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Exhibit 99.1

 

Investor Relations

 

News from Aon

 

Aon Reports Fourth Quarter and Full Year 2013 Results

 

Fourth Quarter Key Metrics and Highlights

 

·                  Total revenue was $3.2 billion with organic revenue growth of 4%

·                  Operating margin was 16.0%, and operating margin, adjusted for certain items, increased 160 basis points to 21.2%

·                  EPS was $1.14, and EPS, adjusted for certain items, increased 21% to $1.54

·                  Cash flow from operations increased 18% to $649 million, and free cash flow increased 23%, or $110 million, to $594 million

·                  Repurchased 965,487 Class A Ordinary Shares for approximately $77 million

 

Full Year Key Metrics and Highlights

 

·                  Total revenue was $11.8 billion with organic revenue growth of 3%

·                  Operating margin was 14.1%, and operating margin, adjusted for certain items, increased 40 basis points to 19.0%

·                  EPS was $3.53, and EPS, adjusted for certain items, increased 16% to $4.89

·                  Cash flow from operations increased 15% to a record $1.6 billion, and free cash flow increased 22%, or $254 million, to $1.4 billion

·                  Repurchased 16.8 million Class A Ordinary Shares for approximately $1.1 billion

 

LONDON — January 31, 2014 - Aon plc (NYSE: AON) today reported results for the three months and twelve months ended December 31, 2013.

 

Net income attributable to Aon shareholders was $355 million, or $1.14 per share, compared to $305 million, or $0.93 per share, for the prior year quarter.  Net income per share attributable to Aon shareholders, adjusted for certain items, increased 21% to $1.54, when compared to $1.27 in the prior year quarter.  Certain items that impacted fourth quarter results and comparisons with the prior year quarter are detailed in the “Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share” on page 13 of this press release.

 

“Our results reflect a strong finish to the year with improvement across each key financial metric for both the quarter and full year,” said Greg Case, president and chief executive officer.  “In 2013, we made significant strategic investments across the firm, delivered record cash flow from operations of $1.6 billion and created significant value for shareholders through the repurchase of more than $1.1 billion of ordinary shares. As we look ahead to 2014, our industry-leading platform is positioned for continued long-term growth, improved operational performance, strong free cash flow generation and significantly increased financial flexibility.”

 



 

FOURTH QUARTER FINANCIAL SUMMARY

 

Total revenue increased 3% to $3.2 billion when compared to the prior year quarter primarily driven by a 4% increase in organic revenue, partially offset by a 1% unfavorable impact from foreign currency translation.

 

Total operating expenses for the fourth quarter increased 2% to $2.7 billion when compared to the prior year quarter due primarily to an increase in expense associated with 4% organic revenue growth and a $29 million increase in formal restructuring costs, partially offset by savings related to the restructuring programs, an $18 million favorable impact from foreign currency translation, a $12 million decrease in expenses related to acquisitions, net of divestitures, and an $11 million decrease in intangible asset amortization.

 

Depreciation expense decreased 2%, or $1 million, to $63 million when compared to the prior year quarter.

 

Intangible asset amortization expense decreased 10%, or $11 million, to $99 million when compared to the prior year quarter due to a $6 million decrease in Risk Solutions and a $5 million decrease in HR Solutions.

 

Restructuring expenses increased $29 million to $65 million when compared to $36 million in the prior year quarter.  The Company has closed and completed all restructuring activities and incurred 100% of the total costs for the Aon Hewitt restructuring program.  An analysis of restructuring-related costs by type and segment are detailed on page 14 of this press release.

 

Restructuring savings in the fourth quarter related to the Aon Hewitt restructuring program are estimated at $94 million compared to $67 million in the prior year quarter.  Of the estimated savings in the fourth quarter, approximately $73 million were related to the HR Solutions segment compared to $55 million in the prior year quarter, and approximately $21 million were related to the Risk Solutions segment compared to $12 million in the prior year quarter.

 

In HR Solutions, approximately $260 million of the $303 million in total cumulative savings have been achieved under the program, with the remaining $43 million of savings to be achieved by the end of 2014.  In Risk Solutions, approximately $69 million of the $99 million in total cumulative savings have been achieved under the program, with the remaining $30 million of savings to be achieved by the end of 2014.

 

Foreign currency exchange rates in the fourth quarter had a $0.03 per share, or $13 million pretax, net unfavorable impact on adjusted net income if the Company were to translate prior year quarter results at current quarter foreign exchange rates.  An unfavorable impact in operating income for Risk Solutions of $16 million was partially offset by a $3 million favorable impact in HR Solutions.

