Fourth Quarter Key Metrics and Highlights
- Total revenue increased 8% to $3.4
billion, including organic revenue growth of 7%
- Operating margin decreased 920 basis points to 23.1%, and
operating margin, adjusted for certain items, increased 60 basis
points to 33.8%
- EPS decreased 21% to $2.47, and
EPS, adjusted for certain items was flat at $3.89
- Repurchased 2.3 million class A ordinary shares for
approximately $0.8 billion
- Announced definitive agreement to acquire leading broker NFP to
unlock fast-growing middle market with Aon Business
Services-enhanced distribution and further accelerate our Aon
United strategy
Full Year Key Metrics and Highlights
- Total revenue increased 7% to $13.4
billion, including organic revenue growth of 7%
- Operating margin decreased 110 basis points to 28.3%, and
operating margin, adjusted for certain items, increased 80 basis
points to 31.6%
- EPS increased 3% to $12.51, and
EPS, adjusted for certain items, increased 6% to $14.14
- Cash flows from operations increased 7% to $3,435 million and free cash flow increased 5% to
$3,183 million
- Repurchased 8.4 million class A ordinary shares for
approximately $2.7 billion
DUBLIN, Feb. 2, 2024
/PRNewswire/ -- Aon plc (NYSE: AON) today reported results for the
three and twelve months ended December 31, 2023.
Net income per share attributable to Aon shareholders in
the fourth quarter decreased 24%, or $2.47 per share on a diluted basis, compared to
$3.14 per share on a diluted basis,
in the prior year period. Net income per share attributable to Aon
shareholders, adjusted for certain items, was flat at $3.89 on a diluted basis for the quarter,
including a favorable impact of $0.03
per share if prior year period results were translated at current
period foreign exchange rates ("foreign currency translation").
Certain items that impacted fourth quarter results and comparisons
with the prior year period are detailed in "Reconciliation of
Non-GAAP Measures - Operating Income and Diluted Earnings Per
Share" on page 10 of this press release.
"In the fourth quarter and full year, our colleagues delivered
7% organic revenue growth, highlighted by double-digit growth in
Reinsurance Solutions and Health Solutions. This top line
growth contributed to full year adjusted margin expansion of 80
basis points, adjusted operating income growth of 10%, and
$3.2 billion of free cash flow." said
Greg Case, Chief Executive Officer.
"This strong performance demonstrates how we are going further,
faster with our 3x3 plan, which is an acceleration of our proven
Aon United strategy. Our Risk Capital and Human Capital structure
has unlocked new opportunities to grow, and Aon Business Services
is a catalyst for innovation delivering new products and tools at
scale across client segments and geographies."
FOURTH QUARTER 2023 FINANCIAL SUMMARY
Total revenue in the fourth quarter increased 8%
to $3.4 billion compared to the prior
year period reflecting 7% organic revenue growth, a 2% favorable
impact from foreign currency translation, and a 1% favorable impact
from fiduciary investment income, partially offset by a 2%
unfavorable impact from acquisitions, divestitures and other.
Total operating expenses in the fourth quarter
increased 23% to $2.6 billion
compared to the prior year period due primarily to an increase in
expense associated with 7% organic revenue growth, investments in
long-term growth, a $197 million
charge in connection with certain accrued actual or anticipated
legal settlement expenses, and a $40
million unfavorable impact from foreign currency
translation.
Foreign currency translation in the fourth quarter had a
$6 million, or $0.03 per share, favorable impact on U.S. GAAP
net income and a $7 million, or
$0.03 per share, favorable impact on
adjusted net income. If currency were to remain stable at today's
rates, the Company would expect a favorable impact of approximately
$0.03 per share, or an approximately
$9 million increase in adjusted operating income, in the first
quarter of 2024, and a favorable impact of approximately
$0.02 per share, or an approximately
$6 million increase in adjusted operating income, for full
year 2024.
Effective tax rate for the fourth quarter was 16.7%,
compared to 6.1% in the prior year period, primarily driven
by changes in the geographical distribution of income and a lower
net favorable impact from discrete items than in the prior year
period. After adjusting to exclude the applicable tax impact
associated with certain non-GAAP adjustments, the adjusted
effective tax rate for the fourth quarter of 2023 was 18.2%
compared to 9.0% in the prior year period. The primary drivers of
the change in the adjusted tax rate were the geographical
distribution of income and a lower net favorable impact from
discrete items than in the prior year period. These adjustments are
discussed in "Reconciliation of Non-GAAP Measures - Operating
Income and Diluted Earnings Per Share" on page 10 of this press
release.
Weighted average diluted shares outstanding decreased to
202.0 million in the fourth quarter compared to 209.3 million in
the prior year period. The Company repurchased 2.3 million class A
ordinary shares for approximately $0.8
billion in the fourth quarter. As of December 31, 2023, the Company had approximately
$3.3 billion of remaining
authorization under its share repurchase program.
FULL YEAR 2023 CASH FLOW SUMMARY
The full year 2023 cash flow summary provided below includes
supplemental information related to free cash flow, 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.
