2014

Aon Reports Third Quarter 2012 Results - Total revenue was $2.7 billion with organic revenue growth of 4% -

- EPS from continuing operations was $0.62 -

LONDON, Oct. 26, 2012 /PRNewswire/ --

Third Quarter Summary

  • EPS from continuing operations, adjusted for certain items, increased 8% to $0.95
  • Risk Solutions revenue was flat at $1.8 billion with organic revenue growth of 3%
  • Risk Solutions operating margin was 17.4% and the operating margin, adjusted for certain items, decreased 20 basis points to 20.0%
  • HR Solutions revenue increased 1% to $971 million with organic revenue growth of 4%
  • HR Solutions operating margin was 8.2% and the operating margin, adjusted for certain items, increased 150 basis points to 17.5%
  • Cash flow from operations increased 63% to $598 million
  • Repurchased 5.4 million Class A ordinary shares for approximately $275 million
  • Announced that the first fully insured multi-carrier corporate health care exchange will be launched in the fourth quarter of 2012 with more than 100,000 participants

Aon plc (NYSE: AON) today reported results for the three months ended September 30, 2012. 

Net income attributable to Aon shareholders from continuing operations increased 3% to $204 million, or $0.62 per share, compared to $198 million, or $0.59 per share, for the prior year quarter.  Net income per share attributable to Aon shareholders from continuing operations, adjusted for certain items, was $0.95, an eight percent increase compared to $0.88 in the prior year quarter.  Certain items that impacted third 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 12 of this press release. 

"Our third quarter results, led by strong operating performance in HR Solutions, reflect solid progress against each of our three key metrics including four percent organic revenue growth, thirty basis points margin improvement and eight percent earnings growth," said Greg Case, president and chief executive officer.  "As we invest heavily in long-term growth opportunities such as our GRIP platform and healthcare exchanges to empower results for clients, we are delivering savings from our restructuring programs, generating strong free cash flow and effectively allocating capital, as highlighted by the repurchase of $275 million of ordinary shares in the quarter."

THIRD QUARTER FINANCIAL SUMMARY

Total revenue increased 1% to $2.7 billion compared to the prior year quarter driven by a 4% increase in organic revenue, primarily offset by a 3% decrease from unfavorable foreign currency exchange rates and a 27% decline in investment income due to lower average interest rates.

Total operating expenses for the third quarter were flat compared to the prior year quarter at $2.4 billion due primarily to a 4% increase in organic revenue, $14 million of acquisition related expenses, a $14 million increase in intangible asset amortization expense and a $6 million increase in restructuring costs, primarily offset by an $87 million favorable impact from foreign currency exchange rates, a $22 million decline in Hewitt related costs and savings related to the formal restructuring programs.

Depreciation expense increased 6%, or $3 million, to $56 million compared to the prior year quarter.

Intangible asset amortization expense increased 15%, or $14 million, to $105 million compared to the prior year quarter due primarily to a $16 million increase relating to assets associated with the merger with Hewitt.

Restructuring expenses were $32 million compared to $26 million in the prior year quarter.  In the third quarter, the Company incurred $16 million of costs in the HR Solutions segment and $16 million of costs in the Risk Solutions segment related to the Aon Hewitt restructuring program.  The Company has closed and completed all restructuring activities and incurred 100% of the total costs for the Aon Benfield restructuring program.  An analysis of restructuring-related costs by type and segment are detailed on page 13 of this release.

Restructuring savings in the third quarter related to the Aon Hewitt restructuring program are estimated at $64 million compared to $37 million in the prior year quarter.  Of the estimated savings in the third quarter, approximately $10 million were related to the Risk Solutions segment compared to $3 million in the prior year quarter.  The Company expects to deliver cumulative expense savings of $355 million in 2013 related to the Aon Hewitt restructuring program, including $280 million related to the restructuring program and $75 million in additional synergy savings from areas such as information technology, procurement and public company costs. 