 

Effective tax rate on net income in the fourth quarter was 24.2% compared to 25.2% in the prior year quarter.  The effective tax rate in the fourth quarter of 2013 was favorably impacted by certain discrete tax adjustments and favorably impacted by changes in the geographic distribution of income.

 

2



 

Average diluted shares outstanding decreased to 311.4 million in the fourth quarter compared to 327.5 million in the prior year quarter.  The Company repurchased 965,487 Class A Ordinary Shares for approximately $77 million in the fourth quarter.  The Company has $2.87 billion of remaining authorization under its share repurchase program.

 

Cash flow from operations increased 18%, or $97 million, to $649 million in the fourth quarter due primarily to growth in net income and a decrease in pension contributions.  Free cash flow, as defined by cash flow from operations less capital expenditures, increased 23%, or $110 million, to $594 million in the fourth quarter driven by strong cash flow from operations and a $13 million decrease in capital expenditures.  A reconciliation of free cash flow to cash flow from operations can be found on the “Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow” on page 12 of this press release.

 

FOURTH QUARTER SEGMENT REVIEW

 

Certain noteworthy items impacted operating income and operating margins in the fourth quarters of 2013 and 2012.  The fourth 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 and Free Cash Flow” on page 12 and “Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share” on page 13 of this press release.

 

RISK SOLUTIONS

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

(millions)

 

Three Months Ended

 

 

 

Less:

 

Acquisitions,

 

 

 

Commissions,

 

Dec 31,

 

Dec 31,

 

%

 

Currency

 

Divestitures,

 

Organic

 

Fees and Other

 

2013

 

2012

 

Change

 

Impact

 

Other

 

Revenue

 

Retail

 

$

1,708

 

$

1,694

 

1

%

(1

)%

(1

)%

3

%

Reinsurance

 

338

 

349

 

(3

)

(3

)

 

 

Subtotal

 

$

2,046

 

$

2,043

 

%

(1

)%

(2

)%

3

%

Investment Income

 

7

 

7

 

 

 

 

 

 

 

 

Total Revenue

 

$

2,053

 

$

2,050

 

%

 

 

 

 

 

 

 

Risk Solutions total revenue was flat at $2.1 billion when compared to the prior year quarter due to 3% organic growth in commissions and fees, offset by a 2% decrease in commissions and fees resulting from acquisitions, net of divestitures, and a 1% unfavorable impact from foreign currency translation.

 

Retail Brokerage organic revenue increased 3% reflecting revenue growth in both the Americas and International businesses.  Americas organic revenue increased 4% reflecting strong growth in Latin America and record new business in US Retail.  International organic revenue increased 2% driven by strong growth across emerging markets, New Zealand and Asia, partially offset by a decline in Ireland.  Reinsurance organic revenue was flat compared to the prior year quarter due primarily to growth in capital markets transactions and advisory business, as well as net new business growth in treaty placements, offset by an anticipated unfavorable impact from timing in the quarter.

 

3



 

 

 

Three Months Ended

 

 

 

 

 

Dec 31,

 

Dec 31,

 

%

 

(millions)

 

2013

 

2012

 

Change

 

Revenue

 

$

2,053

 

$

2,050

 

%

Expenses

 

 

 

 

 

 

 

Compensation and benefits

 

1,132

 

1,114

 

2

 

Other general expenses

 

508

 

502

 

1

 

Total operating expenses

 

1,640

 

1,616

 

1

%

 

 

 

 

 

 

 

 

Operating income

 

$

413

 

$

434

 

(5

)%

Operating margin

 

20.1

%

21.2

%

 

 

 

 

 

 

 

 

 

 

Operating income - adjusted

 

$

484

 

$

475

 

2

%

Operating margin - adjusted

 

23.6

%

23.2

%

 

 

 

Compensation and benefits for the fourth quarter increased 2%, or $18 million, when compared to the prior year quarter due primarily to an increase in expense associated with 3% organic revenue growth and an $8 million increase in restructuring costs related to the Aon Hewitt restructuring program, partially offset by a $10 million decrease in expenses related to acquisitions, net of divestitures, savings related to the restructuring programs and a $7 million favorable impact from foreign currency translation.

 

Other general expenses for the fourth quarter increased 1%, or $6 million, when compared to the prior year quarter due primarily to a $28 million increase in restructuring costs related to the Aon Hewitt restructuring program, partially offset by a $7 million decrease in expenses related to acquisitions, net of divestitures, a $6 million decrease in intangible asset amortization and a $4 million favorable impact from foreign currency translation.

