DUBLIN, Oct. 29, 2021
/PRNewswire/ --
Third Quarter Key Metrics
- Total revenue increased 13% to $2.7
billion, including organic revenue growth of 12%
- Operating margin decreased 4,810 basis points to (29.6)%,
and operating margin, adjusted for certain items, decreased 30
basis points to 22.1%, including a negative impact of 240 basis
points from the repatterning of discretionary expenses as
previously described
- EPS decreased to $(3.99), and
EPS, adjusted for certain items, increased 14% to $1.74
- For the first nine months of 2021, cash flows from operations
decreased 38% to $1,251 million, and
free cash flow decreased 40% to $1,149
million
Third Quarter Highlights
- Announced the Aon United Growth Ownership Plan, enabling
virtually all colleagues globally to share in the firm's current
and future success
- Repurchased 4.4 million class A ordinary shares for
approximately $1.3 billion
Aon plc (NYSE: AON) today reported results for the three months
ended September 30, 2021.
Net income (loss) attributable to Aon shareholders was
$(900) million, or $(3.99) per share, compared to $275 million, or $1.18 per share, in the prior year period. Net
income per share attributable to Aon shareholders, adjusted for
certain items, increased 14% to $1.74, including a favorable impact of
$0.02 per share if prior year period
results were translated at current period foreign exchange rates
("foreign currency translation"), compared to $1.53 in the prior year period. Certain items
that impacted third quarter results and comparisons with the prior
year period are detailed in the "Reconciliation of Non-GAAP
Measures - Operating Income and Diluted Earnings Per Share" on page
10 of this press release.
"In the third quarter, our team delivered outstanding results,
including 12% organic revenue growth translating into 14% growth in
adjusted earnings per share," said Greg
Case, Chief Executive Officer. "This performance is driven
by great execution of our Aon United Blueprint and the work our
colleagues do every day to ensure clients are better informed,
better advised and able to make better decisions to protect and
grow their businesses. Our focus on unmet client needs related to
new forms of volatility, workforce resiliency, and access to
capital make us more relevant to current clients and more capable
of addressing a broader marketplace, positioning Aon to deliver
substantial ongoing value to clients and shareholders."
THIRD QUARTER 2021 FINANCIAL SUMMARY
Total
revenue in the third quarter increased 13% to $2.7 billion compared to the prior year period
driven by 12% organic revenue growth and a 2% favorable impact from
foreign currency translation, partially offset by a 1% unfavorable
impact from acquisitions, divestitures, and other.
Total operating expenses in the third quarter increased
80% to $3.5 billion compared to the
prior year period due primarily to a $1.3
billion increase in charges related to terminating the
combination with Willis Towers
Watson and related costs, an increase in expense associated
with 12% organic revenue growth, a $65
million negative impact from the repatterning of
discretionary expenses within the year, as previously described,
and a $36 million unfavorable impact
from foreign currency translation, partially offset by a
$10 million decrease in amortization
and impairment of intangible assets that occurred in the prior
period.
Foreign currency translation in the third quarter had a
$4 million, or $0.02 per share, favorable impact on U.S. GAAP
net income and a $6 million, or
$0.02 per share, favorable impact on
adjusted net income. If currency were to remain stable at today's
rates, the Company would expect an insignificant impact per share
in the fourth quarter of 2021.
Effective tax rate used in the Company's U.S. GAAP
financial statements in the third quarter was (2.6)%, compared to
22.5% in the prior year period. The primary driver of the
change in the U.S. GAAP tax rate was the impact of the termination
fee(1) and additional payments related to terminating
the combination with Willis Towers
Watson and related costs. After adjusting to exclude the
applicable tax impact associated with certain non-GAAP adjustments,
the adjusted effective tax rate for the third quarter of 2021
increased to 23.9% compared to 20.1% in the prior year period. The
primary drivers of the change in the adjusted tax rate were the
geographical distribution of income and the impact of discrete
items.
Weighted average diluted shares outstanding decreased to
225.4 million in the third quarter compared to 233.5 million in the
prior year period. The Company repurchased 4.4 million Class A
Ordinary Shares for approximately $1.3
billion in the third quarter. As of September 30, 2021,
the Company had approximately $3.7 billion of remaining authorization
under its share repurchase program.
YEAR TO DATE 2021 CASH FLOW SUMMARY
Cash flows
provided by operations for the first nine months of 2021
decreased $772 million, or 38%, to
$1,251 million compared to the prior
year period, primarily due to the $1
billion termination fee payment and additional payments
related to terminating the combination with Willis Towers Watson and related costs,
partially offset by strong revenue growth and a $86 million decrease in restructuring cash
outlays. The prior year period included near-term actions taken due
to uncertainty surrounding COVID-19.