Associated with the transfer of the Health and Benefits business effective January 1, 2012, approximately $46 million of the estimated savings under the Aon Hewitt restructuring program will be achieved in Risk Solutions.  As of the third quarter, an estimated $33 million of cumulative savings have been achieved in Risk Solutions.

Restructuring savings in the third quarter related to the Aon Benfield restructuring program are estimated at $36 million compared to $30 million in the prior year quarter.  Before any potential reinvestment of savings, the Aon Benfield restructuring program is expected to deliver cumulative expense savings of $146 million in 2012 related to the Risk Solutions segment.

Foreign currency exchange rates in the third quarter had no material impact on adjusted net income per share from continuing operations if the Company were to translate prior year quarter results at current quarter foreign exchange rates.  An unfavorable impact of $6 million in Risk Solutions was offset by a $5 million favorable impact in HR Solutions and a $1 million favorable impact in Unallocated.

Effective tax rate on net income from continuing operations decreased to 23.2% in the third quarter compared to 28.9% in the prior year quarter.  The effective tax rate in the third quarter of 2012 was favorably impacted by certain discrete tax adjustments.  The Company currently anticipates an effective tax rate on net income from continuing operations of approximately 26.0% in the fourth quarter of 2012 excluding any impact from potential discrete tax adjustments.

Average diluted shares outstanding decreased to 331.0 million in the third quarter compared to 336.9 million in the prior year quarter. The Company repurchased 5.4 million Class A ordinary shares for approximately $275 million in the third quarter.  The Company has $4.5 billion of remaining authorization.

THIRD QUARTER SEGMENT REVIEW

Certain noteworthy items impacted operating income and operating margins in the third quarter of 2012 and 2011.  The third quarter segment reviews 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" on page 11 and "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share" on page 12 of this press release.

RISK SOLUTIONS









Less:



(millions)

Three Months Ended




Less:


Acquisitions,




Commissions,

Sept 30,


Sept 30,


%


Currency


Divestitures,


Organic


Fees and Other

2012


2011


Change


Impact


Other


Revenue


Retail

$  1,390


$  1,392


-%


(4)%


2%


2%


Reinsurance

377


365


3


(4)


-


7


Subtotal

$  1,767


$  1,757


1%


(4)%


2%


3%


Investment Income

11


15


(27)








Total Revenue

$ 1,778


$ 1,772


-%



























Risk Solutions total revenue was flat compared to the prior year quarter at $1.8 billion due to 3% organic growth in commissions and fees and a 2% favorable impact from acquisitions, net of divestitures, partially offset by a 4% unfavorable impact from foreign currency exchange rates and a 27% decline in investment income.

Retail Brokerage organic revenue increased 2% reflecting revenue growth in both the Americas and International businesses.  Americas organic revenue increased 2% in the third quarter primarily as a result of strong management of the renewal book portfolio across Latin America and Affinity.  International organic revenue increased 3% driven by strong growth in emerging markets, health and benefits, and solid management of the renewal book portfolio across continental Europe.  Reinsurance organic revenue increased 7% with strong growth across all businesses including new business growth in treaty placements internationally and a favorable near-term benefit from pricing, capital market transactions and advisory business and facultative placements.



Three Months Ended





Sept 30,


Sept 30,


%

(millions)


2012


2011


Change

Revenue


$  1,778


$  1,772


-%

Expenses







Compensation and benefits


1,024


1,014


1

Other general expenses


445


447


-

Total operating expenses


1,469


1,461


1%

Operating income


$     309


$     311


(1)%

Operating margin


17.4%


17.6%










Operating income - adjusted


$     356


$     358


(1)%

Operating margin - adjusted 


20.0%


20.2%



Compensation and benefits for the third quarter increased 1%, or $10 million, compared to the prior year quarter due primarily to 3% organic revenue growth, $12 million of acquisition related expenses and a $3 million increase in restructuring costs, partially offset by a $43 million favorable impact from foreign currency exchange rates and benefits related to the formal restructuring programs.

