $1.89, compared to $1.54 in the prior year quarter, including a $0.06 per share unfavorable impact on adjusted net income from continuing operations if the Company were to translate prior year quarter results at current quarter foreign exchange rates ("foreign currency translation").  Certain items that impacted fourth quarter results and comparisons with the prior year quarter are detailed in the "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share" on page 13 of this press release. 

"We delivered twenty-three percent earnings growth in the fourth quarter driven by organic revenue growth and strong operating margin improvement in both segments, a lower effective tax rate and effective capital management," said Greg Case, President and Chief Executive Officer.  "Results reflect a strong finish to 2014, having made significant investments in client serving capabilities while returning a record amount of capital to shareholders.  Looking forward, we have positioned the firm for increased operating leverage, strong free cash flow generation and significant shareholder value creation in 2015."

FOURTH QUARTER FINANCIAL SUMMARY

Total revenue increased 3% to $3.3 billion compared to the prior year quarter driven primarily by 6% organic revenue growth, partially offset by a 3% unfavorable impact from foreign currency translation.

Total operating expenses for the fourth quarter decreased 1% to $2.7 billion compared to the prior year quarter due primarily to a $79 million favorable impact from foreign currency translation, a $65 million decrease in formal restructuring costs, and a $10 million decrease in intangible asset amortization, partially offset by an increase in expense associated with 6% organic revenue growth, $35 million of expense related to legacy litigation, and a $17 million increase in expenses related to acquisitions, net of divestitures.

Depreciation expense decreased 6%, or $4 million, to $59 million compared to the prior year quarter.

Intangible asset amortization expense decreased 10%, or $10 million, to $89 million compared to the prior year quarter, due to a $10 million decrease in HR Solutions primarily related to the Hewitt acquisition.

Restructuring savings in the fourth quarter related to the Aon Hewitt restructuring program are estimated at $101 million compared to $94 million in the prior year quarter.  Of the estimated savings in the fourth quarter, approximately $76 million were related to the HR Solutions segment compared to $73 million in the prior year quarter, and approximately $25 million were related to the Risk Solutions segment compared to $21 million in the prior year quarter. 

The Company completed all remaining restructuring activities related to the Aon Hewitt restructuring program in the fourth quarter.  Before any potential reinvestment of savings, the Aon Hewitt restructuring program delivered annual cumulative expense savings of approximately $402 million in 2014.  Of the $402 million in annual cumulative expense savings, approximately $303 million of savings were achieved in HR Solutions and $99 million of savings were achieved in Risk Solutions.

Foreign currency exchange rates in the fourth quarter had a $0.06 per share, or $23 million, pretax unfavorable impact (-$22 million in Risk Solutions, -$2 million in HR Solutions, +$1 million in Unallocated expenses) on adjusted net income from continuing operations if the Company were to translate prior year quarter results at current quarter foreign exchange rates.

Effective tax rate in the fourth quarter was 19.6% compared to 24.2% in the prior year quarter.  The effective tax rate in the fourth quarter of 2014 was favorably impacted by changes in the geographic distribution of income.

Average diluted shares outstanding decreased to 293.4 million in the fourth quarter compared to 311.4 million in the prior year quarter.  The Company repurchased 5.4 million Class A Ordinary Shares for approximately $500 million in the fourth quarter.  The Company has $5.6 billion of remaining authorization under its share repurchase program after giving effect to a $5.0 billion increase in authorization during the fourth quarter.

Cash flow from operations for 2014 increased 1% to a record $1.6 billion driven primarily by growth in net income and a decline in pension contributions, partially offset by an unfavorable impact from timing of significant receivable collections in the prior year period.

Free cash flow, as defined as cash flow from operations less capital expenditures, for 2014 decreased 1% to $1.4 billion driven by an increase in cash flow from operations, offset by a $27 million increase in capital expenditures.  A reconciliation of free cash flow to cash flow from operations can be found on the "Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow" on page 12 of this press release.

FOURTH QUARTER SEGMENT REVIEW

Certain noteworthy items impacted operating income and operating margins in the fourth quarters of 2014 and 2013.  The fourth quarter segment information provided below include supplemental information related to organic revenue, adjusted operating income and operating margin, which is described in detail on the "Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow" on page 12 and "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share" on page 13 of this press release.