Free cash flow, defined as cash flows from operations
less capital expenditures, decreased 40%, to $1,149 million for the first nine months of 2021
compared to the prior year period, reflecting a decrease in cash
flows from operations, partially offset by a $17 million decrease in capital expenditures.
THIRD QUARTER 2021 REVENUE REVIEW
The third quarter
revenue reviews provided below include supplemental information
related to organic revenue growth, which is a non-GAAP measure that
is described in detail in "Reconciliation of Non-GAAP Measures -
Organic Revenue Growth and Free Cash Flow" on page 9 of this press
release.
|
|
Three Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
|
2021
|
|
2020
|
|
%
Change
|
|
Less:
Currency
Impact
|
|
Less:
Fiduciary
Investment
Income
|
|
Less:
Acquisitions,
Divestitures &
Other
|
|
Organic
Revenue
Growth
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
|
1,505
|
|
$
|
1,320
|
|
14%
|
|
2%
|
|
—%
|
|
(1)%
|
|
13%
|
Reinsurance
Solutions
|
|
353
|
|
321
|
|
10
|
|
1
|
|
—
|
|
1
|
|
8
|
Health
Solutions
|
|
497
|
|
423
|
|
17
|
|
2
|
|
—
|
|
(1)
|
|
16
|
Wealth
Solutions
|
|
351
|
|
327
|
|
7
|
|
3
|
|
—
|
|
—
|
|
4
|
Eliminations
|
|
(4)
|
|
(6)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Total
revenue
|
|
$
|
2,702
|
|
$
|
2,385
|
|
13%
|
|
2%
|
|
—%
|
|
(1)%
|
|
12%
|
Total revenue increased $317
million, or 13%, to $2,702
million compared to the prior year period, including organic
revenue growth of 12% reflecting growth in the core, driven by net
new business generation and ongoing strong retention, as well as
double-digit growth overall in the more discretionary portions of
the business.
Commercial Risk Solutions organic revenue growth of 13%
reflects growth across every major geography, driven by strong new
business generation, retention and management of the renewal book
portfolio. Strength in retail brokerage was highlighted by
double-digit growth in the U.S., Latin
America, and Asia and the
Pacific, driven by continued strength in core P&C, as well as
double-digit growth in transaction liability and project-related
work. Results also reflect solid growth globally in the affinity
business across both consumer and business solutions. On average
globally, exposures and pricing were modestly positive, resulting
in a modestly positive market impact.
Reinsurance Solutions organic revenue growth of 8%
reflects strong growth in treaty, driven by continued net new
business generation globally, as well as double-digit growth in
facultative placements, partially offset by a modest decline in
capital markets transactions. Market impact was modestly positive
on results in the quarter. The majority of revenue in our treaty
portfolio is recurring in nature and is recorded in connection with
the major renewal periods that take place throughout the first half
of the year, while the second half of the year is largely driven by
facultative placements and capital markets that are more
transactional in nature.
Health Solutions organic revenue growth of 16% reflects
double-digit growth in Human Capital, driven by both rewards and
assessments solutions. In health and benefits brokerage, solid
growth globally in the core was driven by strong retention and
management of the renewal book portfolio, as well as growth in the
more discretionary areas, primarily voluntary benefits and
project-related work. Results include a positive impact from the
timing of certain revenue.
Wealth Solutions organic revenue growth of 4% reflects
strong growth in delegated investment management. Results also
reflect modest growth in Retirement Consulting, driven by higher
utilization rates and project-related work.
THIRD QUARTER 2021 EXPENSE REVIEW
|
|
Three Months
Ended
September 30,
|
|
|
|
|
(millions)
|
|
2021
|
|
2020
|
|
$
Change
|
|
%
Change
|
Expenses
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
$
|
1,835
|
|
$
|
1,387
|
|
$
|
448
|
|
32%
|
Information
technology
|
|
130
|
|
107
|
|
23
|
|
21
|
Premises
|
|
98
|
|
70
|
|
28
|
|
40
|
Depreciation of fixed
assets
|
|
56
|
|
42
|
|
14
|
|
33
|
Amortization and
impairment of intangible assets
|
|
36
|
|
50
|
|
(14)
|
|
(28)
|
Other general
expense
|
|
1,348
|
|
288
|
|
1,060
|
|
368
|
Total operating
expenses
|
|
$
|
3,503
|
|
$
|
1,944
|
|
$
|
1,559
|
|
80%
|
Compensation and benefits expense increased $448 million, or 32%, compared to the prior year
period due primarily to a $245
million increase in charges related to terminating the
combination with Willis Towers
Watson and related costs, an increase in expense associated
with 12% organic revenue growth, a $65
million negative impact from the repatterning of
discretionary expenses within the year, as previously described,
and a $28 million unfavorable impact
from foreign currency translation.