 

Fourth quarter operating income decreased 5% to $413 million when compared to the prior year quarter.  Adjusting for certain items detailed on page 13 of this press release, operating income increased 2%, or $9 million, and operating margin increased 40 basis points to 23.6% when compared to the prior year quarter.  Adjusted operating margin was driven by solid organic revenue growth and savings related to the restructuring programs, partially offset by a $16 million, or 40 basis point, unfavorable impact from foreign currency translation.

 

HR SOLUTIONS

 

(millions)

 

Three Months Ended

 

 

 

Less:

 

Less:
Acquisitions,

 

 

 

Commissions, 

 

Dec 31,

 

Dec 31,

 

%

 

Currency

 

Divestitures,

 

Organic

 

Fees and Other

 

2013

 

2012

 

Change

 

Impact

 

Other

 

Revenue

 

Consulting Services

 

$

450

 

$

445

 

1

%

%

%

1

%

Outsourcing

 

723

 

649

 

11

 

 

 

11

 

Intersegment

 

(7

)

(16

)

N/A

 

N/A

 

N/A

 

N/A

 

Subtotal

 

$

1,166

 

$

1,078

 

8

%

%

%

8

%

Investment Income

 

 

 

N/A

 

 

 

 

 

 

 

Total Revenue

 

$

1,166

 

$

1,078

 

8

%

 

 

 

 

 

 

 

4



 

HR Solutions total revenue increased 8% to $1.2 billion when compared to the prior year quarter driven by 8% organic growth in commissions and fees.

 

Organic revenue in Consulting Services increased 1% driven primarily by growth in investment and compensation consulting, partially offset by a decline in actuarial services in retirement consulting. Organic revenue in Outsourcing increased 11% compared to the prior year quarter due primarily to strong growth in health care exchanges and modest growth in benefits administration and HR BPO.

 

 

 

Three Months Ended

 

 

 

 

 

Dec 31,

 

Dec 31,

 

%

 

(millions)

 

2013

 

2012

 

Change

 

Revenue

 

$

1,166

 

$

1,078

 

8

%

Expenses

 

 

 

 

 

 

 

Compensation and benefits

 

680

 

657

 

4

 

Other general expenses

 

330

 

343

 

(4

)

Total operating expenses

 

1,010

 

1,000

 

1

%

 

 

 

 

 

 

 

 

Operating income

 

$

156

 

$

78

 

100

%

Operating margin

 

13.4

%

7.2

%

 

 

 

 

 

 

 

 

 

 

Operating income - adjusted

 

$

249

 

$

183

 

36

%

Operating margin - adjusted

 

21.4

%

17.0

%

 

 

 

Compensation and benefits for the fourth quarter increased 4%, or $23 million, when compared to the prior year quarter due primarily to an increase in expense associated with 8% organic revenue growth, partially offset by savings related to the Aon Hewitt restructuring program, a $5 million favorable impact from foreign currency translation and a $3 million decrease in restructuring costs related to the Aon Hewitt restructuring program.

 

Other general expenses for the fourth quarter decreased 4%, or $13 million, when compared to the prior year quarter due primarily to savings related to the Aon Hewitt restructuring program, a $5 million decrease in intangible asset amortization and a $4 million decrease in restructuring costs related to the Aon Hewitt restructuring program.

 

Fourth quarter operating income increased 100% to $156 million when compared to the prior year quarter.  Adjusting for certain items detailed on page 13 of this press release, operating income increased 36%, or $66 million, and operating margin increased 440 basis points to 21.4% when compared to the prior year quarter.  Adjusted operating margin was driven by strong organic revenue growth and savings related to the Aon Hewitt restructuring program, partially offset by continued investment in long-term growth opportunities.

 

5



 

INCOME BEFORE INCOME TAXES

 

 

 

Three Months Ended

 

 

 

 

 

Dec 31,

 

Dec 31,

 

%

 

(millions)

 

2013

 

2012

 

Change

 

Risk Solutions

 

$

413

 

$

434

 

(5

)%

HR Solutions

 

156

 

78

 

100

 

Unallocated expenses

 

(54

)

(51

)

6

 

Operating income

 

$

515

 

$

461

 

12

%

Interest income

 

3

 

4

 

(25

)

Interest expense

 

(57

)

(55

)

4

 

Other income

 

14

 

 

100

 

Income before income taxes

 

$

475

 

$

410

 

16

%

 

Unallocated expenses increased $3 million to $54 million due primarily to an increase related to certain long-term employee incentive compensation programs.  Interest income decreased $1 million to $3 million due to lower average interest rates and lower average cash balances.  Interest expense increased $2 million to $57 million due primarily to an increase in costs related to certain derivative hedging programs.  Other income of $14 million primarily includes gains on sale of businesses and certain long-term investments.