Cash flows provided by operations for 2023 increased
$216 million, or 7%, to $3,435 million compared to the prior year period,
reflecting strong operating income growth and overall working
capital optimization, partially offset by a negative impact to
working capital due to temporary invoicing delays associated with
the implementation of a new system, and higher cash tax
payments.
Free cash flow, defined as cash flow from operations
less capital expenditures, increased 5%, to $3,183 million in 2023 compared to the prior
year, reflecting an increase in cash flows from operations,
partially offset by a $56 million
increase in capital expenditures, due primarily to ongoing
investments in Aon Business Services-enabled technology platforms
and technology to drive long-term-growth.
FOURTH QUARTER 2023 REVENUE REVIEW
The fourth 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 Growth and Free Cash Flow" on
page 9 of this press release.
|
|
Three Months
Ended
December 31,
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
|
2023
|
|
2022
|
|
%
Change
|
|
Less:
Currency
Impact
|
|
Less:
Fiduciary
Investment
Income
|
|
Less:
Acquisitions,
Divestitures &
Other
|
|
Organic
Revenue
Growth
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$ 1,906
|
|
$ 1,822
|
|
5 %
|
|
1 %
|
|
1 %
|
|
(1) %
|
|
4 %
|
Reinsurance
Solutions
|
|
332
|
|
281
|
|
18
|
|
1
|
|
6
|
|
(3)
|
|
14
|
Health
Solutions
|
|
763
|
|
678
|
|
13
|
|
1
|
|
—
|
|
1
|
|
11
|
Wealth
Solutions
|
|
377
|
|
353
|
|
7
|
|
3
|
|
—
|
|
(1)
|
|
5
|
Elimination
|
|
(3)
|
|
(4)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Total
revenue
|
|
$ 3,375
|
|
$ 3,130
|
|
8 %
|
|
2 %
|
|
1 %
|
|
(2) %
|
|
7 %
|
Total revenue increased $245
million, or 8%, to $3,375
million, compared to the prior year period, including
organic revenue growth of 7% driven by ongoing strong retention,
net new business generation, and management of the renewal book, a
2% favorable impact from foreign currency translation, and a 1%
favorable impact from fiduciary investment income, partially offset
by a 2% unfavorable impact from acquisitions, divestitures and
other.
Commercial Risk Solutions organic revenue growth of 4%
reflects solid growth across most major geographies driven by
strong retention, management of the renewal book, and net new
business generation. Growth in retail brokerage was highlighted by
double-digit growth in Asia and
the Pacific, driven by continued strength in core P&C. The U.S.
grew modestly driven by strength in property, casualty, and
construction, partially offset by the impact of external M&A
and IPO markets. On average globally, exposures and pricing were
positive, resulting in modestly positive market impact.
Reinsurance Solutions organic revenue growth of 14%
reflects strong growth in treaty, driven by strong retention and
continued net new business generation, as well as strong growth in
facultative placements and investment banking. 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 typically driven by facultative placements, capital
markets activity, and advisory work that is more transactional in
nature.
Health Solutions organic revenue growth of 11% reflects
strong growth globally in core health and benefits brokerage
primarily from net new business generation and management of the
renewal book. Strength in the core was highlighted by double-digit
growth in most major geographies. Results also reflect double-digit
growth in Consumer Benefit Solutions and modest growth in
Talent.
Wealth Solutions organic revenue growth of 5% reflects
strong growth in Retirement, driven by advisory demand and
project-related work related to pension de-risking and ongoing
impact of regulatory changes. In Investments, a modest increase in
AUM-based delegated investment revenue was offset by a decline in
advisory.
FOURTH QUARTER 2023 EXPENSE REVIEW
|
|
Three Months
Ended
December 31,
|
|
|
|
|
(millions)
|
|
2023
|
|
2022
|
|
$
Change
|
|
%
Change
|
Expenses
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
$
1,671
|
|
$
1,539
|
|
$ 132
|
|
9 %
|
Information
technology
|
|
131
|
|
138
|
|
(7)
|
|
(5)
|
Premises
|
|
77
|
|
73
|
|
4
|
|
5
|
Depreciation of fixed
assets
|
|
48
|
|
36
|
|
12
|
|
33
|
Amortization and
impairment of intangible assets
|
|
19
|
|
26
|
|
(7)
|
|
(27)
|
Other general
expense
|
|
521
|
|
306
|
|
215
|
|
70
|
Accelerating Aon
United Program expenses
|
|
129
|
|
—
|
|
129
|
|
100
|
Total operating
expenses
|
|
$
2,596
|
|
$
2,118
|
|
$ 478
|
|
23 %
|
Compensation and benefits expense increased $132 million, or 9%, compared to the prior year
period due primarily to an increase in expense associated with 7%
organic revenue growth and a $32
million unfavorable impact from foreign currency
translation.
Information technology expense decreased $7 million, or 5%, compared to the prior
year period due primarily to lower cloud costs and elevated
technology investments in the prior year period.
Premises expense increased $4 million, or 5%,
compared to the prior year period.