Information technology expense increased $23 million, or 21%, compared to the prior year
period due primarily to a $17 million
increase in charges related to terminating the combination with
Willis Towers Watson and related
costs and an increase in expense associated with 12% organic
revenue growth.
Premises expense increased $28
million, or 40%, compared to the prior year period due
primarily to a $22 million increase
in charges related to terminating the combination with Willis Towers Watson and related costs and a
$2 million unfavorable impact from
foreign currency translation.
Depreciation of fixed assets increased $14 million, or 33%, compared to the prior year
period due primarily to a $16 million
increase in charges related to terminating the combination with
Willis Towers Watson and related
costs.
Amortization and impairment of intangible assets
decreased $14 million, or 28%,
compared to the prior year period, which included $10 million of asset impairments.
Other general expenses increased $1.1 billion, or 368%, compared to the prior year
period due primarily to a $1.0
billion increase in charges related to terminating the
combination with Willis Towers
Watson and related costs and an increase in expense
associated with 12% organic revenue growth.
All remaining charges related to terminating the combination
with Willis Towers Watson, including
the termination fee, have been recognized in Q3 2021.
THIRD QUARTER 2021 INCOME SUMMARY
Certain noteworthy
items impacted adjusted operating income and adjusted operating
margins in the third quarters of 2021 and 2020, which are also
described in detail in "Reconciliation of Non-GAAP Measures -
Operating Income and Diluted Earnings Per Share" on page 10 of this
press release.
|
|
Three Months
Ended
September 30,
|
|
(millions)
|
|
2021
|
|
2020
|
%
Change
|
Revenue
|
|
$
|
2,702
|
|
$
|
2,385
|
|
13%
|
Expenses
|
|
3,503
|
|
1,944
|
|
80
|
Operating income
(loss)
|
|
$
|
(801)
|
|
$
|
441
|
|
(282)%
|
Operating
margin
|
|
(29.6)%
|
|
18.5%
|
|
|
Operating income -
as adjusted
|
|
$
|
598
|
|
$
|
534
|
|
12%
|
Operating margin -
as adjusted
|
|
22.1%
|
|
22.4%
|
|
|
Operating income decreased to $(801) million and operating margin decreased
4,810 basis points compared to the prior year period, due primarily
to a $1.3 billion increase in charges
related to terminating the combination with Willis Towers Watson and related costs.
Operating income, adjusted for certain items increased $64 million, or 12%, and operating margin,
adjusted for certain items, decreased 30 basis points to 22.1%,
each compared to the prior year period. Adjusted operating income
and adjusted operating margin primarily reflect strong organic
revenue growth that significantly outpaced investment, as well as a
$65 million, or 240 basis points,
negative impact from the repatterning of discretionary expenses, as
previously described.
Interest income and interest expense were flat
compared to the prior year period. Other pension income
increased $1 million to $5 million compared to the prior year period.
Other income increased $9
million to $5 million compared
to the prior year period, primarily reflecting net gains due to the
favorable impact of exchange rates on the remeasurement of assets
and liabilities in non-functional currencies.
Conference Call, Presentation Slides and Webcast
Details
The Company will host a conference call on Friday,
October 29, 2021 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.
(1)
|
Aon Corporation, a
subsidiary of Aon plc, paid the Regulatory Termination Fee to
Willis Towers Watson on July 27, 2021, reflecting that U.S.
business services provided by Aon Corporation and its subsidiaries
were the primary focus of the Department of Justice's challenge to
our proposed combination. The Regulatory Termination Fee was paid
to defend the existing U.S. business of Aon Corporation and to
avoid additional remedy divestitures of critical Aon Corporation
business segments in the U.S. and the continuing delay and
uncertainty in completing the combination.
|
About Aon
Aon plc (NYSE: AON) exists to
shape decisions for the better — to protect and enrich the lives of
people around the world. Our colleagues provide our clients in over
120 countries with advice and solutions that give them the clarity
and confidence to make better decisions to protect and grow their
business.
Follow Aon on Twitter and LinkedIn. Stay up-to-date by visiting
the Aon Newsroom and sign up for News Alerts here.
Safe Harbor Statement
This communication
contains certain statements related to future results, or states
Aon's 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 Aon's
operations, the uncertainty surrounding the COVID-19 pandemic, and
the termination of Aon's Business Combination Agreement with Willis
Towers Watson Public Limited Company regarding the combination of
the parties (the "Combination"). All statements other than
statements of historical facts that address activities, events or
developments that Aon expects or anticipates may occur in the
future, including such things as its outlook, future capital
expenditures, growth in commissions and fees, changes to the
composition or level of its revenues, cash flow and liquidity,
expected tax rates, business strategies, competitive strengths,
goals, the benefits of new initiatives, growth of its business and
operations, plans, references to future successes, the termination
of the Combination and divestitures planned in connection
therewith, and pending or potential litigation relating to the
Combination and divestitures planned in connection therewith,
including as a result of the termination or potential termination
of such transactions, are forward-looking statements. Also, when
Aon uses the words such as "anticipate", "believe", "estimate",
"expect", "intend", "plan", "probably", "potential", "looking
forward", or similar expressions, it is making forward-looking
statements.
