LONDON, Aug. 4, 2017 /PRNewswire/ --
Second Quarter Key Metrics From Continuing Operations
- Reported revenue increased 4% to $2.4
billion, with organic revenue growth of 3%
- Operating margin was (5.0)%, and operating margin, adjusted for
certain items, increased 110 basis points to 22.4%
- EPS was $(0.20), and EPS,
adjusted for certain items, increased 13% to $1.45
- For the first six months of 2017, cash flow from operations was
$436 million, and free cash flow was
$354 million
Second Quarter Highlights
- Repurchased 8 million Class A Ordinary Shares for approximately
$1 billion
- Closed the sale of the Benefits Administration and HR Business
Process Outsourcing (BPO) platform for cash consideration of
$4.3 billion, subject to customary
adjustments, and additional consideration of up to $500 million
- Announced a 9% increase to the quarterly cash dividend
Aon plc (NYSE: AON) today reported results for the three months
ended June 30, 2017.
Net income attributable to Aon shareholders was
$769 million, or $2.93 per share, compared to $300 million or $1.11 per share, in the prior year period. Net
income per share attributable to Aon shareholders, adjusted for
certain items, increased 2% to $1.53,
compared to $1.50 in the prior year
period. Net income (loss) from continuing operations
was $(43) million, or $(0.20) per share, compared to $273 million, or $0.98 per share, in the prior year period. Net
income per share from continuing operations, adjusted for certain
items, increased 13% to $1.45,
compared to $1.28 in the prior year
period. Certain items that impacted second quarter results and
comparisons with the prior year period are detailed in the
"Reconciliation of Non-GAAP Measures - Operating Income from
Continuing Operations and Diluted Earnings per Share" on page 11 of
this press release.
"Our second quarter results reflect growth across all major
lines of revenue, solid operating performance with 110 basis points
of adjusted operating margin improvement and 13% earnings per share
growth, highlighted by the repurchase of $1
billion of stock in the quarter," said Greg Case, President and Chief Executive
Officer. "During the quarter, we took significant steps to
strengthen our industry-leading global professional services
platform, including the completed divestiture of our outsourcing
businesses and initial investments in our Aon United single
operating model. Combined with strong free cash flow
generation and capital proceeds from the transaction, we believe we
are on track to exceed $7.97 adjusted
earnings per share in 2018 and deliver double-digit free cash flow
growth over the long-term."
SECOND QUARTER 2017 FINANCIAL SUMMARY
The second
quarter financial results discussed herein represent performance
from continuing operations unless otherwise noted.
Total revenue in the second quarter increased 4%
to $2.4 billion, compared to the
prior year period driven primarily by 3% organic revenue growth and
a 3% increase related to acquisitions, net of divestitures,
partially offset by a 2% unfavorable impact from foreign currency
translation.
Total operating expenses in the second quarter increased
31% to $2.5 billion compared to the
prior year period due primarily to a $380
million non-cash impairment charge to the associated
indefinite lived tradenames associated with the sale of the
Benefits Administration and HR Business Process Outsourcing (BPO)
platform, $155 million of
restructuring costs, a $62 million
increase in operating expenses related to acquisitions, net of
divestitures, $35 million of
accelerated amortization related to tradenames, $34 million of costs related to regulatory and
compliance matters, and an $8 million
increase in intangible asset amortization from previous
acquisitions, partially offset by $62
million of expense related to certain non-cash pension
settlements in the prior year period, a $50
million favorable impact from foreign currency translation
and $44 million of savings related to
restructuring and other operational improvement initiatives.
Restructuring expenses were $155
million in the second quarter, primarily driven by workforce
reductions. The Company expects to invest $900 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 $700 million of cash restructuring charges and
$200 million of capital expenditures.
To date, the Company has incurred 40% of the total estimated
restructuring charges. An analysis of restructuring and related
costs by type is detailed on page 15 of this press release.
Restructuring savings in the second quarter related to
restructuring and other operational improvement initiatives are
estimated at $44 million before
reinvestment. Before any potential reinvestment of savings,
restructuring and other operational improvement initiatives are
expected to deliver run-rate savings of $400
million annually in 2019. To date, the Company has
achieved 14% of the total estimated annualized savings.
Foreign currency exchange rates in the second quarter had
a $0.05 per share, or $15 million, favorable impact on U.S. GAAP net
income, and a $0.02 per share, or
$7 million, pretax favorable impact
on adjusted net income if the Company were to translate prior year
quarter results at current quarter foreign exchange rates.
Effective tax rate used in the U.S. GAAP financial
statements in the second quarter was 76.9%, compared to the prior
year quarter of 13.6%. After adjusting to exclude the
applicable tax impact associated with estimated restructuring
expenses, accelerated tradename amortization, impairment charges,
regulatory and compliance provisions, and non-cash pension
settlement charges anticipated in Q4 2017, the adjusted effective
tax rate for the second quarter of 2017 was 15.6% compared to 14.9%
in the prior year quarter, due primarily to a net favorable impact
of certain discrete items recognized in both periods. These
adjustments are discussed in "Reconciliation of Non-GAAP Measures -
Operating Income from Continuing Operations and Diluted Earnings
per Share" on page 11 of this press release.