Depreciation of fixed assets increased $12 million, or 33%, compared to the prior year
period due primarily to ongoing investments in Aon Business
Services-enabled technology platforms to drive long-term
growth.
Amortization and impairment of intangible assets
decreased $7 million, or 27%,
compared to the prior year period due primarily to a decrease
associated with assets held for sale as part of ongoing portfolio
management and assets fully amortized in the prior year period.
Other general expense increased $215 million, or 70%, compared to the prior year
period primarily due to a $197
million charge in connection with certain accrued actual or
anticipated legal settlement expenses and $17 million of transaction costs associated with
the expected acquisition of NFP.
Accelerating Aon United Restructuring Program expenses
were $129 million, relating to
workforce optimization, asset impairments, and technology and other
costs.
FOURTH QUARTER 2023 INCOME SUMMARY
Certain noteworthy items impacted adjusted operating income and
adjusted operating margins in the fourth quarters of 2023 and 2022,
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
December 31,
|
|
|
(millions)
|
|
2023
|
|
2022
|
|
%
Change
|
Revenue
|
|
$ 3,375
|
|
$
3,130
|
|
8 %
|
Expenses
|
|
2,596
|
|
2,118
|
|
23 %
|
Operating
income
|
|
$
779
|
|
$
1,012
|
|
(23) %
|
Operating
margin
|
|
23.1 %
|
|
32.3 %
|
|
|
Operating income -
as adjusted
|
|
$ 1,141
|
|
$
1,038
|
|
10 %
|
Operating margin -
as adjusted
|
|
33.8 %
|
|
33.2 %
|
|
|
Operating income decreased $233
million, or 23%, and operating margin decreased 920 basis
points to 23.1%, each compared to the prior year period. Operating
income, adjusted for certain items detailed on page 10 of this
press release, increased $103
million, or 10%, and operating margin, adjusted for certain
items, increased 60 basis points to 33.8%, each compared to the
prior year period. The increase in adjusted operating income and
margin reflects organic revenue growth and increased fiduciary
investment income, partially offset by increased expenses and
investments in long-term growth.
Interest income increased $9
million compared to the prior year period, reflecting higher
interest rates. Interest expense increased $14 million to $124
million compared to the prior year period, reflecting an
overall increase in total debt and higher interest rates.
Other income (expense) decreased $138 million compared to the prior year period,
primarily due to a $170 million
non-cash pension settlement charge in the prior year period that
did not repeat in the fourth quarter of 2023. Other income
(expense) - as adjusted increased $32
million compared to the prior year period, primarily
due to an increase in non-cash net periodic pension cost.
Net income attributable to Aon shareholders in the fourth
quarter decreased 24% to $498 million
compared to $657 million, in the
prior year period. Net income attributable to Aon shareholders,
adjusted for certain items, in the fourth quarter decreased 4% to
$785 million compared to $815 million, in the prior year period.
2023 FULL YEAR SUMMARY
Total revenue in 2023 increased 7% to $13.4 billion compared to the prior year
reflecting 7% organic revenue growth and a 2% favorable impact from
fiduciary investment income, partially offset by a 2% unfavorable
impact from acquisitions, divestitures and other.
Net income attributable to Aon shareholders decreased to
$2,564 million, or $12.51 per share on a diluted basis, compared to
$2,589 million, or $12.14 per share, in the prior year. Net income
per share, adjusted for certain items, increased 6% to $14.14 on a diluted basis, including an
unfavorable impact of $0.17 per share
from foreign currency translation, compared to $13.39 in the prior year. Certain items that
impacted full year results and comparisons against the prior year
are detailed in "Reconciliation of Non-GAAP Measures - Operating
Income and Diluted Earnings Per Share" on page 10 of this press
release.
During 2023, the Company repurchased approximately 8.4 million
class A ordinary shares for approximately $2.7 billion at an average price of
$321.52 per share. As of
December 31, 2023, the Company had approximately $3.3 billion of remaining authorization under its
share repurchase program.
Conference Call, Presentation Slides and Webcast
Details
The Company will host a conference call on Friday,
February 2, 2024 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) 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 and sovereignties with advice and solutions that give
them the clarity and confidence to make better decisions to protect
and grow their business.
Follow Aon on LinkedIn, Twitter, Facebook and
Instagram. Stay up-to-date by visiting the Aon Newsroom and
sign up for News Alerts.
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, all of 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. 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, the impacts of the Accelerating Aon United
Program, the pending acquisition of NFP, actual or anticipated
legal settlement expenses, future capital expenditures, growth in
commissions and fees, changes to the composition or level of its
revenues, cash flow and liquidity, expected tax rates, expected
foreign currency translation impacts, business strategies,
competitive strengths, goals, the benefits of new initiatives,
growth of its business and operations, plans, references to future
successes, and expectations with respect to the closing and
benefits of the acquisition of NFP are forward-looking statements.