The following factors, among others, could cause actual results
to differ from those set forth in or anticipated by the
forward-looking statements: general economic and political
conditions in different countries in which Aon does business around
the world, including the U.K.'s withdrawal from the European Union;
changes in the competitive environment or damage to Aon's
reputation; fluctuations in exchange and interest rates that could
influence revenue and expenses; 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 or increasing borrowing costs; rating agency
actions that could affect Aon's ability to borrow funds; volatility
in Aon's tax rate due to a variety of different factors, including
U.S. tax reform; changes in estimates or assumptions on Aon's
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., Ireland,
the 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 Aon infringes on the intellectual property
rights of others; the effects of Irish law on Aon's operating
flexibility and the enforcement of judgments against Aon; the
failure to retain and attract qualified personnel, whether as a
result of the termination of the Combination or otherwise;
international risks associated with Aon's global operations; the
effects of natural or man-made disasters, including the effects of
COVID-19 and other health pandemics; 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 Aon's reputation among
clients, markets or third parties; the actions taken by third
parties that perform aspects of Aon's business operations and
client services; the extent to which Aon manages certain risks
created in connection with the services, including fiduciary and
investments, consulting, and other advisory services, among others,
that Aon currently provides, or will provide in the future, to
clients; Aon's ability to continue, and the costs and the costs and
risks associated with, growing, developing and integrating
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
Aon's relationships with insurance carriers; Aon's ability to
implement initiatives intended to yield, and the ability to
achieve, cost savings; Aon's ability to realize the expected
benefits from its restructuring plan; adverse effects on the market
price of Aon's securities and/or operating results for any reason,
including, without limitation, because of the failure to consummate
the Combination; the failure to realize the expected benefits of
the Combination (including anticipated revenue and growth
synergies); significant transaction costs in connection with the
terminated Combination and divestitures planned in connection with
the Combination; litigation associated with the termination of the
Combination and divestitures planned in connection with the
Combination; the payment of the termination fee in connection with
the termination of the Combination; the potential impact of the
termination of the Combination on relationships, including with
suppliers, customers, employees and regulators; and general
economic, business and political conditions (including any
epidemic, pandemic or disease outbreak, including COVID-19) that
affect the Company.
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. Accordingly, you should not place
undue reliance on forward-looking statements, which speak only as
of the dates on which they are made. In addition, results for the
year ended December 31, 2020, and the
quarters ended March 31, 2021,
June 30, 2021, and September 30, 2021 are not necessarily indicative
of results that may be expected for any future period, particularly
in light of the continuing effects of the COVID-19 pandemic.
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 Securities and
Exchange Commission (the "SEC"). See
Aon's Annual Report on Form 10-K for the year ended
December 31, 2020 and its Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2021, June 30,
2021, and September 30, 2021
for a further discussion of these and other risks and uncertainties
applicable to Aon and its businesses. These factors may be revised
or supplemented in subsequent reports filed with the SEC. Aon is
not under, 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 not calculated in
accordance with generally accepted accounting principles in the
United State ("U.S. GAAP") related to organic revenue growth, free
cash flow, adjusted operating income, adjusted operating margin,
and adjusted earnings per share that exclude the effects of
intangible asset amortization, restructuring, capital expenditures,
and certain other noteworthy items that affected results for the
comparable periods. Organic revenue growth includes the impact of
intercompany activity and excludes foreign exchange rate changes,
acquisitions, divestitures, transfers between revenue lines,
fiduciary investment income, and gains or losses on derivatives
accounted for as hedges. Currency impact is determined by
translating last year's revenue, expense, or net income at this
year's foreign exchange rates. Reconciliations to the closest U.S.
GAAP measure for each non-GAAP measure presented in this
communication are provided in the attached appendices. Supplemental
organic revenue growth information and additional measures that
exclude the effects of certain items noted above do not affect net
income or any other U.S. GAAP reported amounts. Free cash flow is
cash flows from operating activity less capital expenditures. The
adjusted effective tax rate excludes the applicable tax impact
associated with expenses for estimated intangible asset
amortization, restructuring, and certain other noteworthy items,
such as the change to the U.K. corporate income tax rate.
Management believes that these measures are important to make
meaningful period-to-period comparisons and that this supplemental
information is helpful to investors. Non-GAAP measures should be
viewed in addition to, not in lieu of, Aon's Condensed Consolidated
Financial Statements. Industry peers provide similar supplemental
information regarding their performance, although they may not make
identical adjustments.