Other general expenses for the third quarter were flat compared to the prior year quarter as a $27 million favorable impact from foreign currency exchange rates and a $5 million decline in Glenrand M-I-B restructuring related costs were primarily offset by 3% organic revenue growth and incremental investments in content and capability.

Third quarter operating income decreased 1% to $309 million.  Adjusting for certain items detailed on page 12 of this press release, operating income decreased 1%, or $2 million, compared to the prior year quarter, and operating margin decreased 20 basis points to 20.0% due primarily to investments in long-term growth opportunities and a decline in investment income, partially offset by savings related to the restructuring programs.

HR SOLUTIONS

(millions)

Three Months Ended




Less:


Less:

Acquisitions,



Commissions,

Sept 30,


Sept 30,


%


Currency


Divestitures,


Organic

Fees and Other

2012


2011


Change


Impact


Other


Revenue

Consulting Services

$     394


$     403


(2)%


(2)%


(5)%


5%

Outsourcing

585


558


5


(1)


2


4

Intersegment

(8)


(4)


  N/A


  N/A


   N/A


N/A

Subtotal

$    971


$     957


1%


(1)%


(2)%


4%

Investment Income

-


-


  N/A







Total Revenue

$ 971


$ 957


1%







HR Solutions total revenue increased 1% to $971 million compared to the prior year quarter due to 4% organic growth in commissions and fees partially offset by a 2% unfavorable impact from acquisitions, net of divestitures, and a 1% unfavorable impact from foreign currency exchange rates.

Organic revenue in Consulting Services increased 5% driven primarily by strong growth in investment consulting, pension administration services, talent and rewards consulting and across businesses in Asia, partially offset by a decline in discretionary demand in retirement consulting internationally.  Organic revenue in Outsourcing increased 4% due primarily to new client wins in HR BPO and benefits administration and increased demand for discretionary services, partially offset by anticipated price compression in benefits administration.



Three Months Ended





Sept 30,


Sept 30,


%

(millions)


2012


2011


Change

Revenue


$       971


$       957


1%

Expenses







Compensation and benefits


569


587


(3)

Other general expenses


322


309


4

Total operating expenses


891


896


(1)%

Operating income


$         80


$         61


31%

Operating margin


8.2%


6.4%










Operating income - adjusted


$       170


$       153


11%

Operating margin - adjusted 


17.5%


16.0%



Compensation and benefits for the third quarter decreased 3%, or $18 million, compared to the prior year quarter due primarily to benefits related to the Aon Hewitt restructuring program, an increase in costs related to new client implementations that were deferred in the current quarter and a $13 million favorable impact from foreign currency exchange rates, partially offset by 4% organic revenue growth, investments in key talent and a $5 million increase in restructuring costs.

Other general expenses for the third quarter increased 4%, or $13 million, from the prior year quarter due primarily to a $16 million increase in intangible asset amortization expense and 4% organic revenue growth, partially offset by a $22 million decline in Hewitt related costs and savings related to the Aon Hewitt restructuring program.

Third quarter operating income increased 31% to $80 million.  Adjusting for certain items detailed on page 12 of this press release, operating income increased 11%, or $17 million, to $170 million, and operating margin increased 150 basis points to 17.5% versus the prior year quarter due primarily to organic revenue growth, benefits related to the Aon Hewitt restructuring program and an increase in costs related to new client implementations that were deferred in the current quarter, partially offset by investments in the business and an unfavorable revenue mix shift.