RISK SOLUTIONS















Less:




(millions)


Three Months Ended





Less:


Acquisitions,




Commissions,

Fees and Other


Dec 31,
2014


Dec 31,
2013


%

Change


Currency

Impact


Divestitures,

Other


Organic

Revenue

Retail


$

1,715


$

1,708


—%


(4)%


—%


4%

Reinsurance


334


338


(1)


(4)



3

Subtotal


$

2,049


$

2,046


—%


(4)%


1%


3%

Investment Income


7


7











Total Revenue


$

2,056


$

2,053


—%










Risk Solutions total revenue increased $3 million compared to the prior year quarter driven by 3% organic growth in commissions and fees and a 1% increase in commissions and fees resulting from acquisitions, net of divestitures, offset by a 4% unfavorable impact from foreign currency translation.

Retail organic revenue increased 4% primarily driven by strong organic revenue growth in the Americas.  Americas organic revenue increased 7% reflecting strong growth across all regions, including record new business generation in US Retail and Latin America, and an $8 million anticipated favorable impact from timing of certain revenue.  Excluding the timing benefit, underlying organic revenue growth was 6%.  International organic revenue was flat driven by strong growth across Asia and the Pacific, offset by a modest decline in continental Europe. 

Reinsurance organic revenue increased 3% compared to the prior year quarter driven by net new business growth in treaty placements, as well as growth in capital markets transactions and advisory business and facultative placements, partially offset by a significant unfavorable market impact in treaty.



Three Months Ended




(millions)


December 31, 
2014


December 31,
2013


%

 Change

Revenue


$

2,056


$

2,053


—%

Expenses









Compensation and benefits


1,131


1,132


Other general expenses


482


508


(5)

Total operating expenses


1,613


1,640


(2)

Operating income


$

443


$

413


7%

Operating margin


21.5%


20.1%



Operating income - adjusted


$

507


$

484


5%

Operating margin - adjusted


24.7%


23.6%




Compensation and benefits for the fourth quarter decreased $1 million compared to the prior year quarter due primarily to a $41 million favorable impact from foreign currency translation and an $11 million decrease in formal restructuring costs, partially offset by an increase in expense associated with 3% organic revenue growth and a $16 million increase in expenses related to acquisitions, net of divestitures.

Other general expenses for the fourth quarter decreased 5%, or $26 million, compared to the prior year quarter due primarily to a $31 million decrease in formal restructuring costs, a $25 million favorable impact from foreign currency translation, and expense discipline, partially offset by $35 million of expense related to legacy litigation, and a $6 million increase in expenses related to acquisitions, net of divestitures.

Fourth quarter operating income increased 7% to $443 million compared to the prior year quarter.  Adjusting for certain items detailed on page 13 of this press release, operating income increased 5%, or $23 million, and operating margin increased 110 basis points to 24.7%, each compared to the prior year quarter.  The increase in adjusted operating margin was driven primarily by organic revenue growth of 3%, return on investments, and expense discipline.

HR SOLUTIONS

(millions)


Three Months Ended





Less:


Less:

Acquisitions,




Commissions,

Fees and Other


December 31,
2014


December 31,
2013


%

Change


Currency

Impact


Divestitures,

Other


Organic

Revenue

Consulting Services


$

455


$

450


1%


(2)%


(1)%


4%

Outsourcing


819


723


13


(1)


(1)


15

Intersegment


(14)


(7)


N/A


N/A


N/A


N/A

Subtotal


$

1,260


$

1,166


8%


(1)%


(1)%


10%

Investment Income




—%










Total Revenue


$

1,260


$

1,166


8%










HR Solutions total revenue increased 8% to $1.3 billion compared to the prior year quarter driven by 10% organic growth in commissions and fees, partially offset by a 1% decrease in commissions and fees related to acquisitions, net of divestitures and a 1% unfavorable impact from foreign currency translation.

Organic revenue in Consulting Services increased 4% due primarily to solid growth in US retirement for investment consulting and businesses across Asia, partially offset by a modest decline in continental Europe. Organic revenue in Outsourcing increased 15% compared to the prior year quarter due primarily to strong growth in health care exchanges and new client wins in HR Business Process Outsourcing.