Also, when Aon uses words such as "anticipate", "believe",
"continue", "could", "estimate", "expect", "forecast", "intend",
"looking forward", "may", "might", "plan", "potential",
"opportunity", "commit", "probably", "project", "should", "will",
"would" 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: changes in the competitive environment, due to
macroeconomic conditions (including impacts from instability in the
banking or commercial real estate sectors) or otherwise, or damage
to Aon's reputation; fluctuations in currency exchange, interest,
or inflation rates that could impact our financial condition or
results; changes in global equity and fixed income markets that
could affect the return on invested assets; changes in the funded
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 and the terms thereof reducing
Aon's flexibility or increasing borrowing costs; rating agency
actions that could limit Aon's access to capital and our
competitive position; volatility in Aon's global tax rate due to
being subject to a variety of different factors, including the
adoption and implementation of OECD tax proposals; changes in Aon's
accounting estimates or assumptions on Aon's financial statements;
limits on Aon's subsidiaries' ability to pay dividends or otherwise
make payments to Aon; the impact of legal proceedings and other
contingencies, including those arising from acquisition or
disposition transactions, errors and omissions and other claims
against Aon (including proceeding and contingencies relating to
transactions for which capital was arranged by Vesttoo
Ltd.); the impact of, and potential challenges in complying
with, laws and regulations in the jurisdictions in which Aon
operates, particularly given the global nature of Aon's operations
and the possibility of differing or conflicting laws and
regulations, or the application or interpretation thereof, across
jurisdictions in which Aon does business; the impact of any
regulatory investigations brought in Ireland, the U.K., the U.S. and other
countries; failure to protect intellectual property rights or
allegations that Aon infringes on the intellectual property rights
of others; general economic and political conditions in different
countries in which Aon does business around the world; the failure
to retain, attract and develop experienced and qualified personnel,
whether as a result of the pending acquisition of NFP or otherwise;
international risks associated with Aon's global operations,
including impacts from military conflicts or political instability,
such as the ongoing Russian war in Ukraine and the Israel-Hamas conflict; the
effects of natural or man-made disasters, including the effects of
the COVID-19 and other health pandemics and the impacts of climate
change; any system or network disruption or breach resulting in
operational interruption or improper disclosure of confidential,
personal, or proprietary data, and resulting liabilities or damage
to our reputation; Aon's ability to develop, implement, update and
enhance new systems; the actions taken by third parties that
perform aspects of Aon's business operations and client services;
the extent to which Aon is exposed to certain risks, including
lawsuits, related to actions Aon may take in being responsible for
making decisions on behalf of clients in Aon's investment
businesses or in other advisory services that Aon currently
provides, or may provide in the future; Aon's ability to continue,
and the costs and risks associated with, growing, developing and
integrating acquired business, and entering into new lines of
business or products; Aon's ability to secure regulatory approval
and complete transactions, including the pending acquisition of
NFP, and the costs and risks associated with the failure to
consummate proposed transactions; changes in commercial property
and casualty markets, commercial premium rates or methods of
compensation; Aon's ability to develop and implement innovative
growth strategies and initiatives intended to yield cost savings
(including the Accelerating Aon United Program), and the ability to
achieve such growth or cost savings; the effects of Irish law on
Aon's operating flexibility and the enforcement of judgments
against Aon; adverse effects on the market price of Aon's
securities and/or operating results for any reason, including,
without limitation, because of a failure to consummate the pending
acquisition of NFP or the failure to realize the expected benefits
of the pending acquisition of NFP (including anticipated revenue
and growth synergies) in the expected timeframe, or at all;
significant transaction and integration costs or difficulties in
connection with the pending acquisition of NFP or unknown or
inestimable liabilities; and potential impact of the consummation
of the pending acquisition of NFP on relationships, including with
suppliers, customers, employees and regulators.
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 prior
periods are not necessarily indicative of results that may be
expected for any future period. 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, 2022 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 States ("U.S. GAAP"),
including organic revenue growth, free cash flow, adjusted
operating income, adjusted operating margin, adjusted earnings per
share, adjusted net income attributable to Aon shareholders,
adjusted diluted net income per share, adjusted effective tax rate,
adjusted other income (expense) – pensions, adjusted other income
(expense), and adjusted income before income taxes that exclude the
effects of intangible asset amortization and impairment, pension
settlements, Accelerating Aon United Program expenses, NFP
transaction costs, certain legal settlements, 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 (including held for sale businesses),
transfers between revenue lines, fiduciary investment income, and
gains or losses on derivatives accounted for as hedges. Currency
impact represents the effect on prior year period results if they
were translated at current period 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 and
impairment, and certain other noteworthy items. Management believes
that these measures are important to make meaningful
period-to-period comparisons and that this supplemental information
is helpful to investors. Management also uses these measures to
assess operating performance and performance for compensation.
Non-GAAP measures should be viewed in addition to, not in lieu of,
Aon's Consolidated Financial Statements. Industry peers provide
similar supplemental information regarding their performance,
although they may not make identical adjustments.