INCOME FROM CONTINUING OPERATIONS



Three Months Ended





Sept 30,


Sept 30,


%

(millions)


2012


2011


Change

Risk Solutions


$      309


$      311


(1)%

HR Solutions


80


61


31

Unallocated expenses


(50)


(44)


14

Operating income from continuing operations before tax


$      339


$      328


3%

Interest income


1


4


(75)

Interest expense


(57)


(60)


(5)

Other (expense) income


(9)


20


N/A

Income from continuing operations before tax


$      274


$      292


(6)%

Unallocated expenses increased $6 million to $50 million due primarily to a $5 million increase in non-recurring costs for certain employee benefit programs and an increase in operating expenses related to relocation of the Company's headquarters. The prior year quarter included an $11 million unfavorable mark-to-market on certain Company owned life insurance plans.  Interest income decreased $3 million to $1 million due to lower average interest rates and lower average cash balances.  Interest expense decreased $3 million to $57 million due primarily to a decline in the average rate on total debt outstanding.  Other expense of $9 million primarily includes a $16 million loss due to the unfavorable impact of exchange rates on remeasurement of assets and liabilities in non-functional currencies and $9 million of net gains on certain Company owned life insurance plans and other long-term investments.  The prior year quarter included a $13 million gain due to the favorable impact of exchange rates on remeasurement of assets and liabilities in non-functional currencies and a $7 million gain related to the Company's ownership in certain insurance investment funds and other long-term investments.

Conference Call, Presentation Slides and Webcast Details

The Company will host a conference call on Friday, October 26, 2012 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 the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 62,000 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 and shirt sponsorship 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. Potential factors that could impact results include:  general economic conditions in different countries in which Aon does business around the world, including conditions is the European Union relating to sovereign debt and the continued viability of the Euro; changes in the competitive environment; 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; rating agency actions that could affect Aon's ability to borrow funds; fluctuations in exchange and interest rates that could influence revenue and expense; the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions and ERISA class actions; the impact of any investigations brought by regulatory authorities in the U.S., U.K. and other countries; the cost of resolution of other contingent liabilities and loss contingencies, including potential liabilities arising from error and omissions claims against Aon; the failure to retain and attract qualified personnel; 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 effect of the change in global headquarters and jurisdiction of incorporation, including the reaction of clients, employees and other constituents, the effect of compliance with U.K. regulatory regimes or the failure to realize some of the anticipated benefits; the extent to which Aon retains existing clients and attracts new businesses and Aon's ability to incentivize and retain key employees; the extent to which Aon manages certain risks created in connection with the various services, including fiduciary and advisory services, among others, that Aon currently provides, or will provide in the future, to clients; the possibility that the expected efficiencies and cost savings from the merger with Hewitt Associates Inc. ("Hewitt") will not be realized, or will not be realized within the expected time period; the risk that the Aon and Hewitt businesses will not be integrated successfully; Aon's ability to implement restructuring initiatives and other initiatives intended to yield cost savings, and the ability to achieve those cost savings; the potential of a system or network disruption resulting in operational interruption or improper disclosure of personal data; 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; and Aon's ability to grow and develop companies that it acquires or new lines of business. 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 Annual Report to Shareholders for the fiscal year ended December 31, 2011 and our Quarterly Reports on Form 10-Q for the three months ended March 31, 2012 and June 30, 2012 and other public filings with the SEC 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 and several additional measures including expenses, margins and income per share, that exclude the effects of restructuring charges, intangible asset amortization, 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.  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

Vice President, Investor Relations       

Vice President, Global Public Relations

+44-207-086-0100                               

312-381-2485




Aon plc

Condensed Consolidated Statements of Income (Unaudited)






Three Months Ended


Nine Months Ended

(millions, except per share data)


Sept. 30, 2012


Sept. 30, 2011


Percent Change


Sept. 30, 2012


Sept. 30, 2011


Percent Change

Revenue
















Commissions, fees and other


$  2,726


$  2,708


1

%


$  8,368


$  8,255


1

%


Fiduciary investment income


11


15


(27)



31


38


(18)




Total revenue


2,737


2,723


1



8,399


8,293


1



















Expenses
















Compensation and benefits


1,620


1,634


(1)



4,920


4,843


2



Other general expenses (1)