Three Months Ended




(millions)


December 31,
2014


December 31,
2013


%

Change

Revenue


$

1,260


$

1,166


8%

Expenses







Compensation and benefits


690


680


1

Other general expenses


334


330


1

Total operating expenses


1,024


1,010


1

Operating income


$

236


$

156


51%

Operating margin


18.7%


13.4%



Operating income - adjusted


$

296


$

249


19%

Operating margin - adjusted


23.5%


21.4%



Compensation and benefits for the fourth quarter increased 1%, or $10 million, compared to the prior year quarter due primarily to an increase in expense associated with 10% organic revenue growth and a $7 million unfavorable impact from timing of certain expenses, partially offset by an $18 million decrease in formal restructuring costs, a $9 million favorable impact from currency translation, and a $4 million decrease in expenses related to acquisitions, net of divestitures.

Other general expenses for the fourth quarter increased 1%, or $4 million, compared to the prior year quarter due to an increase in expense associated with 10% organic revenue growth and a $2 million unfavorable impact from timing of certain expenses, partially offset by a $10 million decrease in intangible asset amortization and a $5 million decrease in formal restructuring costs.

Fourth quarter operating income increased 51% to $236 million compared to the prior year quarter.  Adjusting for certain items detailed on page 13 of this press release, operating income increased 19%, or $47 million, and operating margin increased 210 basis points to 23.5%, each compared to the prior year quarter.  The increase in adjusted operating margin was driven by strong organic revenue growth of 10%, partially offset by an anticipated $9 million unfavorable impact from timing of certain expenses that benefited the prior quarter.

INCOME BEFORE INCOME TAXES



Three Months Ended



(millions)


December 31,
2014


December 31,
2013


%
Change

Risk Solutions


$

443


$

413


7%

HR Solutions


236


156


51

Unallocated expenses


(44)


(54)


(19)

Operating income


$

635


$

515


23%

Interest income


3


3


Interest expense


(67)


(57)


18

Other income


10


14


(29)

Income before income taxes


$

581


$

475


22%

Unallocated expenses decreased $10 million to $44 million compared to the prior year quarter primarily driven by expense discipline in the current quarter and higher than normal expenses in the prior year quarter.  Interest income was flat at $3 million compared to the prior year quarter.  Interest expense increased $10 million to $67 million compared to the prior year quarter due primarily to an increase in total debt outstanding.  Other income of $10 million primarily includes a $7 million net gain due to the favorable impact of exchange rates on the remeasurement of assets and liabilities in non-functional currencies and gains on certain long term investments. The prior year quarter primarily includes gains on sale of businesses and certain long term investments.

2014 FULL YEAR SUMMARY

Total revenue for 2014 increased 2% to $12.0 billion due to 3% organic growth in commissions and fees, partially offset by a 1% unfavorable impact from foreign currency translation. Risk Solutions total revenue increased 1% to $7.8 billion and HR Solutions total revenue increased 5% to $4.3 billion.

Net income attributable to Aon shareholders for 2014 increased 26% to $1.4 billion compared to $1.1 billion for the prior year.  Net income attributable to Aon shareholders, adjusted for certain items, increased 11% to $1.7 billion.  Certain items that impacted full year results and comparisons against the prior year are detailed in the "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share" on page 13 of this press release.

Net income per share attributable to Aon shareholders for 2014 increased 32% to $4.66 per share compared to $3.53 per share for the prior year.  Net income attributable to Aon shareholders, adjusted for certain items, increased 17% to $5.71 per share compared to $4.89 per share for the prior year, including an $0.11 per share unfavorable impact on adjusted net income from continuing operations if the Company were to translate prior year quarter results at current quarter foreign exchange rates.  Certain items that impacted full year results and comparisons against the prior year are detailed in the "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share" on page 13 of this press release.

Cash flow from operations increased 1% to a record $1.6 billion in 2014 driven primarily by growth in net income and a decline in pension contributions, partially offset by an unfavorable impact from timing of significant receivable collections in the prior year period.  Free cash flow decreased 1% to $1.4 billion for 2014 driven by an increase in cash flow from operations, offset by a $27 million increase in capital expenditures. A reconciliation of free cash flow to cash flow from operations can be found on the "Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow" on page 12 of this press release.

During 2014, the Company repurchased approximately 25.8 million Class A Ordinary Shares for $2.25 billion at an average price of $87.18 per share.