Investor
Contact:
|
|
Media
Contact:
|
Leslie
Follmer
|
|
Will Dunn
|
+1
312-381-3310
|
|
+1
312-381-3024
|
investor.relations@aon.com
|
|
mediainquiries@aon.com
|
Aon
plc Consolidated Statements of Income
(Unaudited)
|
|
|
Three Months
Ended
December 31,
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
(millions, except
per share data)
|
|
2023
|
|
2022
|
|
%
Change
|
|
2023
|
|
2022
|
|
%
Change
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
$
3,375
|
|
$
3,130
|
|
8 %
|
|
$
13,376
|
|
$
12,479
|
|
7 %
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
1,671
|
|
1,539
|
|
9 %
|
|
6,902
|
|
6,477
|
|
7 %
|
Information
technology
|
|
131
|
|
138
|
|
(5) %
|
|
534
|
|
509
|
|
5 %
|
Premises
|
|
77
|
|
73
|
|
5 %
|
|
294
|
|
289
|
|
2 %
|
Depreciation of fixed
assets
|
|
48
|
|
36
|
|
33 %
|
|
167
|
|
151
|
|
11 %
|
Amortization and
impairment of intangible assets
|
|
19
|
|
26
|
|
(27) %
|
|
89
|
|
113
|
|
(21) %
|
Other general
expense
|
|
521
|
|
306
|
|
70 %
|
|
1,470
|
|
1,271
|
|
16 %
|
Accelerating Aon
United Program expenses
|
|
129
|
|
—
|
|
100 %
|
|
135
|
|
—
|
|
100 %
|
Total operating
expenses
|
|
2,596
|
|
2,118
|
|
23 %
|
|
9,591
|
|
8,810
|
|
9 %
|
Operating
income
|
|
779
|
|
1,012
|
|
(23) %
|
|
3,785
|
|
3,669
|
|
3 %
|
Interest
income
|
|
12
|
|
3
|
|
300 %
|
|
31
|
|
18
|
|
72 %
|
Interest
expense
|
|
(124)
|
|
(110)
|
|
13 %
|
|
(484)
|
|
(406)
|
|
19 %
|
Other income
(expense)
|
|
(58)
|
|
(196)
|
|
(70) %
|
|
(163)
|
|
(125)
|
|
30 %
|
Income before income
taxes
|
|
609
|
|
709
|
|
(14) %
|
|
3,169
|
|
3,156
|
|
— %
|
Income tax expense
(1)
|
|
102
|
|
43
|
|
137 %
|
|
541
|
|
510
|
|
6 %
|
Net
income
|
|
507
|
|
666
|
|
(24) %
|
|
2,628
|
|
2,646
|
|
(1) %
|
Less: Net income
attributable to noncontrolling interests
|
|
9
|
|
9
|
|
— %
|
|
64
|
|
57
|
|
12 %
|
Net income
attributable to Aon shareholders
|
|
$ 498
|
|
$ 657
|
|
(24) %
|
|
$
2,564
|
|
$
2,589
|
|
(1) %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per
share attributable to Aon shareholders
|
|
$ 2.49
|
|
$ 3.17
|
|
(21) %
|
|
$
12.60
|
|
$
12.23
|
|
3 %
|
Diluted net income per
share attributable to Aon shareholders
|
|
$ 2.47
|
|
$ 3.14
|
|
(21) %
|
|
$
12.51
|
|
$
12.14
|
|
3 %
|
Weighted average
ordinary shares outstanding - basic
|
|
200.3
|
|
207.5
|
|
(3) %
|
|
203.5
|
|
211.7
|
|
(4) %
|
Weighted average
ordinary shares outstanding - diluted
|
|
202.0
|
|
209.3
|
|
(3) %
|
|
205.0
|
|
213.2
|
|
(4) %
|
|
|
(1)
|
The effective tax rate
was 16.7% and 6.1% for the three months ended December 31, 2023 and
2022, respectively, and 17.1% and 16.2% for the twelve months ended
December 31, 2023 and 2022, respectively.