778


761


2



2,344


2,284


3




Total operating expenses


2,398


2,395


-



7,264


7,127


2


Operating income


339


328


3



1,135


1,166


(3)




















Interest income


1


4


(75)



6


14


(57)



Interest expense


(57)


(60)


(5)



(173)


(186)


(7)



Other (expense) income (1)


(9)


20


(145)



3


6


(50)


Income from continuing operations before income taxes


274


292


(6)



971


1,000


(3)



Income taxes (2) 


64


84


(24)



257


274


(6)


Income from continuing operations


210


208


1



714


726


(2)



















(Loss) income from discontinued operations before income taxes


-


-


 N/A 



(1)


5


(120)



Income taxes (3) 


-


-


 N/A 



-


1


(100)


(Loss) income from discontinued operations


-


-


 N/A 



(1)


4


(125)



















Net income 


210


208


1



713


730


(2)



Less:  Net income attributable to the noncontrolling interests


6


10


(40)



25


28


(11)


Net income attributable to Aon shareholders


$     204


$     198


3

%


$     688


$     702


(2)

%


















Net income (loss) attributable to Aon shareholders:
















Income from continuing operations


$     204


$     198


3

%


$     689


$     698


(1)

%


(Loss) income from discontinued operations


-


-


 N/A 



(1)


4


(125)



Net income 


$     204


$     198


3

%


$     688


$     702


(2)

%

Basic net income per share attributable to Aon shareholders:
















Income from continuing operations


$    0.62


$    0.59


5

%


$    2.08


$    2.07


-

%


Income from discontinued operations


-


-


 N/A 



-


0.01


(100)



Net income 


$    0.62


$    0.59


5

%


$    2.08


$    2.08


-

%


















Diluted net income per share attributable to Aon shareholders:
















Income from continuing operations


$    0.62


$    0.59


5

%


$    2.06


$    2.04


1

%


Income from discontinued operations


-


-


 N/A 



-


0.01


(100)



Net income 


$    0.62


$    0.59


5

%


$    2.06


$    2.05


-

%


















Weighted average ordinary shares outstanding - diluted


331.0


336.9


(2)

%


334.4


341.8


(2)

%



















(1)

Beginning in 2012, amounts related to gains and losses on foreign currency transactions have been included in Other (expense) income. These amounts in prior periods, which were historically included in Other general expenses, have been reclassified to conform with the current presentation. The amounts reclassified in the three and nine months ended September 30, 2011 were $13 million and $5 million, respectively, of income from Other general expenses to Other (expense) income.



(2)

Tax rate for continuing operations is 23.2% and 28.9% for the three months ended September 30, 2012 and 2011, respectively, and 26.5% and 27.4% for the nine months ended September 30, 2012 and 2011, respectively.



(3)

Tax rate for discontinued operations is not meaningful for the three and nine months ended September 30, 2012, respectively, and is 34.4% and 24.3% for the three and nine months ended September 30, 2011, respectively.

 

Aon plc

Revenue from Continuing Operations (Unaudited)




Three Months Ended


Nine Months Ended

(millions)

Sept. 30, 2012


Sept. 30, 2011


Percent Change


Organic Revenue (1)


Sept. 30, 2012


Sept. 30, 2011


Percent Change


Organic Revenue (1)

Commissions, Fees and Other




















Risk Solutions

$  1,767


$  1,757


1

%


3

%


$  5,551


$  5,497


1

%


4

%

HR Solutions

971


957


1



4



2,847


2,778


2



4




Total Operating Segments

$  2,738


$  2,714


1

%


4

%


$  8,398


$  8,275


1

%


4

%























Fiduciary Investment Income




















Risk Solutions

$        11


$        15


(27)

%





$        31


$        38


(18)

%




HR Solutions

-


-


 N/A 






-


-


 N/A 







Total Operating Segments

$        11


$        15


(27)

%





$        31


$        38


(18)

%


























Total Revenue




















Risk Solutions

$  1,778


$  1,772


-

%





$  5,582


$  5,535


1

%




HR Solutions

971


957


1






2,847


2,778


2





Intersegment 

(12)


(6)


100






(30)


(20)


50







Total

$  2,737


$  2,723


1

%





$  8,399


$  8,293


1

%

















































(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 11 of this release.