 

2013 FULL YEAR SUMMARY

 

Total revenue for 2013 increased 3% to $11.8 billion due to 3% organic growth in commissions and fees and a 1% increase in commissions and fees resulting from acquisitions, net of divestitures, partially offset by a 1% unfavorable impact from foreign currency translation. Risk Solutions total revenue increased 2% to $7.8 billion and HR Solutions total revenue increased 3% to $4.1 billion.

 

Net income attributable to Aon shareholders for 2013 increased 12% to $1.1 billion compared to $993 million for the prior year.  Net income attributable to Aon shareholders, adjusted for certain items, increased 10% to $1.5 billion.  Certain items that impacted full year results and comparisons against the prior year are detailed in the “Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share” on page 13 of this press release.

 

Net income per share attributable to Aon shareholders for 2013 increased 18% to $3.53 per share compared to $2.99 per share for the prior year.  Net income attributable to Aon shareholders, adjusted for certain items, increased 16% to $4.89 per share compared to $4.21 per share for the prior year.  Certain items that impacted full year results and comparisons against the prior year are detailed in the “Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings per Share” on page 13 of this press release.

 

Cash flow from operations increased 15% to $1.6 billion in 2013 due primarily to growth in net income, strong working capital performance and a decrease in pension contributions.  Free cash flow increased 22% to $1.4 billion for 2013 driven by strong cash flow from operations and a 15%, or $40 million decrease in capital expenditures. A reconciliation of free cash flow to cash flow from operations can be found on the “Reconciliation of Non-GAAP Measures - Organic Revenue and Free Cash Flow” on page 12 of this press release.

 

6



 

During 2013, the Company repurchased approximately 16.8 million Class A ordinary shares for $1.1 billion at an average price of $65.65 per share.

 

Conference Call, Presentation Slides and Webcast Details

 

The Company will host a conference call on Friday, January 31, 2014 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 65,000 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. These forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts that address activities, events or developments that we expect or anticipate may occur in the future, including such things as our outlook, future capital expenditures, growth in commissions and fees, changes to the composition or level of our revenues, cash flow and liquidity, expected tax rates, business strategies, competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, plans and references to future successes, are forward-looking statements. Also, when we use the words such as ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘plan’, ‘probably’, or similar expressions, we are making forward-looking statements.

 

The following factors, among others, could cause actual results to differ from those set forth in the forward looking statements:  general economic conditions in different countries in which Aon does business around the world; 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 differences in 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 and business process outsourcing services, among others, that Aon currently provides, or will provide in the future, to clients;  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, develop and integrate companies that it acquires or new lines of business.

 

7



 

Further information concerning Aon and its business, including factors that potentially could materially affect Aon’s financial results, is contained in Aon’s filings with the SEC. See Aon’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q for a further discussion of these and other risks and uncertainties applicable to Aon’s businesses. Aon does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in their respective expectations, except as required by law.

 

Explanation of Non-GAAP Measures

 

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

 

#

 

Investor Contact:

 

Media Contact:

Scott Malchow

 

David Prosperi

Senior Vice President, Investor Relations

 

Vice President, Global Public Relations

+44 (0) 20 7086 0100

 

312-381-2485

 

8


 


 

Aon plc

Consolidated Statements of Income (Unaudited)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

(millions, except per share data)

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions, fees and other

 

$

3,202

 

$

3,108

 

3

$

11,787

 

$

11,476

 

3

%

Fiduciary investment income

 

7

 

7

 

 

28

 

38

 

(26

)

Total revenue

 

3,209

 

3,115

 

3

 

11,815

 

11,514

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

1,842

 

1,789

 

3

 

6,945

 

6,709

 

4

 

Other general expenses

 

852

 

865

 

(2

)

3,199

 

3,209

 

 

Total operating expenses

 

2,694

 

2,654

 

2

 

10,144

 

9,918

 

2

 

Operating income

 

515

 

461

 

12

 

1,671

 

1,596

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

3

 

4

 

(25

)

9

 

10

 

(10

)

Interest expense

 

(57

)

(55

)

4

 

(210

)

(228

)

(8

)

Other income (2)

 

14

 

 

100

 

68

 

2

 

3,300

 

Income before income taxes

 

475

 

410

 

16

 

1,538

 

1,380

 

11

 

Income taxes (1) 

 

115

 

103

 

12

 

390

 

360

 

8

 

Net income

 

360

 

307

 

17

 

1,148

 

1,020

 

13

 

Less: Net income attributable to the noncontrolling interests

 

5

 

2

 

150

 

35

 

27

 

30

 

Net income attributable to Aon shareholders

 

$

355

 

$

305

 

16

%

$

1,113

 

$

993

 

12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share attributable to Aon shareholders

 

$

1.16

 

$

0.95

 

22

%

$

3.57

 

$

3.02

 

18

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share attributable to Aon shareholders

 

$

1.14

 

$

0.93

 

23

%

$

3.53

 

$

2.99

 

18

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding - diluted

 

311.4

 

327.5

 

(5

)%

315.4

 

332.6

 

(5

)%

 


(1)              The effective tax rate is 24.2% and 25.2% for the three months ended December 31, 2013 and 2012, respectively and 25.4% and 26.1% for the twelve months ended December 31, 2013 and 2012, respectively.