Weighted average diluted shares outstanding decreased to
262.4 million in the second quarter compared to 269.8 million in
the prior year quarter. The Company repurchased 8 million Class A
Ordinary Shares for approximately $1
billion in the quarter. As of June 30, 2017, the Company had $6.7 billion of remaining authorization under its
share repurchase program.
SECOND QUARTER 2017 CASH FLOW SUMMARY
Cash flow
from operations for the first six months of 2017 decreased 22%,
or $121 million, to $436 million compared to the prior year period,
primarily reflecting $94 million of
cash restructuring charges and $44
million of transaction related costs, partially offset by
operational improvement.
Free cash flow, defined as cash flow from operations less
capital expenditures, decreased 28%, or $135
million, to $354 million for
the first six months of 2017 compared to the prior year period,
reflecting a decline in cash flow from operations and a
$14 million increase in capital
expenditures, including investments in our operating model. A
reconciliation of 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.
SECOND QUARTER 2017 REVENUE REVIEW
The second 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)
|
|
June 30,
2017
|
|
June 30,
2016
|
|
% Change
|
|
Less: Currency Impact
|
|
Less:
Fiduciary
Investment
Income
|
|
Less:
Acquisitions, Divestitures &
Other
|
|
Organic Revenue Growth
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
|
1,042
|
|
$
|
990
|
|
5%
|
|
(1)%
|
|
—%
|
|
4%
|
|
2%
|
Reinsurance
Solutions
|
|
344
|
|
332
|
|
4
|
|
(1)
|
|
—
|
|
(1)
|
|
6
|
Retirement
Solutions
|
|
389
|
|
405
|
|
(4)
|
|
(4)
|
|
—
|
|
(1)
|
|
1
|
Health
Solutions
|
|
312
|
|
281
|
|
11
|
|
(1)
|
|
—
|
|
7
|
|
5
|
Data & Analytic
Services
|
|
285
|
|
275
|
|
4
|
|
(1)
|
|
—
|
|
1
|
|
4
|
Elimination
|
|
(4)
|
|
(1)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Total
revenue
|
|
$
|
2,368
|
|
$
|
2,282
|
|
4%
|
|
(2)%
|
|
—%
|
|
3%
|
|
3%
|
Total organic revenue increased 3% compared to the prior year
period, reflecting growth across every major revenue line and
highlighted by strong growth in Reinsurance Solutions and Health
Solutions.
Commercial Risk Solutions organic revenue increased 2%
compared to the prior year period driven by strong growth across
the Pacific region, in both Australia and New
Zealand, and solid growth in the U.S. and Canada, partially offset by a modest decline
in Latin America and Asia.
Reinsurance Solutions organic revenue increased 6%
compared to the prior year period driven by strong growth in
capital markets, as well as growth in facultative placements and
net new business generation in treaty, partially offset by a modest
unfavorable market impact globally.
Retirement Solutions organic revenue increased 1%
compared to the prior year period driven by continued growth in
investment consulting, primarily for delegated investment
management, partially offset by a decline in our talent
practice.
Health Solutions organic revenue increased 5% compared to
the prior year period driven by solid growth globally in health
& benefits brokerage, highlighted by strong growth in the U.S.,
Asia, and EMEA.
Data & Analytic Services organic revenue increased 4%
compared to the prior year period driven by strong growth across
Affinity, with particular strength in the U.S.
SECOND QUARTER EXPENSE REVIEW
|
|
Three Months
Ended
|
|
|
|
(millions)
|
|
June 30,
2017
|
June 30,
2016
|
$
Change
|
|
%
Change
|
Expenses
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
$
|
1,457
|
|
$
|
1,396
|
|
$
|
61
|
|
4%
|
Information
technology
|
|
98
|
|
99
|
|
(1)
|
|
(1)
|
Premises
|
|
86
|
|
89
|
|
(3)
|
|
(3)
|
Depreciation of fixed
assets
|
|
54
|
|
41
|
|
13
|
|
32
|
Amortization and
impairment of intangible assets
|
|
460
|
|
38
|
|
422
|
|
1,111
|
Other general
expenses
|
|
331
|
|
232
|
|
99
|
|
43
|
Total operating
expenses
|
|
$
|
2,486
|
|
$
|
1,895
|
|
$
|
591
|
|
31%
|
Compensation and benefits expense increased 4%, or
$61 million, compared to the prior
year period due primarily to $102
million of restructuring costs, a $38
million increase in expenses related to acquisitions, net of
divestitures, and an increase in expense associated with 3% organic
revenue growth, partially offset by $62
million of expense related to certain non-cash pension
settlements in the prior year period, a $38
million favorable impact from foreign currency translation,
and $24 million of savings related to
restructuring and other operational improvement initiatives.
Information technology expense decreased 1%, or
$1 million, compared to the prior
year period due primarily to $12
million of savings related to restructuring and other
operational improvement initiatives and a $2
million favorable impact from foreign currency translation,
partially offset by $7 million of
restructuring costs.