Aon plc

Segments (Unaudited)


Risk Solutions


Three Months Ended


Nine Months Ended

(millions)


Sept. 30, 2012


Sept. 30, 2011


Percent Change



Sept. 30, 2012


Sept. 30, 2011


Percent Change


Revenue
















Commissions, fees and other


$  1,767


$  1,757


1

%


$  5,551


$  5,497


1

%


Fiduciary investment income


11


15


(27)



31


38


(18)




Total revenue


1,778


1,772


-



5,582


5,535


1



















Expenses
















Compensation and benefits


1,024


1,014


1



3,146


3,083


2



Other general expenses


445


447


-



1,377


1,416


(3)




Total operating expenses


1,469


1,461


1



4,523


4,499


1



















Operating income


$     309


$     311


(1)

%


$  1,059


$  1,036


2

%


















Operating margin


17.4%


17.6%





19.0%


18.7%





















HR Solutions


Three Months Ended


Nine Months Ended

(millions)


Sept. 30, 2012


Sept. 30, 2011


Percent Change



Sept. 30, 2012


Sept. 30, 2011


Percent Change


Revenue
















Commissions, fees and other


$     971


$     957


1

%


$  2,847


$  2,778


2

%


Fiduciary investment income


-


-


 N/A 



-


-


 N/A 




Total revenue


971


957


1



2,847


2,778


2



















Expenses
















Compensation and benefits


569


587


(3)



1,703


1,681


1



Other general expenses


322


309


4



933


858


9




Total operating expenses


891


896


(1)



2,636


2,539


4



















Operating income


$        80


$        61


31

%


$     211


$     239


(12)

%


















Operating margin


8.2%


6.4%





7.4%


8.6%





















Total Operating Income (Loss)


Three Months Ended


Nine Months Ended

(millions)


Sept. 30, 2012


Sept. 30, 2011


Percent Change



Sept. 30, 2012


Sept. 30, 2011


Percent Change


Risk Solutions


$     309


$     311


(1)

%


$  1,059


$  1,036


2

%

HR Solutions


80


61


31



211


239


(12)


Unallocated


(50)


(44)


14



(135)


(109)


24



 Total operating income


$     339


$     328


3

%


$  1,135


$  1,166


(3)

%


















Total operating margin


12.4%


12.0%





13.5%


14.1%




 

Aon plc

Reconciliation of Non-GAAP Measures - Organic Revenue (Unaudited)









Three Months Ended


(millions)


Sept. 30, 2012


Sept. 30, 2011


Percent Change


Less:  Currency Impact (1)


Less: Acquisitions, Divestitures & Other


Organic Revenue (2)


Commissions, Fees and Other


















Risk Solutions Segment:



















Retail brokerage




















Americas


$     743


$     738


1

%


(2)

%


1

%


2

%




International


647


654


(1)



(7)



3



3






 Total Retail brokerage


1,390


1,392


-



(4)



2



2




Reinsurance brokerage 


377


365


3



(4)



-



7






 Total Risk Solutions 


1,767


1,757


1



(4)



2



3



HR Solutions Segment:




















Consulting services


394


403


(2)



(2)



(5)



5





Outsourcing


585


558


5



(1)



2



4





Intrasegment


(8)


(4)


 N/A 



 N/A 



 N/A 



 N/A 






 Total HR Solutions 


971


957


1



(1)



(2)



4



Total Operating Segments


$  2,738


$  2,714


1

%


(3)

%


-

%


4

%

















































Nine Months Ended


(millions)


Sept. 30, 2012


Sept. 30, 2011


Percent Change


Less:  Currency Impact (1)


Less: Acquisitions, Divestitures & Other


Organic Revenue (2)