 

(2)              Beginning in Q4 2013, amounts related to discontinued operations have been included in Other income.  These amounts in prior periods, which were historically included in Income (loss) from discontinued operations, have been reclassified to conform with current presentation.  The amount reclassified was a $1 million loss for the twelve months ended December 31, 2012 from Loss from discontinued operations to Other Income.  There was no income or loss from discontinued operations for the three months ended December 31, 2012.

 

9



 

Aon plc

Revenue (Unaudited)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

(millions)

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Organic
Revenue (1)

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Organic
Revenue (1)

 

Commissions, Fees and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Solutions

 

$

2,046

 

$

2,043

 

%

3

%

$

7,761

 

$

7,594

 

2

%

3

%

HR Solutions

 

1,166

 

1,078

 

8

 

8

 

4,057

 

3,925

 

3

 

3

 

Total Operating Segments

 

$

3,212

 

$

3,121

 

3

%

4

%

$

11,818

 

$

11,519

 

3

%

3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiduciary Investment Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Solutions

 

$

7

 

$

7

 

%

 

 

$

28

 

$

38

 

(26

)%

 

 

HR Solutions

 

 

 

 

 

 

 

 

 

 

 

Total Operating Segments

 

$

7

 

$

7

 

%

 

 

$

28

 

$

38

 

(26

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Solutions

 

$

2,053

 

$

2,050

 

%

 

 

$

7,789

 

$

7,632

 

2

%

 

 

HR Solutions

 

1,166

 

1,078

 

8

 

 

 

4,057

 

3,925

 

3

 

 

 

Intersegment

 

(10

)

(13

)

(23

)

 

 

(31

)

(43

)

(28

)

 

 

Total

 

$

3,209

 

$

3,115

 

3

%

 

 

$

11,815

 

$

11,514

 

3

%

 

 

 


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

 

10



 

Aon plc

Segments (Unaudited)

 

Risk Solutions

 

 

 

Three Months Ended

 

Twelve Months Ended

 

(millions)

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions, fees and other

 

$

2,046

 

$

2,043

 

$

7,761

 

$

7,594

 

2

%

Fiduciary investment income

 

7

 

7

 

 

28

 

38

 

(26

)

Total revenue

 

2,053

 

2,050

 

 

7,789

 

7,632

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

1,132

 

1,114

 

2

 

4,385

 

4,260

 

3

 

Other general expenses

 

508

 

502

 

1

 

1,864

 

1,879

 

(1

)

Total operating expenses

 

1,640

 

1,616

 

1

 

6,249

 

6,139

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

413

 

$

434

 

(5

)% 

$

1,540

 

$

1,493

 

3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

20.1

%

21.2

%

 

 

19.8

%

19.6

%

 

 

 

HR Solutions

 

 

 

Three Months Ended

 

Twelve Months Ended

 

(millions)

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions, fees and other

 

$

1,166

 

$

1,078

 

8

$

4,057

 

$

3,925

 

3

%

Fiduciary investment income

 

 

 

 

 

 

 

Total revenue

 

1,166

 

1,078

 

8

 

4,057

 

3,925

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

680

 

657

 

4

 

2,455

 

2,360

 

4

 

Other general expenses

 

330

 

343

 

(4

)

1,284

 

1,276

 

1

 

Total operating expenses

 

1,010

 

1,000

 

1

 

3,739

 

3,636

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

156

 

$

78

 

100

$

318

 

$

289

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

13.4

%

7.2

%

 

 

7.8

%

7.4

%

 

 

 

Total Operating Income (Loss)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

(millions)

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Risk Solutions

 

$

413

 

$

434

 

(5

)% 

$

1,540

 

$

1,493

 

3

%

HR Solutions

 

156

 

78

 

100

 

318

 

289

 

10

 

Unallocated

 

(54

)

(51

)

6

 

(187

)

(186

)

1

 

Total operating income

 

$

515

 

$

461

 

12

%

$

1,671

 

$

1,596

 

5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating margin

 

16.0

%

14.8

%

 

 

14.1

%

13.9

%

 

 

 

11


 


 

Aon plc

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

 