|
Aon
plc
Reconciliation of
Non-GAAP Measures - Organic Revenue Growth and Free Cash Flow
(Unaudited)
Organic Revenue
Growth (Unaudited)
|
|
|
|
Three Months
Ended
December 31,
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
|
2023
|
|
2022
|
|
%
Change
|
|
Less:
Currency
Impact (1)
|
|
Less:
Fiduciary
Investment
Income (2)
|
|
Less:
Acquisitions,
Divestitures &
Other
|
|
Organic
Revenue
Growth (3)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
1,906
|
|
$
1,822
|
|
5 %
|
|
1 %
|
|
1 %
|
|
(1) %
|
|
4 %
|
Reinsurance
Solutions
|
|
332
|
|
281
|
|
18
|
|
1
|
|
6
|
|
(3)
|
|
14
|
Health
Solutions
|
|
763
|
|
678
|
|
13
|
|
1
|
|
—
|
|
1
|
|
11
|
Wealth
Solutions
|
|
377
|
|
353
|
|
7
|
|
3
|
|
—
|
|
(1)
|
|
5
|
Elimination
|
|
(3)
|
|
(4)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Total
revenue
|
|
$
3,375
|
|
$
3,130
|
|
8 %
|
|
2 %
|
|
1 %
|
|
(2) %
|
|
7 %
|
|
|
Twelve Months
Ended
December 31,
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
|
2023
|
|
2022
|
|
%
Change
|
|
Less:
Currency
Impact (1)
|
|
Less:
Fiduciary
Investment
Income (2)
|
|
Less:
Acquisitions,
Divestitures &
Other
|
|
Organic
Revenue
Growth (3)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Risk
Solutions
|
|
$
7,043
|
|
$
6,715
|
|
5 %
|
|
— %
|
|
2 %
|
|
(2) %
|
|
5 %
|
Reinsurance
Solutions
|
|
2,481
|
|
2,190
|
|
13
|
|
(1)
|
|
4
|
|
—
|
|
10
|
Health
Solutions
|
|
2,433
|
|
2,224
|
|
9
|
|
—
|
|
—
|
|
(1)
|
|
10
|
Wealth
Solutions
|
|
1,431
|
|
1,367
|
|
5
|
|
—
|
|
—
|
|
1
|
|
4
|
Elimination
|
|
(12)
|
|
(17)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Total
revenue
|
|
$
13,376
|
|
$
12,479
|
|
7 %
|
|
— %
|
|
2 %
|
|
(2) %
|
|
7 %
|
(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 December 31, 2023 and 2022 was
$78 million and $41 million, respectively. Fiduciary investment
income for the twelve months ended December 31, 2023 and 2022 was
$274 million and $76 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 (including held for sale
businesses, which had a 1% favorable impact on total organic
revenue growth for the three and twelve months ended December 31,
2023), transfers between revenue lines, and gains and losses on
derivatives accounted for as hedges.
|
Free Cash Flows
(Unaudited)
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
(millions)
|
|
2023
|
|
2022
|
|
%
Change
|
Cash Provided By
Operating Activities
|
|
$
3,435
|
|
$
3,219
|
|
7 %
|
Capital
Expenditures
|
|
(252)
|
|
(196)
|
|
29 %
|
Free Cash Flows
(1)
|
|
$
3,183
|
|
$
3,023
|
|
5 %
|
|
|
(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 and Diluted Earnings Per Share
(Unaudited) (1)
|
|
|
|
Three Months
Ended
December 31,
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
(millions, except
percentages)
|
|
2023
|
|
2022
|
|
%
Change
|
|
2023
|
|
2022
|
|
%
Change
|
Revenue
|
|
$
3,375
|
|
$
3,130
|
|
8 %
|
|
$
13,376
|
|
$
12,479
|
|
7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
$ 779
|
|
$
1,012
|
|
(23) %
|
|
$ 3,785
|
|
$
3,669
|
|
3 %
|
Amortization and
impairment of intangible assets
|
|
19
|
|
26
|
|
(27) %
|
|
89
|
|
113
|
|
(21) %
|
Accelerating Aon
United Program expenses (2)
|
|
129
|
|
—
|
|
100 %
|
|
135
|
|
—
|
|
100 %
|
Legal settlements
(3)
|
|
197
|
|
—
|
|
100 %
|
|
197
|
|
58
|
|
240 %
|
Transaction costs
(4)
|
|
17
|
|
—
|
|
100 %
|
|
17
|
|
—
|
|
100 %
|
Operating income -
as adjusted
|
|
$
1,141
|
|
$
1,038
|
|
10 %
|
|
$ 4,223
|
|
$
3,840
|
|
10 %
|
Operating
margin
|
|
23.1 %
|
|
32.3 %
|
|
|
|
28.3 %
|
|
29.4 %
|
|
|
Operating margin -
as adjusted
|
|
33.8 %
|
|
33.2 %
|
|
|
|
31.6 %
|
|
30.8 %
|
|
|
|
|
Three Months
Ended
December 31,
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
(millions, except per share data)
|
|
2023
|
|
2022
|
|
%
Change
|
|
2023
|
|
2022
|
|
%
Change
|
Operating income -
as adjusted
|
|
$
1,141
|
|
$
1,038
|
|
10 %
|
|
$
4,223
|
|
$
3,840
|
|
10 %
|
Interest
income
|
|
12
|
|
3
|
|
300 %
|
|
31
|
|
18
|
|
72 %
|
Interest
expense
|
|
(124)
|
|
(110)
|
|
13 %
|
|
(484)
|
|
(406)
|
|
19 %
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
- pensions - as adjusted (5)
|
|
(20)
|
|
—
|
|
(100) %
|
|
(71)
|
|
(9)
|
|
689 %
|
Other income (expense)
- other
|
|
(38)
|
|
(26)
|
|
46 %
|
|
(65)
|
|
54
|
|
(220) %
|
Other income (expense)
- as adjusted (5)
|
|
(58)
|
|
(26)
|
|
123 %
|
|
(136)
|
|
45
|
|
(402) %
|
Income before income
taxes - as adjusted
|
|
971
|
|
905
|
|
7 %
|
|
3,634
|
|
3,497
|
|
4 %
|
Income tax expense
(6)
|
|
177
|
|
81
|
|
119 %
|
|
671
|
|
585
|
|
15 %
|
Net income - as
adjusted
|
|
794
|
|
824
|
|
(4) %
|
|
2,963
|
|
2,912
|
|
2 %
|
Less: Net income
attributable to noncontrolling interests
|
|
9
|
|
9
|
|
— %
|
|
64
|
|
57
|
|
12 %
|
Net income
attributable to Aon shareholders - as adjusted
|
|
785
|
|
815
|
|
(4) %
|
|
2,899
|
|
2,855
|
|
2 %
|
Diluted net income per
share attributable to Aon shareholders - as adjusted
|
|
$ 3.89
|
|
$ 3.89
|
|
— %
|
|
$
14.14
|
|
$
13.39
|
|
6 %
|
Weighted average
ordinary shares outstanding - diluted
|
|
202.0
|
|
209.3
|
|
(3) %
|
|
205.0
|
|
213.2
|
|
(4) %
|
Effective Tax Rates
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP
|
|
16.7 %
|
|
6.1 %
|
|
|
|
17.1 %
|
|
16.2 %
|
|
|
Non-GAAP
|
|
18.2 %
|
|
9.0 %
|
|
|
|
18.5 %
|
|
16.7 %
|
|
|
(1)
|
Certain noteworthy
items impacting operating income in 2023 and 2022 are described in
this schedule. The items shown with the caption "as adjusted" are
non-GAAP measures.