Investor
Contact:
|
|
Media
Contact:
|
Investor
Relations
|
|
Nadine
Youssef
|
+1
312-381-3310
|
|
+1
312-381-3024
|
investor.relations@aon.com
|
|
mediainquiries@aon.com
|
Aon
plc
Condensed
Consolidated Statements of Income (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
|
Nine Months
Ended
September 30,
|
|
|
(millions, except per
share data)
|
|
2021
|
|
2020
|
|
%
Change
|
|
2021
|
|
2020
|
|
% Change
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
$
|
2,702
|
|
$
|
2,385
|
|
13%
|
|
$
|
9,113
|
|
$
|
8,101
|
|
12%
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
1,835
|
|
1,387
|
|
32%
|
|
5,182
|
|
4,270
|
|
21%
|
Information
technology
|
|
130
|
|
107
|
|
21%
|
|
359
|
|
325
|
|
10%
|
Premises
|
|
98
|
|
70
|
|
40%
|
|
251
|
|
217
|
|
16%
|
Depreciation of fixed
assets
|
|
56
|
|
42
|
|
33%
|
|
138
|
|
124
|
|
11%
|
Amortization and
impairment of intangible assets
|
|
36
|
|
50
|
|
(28)%
|
|
112
|
|
205
|
|
(45)%
|
Other general
expense
|
|
1,348
|
|
288
|
|
368%
|
|
1,955
|
|
892
|
|
119%
|
Total operating
expenses
|
|
3,503
|
|
1,944
|
|
80%
|
|
7,997
|
|
6,033
|
|
33%
|
Operating income
(loss)
|
|
(801)
|
|
441
|
|
(282)%
|
|
1,116
|
|
2,068
|
|
(46)%
|
Interest
income
|
|
3
|
|
3
|
|
—%
|
|
9
|
|
5
|
|
80%
|
Interest
expense
|
|
(80)
|
|
(80)
|
|
—%
|
|
(237)
|
|
(252)
|
|
(6)%
|
Other income (expense)
(1)
|
|
10
|
|
—
|
|
100%
|
|
7
|
|
19
|
|
(63)%
|
Income (loss)
before income taxes
|
|
(868)
|
|
364
|
|
(338)%
|
|
895
|
|
1,840
|
|
(51)%
|
Income tax expense
(2)
|
|
23
|
|
82
|
|
(72)%
|
|
460
|
|
356
|
|
29%
|
Net income
(loss)
|
|
(891)
|
|
282
|
|
(416)%
|
|
435
|
|
1,484
|
|
(71)%
|
Less: Net income
attributable to noncontrolling interests
|
|
9
|
|
7
|
|
29%
|
|
43
|
|
39
|
|
10%
|
Net income (loss)
attributable to Aon shareholders
|
|
$
|
(900)
|
|
$
|
275
|
|
(427)%
|
|
$
|
392
|
|
$
|
1,445
|
|
(73)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income
(loss) per share attributable to Aon shareholders
|
|
$
|
(3.99)
|
|
$
|
1.18
|
|
(438)%
|
|
$
|
1.73
|
|
$
|
6.21
|
|
(72)%
|
Diluted net income
(loss) per share attributable to Aon shareholders
|
|
$
|
(3.99)
|
|
$
|
1.18
|
|
(438)%
|
|
$
|
1.72
|
|
$
|
6.18
|
|
(72)%
|
Weighted average
ordinary shares outstanding - basic
|
|
225.4
|
|
232.6
|
|
(3)%
|
|
226.5
|
|
232.8
|
|
(3)%
|
Weighted average
ordinary shares outstanding - diluted
|
|
225.4
|
|
233.5
|
|
(3)%
|
|
227.7
|
|
233.9
|
|
(3)%
|
(1)
|
Included in Other
income (expense) for both the three and nine months ended September
30, 2020 is $1 million respectively, of income that was
previously classified as net income from discontinued
operations.
|
(2)
|
The effective tax
rate was (2.6)% and 22.5% for the three months ended
September 30, 2021 and 2020, respectively, and 51.4% and 19.3%
for the nine months ended September 30, 2021 and 2020,
respectively.