Premises expense decreased 3%, or $3 million, compared to the prior year period due
primarily to a $2 million favorable
impact from foreign currency translation and $1 million of savings related to restructuring
and other operational improvement initiatives, partially offset by
$1 million of restructuring
costs.
Depreciation of fixed assets expense increased 32%, or
$13 million, compared to the prior
year period primarily due to $11
million of restructuring costs related to of fixed asset
write-offs, partially offset by a $1
million favorable impact from foreign currency
translation.
Amortization and impairment of intangible assets expense
increased 1,111%, or $422 million,
compared to the prior year period primarily due to a $380 million non-cash impairment charge to the
indefinite lived tradenames associated with the sale of the
Benefits Administration and HR Business Process Outsourcing (BPO)
platform, $35 million of accelerated
amortization related to tradenames and an $8
million increase in intangible asset amortization from
previous acquisitions, partially offset by a $1 million favorable impact from foreign currency
translation.
Other general expenses increased 43%, or $99 million, compared to the prior year period
due primarily to $34 million of
restructuring costs, $34 million of
costs related to regulatory and compliance matters, a $16 million increase in operating expenses
related to acquisitions, net of divestitures, and an increase in
expense associated with 3% organic revenue growth, partially offset
by $7 million of savings related to
restructuring and other operational improvement initiatives and a
$6 million favorable impact from
foreign currency translation.
SECOND QUARTER 2017 INCOME SUMMARY
Certain noteworthy
items impacted operating income and operating margins in the second
quarters of 2017 and 2016. The second quarter information
provided below includes supplemental information related to
adjusted operating income and adjusted operating margin, which are
non-GAAP measures that are described in detail in "Reconciliation
of Non-GAAP Measures - Operating Income from Continuing Operations
and Diluted Earnings per Share" on page 11 of this press
release.
|
|
Three Months Ended
|
|
|
(millions)
|
|
June
30, 2017
|
|
June
30, 2016
|
|
% Change
|
Revenue
|
|
$
|
2,368
|
|
$
|
2,282
|
|
4%
|
Expenses
|
|
2,486
|
|
1,895
|
|
31
|
Operating
income
|
|
$
|
(118)
|
|
$
|
387
|
|
(130)%
|
Operating
margin
|
|
(5.0)%
|
|
17.0%
|
|
|
Operating income -
adjusted
|
|
$
|
531
|
|
$
|
487
|
|
9%
|
Operating margin -
adjusted
|
|
22.4%
|
|
21.3%
|
|
|
Operating income decreased $505
million, or 130%, compared to the prior year period.
Adjusting for certain items detailed on page 11 of this press
release, operating income increased 9%, or $44 million, and operating margin increased 110
basis points to 22.4%, each compared to the prior year period. The
increase in adjusted operating margin was primarily driven by
$44 million, or +190 basis points, of
savings from restructuring and other operational improvement
initiatives partially offset by a $4
million, or -20 basis point, unfavorable impact from lower
non-cash pension income and a $10
million, or -40 basis point, headwind from lower errors and
omissions expense in the prior year quarter.
|
|
Three Months Ended
|
|
|
(millions)
|
|
June
30, 2017
|
|
June
30, 2016
|
|
% Change
|
Operating
income
|
|
$
|
(118)
|
|
$
|
387
|
|
(130)%
|
Interest
income
|
|
8
|
|
3
|
|
167
|
Interest
expense
|
|
(71)
|
|
(73)
|
|
(3)
|
Other income
(expense)
|
|
(5)
|
|
(1)
|
|
400
|
Income from
continuing operations before income taxes
|
|
$
|
(186)
|
|
$
|
316
|
|
(159)%
|
Interest income increased $5
million to $8 million compared
to the prior year period primarily due to additional income earned
on the proceeds from the sale of our outsourcing businesses.
Interest expense decreased $2
million to $71 million
compared to the prior year period driven by a modest decrease in
total debt outstanding. Other expense was $5 million and primarily included losses on
certain foreign exchange hedging programs. The prior year period
primarily includes losses on certain foreign exchange hedging
programs and long-term investments, partially offset by the sale of
a certain business.
DISCONTINUED OPERATIONS
Net income from
discontinued operations was $821
million, or $3.13 per share,
compared to $35 million, or
$0.13 per share, in the prior year
period. Net income per share from discontinued operations,
adjusted for certain items, was $22
million, or $0.08 per share,
compared to $58 million, or
$0.22 per share in the prior year
period. Certain items that impacted second quarter results and
comparisons with the prior year period are detailed in
"Reconciliation of Non-GAAP Measures - Operating Income from
Continuing Operations and Diluted Earnings per Share" on page 11 of
this press release.
Conference Call, Presentation Slides and Webcast
Details
The Company will host a conference call on
Friday, August 4, 2017 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, including negative yields in some
jurisdictions, 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 of 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; 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 risks associated with the various services,
including fiduciary and investments and other advisory services and
business process outsourcing services, among others, that Aon
provides or will provide to clients; Aon's ability to grow, develop
and integrate companies or new lines of business that it acquires;
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; risks and
uncertainties in connection with the sale of our benefits
administration and business process outsourcing business; and our
ability to realize the expected benefits from our restructuring
plan.