Conference Call, Presentation Slides and Webcast Details
The Company will host a conference call on Friday, February 6, 2015 at 7:30 a.m., central time.  Interested parties can listen to the conference call via a live audio webcast and view the presentation slides at www.aon.com.

About Aon
Aon plc (NYSE: AON) is a leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon's global partnership with Manchester United.

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", 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 law suits 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; Aon's ability to implement initiatives intended to yield cost savings, and the ability to achieve those cost savings.

Further information concerning Aon and its business, 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 and its Quarterly Reports on Form 10-Q for a further discussion of these and other risks and uncertainties applicable to Aon's businesses. Aon does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in their respective expectations, except as required by law.

Explanation of Non-GAAP Measures
This communication includes supplemental information related to organic revenue, free cash flow, adjusted operating margin and adjusted earnings per share, that exclude the effects of restructuring charges, intangible asset amortization, capital expenditures, transaction and integration costs and certain other noteworthy items that affected results for the comparable periods.  Organic revenue excludes from reported revenues the impact of foreign exchange, acquisitions, divestitures, transfers between business units, reimbursable expenses and unusual items.  The impact of foreign exchange is determined by translating last year's revenue, expense or net income at this year's foreign exchange rates.  Reconciliations are provided in the attached schedules.  Supplemental organic revenue information and additional measures that exclude the effects of the restructuring charges and certain other items do not affect net income or any other GAAP reported amounts.  Free cash flow is cash flow from operating activity less capital expenditures.  Management believes that these measures are important to make meaningful period-to-period comparisons and that this supplemental information is helpful to investors.  They should be viewed in addition to, not in lieu of, the Company's Consolidated Financial Statements.  Industry peers provide similar supplemental information regarding their performance, although they may not make identical adjustments.

Investor Contact:


Media Contact:

Scott Malchow


David Prosperi

Senior Vice President, Investor Relations


Vice President, Global Public Relations

+44 (0) 20 7086 0100


312-381-2485

 

Aon plc
Condensed Consolidated Statements of Income (Unaudited)




Three Months Ended


Twelve Months Ended

(millions, except per share data)


Dec 31,
2014


Dec 31,
2013


Percent

Change


Dec 31,
2014


Dec 31,
2013


Percent

Change

Revenue



















Commissions, fees and other


$

3,292


$

3,202


3%


$

12,019


$

11,787


2%

Fiduciary investment income


7


7



26


28


(7)

Total revenue


3,299


3,209


3


12,045


11,815


2

Expenses














Compensation and benefits


1,848


1,842



7,014


6,945


1

Other general expenses


816


852


(4)


3,065


3,199


(4)

Total operating expenses


2,664


2,694


(1)


10,079


10,144


(1)

Operating income


635


515


23


1,966


1,671


18

Interest income


3


3



10


9


11

Interest expense


(67)


(57)


18


(255)


(210)


21

Other income


10


14


(29)


44


68


(35)

Income before income taxes


581


475


22


1,765


1,538


15

Income taxes


114


115


(1)


334


390


(14)

Net income


467


360


30


1,431


1,148


25

Less: Net income attributable to noncontrolling interests


8


5


60


34


35


(3)

Net income attributable to Aon shareholders


$

459


$

355


29%


$

1,397


$

1,113


26%

















Basic net income per share attributable to Aon shareholders


$

1.60


$

1.16


38%


$

4.73


$

3.57


32%

Diluted net income per share attributable to Aon shareholders


$

1.56


$

1.14


37


$

4.66


$

3.53


32

Weighted average ordinary shares outstanding - diluted


293.4


311.4


(6)%


299.6


315.4


(5)%

(1)

The effective tax rate is 19.6% and 24.2% for the three months ended December 31, 2014 and 2013, respectively and 18.9% and 25.4% for the twelve months ended December 31, 2014 and 2013, respectively.