|
Aon
plc
Reconciliation of
Non-GAAP Measures - Organic Revenue Growth and Free Cash Flow
(Unaudited)
Organic Revenue
Growth (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
|
2021
|
|
2020
|
|
%
Change
|
|
Less:
Currency
Impact (1)
|
|
Less:
Fiduciary
Investment
Income (2)
|
|
Less:
Acquisitions,
Divestitures &
Other
|
|
Organic
Revenue
Growth (3)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
|
1,505
|
|
$
|
1,320
|
|
14%
|
|
2%
|
|
—%
|
|
(1)%
|
|
13%
|
Reinsurance
Solutions
|
|
353
|
|
321
|
|
10
|
|
1
|
|
—
|
|
1
|
|
8
|
Health
Solutions
|
|
497
|
|
423
|
|
17
|
|
2
|
|
—
|
|
(1)
|
|
16
|
Wealth
Solutions
|
|
351
|
|
327
|
|
7
|
|
3
|
|
—
|
|
—
|
|
4
|
Elimination
|
|
(4)
|
|
(6)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Total
revenue
|
|
$
|
2,702
|
|
$
|
2,385
|
|
13%
|
|
2%
|
|
—%
|
|
(1)%
|
|
12%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
|
2021
|
|
2020
|
|
%
Change
|
|
Less:
Currency
Impact (1)
|
|
Less:
Fiduciary
Investment
Income (2)
|
|
Less:
Acquisitions,
Divestitures &
Other
|
|
Organic
Revenue
Growth (3)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
|
4,788
|
|
$
|
4,197
|
|
14%
|
|
4%
|
|
—%
|
|
(1)%
|
|
11%
|
Reinsurance
Solutions
|
|
1,775
|
|
1,617
|
|
10
|
|
2
|
|
—
|
|
1
|
|
7
|
Health
Solutions
|
|
1,503
|
|
1,316
|
|
14
|
|
3
|
|
—
|
|
—
|
|
11
|
Wealth
Solutions
|
|
1,062
|
|
984
|
|
8
|
|
4
|
|
—
|
|
1
|
|
3
|
Elimination
|
|
(15)
|
|
(13)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Total
revenue
|
|
$
|
9,113
|
|
$
|
8,101
|
|
12%
|
|
3%
|
|
—%
|
|
—%
|
|
9%
|
(1)
|
Currency impact
represents the effect on prior year period results if they were
translated at current period foreign exchange rates.
|
(2)
|
Fiduciary investment
income for the three months ended September 30, 2021 and 2020
was $2 million and $3 million, respectively. Fiduciary investment
income for the nine months ended September 30, 2021 and 2020
was $6 million and $23 million, respectively.
|
(3)
|
Organic revenue
growth includes the impact of intercompany activity and excludes
the impact of changes in foreign exchange rates, fiduciary
investment income, acquisitions, divestitures, transfers between
revenue lines, and gains or losses on derivatives accounted for as
hedges.
|
Free Cash Flows
from Operations (Unaudited)
|
|
|
|
|
|
|
Nine Months
Ended
September 30,
|
|
(millions)
|
|
2021
|
|
2020
|
|
%
Change
|
Cash Provided by
Operating Activities
|
|
$
|
1,251
|
|
$
|
2,023
|
|
(38)%
|
Capital Expenditures
Used for Operations
|
|
(102)
|
|
(119)
|
|
(14)%
|
Free Cash Flows
Provided by Operations (1)
|
|
$
|
1,149
|
|
$
|
1,904
|
|
(40)%
|
(1)
|
Free cash flow is
defined as cash flows 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 (Loss) and Diluted Earnings
Per Share (Unaudited) (1)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
|
Nine Months
Ended
September 30,
|
|
|
(millions,
except percentages)
|
|
2021
|
|
2020
|
|
%
Change
|
|
2021
|
|
2020
|
|
%
Change
|
Revenue
|
|
$
|
2,702
|
|
$
|
2,385
|
|
13%
|
|
$
|
9,113
|
|
$
|
8,101
|
|
12%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
$
|
(801)
|
|
$
|
441
|
|
(282)%
|
|
$
|
1,116
|
|
$
|
2,068
|
|
(46)%
|
Amortization and
impairment of intangible assets
|
|
36
|
|
50
|
|
|
|
112
|
|
205
|
|
|
Transaction costs and
other charges related to the combination and resulting termination
(2)
|
|
1,363
|
|
43
|
|
|
|
1,436
|
|
79
|
|
|
Operating income -
as adjusted
|
|
$
|
598
|
|
$
|
534
|
|
12%
|
|
$
|
2,664
|
|
$
|
2,352
|
|
13%
|
Operating
margin
|
|
(29.6)%