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,
2016 and its Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2017 and June 30, 2017 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 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, fiduciary investment income, and
reimbursable expenses. 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. 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.
Investor
Contact:
|
|
Media
Contact:
|
Scott
Malchow
|
|
Donna
Mirandola
|
Senior Vice
President, Investor Relations
|
|
Senior Director,
External Communications - Americas
|
+44 (0) 20 7086
0100
|
|
312-381-1532
|
Aon
plc
|
|
Condensed
Consolidated Statements of Income (Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
|
Six Months
Ended
|
|
|
(millions, except per
share data)
|
|
June
30, 2017
|
|
June
30, 2016
|
|
% Change
|
|
June
30, 2017
|
|
June
30, 2016
|
|
% Change
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
$
|
2,368
|
|
$
|
2,282
|
|
4%
|
|
$
|
4,749
|
|
$
|
4,558
|
|
4%
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
1,457
|
|
1,396
|
|
4%
|
|
2,918
|
|
2,741
|
|
6%
|
Information
technology
|
|
98
|
|
99
|
|
(1)%
|
|
186
|
|
182
|
|
2%
|
Premises
|
|
86
|
|
89
|
|
(3)%
|
|
170
|
|
171
|
|
(1)%
|
Depreciation of fixed
assets
|
|
54
|
|
41
|
|
32%
|
|
108
|
|
79
|
|
37%
|
Amortization and
impairment of intangible assets
|
|
460
|
|
38
|
|
1,111%
|
|
503
|
|
75
|
|
571%
|
Other general
expenses
|
|
331
|
|
232
|
|
43%
|
|
639
|
|
503
|
|
27%
|
Total operating
expenses
|
|
2,486
|
|
1,895
|
|
31%
|
|
4,524
|
|
3,751
|
|
21%
|
Operating
income
|
|
(118)
|
|
387
|
|
(130)%
|
|
225
|
|
807
|
|
(72)%
|
Interest
income
|
|
8
|
|
3
|
|
167%
|
|
10
|
|
5
|
|
100%
|
Interest
expense
|
|
(71)
|
|
(73)
|
|
(3)%
|
|
(141)
|
|
(142)
|
|
(1)%
|
Other income
(expense)
|
|
(5)
|
|
(1)
|
|
400%
|
|
(15)
|
|
17
|
|
(188)%
|
Income (loss) from
continuing operations before income taxes
|
|
(186)
|
|
316
|
|
(159)%
|
|
79
|
|
687
|
|
(89)%
|
Income taxes
(1)
|
|
(143)
|
|
43
|
|
(433)%
|
|
(143)
|
|
102
|
|
(240)%
|
Net income (loss)
from continuing operations
|
|
(43)
|
|
273
|
|
(116)%
|
|
222
|
|
585
|
|
(62)%
|
Net income from
discontinued operations, net of tax (2)
|
|
821
|
|
35
|
|
2,246%
|
|
861
|
|
60
|
|
1,335%
|
Net
income
|
|
778
|
|
308
|
|
153%
|
|
1,083
|
|
645
|
|
68%
|
Less: Net income
attributable to noncontrolling interests
|
|
9
|
|
8
|
|
13%
|
|
23
|
|
20
|
|
15%
|
Net income
attributable to Aon shareholders
|
|
$
|
769
|
|
$
|
300
|
|
156%
|
|
$
|
1,060
|
|
$
|
625
|
|
70%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income
(loss) per share attributable to Aon shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.20)
|
|
$
|
0.99
|
|
(120)%
|
|
$
|
0.75
|
|
$
|
2.10
|
|
(64)%
|
Discontinued
operations (3)
|
|
3.13
|
|
0.13
|
|
2,308%
|
|
3.27
|
|
0.22
|
|
1,386%
|
Net income
|
|
$
|
2.93
|
|
$
|
1.12
|
|
162%
|
|
$
|
4.02
|
|
$
|
2.32
|
|
73%
|
Diluted net income
(loss) per share attributable to Aon shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.20)
|
|
$
|
0.98
|
|
(120)%
|
|
$
|
0.75
|
|
$
|
2.08
|
|
(64)%
|
Discontinued
operations (3)
|
|
3.13
|
|
0.13
|
|
2,308%
|
|
3.24
|
|
0.22
|
|
1,373%
|
Net income
|
|
$
|
2.93
|
|
$
|
1.11
|
|
164%
|
|
$
|
3.99
|
|
$
|
2.30
|
|
73%
|
Weighted average
ordinary shares outstanding - basic
|
|
262.4
|
|
268.0
|
|
(2)%
|
|
263.6
|
|
269.9
|
|
(2)%
|
Weighted average
ordinary shares outstanding - diluted
|
|
262.4
|
|
269.8
|
|
(3)%
|
|
265.7
|
|
271.7
|
|
(2)%
|
|
|
(1)
|
The effective tax
rate was 76.9% and 13.6% for the three months ended June 30,
2017 and 2016, respectively, and (181.0)% and 14.8% for the
six months ended June 30, 2017 and 2016,
respectively.
|
(2)
|
Income from
discontinued operations, net of tax, includes a $798 million gain
on the sale of the Divested Business.
|
(3)
|
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 June 30, 2017.