Organic Revenue (Unaudited)

 

 

 

Three Months Ended

 

(millions)

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Less:
Currency
Impact (1)

 

Less:
Acquisitions,
Divestitures &
Other

 

Organic
Revenue
(2)

 

Commissions, Fees and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Solutions Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail brokerage

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

905

 

$

883

 

2

%

(2

)%

%

4

%

International

 

803

 

811

 

(1

)

 

(3

)

2

 

Total Retail brokerage

 

1,708

 

1,694

 

1

 

(1

)

(1

)

3

 

Reinsurance brokerage

 

338

 

349

 

(3

)

(3

)

 

 

Total Risk Solutions

 

2,046

 

2,043

 

 

(1

)

(2

)

3

 

HR Solutions Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting services

 

450

 

445

 

1

 

 

 

1

 

Outsourcing

 

723

 

649

 

11

 

 

 

11

 

Intrasegment

 

(7

)

(16

)

N/A

 

N/A

 

N/A

 

N/A

 

Total HR Solutions

 

1,166

 

1,078

 

8

 

 

 

8

 

Total Operating Segments

 

$

3,212

 

$

3,121

 

3

%

(1

)%

%

4

%

 

 

 

Twelve Months Ended

 

(millions)

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Less:
Currency
Impact (1)

 

Less:
Acquisitions,
Divestitures &
Other

 

Organic
Revenue
(2)

 

Commissions, Fees and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Solutions Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail brokerage

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

3,191

 

$

3,071

 

4

%

(1

)%

%

5

%

International

 

3,065

 

3,018

 

2

 

 

 

2

 

Total Retail brokerage

 

6,256

 

6,089

 

3

 

(1

)

 

4

 

Reinsurance brokerage

 

1,505

 

1,505

 

 

(1

)

(1

)

2

 

Total Risk Solutions

 

7,761

 

7,594

 

2

 

(1

)

 

3

 

HR Solutions Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting services

 

1,626

 

1,585

 

3

 

(1

)

1

 

3

 

Outsourcing

 

2,469

 

2,372

 

4

 

 

1

 

3

 

Intrasegment

 

(38

)

(32

)

N/A

 

N/A

 

N/A

 

N/A

 

Total HR Solutions

 

4,057

 

3,925

 

3

 

 

 

3

 

Total Operating Segments

 

$

11,818

 

$

11,519

 

3

%

(1

)%

1

%

3

%

 

Free Cash Flow (Unaudited)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

(millions)

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Dec. 31,
2013

 

Dec. 31,
2012

 

Percent
Change

 

Cash Provided By (Used For) Operations

 

$

649

 

$

552

 

18

%

$

1,633

 

$

1,419

 

15

%

Less: Capital Expenditures

 

(55

)

(68

)

(19

)

(229

)

(269

)

(15

)

Free Cash Flow (3)

 

$

594

 

$

484

 

23

%

$

1,404

 

$

1,150

 

22

%

 


(1)         Currency impact is determined by translating last year’s revenue at this year’s foreign exchange rates.

 

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

 

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

 

12



 

Aon plc

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

 

 

 

Three Months Ended December 31, 2013

 

Twelve Months Ended December 31, 2013

 

(millions)

 

Risk
Solutions

 

HR
Solutions

 

Unallocated
Income &
Expense

 

Total

 

Risk
Solutions

 

HR
Solutions

 

Unallocated
Income &
Expense

 

Total

 

Revenue

 

$

2,053

 

$

1,166

 

$

(10

)

$

3,209

 

$

7,789

 

$

4,057

 

$

(31

)

$

11,815

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) - as reported

 

$

413

 

$

156

 

$

(54

)

$

515

 

$

1,540

 

$

318

 

$

(187

)

$

1,671

 

Restructuring charges

 

42

 

23

 

 

65

 

94

 

80

 

 

174

 

Intangible asset amortization

 

29

 

70

 

 

99

 

115

 

280

 

 

395

 

Headquarters relocation costs

 

 

 

 

 

 

 

5

 

5

 

Operating income (loss) - as adjusted

 

$

484

 

$

249

 

$

(54

)

$

679

 

$

1,749

 

$

678

 

$

(182

)

$

2,245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margins - as adjusted

 

23.6

%

21.4

%

N/A

 

21.2

%

22.5

%

16.7

%

N/A

 

19.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2012

 

Twelve Months Ended December 31, 2012

 

(millions)

 

Risk
Solutions

 

HR
Solutions

 

Unallocated
Income &
Expense

 

Total

 

Risk
Solutions

 

HR
Solutions

 

Unallocated
Income &
Expense

 

Total

 

Revenue

 

$

2,050

 