|
|
18.5%
|
|
|
|
12.2%
|
|
25.5%
|
|
|
Operating margin -
as adjusted
|
|
22.1%
|
|
22.4%
|
|
|
|
29.2%
|
|
29.0%
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
|
Nine Months
Ended
September 30,
|
|
|
(millions,
except percentages)
|
|
2021
|
|
2020
|
|
%
Change
|
|
2021
|
|
2020
|
|
%
Change
|
Operating income -
as adjusted
|
|
$
|
598
|
|
$
|
534
|
|
12%
|
|
$
|
2,664
|
|
$
|
2,352
|
|
13%
|
Interest
income
|
|
3
|
|
3
|
|
—%
|
|
9
|
|
5
|
|
80%
|
Interest
expense
|
|
(80)
|
|
(80)
|
|
—%
|
|
(237)
|
|
(252)
|
|
(6)%
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
- pensions - as adjusted
|
|
5
|
|
4
|
|
25%
|
|
19
|
|
10
|
|
90%
|
Other income (expense)
- other
|
|
5
|
|
(4)
|
|
225%
|
|
(12)
|
|
9
|
|
(233)%
|
Total Other income
(expense) - as adjusted
|
|
10
|
|
—
|
|
100%
|
|
7
|
|
19
|
|
(63)%
|
Income (loss)
before income taxes - as adjusted
|
|
531
|
|
457
|
|
16%
|
|
2,443
|
|
2,124
|
|
15%
|
Income tax expense
(3)
|
|
127
|
|
92
|
|
38%
|
|
507
|
|
404
|
|
25%
|
Net income (loss)
- as adjusted
|
|
404
|
|
365
|
|
11%
|
|
1,936
|
|
1,720
|
|
13%
|
Less: Net income
attributable to noncontrolling interests
|
|
9
|
|
7
|
|
29%
|
|
43
|
|
39
|
|
10%
|
Net income (loss)
attributable to Aon shareholders - as adjusted
|
|
$
|
395
|
|
$
|
358
|
|
10%
|
|
$
|
1,893
|
|
$
|
1,681
|
|
13%
|
Diluted net income
(loss) per share attributable to Aon shareholders - as
adjusted
|
|
$
|
1.74
|
|
$
|
1.53
|
|
14%
|
|
$
|
8.31
|
|
$
|
7.19
|
|
16%
|
Weighted average
ordinary shares outstanding - diluted (4)
|
|
226.9
|
|
233.5
|
|
(3)%
|
|
227.7
|
|
233.9
|
|
(3)%
|
Effective Tax
Rates (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP
|
|
(2.6)%
|
|
22.5%
|
|
|
|
51.4%
|
|
19.3%
|
|
|
Non-GAAP
|
|
23.9%
|
|
20.1%
|
|
|
|
20.8%
|
|
19.0%
|
|
|
(1)
|
Certain noteworthy
items impacting operating income (loss) in the three and nine
months ended September 30, 2021 and 2020 are described in this
schedule. The items shown with the caption "as adjusted" are
non-GAAP measures.
|
(2)
|
As part of the
terminated combination with WTW, certain transaction costs have
been incurred by the Company through the third quarter of 2021.
These costs may include advisory, legal, accounting, valuation, and
other professional or consulting fees related to the combination,
including planned divestitures that have been terminated, as well
as certain compensation expenses and expenses related to further
steps on our Aon United operating model as a result of the
termination. Additionally, this includes the $1 billion Termination
Fee paid in connection with the termination of the
combination.
|
(3)
|
Adjusted items are
generally taxed at the estimated annual effective tax rate, except
for the applicable tax impact associated with accelerated tradename
amortization, impairment charges, and certain transaction costs and
other charges related to the combination and resulting termination,
which are adjusted at the related jurisdictional rate. In addition,
income tax expense for the nine months ended September 30,
2021 was adjusted to exclude the impact of remeasuring the net
deferred tax liabilities in the U.K. as a result of the corporate
income tax rate increase enacted in the second quarter of
2021.
|
(4)
|
For the three months
ended September 30, 2021, the Weighted average ordinary shares
outstanding includes the dilutive effect of approximately 1.5
million of potentially issuable shares, which have been excluded
from the U.S. GAAP Weighted average ordinary shares
outstanding.