 

 

Aon plc
Revenue (Unaudited)




Three Months Ended


Twelve Months Ended

(millions)


Dec 31,
2014


Dec 31,
2013


Percent

Change


Organic

Revenue

Growth (1)


Dec 31,
2014


Dec 31,
2013


Percent
Change


Organic
Revenue Growth (1)

Commissions, Fees and Other























Risk Solutions


$

2,049


$

2,046


—%


3%


$

7,808


$

7,761


1%


2%

HR Solutions


1,260


1,166


8


10


4,264


4,057


5


5

Total Operating Segments


$

3,309


$

3,212


3%


6%


$

12,072


$

11,818


2%


3%

Fiduciary Investment Income























Risk Solutions


$

7


$

7


—%





$

26


$

28


(7)%




HR Solutions













Total Operating Segments


$

7


$

7


—%





$

26


$

28


(7)%




Total Revenue























Risk Solutions


$

2,056


$

2,053


—%





$

7,834


$

7,789


1%




HR Solutions


1,260


1,166


8





4,264


4,057


5




Intersegment


(17)


(10)


70





(53)


(31)


71




Total


$

3,299


$

3,209


3%





$

12,045


$

11,815


2%






(1)

Organic revenue excludes the impact of foreign exchange, acquisitions, divestitures, transfers, reimbursable expenses and unusual items. Change in organic revenue, a non-GAAP measure, is reconciled to the corresponding U.S. GAAP percent change in revenue on page 12 of this release.

 

 

Aon plc
Segments (Unaudited)

Risk Solutions




Three Months Ended


Twelve Months Ended

(millions)


Dec 31,
2014


Dec 31,
2013


Percent

Change


Dec 31,
2014


Dec 31,
2013


Percent

Change

Revenue



















Commissions, fees and other


$

2,049


$

2,046


—%


$

7,808


$

7,761


1%

Fiduciary investment income


7


7



26


28


(7)

Total revenue


2,056


2,053



7,834


7,789


1

Expenses



















Compensation and benefits


1,131


1,132



4,396


4,385


Other general expenses


482


508


(5)


1,790


1,864


(4)

Total operating expenses


1,613


1,640


(2)


6,186


6,249


(1)

Operating income


$

443


$

413


7%


$

1,648


$

1,540


7%




















Operating margin


21.5%


20.1%





21.0%


19.8%




 

HR Solutions




Three Months Ended


Twelve Months Ended

(millions)


Dec 31,
2014


Dec 31,
2013


Percent

Change


Dec 31,
2014


Dec 31,
2013


Percent

Change

Revenue



















Commissions, fees and other


$

1,260


$

1,166


8%


$

4,264


$

4,057


5%

Fiduciary investment income




N/A




N/A

Total revenue


1,260


1,166


8


4,264


4,057


5

Expenses



















Compensation and benefits


690


680


1


2,518


2,455


3

Other general expenses


334


330


1


1,261


1,284


(2)

Total operating expenses


1,024


1,010


1


3,779


3,739


1

Operating income


$

236


$

156


51%


$

485


$

318


53%




















Operating margin


18.7%


13.4%





11.4%


7.8%




 

Total Operating Income (Loss)




Three Months Ended


Twelve Months Ended

(millions)


Dec 31,
2014


Dec 31,
2013


Percent

Change


Dec 31,
2014


Dec 31,
2013


Percent

Change

Risk Solutions


$

443


$

413


7%


$

1,648


$

1,540


7%

HR Solutions


236


156


51


485


318


53

Unallocated


(44)


(54)


(19)


(167)


(187)


(11)

Total operating income


$

635


$

515


23%


$

1,966


$

1,671


18%




















Total operating margin


19.2%


16.0%





16.3%


14.1%




 

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


        Organic Revenue (Unaudited)




Three Months Ended

(millions)


December 31, 2014


December 31, 2013


Percent

Change


Less:

Currency

Impact (1)


Less: Acquisitions,

Divestitures & Other


Organic

Revenue

Growth (2)

Commissions, Fees and Other



















Risk Solutions Segment:



















Retail brokerage



















Americas


$

959


$

905


6%


(3)%


2%


7%

International


756


803


(6)


(6)



Total Retail brokerage


1,715


1,708



(4)



4

Reinsurance brokerage


334


338


(1)


(4)



3

Total Risk Solutions


2,049


2,046



(4)


1


3

HR Solutions Segment:



















Consulting services


455


450


1


(2)


(1)


4

Outsourcing


819


723


13


(1)


(1)


15

Intrasegment


(14)


(7)


N/A


N/A


N/A


N/A

Total HR Solutions


1,260


1,166


8


(1)


(1)


10

Total Operating Segments


$

3,309


$

3,212


3%


(3)%


—%


6%





Twelve Months Ended

(millions)


December 31, 2014


December 31, 2013


Percent

Change


Less:

Currency

Impact (1)


Less: Acquisitions,

Divestitures & Other


Organic

Revenue

Growth (2)

Commissions, Fees and Other



















Risk Solutions Segment:



















Retail brokerage



















Americas


$

3,288


$

3,191


3%


(2)%


1%


4%

International


3,046


3,065


(1)


(1)


(2)


2

Total Retail brokerage


6,334


6,256


1


(2)



3

Reinsurance brokerage


1,474


1,505


(2)


(1)



(1)

Total Risk Solutions


7,808


7,761


1


(1)



2

HR Solutions Segment:



















Consulting services


1,700


1,626


5




5

Outsourcing


2,607


2,469


6




6

Intrasegment


(43)


(38)


N/A


N/A


N/A


N/A

Total HR Solutions


4,264


4,057


5




5

Total Operating Segments


$

12,072


$

11,818


2%


(1)%


—%


3%

 

        Free Cash Flow (Unaudited)




Twelve Months Ended

(millions)


December 31, 2014


December 31, 2013


Percent

Change

Cash Provided By Operations


$

1,642


$

1,633


1%

Less: Capital Expenditures


(256)


(229)


12

Free Cash Flow (3)


$

1,386


$

1,404


(1)%



(1)

Currency impact is determined by translating last year's revenue at this year's foreign exchange rates.

(2)

Organic revenue excludes the impact of foreign exchange, acquisitions, divestitures, transfers, reimbursable expenses and unusual items.

(3)

Free cash flow is defined as cash flow from operations less capital expenditures. This non-GAAP measure does not imply or represent a precise calculation of residual cash flow available for discretionary expenditures.

 

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




Three Months Ended December 31, 2014


Twelve Months Ended December 31, 2014

(millions)


Risk

Solutions


HR

Solutions


Unallocated

Income &

Expense


Total


Risk

Solutions


HR

Solutions


Unallocated

Income &

Expense


Total

Revenue


$

2,056


$

1,260


$

(17)


$

3,299


$

7,834


$

4,264


$

(53)


$

12,045

























Operating income (loss) - as reported


$

443


$

236


$

(44)


$

635


$

1,648


$

485


$

(167)


$

1,966

Intangible asset amortization


29


60



89


109


243



352

Legal settlement



35







35



35







35

Operating income (loss) - as adjusted


$

507


$

296


$

(44)


$

759


$

1,792


$

728


$

(167)


$

2,353


























Operating margins - as adjusted


24.7%


23.5%


N/A


23.0%


22.9%


17.1%


N/A


19.5%





Three Months Ended December 31, 2013


Twelve Months Ended December 31, 2013

(millions)


Risk

Solutions


HR

Solutions


Unallocated

Income &

Expense


Total


Risk

Solutions


HR

Solutions


Unallocated

Income &

Expense


Total

Revenue


$

2,053


$

1,166


$

(10)


$

3,209


$

7,789


$

4,057


$

(31)


$

11,815


























Operating income (loss) - as reported


$

413


$

156


$

(54)


$

515


$

1,540


$

318


$

(187)


$

1,671

Restructuring Charges


42


23



65


94


80



174

Intangible asset amortization


29


70



99


115


280



395

Headquarters relocation costs








5


5

Operating income (loss) - as adjusted


$

484


$

249


$

(54)


$

679


$

1,749


$

678


$

(182)


$

2,245


























Operating margins - as adjusted


23.6%


21.4%


N/A


21.2%


22.5%


16.7%


N/A


19.0%





Three Months Ended December 31,


Twelve Months Ended December 31,

(millions except per share data)


2014


2013


2014


2013

Operating income - as adjusted


$

759


$

679


$

2,353


$

2,245

Interest income


3


3


10


9

Interest expense


(67)


(57)


(255)


(210)

Other income


10


14


44


68













Income before income taxes - as adjusted


705


639


2,152


2,112

Income taxes (2)


139


154


407


536

Net income - as adjusted


566


485


1,745


1,576

Less: Net income attributable to noncontrolling interests


8


5


34


35

Net income attributable to Aon shareholders - as adjusted


$

558


$

480


$

1,711


$

1,541












Diluted earnings per share - as adjusted


$

1.89


$

1.54


$

5.71


$

4.89












Weighted average ordinary shares outstanding - diluted


293.4


311.4


299.6


315.4



(1)

Certain noteworthy items impacting operating income in 2014 and 2013 are described in this schedule. The items shown with the caption "as adjusted" are non-GAAP measures.