$

1,078

 

$

(13

)

$

3,115

 

$

7,632

 

$

3,925

 

$

(43

)

$

11,514

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) - as reported

 

$

434

 

$

78

 

$

(51

)

$

461

 

$

1,493

 

$

289

 

$

(186

)

$

1,596

 

Restructuring charges

 

6

 

30

 

 

36

 

35

 

66

 

 

101

 

Intangible asset amortization

 

35

 

75

 

 

110

 

126

 

297

 

 

423

 

Headquarters relocation costs

 

 

 

3

 

3

 

 

 

24

 

24

 

Operating income (loss) - as adjusted

 

$

475

 

$

183

 

$

(48

)

$

610

 

$

1,654

 

$

652

 

$

(162

)

$

2,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margins - as adjusted

 

23.2

%

17.0

%

N/A

 

19.6

%

21.7

%

16.6

%

N/A

 

18.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

Twelve Months Ended

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

December 31,

 

 

 

 

 

(millions except per share data)

 

2013

 

2012

 

 

 

 

 

2013

 

2012

 

 

 

 

 

Operating income - as adjusted

 

$

679

 

$

610

 

 

 

 

 

$

2,245

 

$

2,144

 

 

 

 

 

Interest income

 

3

 

4

 

 

 

 

 

9

 

10

 

 

 

 

 

Interest expense

 

(57

)

(55

)

 

 

 

 

(210

)

(228

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income - as reported

 

14

 

 

 

 

 

 

68

 

2

 

 

 

 

 

Headquarters relocation costs

 

 

 

 

 

 

 

 

2

 

 

 

 

 

Other income - as adjusted

 

14

 

 

 

 

 

 

68

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes - as adjusted

 

639

 

559

 

 

 

 

 

2,112

 

1,930

 

 

 

 

 

Income taxes (2)

 

154

 

141

 

 

 

 

 

536

 

504

 

 

 

 

 

Net income - as adjusted

 

485

 

418

 

 

 

 

 

1,576

 

1,426

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

5

 

2

 

 

 

 

 

35

 

27

 

 

 

 

 

Net income attributable to Aon shareholders - as adjusted

 

$

480

 

$

416

 

 

 

 

 

$

1,541

 

$

1,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share - as adjusted

 

$

1.54

 

$

1.27

 

 

 

 

 

$

4.89

 

$

4.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding - diluted

 

311.4

 

327.5

 

 

 

 

 

315.4

 

332.6

 

 

 

 

 

 


(1)          Certain noteworthy items impacting operating income in 2013 and 2012 are described in this schedule. The items shown with the caption “as adjusted” are non-GAAP measures.

 

(2)          The effective tax rate for continuing operations is 24.2% and 25.2% for the three months ended December 31, 2013 and 2012, respectively and 25.4% and 26.1% for the twelve months ended December 31, 2013 and 2012, respectively. Adjusting items are generally taxed at the effective tax rate.

 

13



 

Aon plc

Restructuring Plans (Unaudited) (1)

 

Aon Hewitt Restructuring Plan

By Type:

 

 

 

Actual

 

(millions)

 

Full Year
2010

 

Full Year
2011

 

Full Year
2012

 

Fourth
Quarter
2013

 

Full Year
2013

 

Completed
Plan Total

 

Workforce reduction

 

$

49

 

$

64

 

$

74

 

$

29

 

$

79

 

$

266

 

Lease consolidation

 

3

 

32

 

18

 

30

 

83

 

136

 

Asset impairments

 

 

7

 

4

 

4

 

7

 

18

 

Other costs associated with restructuring

 

 

2

 

2

 

2

 

5

 

9

 

Total restructuring and related expenses

 

$

52

 

$

105

 

$

98

 

$

65

 

$

174

 

$

429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By Segment: (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HR Solutions

 

52

 

49

 

66

 

23

 

80

 

247

 

Risk Solutions

 

 

56

 

32

 

42

 

94

 

182

 

Total restructuring and related expenses

 

$

52

 

$

105

 

$

98

 

$

65

 

$

174

 

$

429

 

 


(1)    In the Condensed 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.