Commissions, Fees and Other


















Risk Solutions Segment:



















Retail brokerage




















Americas


$  2,188


$  2,154


2

%


(2)

%


1

%


3

%




International


2,207


2,224


(1)



(5)



1



3






Total Retail brokerage 


4,395


4,378


-



(4)



1



3




Reinsurance brokerage 


1,156


1,119


3



(3)



-



6






 Total Risk Solutions 


5,551


5,497


1



(3)



-



4



HR Solutions Segment:




















Consulting services


1,140


1,141


-



(2)



(1)



3





Outsourcing


1,723


1,655


4



(1)



1



4





Intrasegment


(16)


(18)


 N/A 



 N/A 



 N/A 



 N/A 






 Total HR Solutions 


2,847


2,778


2



(1)



(1)



4



Total Operating Segments


$  8,398


$  8,275


1

%


(3)

%


-

%


4

%





(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. 


Aon plc

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






















Three Months Ended September 30, 2012


Nine Months Ended September 30, 2012

(millions)

Risk Solutions


HR Solutions


Unallocated Income & Expense


Total


Risk Solutions


HR Solutions


Unallocated Income & Expense


Total

Revenue 

$             1,778


$             971


$             (12)


$ 2,737


$    5,582


$          2,847


$             (30)


$ 8,399



















Operating income (loss) - as reported (2)

$                309


$                80


$             (50)


$    339


$    1,059


$             211


$           (135)


$ 1,135


Restructuring charges

16


16


-


32


29


36


-


65


Intangible asset amortization

31


74


-


105


91


222


-


313


Headquarters relocation costs

-


-


4


4


-


-


21


21

Operating income (loss) - as adjusted

$                356


$             170


$             (46)


$    480


$    1,179


$             469


$           (114)


$ 1,534



















Operating margins - as adjusted

20.0%


17.5%


N/A


17.5%


21.1%


16.5%


N/A


18.3%






















Three Months Ended September 30, 2011


Nine Months Ended September 30, 2011

(millions)

Risk Solutions


HR Solutions


Unallocated Income & Expense


Total


Risk Solutions


HR Solutions


Unallocated Income & Expense


Total

Revenue 

$             1,772


$             957


$               (6)


$ 2,723


$    5,535


$          2,778


$             (20)


$ 8,293



















Operating income (loss) - as reported (2)

$                311


$                61


$             (44)


$    328


$    1,036


$             239


$           (109)


$ 1,166


Restructuring charges 

14


12


-


26


28


42


-


70


Intangible asset amortization

33


58


-


91


97


176


-


273


Hewitt related costs

-


22


-


22


-


42


-


42

Operating income (loss) - as adjusted

$                358


$             153


$             (44)


$    467


$    1,161


$             499


$           (109)


$ 1,551



















Operating margins - as adjusted

20.2%


16.0%


N/A


17.2%


21.0%


18.0%


N/A


18.7%






















Three Months Ended






Nine Months Ended








September 30,






September 30,





(millions except per share data)

2012


2011






2012


2011





Operating income - as adjusted

$                480


$             467






$    1,534


$          1,551






Interest income

1


4






6


14






Interest expense 

(57)


(60)






(173)


(186)
























Other (expense) income - as reported

(9)


20






3


6







Headquarters relocation costs

2


-






2


-







Loss on debt extinguishment

-


-






-


19






Other (expense) income (2)

(7)


20






5


25























Income from continuing operations before income taxes - 

















as adjusted

417


431






1,372


1,404






Income taxes (3)

98


125






364


385





Income from continuing operations - as adjusted

319


306






1,008


1,019






Less:  Net income attributable to noncontrolling interests

6


10






25


28





Income from continuing operations attributable to 

















Aon shareholders - as adjusted

$                313


$             296






$       983


$             991























Diluted earnings per share from continuing operations - 

















as adjusted

$               0.95


$            0.88






$      2.94


$            2.90























Weighted average ordinary shares outstanding - diluted

331.0


336.9






334.4


341.8
























(1)

Certain noteworthy items impacting operating income in 2012 and 2011 are described in this schedule. The items shown with the caption "as adjusted" are non-GAAP measures.