(2)

The effective tax rate is 19.6% and 24.2% for the three months ended December 31, 2014 and 2013, respectively and 18.9% and 25.4% for the twelve months ended December 31, 2014 and 2013, respectively.

 

Aon plc
Condensed Consolidated Statements of Financial Position (Unaudited)




As of

(millions)


December 31,
 2014


December 31,
 2013



(Unaudited)




ASSETS







Current Assets







Cash and cash equivalents


$

374


$

477

Short-term investments


394


523

Receivables, net


2,815


2,896

Fiduciary assets (1)


11,638


11,871

Other current assets


602


563

Total Current Assets


15,823


16,330

Goodwill


8,860


8,997

Intangible assets, net


2,520


2,578

Fixed assets, net


765


791

Investments


143


132

Non-current deferred tax assets


144


193

Other non-current assets


1,517


1,230

Total Assets


$

29,772


$

30,251








LIABILITIES AND EQUITY







Current Liabilities







Fiduciary liabilities


$

11,638


$

11,871

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


783


703

Accounts payable and accrued liabilities


1,805


1,931

Other current liabilities


788


906

Total Current Liabilities


15,014


15,411

Long-term debt


4,799


3,686

Non-current deferred tax liabilities


313


420

Pension, other post-retirement and other post-employment liabilities


2,141


1,607

Other non-current liabilities


874


932

Total Liabilities


23,141


22,056








EQUITY







Shareholders' Equity







Ordinary shares ($0.01 nominal value)


3


3

Additional paid-in capital


5,097


4,785

Retained earnings


4,605


5,731

Accumulated other comprehensive loss


(3,134)


(2,374)

Total Aon Shareholders' Equity


6,571


8,145

Noncontrolling interests


60


50

Total Equity


6,631


8,195

Total Liabilities and Equity


$

29,772


$

30,251


  (1)          Includes short-term investments:  2014 - $3,984 million, 2013 - $3,778 million

 

Aon plc
Condensed Consolidated Statements of Cash Flows (Unaudited)


(millions)

Years ended December 31


2014


2013




(Unaudited)




CASH FLOWS FROM OPERATING ACTIVITIES








Net income


$

1,431


$

1,148

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







Gain from sales of businesses, net


(44)


(65)

Depreciation of fixed assets


242


240

Amortization of intangible assets


352


395

Share-based compensation expense


328


300

Deferred income taxes


(135)


(14)

Change in assets and liabilities:







Fiduciary receivables


(19)


(4)

Short-term investments — funds held on behalf of clients


(403)


156

Fiduciary liabilities


422


(152)

Receivables, net


(25)


141

Accounts payable and accrued liabilities


(81)


48

Restructuring reserves


(83)


15

Current income taxes


42


(116)

Pension and other post employment liabilities


(340)


(502)

Other assets and liabilities


(45)


43

CASH PROVIDED BY OPERATING ACTIVITIES



1,642


1,633









CASH FLOWS FROM INVESTING ACTIVITIES








Proceeds from sale of long-term investments



52


93

Purchases of long-term investments



(20)


(15)

Net sales (purchases) of short-term investments - non-fiduciary



110


(174)

Acquisition of businesses, net of cash acquired



(479)


(54)

Proceeds from sale of businesses



48


40

Capital expenditures



(256)


(229)

CASH  USED FOR INVESTING ACTIVITIES



(545)


(339)









CASH FLOWS FROM FINANCING ACTIVITIES








Share repurchase



(2,250)


(1,102)

Issuance of shares for employee benefit plans



65


98

Issuance of debt



5,239


4,906

Repayment of debt



(3,918)


(4,679)

Cash dividends to shareholders



(273)


(212)

Sales (purchases) of shares to (from) noncontrolling interests



3


(8)

Dividends paid to noncontrolling interests



(24)


(19)

Proceeds from sale-leaseback



25


CASH USED FOR FINANCING ACTIVITIES



(1,133)


(1,016)








EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS


(67)


(92)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS



(103)


186

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD



477


291

CASH AND CASH EQUIVALENTS AT END OF PERIOD



$

374


$

477

 

SOURCE Aon plc