Included within total operating expenses for the three months ended
June 30, 2016 was $17 million of depreciation of fixed assets
and $30 million of intangible asset amortization. Total
operating expenses for the six months ended June 30, 2017 and
2016 include, respectively, $8 million and $35 million of
depreciation of fixed assets and $11 million and $60 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)
|
|
June 30,
2017
|
|
June 30,
2016
|
|
% Change
|
|
Less: Currency Impact (1)
|
|
Less:
Fiduciary
Investment
Income (2)
|
|
Less:
Acquisitions, Divestitures &
Other
|
|
Organic Revenue Growth (3)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
|
1,042
|
|
$
|
990
|
|
5%
|
|
(1)%
|
|
—%
|
|
4%
|
|
2%
|
Reinsurance
Solutions
|
|
344
|
|
332
|
|
4
|
|
(1)
|
|
—
|
|
(1)
|
|
6
|
Retirement
Solutions
|
|
389
|
|
405
|
|
(4)
|
|
(4)
|
|
—
|
|
(1)
|
|
1
|
Health
Solutions
|
|
312
|
|
281
|
|
11
|
|
(1)
|
|
—
|
|
7
|
|
5
|
Data & Analytic
Services
|
|
285
|
|
275
|
|
4
|
|
(1)
|
|
—
|
|
1
|
|
4
|
Elimination
|
|
(4)
|
|
(1)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Total
revenue
|
|
$
|
2,368
|
|
$
|
2,282
|
|
4%
|
|
(2)%
|
|
—%
|
|
3%
|
|
3%
|
|
|
Six Months
Ended
|
(millions)
|
|
June 30,
2017
|
|
June 30,
2016
|
|
% Change
|
|
Less: Currency Impact (1)
|
|
Less:
Fiduciary
Investment
Income (2)
|
|
Less:
Acquisitions, Divestitures &
Other
|
|
Organic Revenue Growth (3)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
|
2,026
|
|
$
|
1,951
|
|
4%
|
|
(1)%
|
|
—%
|
|
3%
|
|
2%
|
Reinsurance
Solutions
|
|
715
|
|
703
|
|
2
|
|
(1)
|
|
—
|
|
(1)
|
|
4
|
Retirement
Solutions
|
|
775
|
|
800
|
|
(3)
|
|
(4)
|
|
—
|
|
(1)
|
|
2
|
Health
Solutions
|
|
684
|
|
573
|
|
19
|
|
(2)
|
|
—
|
|
12
|
|
9
|
Data & Analytic
Services
|
|
553
|
|
534
|
|
4
|
|
(1)
|
|
—
|
|
1
|
|
4
|
Elimination
|
|
(4)
|
|
(3)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Total
revenue
|
|
$
|
4,749
|
|
$
|
4,558
|
|
4%
|
|
(2)%
|
|
—%
|
|
2%
|
|
4%
|
|
|
(1)
|
Currency impact is
determined by translating last year's revenue at this year's
foreign exchange rates.
|
|
|
(2)
|
Fiduciary Investment
Income for the three months ended June 30, 2017 and 2016,
respectively, was $7 million and $5 million. Fiduciary Investment
Income for the six months ended June 30, 2017 and 2016,
respectively, was $13 million and $10 million.
|
|
|
(3)
|
Organic revenue
growth includes the impact of intercompany activity and excludes
the impact of foreign exchange rate changes, acquisitions,
divestitures, transfers between business units, fiduciary
investment income, and reimbursable expenses.
|
Free Cash
Flow from Continuing Operations (Unaudited)
|
|
|
|
Six Months
Ended
|
|
|
(millions)
|
|
June 30,
2017
|
|
June 30,
2016
|
|
Percent Change
|
Cash Provided By
Continuing Operating Activities
|
|
$
|
436
|
|
$
|
557
|
|
(22)%
|
Capital Expenditures
for Continuing Operations
|
|
(82)
|
|
(68)
|
|
21
|
Free Cash Flow for
Continuing Operations (1)
|
|
$
|
354
|
|
$
|
489
|
|
(28)%
|
|
|
(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.