(2)

Beginning in 2012, amounts related to gains and losses on foreign currency transactions have been inlcuded in Other (expense) income. These amounts in prior periods, which were historically included in Other general expenses, have been reclassified to conform with current presentation. The amounts reclassified during the three and nine months ended September 30, 2011 were $8 million and $3 million of income, respectively, in the Risk Solutions segment, $5 million and $6 million of income in the HR Solutions segment, respectively, and $4 million of expense during the nine months ended September 30, 2011 in Unallocated Income & Expense.



(3)

The effective tax rate for continuing operations is 23.2% and 28.9% for the three months ended September 30, 2012 and 2011, respectively, and 26.5% and 27.4% for the nine months ended September 30, 2012 and 2011, respectively. Adjusting items are generally taxed at the effective tax rate.

Aon plc

Restructuring Plans (Unaudited) (1)











Aon Hewitt Restructuring Plan 











By Type:













Actual



(millions)



Full Year 2010

Full Year 2011

Third Quarter 2012

Nine Months 2012

Total to Date


Estimated Total

Workforce reduction 



$            49

$         64

$          25

$          44

$         157


$          180

Lease consolidation 



3

32

6

11

46


95

Asset impairments 



-

7

-

1

8


47

Other costs associated with restructuring 



-

2

1

1

3


3

Total restructuring and related expenses



$            52

$       105

$          32

$          57

$         214


$          325











By Segment: (2)




















HR Solutions



52

49

16

36

137


243

Risk Solutions



-

56

16

21

77


82

Total restructuring and related expenses



$            52

$       105

$          32

$          57

$         214


$          325





















Aon Benfield Restructuring Plan











By Type:


Operations



(millions)

Purchase Price Allocation (3)

Full Year 2009

Full Year 2010

Full Year 2011

Third Quarter 2012

Nine Months 2012

Total to Date


Completed Plan Total

Workforce reduction 

$                 32

$          38

$            15

$         33

$             -

$            8

$         126


$          126

Lease consolidation (4)

20

14

7

(15)

-

-

26


26

Asset impairments 

-

2

2

-

-

-

4


4

Other costs associated with restructuring 

1

1

2

1

-

-

5


5

Total restructuring and related expenses

$                 53

$          55

$            26

$         19

$             -

$            8

$         161


$          161












(1)

In the Consolidated Statements of Income, workforce reductions are included in "Compensation and benefits"; lease consolidations, asset impairments, and other costs associated with restructuring are included in "Other general expenses".



(2)

Costs included in the Risk Solutions segment are associated with the transfer of the Health and Benefits Consulting business from HR Solutions to Risk Solutions effective January 1, 2012. Costs incurred in 2011 in the HR Solutions segment of $41 million related to the Health and Benefits Consulting business have been reclassified and presented in the Risk Solutions segment.



(3)

Represents costs associated with the execution of restructuring activity identified at the acquisition date (November 30, 2008).



(4)

Includes impact of reoccupying previously vacated leased properties. Total restructuring reversal was $19 million related to the Aon Benfield Restructuring Plan during 2011.



 

 Aon plc 

 Condensed Consolidated Statements of Financial Position (Unaudited) 
















 As of 

 (millions) 



September 30, 2012


December 31, 2011







(Unaudited)



 ASSETS 







 Current Assets 







 Cash and cash equivalents 



$                 290


$                 272


 Short-term investments 



718


785


 Receivables, net 



2,959


3,183


 Fiduciary assets (1) 



11,343


10,838


 Other current assets 



392


427



 Total Current Assets 



15,702


15,505


 Goodwill 



8,856


8,770


 Intangible assets, net 



3,040


3,276