|
(2)
|
Total charges related
to the Accelerating Aon United Program ("AAU Program") are expected
to include technology-related costs to facilitate streamlining and
simplifying operations, headcount reduction costs, and costs
associated with asset impairments, including real estate
consolidation costs.
|
(3)
|
In the fourth quarter
of 2023, Aon recognized actual or anticipated legal settlement
expenses in connection with transactions for which capital was
arranged by a third party, Vesttoo Ltd., primarily in the form of
letters of credit from third party banks that are alleged to have
been fraudulent. Certain actual or anticipated legal settlement
expenses totaling $197 million have been recognized in the current
period, where certain potentially meaningful amounts may be
recoverable in future periods. Additionally, a $58 million charge
was recognized in the second quarter of 2022 with certain other
legal settlements reached in matters unrelated to
Vesttoo.
|
(4)
|
In the fourth quarter
of 2023, Aon entered into a definitive agreement to acquire NFP. As
part of the definitive agreement, certain transaction costs were
incurred including advisory, legal, accounting, and other
professional or consulting fees required to complete the
acquisition.
|
(5)
|
To further its pension
de-risking strategy, the Company settled certain pension
obligations in the Netherlands through the purchase of annuities,
where certain pension assets were liquidated to purchase the
annuities. A non-cash settlement charge totaling $27 million was
recognized in the second quarter of 2023, which is excluded from
Other income (expense) - as adjusted. Additionally, the Company
purchased an annuity for portions of its U.S. pension plans that
will settle certain obligations. A non-cash settlement charge
totaling $170 million was recognized in the fourth quarter of 2022,
which is excluded from Other income (expense) - as
adjusted.
|
(6)
|
Adjusted items are
generally taxed at the estimated annual effective tax rate, except
for the applicable tax impact associated with the anticipated sale
of certain assets and liabilities classified as held for sale,
certain pension and legal settlements, AAU Program expenses, and
certain transaction costs and other charges related to the
definitive agreement to acquire NFP, which are adjusted at the
related jurisdictional rate.
|
Aon
plc
Consolidated Statements
of Financial Position
|
|
|
|
As of December
31,
|
|
|
2023
|
|
2022
|
(millions)
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
778
|
|
$
690
|
Short-term
investments
|
|
369
|
|
452
|
Receivables,
net
|
|
3,254
|
|
3,035
|
Fiduciary assets
(1)
|
|
16,278
|
|
15,900
|
Other current
assets
|
|
996
|
|
646
|
Total current
assets
|
|
21,675
|
|
20,723
|
Goodwill
|
|
8,414
|
|
8,292
|
Intangible assets,
net
|
|
234
|
|
447
|
Fixed assets,
net
|
|
638
|
|
558
|
Operating lease
right-of-use assets
|
|
650
|
|
699
|
Deferred tax
assets
|
|
1,195
|
|
824
|
Prepaid
pension
|
|
618
|
|
652
|
Other non-current
assets
|
|
506
|
|
509
|
Total
assets
|
|
$
33,930
|
|
$
32,704
|
|
|
|
|
|
Liabilities and
equity (deficit)
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
2,262
|
|
$
2,114
|
Short-term debt and
current portion of long-term debt
|
|
1,204
|
|
945
|
Fiduciary
liabilities
|
|
16,278
|
|
15,900
|
Other current
liabilities
|
|
1,878
|
|
1,347
|
Total current
liabilities
|
|
21,622
|
|
20,306
|
Long-term
debt
|
|
9,995
|
|
9,825
|
Non-current operating
lease liabilities
|
|
641
|
|
693
|
Deferred tax
liabilities
|
|
115
|
|
99
|
Pension, other
postretirement, and postemployment liabilities
|
|
1,225
|
|
1,186
|
Other non-current
liabilities
|
|
1,074
|
|
1,024
|
Total
liabilities
|
|
34,672
|
|
33,133
|
|
|
|
|
|
Equity
(deficit)
|
|
|
|
|
Ordinary shares -
$0.01 nominal value
Authorized: 500 shares (issued: 2023 - 198.6 ; 2022 -
205.4)
|
|
2
|
|
2
|
Additional paid-in
capital
|
|
6,944
|
|
6,864
|
Accumulated
deficit
|
|
(3,399)
|
|
(2,772)
|
Accumulated other
comprehensive loss
|
|
(4,373)
|
|
(4,623)
|
Total Aon
shareholders' deficit
|
|
(826)
|
|
(529)
|
Noncontrolling
interests
|
|
84
|
|
100
|
Total
deficit
|
|
(742)
|
|
(429)
|
Total liabilities
and equity (deficit)
|
|
$
33,930
|
|
$
32,704
|
|
|
(1)
|
Includes funds held on
behalf of clients of $6,901 million and $6,386 million as of
December 31, 2023 and 2022, respectively.