|
Aon
plc
Condensed
Consolidated Statements of Financial Position
(Unaudited)
|
|
|
|
|
|
As of
|
(millions)
|
|
September
30,
2021
|
|
December
31,
2020
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
609
|
|
$
|
884
|
Short-term
investments
|
|
310
|
|
308
|
Receivables,
net
|
|
3,117
|
|
3,070
|
Fiduciary assets
(1)
|
|
14,017
|
|
13,798
|
Other current
assets
|
|
687
|
|
624
|
Total current
assets
|
|
18,740
|
|
18,684
|
Goodwill
|
|
8,547
|
|
8,666
|
Intangible assets,
net
|
|
529
|
|
640
|
Fixed assets,
net
|
|
541
|
|
599
|
Operating lease
right-of-use assets
|
|
823
|
|
911
|
Deferred tax
assets
|
|
761
|
|
724
|
Prepaid
pension
|
|
1,350
|
|
1,280
|
Other non-current
assets
|
|
525
|
|
610
|
Total
assets
|
|
$
|
31,816
|
|
$
|
32,114
|
|
|
|
|
|
Liabilities and
equity
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
1,995
|
|
$
|
2,016
|
Short-term debt and
current portion of long-term debt
|
|
150
|
|
448
|
Fiduciary
liabilities
|
|
14,017
|
|
13,798
|
Other current
liabilities
|
|
1,348
|
|
1,171
|
Total current
liabilities
|
|
17,510
|
|
17,433
|
Long-term
debt
|
|
8,250
|
|
7,281
|
Non-current operating
lease liabilities
|
|
817
|
|
897
|
Deferred tax
liabilities
|
|
414
|
|
262
|
Pension, other
postretirement, and postemployment liabilities
|
|
1,607
|
|
1,763
|
Other non-current
liabilities
|
|
919
|
|
895
|
Total
liabilities
|
|
29,517
|
|
28,531
|
|
|
|
|
|
Equity
|
|
|
|
|
Ordinary shares -
$0.01 nominal value
|
|
2
|
|
2
|
Additional paid-in
capital
|
|
6,529
|
|
6,312
|
Retained earnings
(accumulated deficit)
|
|
(445)
|
|
1,042
|
Accumulated other
comprehensive loss
|
|
(3,877)
|
|
(3,861)
|
Total Aon
shareholders' equity
|
|
2,209
|
|
3,495
|
Noncontrolling
interests
|
|
90
|
|
88
|
Total
equity
|
|
2,299
|
|
3,583
|
Total liabilities
and equity
|
|
$
|
31,816
|
|
$
|
32,114
|
(1)
|
Includes cash and
short-term investments of $6,412 million and $5,681 million for the
periods ended September 30, 2021 and December 31, 2020,
respectively.
|
Aon
plc Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
Nine Months Ended
September 30,
|
(millions)
|
|
2021
|
|
2020
|
Cash flows from
operating activities
|
|
|
|
|
Net income
|
|
$
|
435
|
|
$
|
1,484
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
|
Gain from sales of
businesses
|
|
(2)
|
|
(25)
|
Depreciation of fixed
assets
|
|
138
|
|
124
|
Amortization and
impairment of intangible assets
|
|
112
|
|
205
|
Share-based
compensation expense
|
|
346
|
|
207
|
Deferred income
taxes
|
|
83
|
|
(4)
|
Change in assets and
liabilities:
|
|
|
|
|
Fiduciary
receivables
|
|
359
|
|
(1,051)
|
Short-term investments
— funds held on behalf of clients
|
|
(786)
|
|
(706)
|
Fiduciary
liabilities
|
|
427
|
|
1,757
|
Receivables,
net
|
|
(79)
|
|
193
|
Accounts payable and
accrued liabilities
|
|
22
|
|
(191)
|
Current income
taxes
|
|
47
|
|
34
|
Pension, other
postretirement and postemployment liabilities
|
|
(101)
|
|
(117)
|
Other assets and
liabilities (1)
|
|
250
|
|
113
|
Cash provided by
operating activities
|
|
1,251
|
|
2,023
|
Cash flows from
investing activities
|
|
|
|
|
Proceeds from
investments
|
|
51
|
|
34
|
Payments for
investments
|
|
(68)
|
|
(80)
|
Net sales (purchases)
of short-term investments — non-fiduciary
|
|
(2)
|
|
(312)
|
Acquisition of
businesses, net of cash acquired
|
|
(3)
|
|
(368)
|
Sale of businesses,
net of cash sold
|
|
8
|
|
30
|
Capital
expenditures
|
|
(102)
|
|
(119)
|
Cash used for
investing activities
|
|
(116)
|
|
(815)
|
Cash flows from
financing activities
|
|
|
|
|
Share
repurchase
|
|
(1,543)
|
|
(963)
|
Issuance of shares for
employee benefit plans
|
|
(122)
|
|
(141)
|
Issuance of
debt
|
|
3,173
|
|
4,153
|
Repayment of
debt
|
|
(2,436)
|
|
(3,857)
|
Cash dividends to
shareholders
|
|
(335)
|
|
(307)
|
Noncontrolling
interests and other financing activities
|
|
(117)
|
|
(31)
|
Cash used for
financing activities
|
|
(1,380)
|
|
(1,146)
|
Effect of exchange
rates on cash and cash equivalents
|
|
(30)
|
|
(31)
|
Net increase
(decrease) in cash and cash equivalents
|
|
(275)
|
|
31
|
Cash and cash
equivalents at beginning of period
|
|
884
|
|
790
|
Cash and cash
equivalents at end of period
|
|
$
|
609
|
|
$
|
821
|
(1)
|
Included in Other
assets and liabilities for the nine months ended September 30, 2020
is an $112 million cash outflow previously classified as
Restructuring reserves.
|
View original
content:https://www.prnewswire.com/news-releases/aon-reports-third-quarter-2021-results-301411584.html
SOURCE Aon plc