|
Aon
plc
|
|
Reconciliation of
Non-GAAP Measures - Operating Income from Continuing Operations and
Diluted Earnings Per Share (Unaudited) (1)
|
|
|
|
Three Months
Ended
|
|
|
|
Six Months
Ended
|
|
|
(millions, except
percentage data)
|
|
June
30, 2017
|
|
June
30, 2016
|
|
Percent
Change
|
|
June
30, 2017
|
|
June
30, 2016
|
|
Percent
Change
|
Revenue from
continuing operations
|
|
$
|
2,368
|
|
$
|
2,282
|
|
4%
|
|
$
|
4,749
|
|
$
|
4,558
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
from continuing operations - as reported
|
|
$
|
(118)
|
|
$
|
387
|
|
(130)%
|
|
$
|
225
|
|
$
|
807
|
|
(72)%
|
Amortization and
impairment of intangible assets
|
|
460
|
|
38
|
|
1,111%
|
|
503
|
|
75
|
|
571%
|
Restructuring
|
|
155
|
|
—
|
|
—%
|
|
299
|
|
—
|
|
—%
|
Regulatory and
compliance matters
|
|
34
|
|
—
|
|
—%
|
|
34
|
|
—
|
|
—%
|
Pension
settlement
|
|
—
|
|
62
|
|
(100)%
|
|
—
|
|
62
|
|
(100)%
|
Operating income
from continuing operations - as adjusted
|
|
$
|
531
|
|
$
|
487
|
|
9%
|
|
$
|
1,061
|
|
$
|
944
|
|
12%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin
from continuing operations - as reported
|
|
(5.0)%
|
|
17.0%
|
|
|
|
4.7%
|
|
17.7%
|
|
|
Operating margin
from continuing operations - as adjusted
|
|
22.4%
|
|
21.3%
|
|
|
|
22.3%
|
|
20.7%
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
Six Months
Ended
|
|
|
(millions, except per share data)
|
|
June 30,
2017
|
|
June
30, 2016
|
|
Percent
Change
|
|
June 30,
2017
|
|
June 30,
2016
|
|
Percent
Change
|
Operating income
from continuing operations - as adjusted
|
|
$
|
531
|
|
$
|
487
|
|
9%
|
|
$
|
1,061
|
|
$
|
944
|
|
12%
|
Interest
income
|
|
8
|
|
3
|
|
167%
|
|
10
|
|
5
|
|
100%
|
Interest
expense
|
|
(71)
|
|
(73)
|
|
(3)%
|
|
(141)
|
|
(142)
|
|
(1)%
|
Other income
(expense)
|
|
(5)
|
|
(1)
|
|
400%
|
|
(15)
|
|
17
|
|
(188)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
income taxes from continuing operations - as
adjusted
|
|
463
|
|
416
|
|
11%
|
|
915
|
|
824
|
|
11%
|
Income taxes
(2)
|
|
72
|
|
62
|
|
16%
|
|
122
|
|
126
|
|
(3)%
|
Net income from
continuing operations - as adjusted
|
|
391
|
|
354
|
|
10%
|
|
793
|
|
698
|
|
14%
|
Adjusted net income
from discontinued operations, net of tax (3)
|
|
22
|
|
58
|
|
(62)%
|
|
70
|
|
106
|
|
(34)%
|
Net income - as
adjusted
|
|
413
|
|
412
|
|
—%
|
|
863
|
|
804
|
|
7%
|
Less: Net income
attributable to noncontrolling interests
|
|
9
|
|
8
|
|
13%
|
|
23
|
|
20
|
|
15%
|
Net income
attributable to Aon shareholders - as adjusted
|
|
$
|
404
|
|
$
|
404
|
|
—%
|
|
$
|
840
|
|
$
|
784
|
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income
(loss) per share attributable to Aon shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
- as adjusted
|
|
$
|
1.45
|
|
$
|
1.28
|
|
13%
|
|
$
|
2.90
|
|
$
|
2.50
|
|
16%
|
Discontinued
operations - as adjusted
|
|
|
0.08
|
|
|
0.22
|
|
(64)%
|
|
|
0.26
|
|
|
0.39
|
|
(33)%
|
Net income - as
adjusted
|
|
$
|
1.53
|
|
$
|
1.50
|
|
2%
|
|
$
|
3.16
|
|
$
|
2.89
|
|
9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
ordinary shares outstanding - diluted
|
|
264.3
|
|
269.8
|
|
(2%)
|
|
265.7
|
|
271.7
|
|
(2%)
|
|
|
(1)
|
Certain noteworthy
items impacting operating income in 2017 and 2016 are described in
this schedule. The items shown with the caption "as adjusted" are
non-GAAP measures.
|
|
|
(2)
|
The effective tax
rates used in the U.S. GAAP financial statements for continuing
operations were 76.9% and (181.0)%, respectively, for the
three and six months ended June 30, 2017. Adjusted items
are generally taxed at the estimated annual effective tax rate,
except for the applicable tax impact associated with estimated
restructuring expenses, accelerated tradename amortization,
impairment charges, regulatory and compliance provisions, and
non-cash pension settlement charges anticipated in Q4 2017, which
are adjusted at the related jurisdictional rate. After
adjusting to exclude the applicable tax impact, the adjusted
effective tax rates for continuing operations were 15.6% and 13.3%,
respectively, for the three and six months ended June 30,
2017. The effective tax rates used in the U.S. GAAP financial
statements for continuing operations were 13.6% and 14.8%,
respectively, for the three and six months ended 2016. Adjusted
items are generally taxed at the estimated annual effective tax
rate, except for the applicable tax impact associated with non-cash
pension charges settled in Q2 2016, which are adjusted at the
related jurisdictional rate. After adjusting to exclude the
applicable tax impact, the adjusted effective tax rates for
continuing operations were 14.9% and 15.3%, respectively, for the
three and six months ended 2016.
|
|
|
(3)
|
Adjusted income from
discontinued operations, net of tax, excludes the gain on sale and
intangible asset amortization on discontinued operations of $1,972
million and $0 million, respectively, for the three months ended
June 30, 2017 and $1,972 million and $11 million for the six months
ended June 30, 2017. The effective tax rates used in the U.S.