 

14



 

Aon plc

Condensed Consolidated Statements of Financial Position (Unaudited)

 

 

 

As of

 

(millions) 

 

December 31,
2013

 

December 31,
2012

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

 

$

477

 

$

291

 

Short-term investments

 

523

 

346

 

Receivables, net

 

2,896

 

3,101

 

Fiduciary assets (1) 

 

11,871

 

12,214

 

Other current assets

 

563

 

430

 

Total Current Assets

 

16,330

 

16,382

 

Goodwill

 

8,997

 

8,943

 

Intangible assets, net

 

2,578

 

2,975

 

Fixed assets, net

 

791

 

820

 

Investments

 

132

 

165

 

Deferred tax assets

 

193

 

285

 

Other non-current assets

 

1,230

 

916

 

Total Assets

 

$

30,251

 

$

30,486

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Fiduciary liabilities

 

$

11,871

 

$

12,214

 

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

 

703

 

452

 

Accounts payable and accrued liabilities

 

1,931

 

1,853

 

Other current liabilities

 

906

 

831

 

Total Current Liabilities

 

15,411

 

15,350

 

Long-term debt

 

3,686

 

3,713

 

Deferred tax liabilities

 

420

 

306

 

Pension, other post retirement and other post employment liabilities

 

1,607

 

2,276

 

Other non-current liabilities

 

932

 

1,036

 

Total Liabilities

 

22,056

 

22,681

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

Ordinary shares ($0.01 nominal value)

 

3

 

3

 

Additional paid-in capital

 

4,785

 

4,436

 

Retained earnings

 

5,731

 

5,933

 

Accumulated other comprehensive loss

 

(2,374

)

(2,610

)

Total Aon Shareholders’ Equity

 

8,145

 

7,762

 

Noncontrolling interests

 

50

 

43

 

Total Equity

 

8,195

 

7,805

 

Total Liabilities and Equity

 

$

30,251

 

$

30,486

 

 


(1) Includes short-term investments: 2013 - $3,778, 2012 - $4,029

 

15



 

Aon plc

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

(millions) 

 

December 31,
2013

 

December 31,
2012

 

December 31,
2013

 

December 31,
2012

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net income

 

$

360

 

$

307

 

$

1,148

 

$

1,020

 

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

 

 

 

 

 

 

 

 

 

(Gain) loss from sales of businesses and investments, net

 

(37

)

1

 

(65

)

 

Depreciation of fixed assets

 

63

 

64

 

240

 

232

 

Amortization of intangible assets

 

99

 

110

 

395

 

423

 

Share-based compensation expense

 

93

 

52

 

300

 

212

 

Deferred income taxes

 

(114

)

(116

)

(14

)

(95

)

Change in assets and liabilities:

 

 

 

 

 

 

 

 

 

Fiduciary receivables

 

(688

)

(955

)

(4

)

(1,402

)

Short term investments - funds held on behalf of clients

 

525

 

121

 

156

 

239

 

Fiduciary liabilities

 

163

 

834

 

(152

)

1,163

 

Receivables, net

 

(233

)

(134

)

141

 

106

 

Accounts payable and accrued liabilities

 

378

 

310

 

48

 

(37

)

Restructuring reserves

 

22

 

(3

)

15

 

(46

)

Current income taxes

 

81

 

118

 

(116

)

185

 

Pension and other post employment liabilities

 

(101

)

(171

)

(502

)

(585

)

Other assets and liabilities

 

38

 

14

 

43

 

4

 

CASH PROVIDED BY OPERATIONS

 

649

 

552

 

1,633

 

1,419

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

Proceeds from sale of long-term investments

 

12

 

7

 

93

 

178

 

Purchases of long-term investments

 

(2

)

(3

)

(15

)

(12

)

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

 

(161

)

374

 

(174

)

440

 

Acquisition of businesses, net of cash acquired

 

(28

)

(65

)

(54

)

(162

)

Proceeds from sale of business

 

34

 

 

40

 

2

 

Capital expenditures

 

(55

)

(68

)

(229

)

(269

)

CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES

 

(200

)

245

 

(339

)

177

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Share repurchase

 

(77

)

(500

)

(1,102

)

(1,125

)

Issuance of shares for employee benefit plans

 

14

 

25

 

98

 

118

 

Issuance of debt

 

636

 

400

 

4,906

 

733

 

Repayment of debt

 

(809

)

(650

)

(4,679

)

(1,077

)

Cash dividends to shareholders

 

(53

)

(51

)

(212

)

(204

)

Purchase of shares from noncontrolling interests

 

(2

)

(4

)

(8

)

(4

)

Dividends paid to noncontrolling interests

 

(6

)

(10

)

(19

)

(27

)

CASH USED FOR FINANCING ACTIVITIES

 

(297

)

(790

)

(1,016

)

(1,586

)

 

 

 

 

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

(44

)

(6

)

(92

)

9

 

Net Increase in Cash and Cash Equivalents

 

108

 

1

 

186

 

19

 

Cash and Cash Equivalents at Beginning of Period

 

369

 

290

 

291

 

272

 

Cash and Cash Equivalents at End of Period

 

$

477

 

$

291

 

$

477

 

$

291

 

 

16