SYS-CON MEDIA Authors: Elizabeth White, Yeshim Deniz, Glenn Rossman, Pat Romanski, Cynthia Dunlop

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Aon Reports Fourth Quarter and Full Year 2013 Results

Fourth Quarter Key Metrics and Highlights

LONDON, Jan. 31, 2014 /PRNewswire/ -- 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.

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.



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%






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.

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.

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.

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  

 


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.

 


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.



 

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%




 


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.

 


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.

 

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.

 

 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 

 

 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












 

SOURCE Aon plc

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