GAAP financial statements for discontinued operation were 59.0% and
58.1%, respectively, for the three months and six months ended
June 30, 2017. After adjusting to exclude the applicable
tax impact associated with the gain on sale and intangible asset
amortization, the adjusted effective tax rates for discontinued
operations were 16.2% and 25.9%, respectively, for the three months
and six months ended June 30, 2017. Adjusted income from
discontinued operations, net of tax, excludes intangible asset
amortization on discontinued operations of $30 million and $60
million, respectively, for the three months and six months ended
June 30, 2016. The effective tax rates used in the U.S.
GAAP financial statements for discontinued operation were 34.0% and
37.5% for the three and six months ended 2016, respectively. After
adjusting to exclude the applicable tax impact associated with
amortization, the adjusted effective tax rates for discontinued
operations were 30.1% and 32.1% for the three and six months ended
2016, respectively.
|
Aon
plc
|
|
Condensed
Consolidated Statements of Financial Position
(Unaudited)
|
|
|
As of
|
(millions)
|
|
June
30, 2017
|
|
December
31, 2016
|
ASSETS
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
684
|
|
|
$
|
426
|
|
Short-term
investments
|
|
2,746
|
|
|
290
|
|
Receivables,
net
|
|
2,191
|
|
|
2,106
|
|
Fiduciary assets
(1)
|
|
9,582
|
|
|
8,959
|
|
Other current
assets
|
|
399
|
|
|
247
|
|
Current assets of
discontinued operations
|
|
—
|
|
|
1,118
|
|
Total Current
Assets
|
|
15,602
|
|
|
13,146
|
|
Goodwill
|
|
7,745
|
|
|
7,410
|
|
Intangible assets,
net
|
|
1,402
|
|
|
1,890
|
|
Fixed assets,
net
|
|
556
|
|
|
550
|
|
Deferred tax
assets
|
|
575
|
|
|
325
|
|
Prepaid
pension
|
|
941
|
|
|
858
|
|
Other non-current
assets
|
|
368
|
|
|
360
|
|
Non-current assets of
discontinued operations
|
|
—
|
|
|
2,076
|
|
TOTAL
ASSETS
|
|
$
|
27,189
|
|
|
$
|
26,615
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
LIABILITIES
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
1,423
|
|
|
$
|
1,604
|
|
Short-term debt and
current portion of long-term debt
|
|
292
|
|
|
336
|
|
Fiduciary
liabilities
|
|
9,582
|
|
|
8,959
|
|
Other current
liabilities
|
|
2,078
|
|
|
656
|
|
Current liabilities
of discontinued operations
|
|
—
|
|
|
940
|
|
Total Current
Liabilities
|
|
13,375
|
|
|
12,495
|
|
Long-term
debt
|
|
5,631
|
|
|
5,869
|
|
Deferred tax
liabilities
|
|
84
|
|
|
101
|
|
Pension, other
postretirement and postemployment liabilities
|
|
1,688
|
|
|
1,760
|
|
Other non-current
liabilities
|
|
858
|
|
|
719
|
|
Non-current
liabilities of discontinued operations
|
|
—
|
|
|
139
|
|
TOTAL
LIABILITIES
|
|
21,636
|
|
|
21,083
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
Ordinary shares -
$0.01 nominal value
|
|
3
|
|
|
3
|
|
Additional paid-in
capital
|
|
5,587
|
|
|
5,577
|
|
Retained
earnings
|
|
3,574
|
|
|
3,807
|
|
Accumulated other
comprehensive loss
|
|
(3,677)
|
|
|
(3,912)
|
|
TOTAL AON
SHAREHOLDERS' EQUITY
|
|
5,487
|
|
|
5,475
|
|
Noncontrolling
interests
|
|
66
|
|
|
57
|
|
TOTAL
EQUITY
|
|
5,553
|
|
|
5,532
|
|
TOTAL LIABILITIES
AND EQUITY
|
|
$
|
27,189
|
|
|
$
|
26,615
|
|
|
|
(1)
|
Includes cash and
short-term investments of $3,712 million and $3,290 million for the
periods ended June 30, 2017 and December 31, 2016,
respectively.