|
Aon
plc
Consolidated Statements
of Cash Flows
|
|
|
Year ended December
31,
|
|
|
2023
|
|
2022
|
(millions)
|
|
(unaudited)
|
|
|
Cash flows from
operating activities
|
|
|
|
|
Net income
|
|
$
2,628
|
|
$
2,646
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
|
Gain from sales of
businesses
|
|
(4)
|
|
(54)
|
Depreciation of fixed
assets
|
|
167
|
|
151
|
Amortization and
impairment of intangible assets
|
|
89
|
|
113
|
Share-based
compensation expense
|
|
438
|
|
397
|
Deferred income
taxes
|
|
(373)
|
|
(252)
|
Other, net
|
|
28
|
|
170
|
Change in assets and
liabilities:
|
|
|
|
|
Receivables,
net
|
|
(188)
|
|
(96)
|
Accounts payable and
accrued liabilities
|
|
13
|
|
(22)
|
Accelerating Aon
United Program liabilities
|
|
99
|
|
—
|
Current income
taxes
|
|
174
|
|
216
|
Pension, other
postretirement and postemployment liabilities
|
|
8
|
|
(53)
|
Other assets and
liabilities
|
|
356
|
|
3
|
Cash provided by
operating activities
|
|
3,435
|
|
3,219
|
Cash flows from
investing activities
|
|
|
|
|
Proceeds from
investments
|
|
76
|
|
110
|
Purchases for
investments
|
|
(67)
|
|
(107)
|
Net sales (purchases)
of short-term investments - non fiduciary
|
|
85
|
|
(175)
|
Acquisition of
businesses, net of cash and funds held on behalf of
clients
|
|
(35)
|
|
(162)
|
Sale of businesses,
net of cash and funds held on behalf of clients
|
|
5
|
|
81
|
Capital
expenditures
|
|
(252)
|
|
(196)
|
Cash used for
investing activities
|
|
(188)
|
|
(449)
|
Cash flows from
financing activities
|
|
|
|
|
Share
repurchase
|
|
(2,700)
|
|
(3,203)
|
Proceeds from issuance
of shares
|
|
72
|
|
58
|
Cash paid for employee
taxes on withholding shares
|
|
(241)
|
|
(215)
|
Commercial paper
issuances, net of repayments
|
|
(27)
|
|
(65)
|
Issuance of
debt
|
|
744
|
|
1,967
|
Repayment of
debt
|
|
(350)
|
|
(500)
|
Increase in fiduciary
liabilities, net of fiduciary receivables
|
|
358
|
|
702
|
Cash dividends to
shareholders
|
|
(489)
|
|
(463)
|
Noncontrolling
interests and other financing activities
|
|
(232)
|
|
(71)
|
Cash used for
financing activities
|
|
(2,865)
|
|
(1,790)
|
Effect of exchange
rates on cash and cash equivalents and funds held on behalf of
clients
|
|
264
|
|
(549)
|
Net increase in cash
and cash equivalents and funds held on behalf of clients
|
|
646
|
|
431
|
Cash and cash
equivalents and funds held on behalf of clients at beginning of
year
|
|
7,076
|
|
6,645
|
Cash and cash
equivalents and funds held on behalf of clients at end of
year
|
|
$
7,722
|
|
$
7,076
|
Reconciliation of cash
and cash equivalents and funds held on behalf of
clients:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
778
|
|
$
690
|
Cash and cash
equivalents and funds held on behalf of clients classified as held
for sale
|
|
43
|
|
—
|
Funds held on behalf
of clients
|
|
6,901
|
|
6,386
|
Total cash and cash
equivalents and funds held on behalf of clients
|
|
$
7,722
|
|
$
7,076
|
View original
content:https://www.prnewswire.com/news-releases/aon-reports-fourth-quarter-and-full-year-2023-results-302051357.html
SOURCE Aon plc