|
Aon
plc
|
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
|
|
|
Six Months
Ended
|
(millions)
|
|
June 30,
2017
|
|
June 30,
2016
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
|
Net income
|
|
$
|
1,083
|
|
|
$
|
645
|
|
Less: Net income from
discontinued operations, net of income taxes
|
|
861
|
|
|
60
|
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
|
Loss (gain) from
sales of businesses and investments, net
|
|
3
|
|
|
(41)
|
|
Depreciation of fixed
assets
|
|
108
|
|
|
79
|
|
Amortization and
impairment of intangible assets
|
|
503
|
|
|
75
|
|
Share-based
compensation expense
|
|
148
|
|
|
144
|
|
Deferred income
taxes
|
|
(227)
|
|
|
15
|
|
Change in assets and
liabilities:
|
|
|
|
|
Fiduciary
receivables
|
|
10
|
|
|
96
|
|
Short-term
investments — funds held on behalf of clients
|
|
(286)
|
|
|
(409)
|
|
Fiduciary
liabilities
|
|
275
|
|
|
313
|
|
Receivables,
net
|
|
(25)
|
|
|
46
|
|
Accounts payable and
accrued liabilities
|
|
(377)
|
|
|
(335)
|
|
Restructuring
reserves
|
|
178
|
|
|
—
|
|
Current income
taxes
|
|
(25)
|
|
|
(62)
|
|
Pension, other
postretirement and other postemployment liabilities
|
|
(101)
|
|
|
(28)
|
|
Other assets and
liabilities
|
|
30
|
|
|
79
|
|
Net cash provided
by operating activities - continuing operations
|
|
436
|
|
|
557
|
|
Net cash provided
by operating activities - discontinued operations
|
|
64
|
|
|
207
|
|
CASH PROVIDED BY
OPERATING ACTIVITIES
|
|
500
|
|
|
764
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
|
Proceeds from
investments
|
|
29
|
|
|
23
|
|
Payments for
investments
|
|
(32)
|
|
|
(29)
|
|
Net sale (purchases)
of short-term investments — non-fiduciary
|
|
(2,451)
|
|
|
106
|
|
Acquisition of
businesses, net of cash acquired
|
|
(149)
|
|
|
(183)
|
|
Sale of businesses,
net of cash sold
|
|
4,193
|
|
|
103
|
|
Capital
expenditures
|
|
(82)
|
|
|
(68)
|
|
Net cash provided
by (used for) investing activities - continuing
operations
|
|
1,508
|
|
|
(48)
|
|
Net cash used for
investing activities - discontinued operations
|
|
(19)
|
|
|
(36)
|
|
CASH PROVIDED BY
(USED FOR) INVESTING ACTIVITIES
|
|
1,489
|
|
|
(84)
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
|
Share
repurchase
|
|
(1,100)
|
|
|
(750)
|
|
Issuance of shares
for employee benefit plans
|
|
(139)
|
|
|
(87)
|
|
Issuance of
debt
|
|
1,651
|
|
|
2,056
|
|
Repayment of
debt
|
|
(1,990)
|
|
|
(1,632)
|
|
Cash dividends to
shareholders
|
|
(182)
|
|
|
(169)
|
|
Noncontrolling
interests and other financing activities
|
|
(10)
|
|
|
(62)
|
|
Net cash provided
by financing activities - continuing operations
|
|
(1,770)
|
|
|
(644)
|
|
Net cash provided
by financing activities - discontinued operations
|
|
—
|
|
|
—
|
|
CASH USED FOR
FINANCING ACTIVITIES
|
|
(1,770)
|
|
|
(644)
|
|
|
|
|
|
|
EFFECT OF EXCHANGE
RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
|
34
|
|
|
18
|
|
NET INCREASE IN
CASH AND CASH EQUIVALENTS
|
|
253
|
|
|
54
|
|
CASH AND CASH
EQUIVALENTS AT BEGINNING OF PERIOD
|
|
431
|
|
|
384
|
|
CASH AND CASH
EQUIVALENTS AT END OF PERIOD (1)
|
|
$
|
684
|
|
|
$
|
438
|
|
|
|
(1)
|
Includes $0 million
and $4 million of discontinued operations at June 30, 2017 and
June 30, 2016, respectively.
|
Aon
plc
|
|
Restructuring Plan
(Unaudited) (1)
|
|
|
|
Three months
ended
June 30, 2017
|
|
Six months
ended
June 30, 2017
|
|
Estimated
Remaining Costs
|
|
Estimated
Total
Cost (2)
|
Workforce
reduction
|
|
$
|
102
|
|
|
$
|
205
|
|
|
$
|
98
|
|
|
$
|
303
|
|
Technology
rationalization
|
|
7
|
|
|
10
|
|
|
136
|
|
|
146
|
|
Lease
consolidation
|
|
1
|
|
|
4
|
|
|
76
|
|
|
80
|
|
Asset
impairments
|
|
11
|
|
|
24
|
|
|
16
|
|
|
40
|
|
Other costs
associated with restructuring and separation
(3)
|
|
34
|
|
|
56
|
|
|
125
|
|
|
181
|
|
Total restructuring
and related expenses
|
|
$
|
155
|
|
|
$
|
299
|
|
|
$
|
451
|
|
|
$
|
750
|
|
|
|
(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-second-quarter-2017-results-300499731.html
SOURCE Aon plc