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    AON   IE00BLP1HW54

AON PLC

(AON)
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AON PLC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

07/29/2022 | 04:10pm EDT

EXECUTIVE SUMMARY OF SECOND QUARTER 2022 FINANCIAL RESULTS


Aon plc is a leading global professional services firm providing a broad range
of risk, health, and wealth solutions. Through our experience, global reach, and
comprehensive analytics, we are better able to help clients meet rapidly
changing, increasingly complex, and interconnected challenges. We are committed
to accelerating innovation to address unmet and evolving client needs, so that
our clients are better informed, better advised, and able to make better
decisions to protect and grow their business. Management is focused on
strengthening Aon and uniting the firm with one portfolio of capability enabled
by data and analytics and one operating model to deliver additional insight,
connectivity, and efficiency.

Financial Results

The following is a summary of our second quarter of 2022 financial results.


•Revenue increased $97 million, or 3%, to $3.0 billion compared to the prior
year period due primarily to organic revenue growth of 8%, partially offset by a
4% unfavorable impact if prior year period results were translated at current
period foreign exchange rates ("foreign currency translation") and a 1%
unfavorable impact from acquisitions, divestitures, and other. For the first six
months of 2022, revenue increased $242 million, or 4%, to $6.7 billion compared
to the prior year period due primarily to organic revenue growth of 8%,
partially offset by a 3% unfavorable impact from foreign currency translation
and a 1% unfavorable impact from acquisitions, divestitures, and other.

•Operating expenses were $2.3 billion, an increase of $69 million from the prior
year period. The increase was due primarily to an increase in expense associated
with 8% organic revenue growth, a $58 million charge related to certain legal
settlements reached, and investments in long-term growth, partially offset by a
$90 million favorable impact from foreign currency translation and a decrease in
transaction costs incurred in the prior year period of $38 million. Operating
expenses for the first six months of 2022 were $4.6 billion, an increase of $92
million compared to the prior year period primarily due to an increase in
expense related to 8% organic revenue growth and a $58 million charge related to
certain legal settlements reached, partially offset by a $133 million favorable
impact from foreign currency translation and a decrease in transaction costs
incurred in the prior year period of $73 million.

•Operating margin increased to 23.5% from 23.3% in the prior year period. The
increase was driven by organic revenue growth of 8%, partially offset by an
increase in operating expenses as listed above. Operating margin for the first
six months of 2022 increased to 31.1% from 29.9% in the prior period. The
increase was primarily driven by organic revenue growth of 8%, partially offset
by an increase in operating expenses as listed above.

•Due to the factors set forth above, Net income increased $121 million, or 31%,
to $514 million compared to the prior year period. For the first six months of
2022, Net income increased $236 million, or 18%, to $1,562 million compared to
the first six months of 2021.

•Diluted earnings per share was $2.33 compared to $1.66 per share for the prior
year period. During the first six months of 2022, diluted earnings per share was
$7.07 compared to $5.66 per share for the prior period.

•Cash flows provided by operating activities was $1,131 million for the first six months of 2022, a decrease of $214 million from the prior year period, primarily due to higher receivables and incentive compensation payments following strong performance in 2021, partially offset by strong operating income growth.


We focus on four key metrics not presented in accordance with U.S. GAAP that we
communicate to shareholders: organic revenue growth, adjusted operating margin,
adjusted diluted earnings per share, and free cash flow. These non-GAAP metrics
should be viewed in addition to, not instead of, our Condensed Consolidated
Financial Statements. The following is our measure of performance against these
four metrics for the second quarter of 2022:

•Organic revenue growth is a non-GAAP measure defined under the caption "Review
of Consolidated Results - Organic Revenue Growth." Organic revenue growth was 8%
for the second quarter of 2022, driven by ongoing strong retention and net new
business generation. Organic revenue growth was 8% for the first six months of
2022, driven by ongoing strong retention and net new business generation.

•Adjusted operating margin, a non-GAAP measure defined under the caption "Review
of Consolidated Results - Adjusted Operating Margin," was 26.2% for the second
quarter of 2022 compared to 25.8% in the prior year period. The increase in
adjusted operating margin primarily reflects strong organic revenue growth,
partially offset by expense growth and investments in long-term growth. For the
first six months of 2022, adjusted operating margin was 32.7% compared to 32.2%
for the prior year period. The increase in adjusted operating margin primarily
reflects strong organic revenue growth, partially offset by expense growth and
investments in long-term growth.

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•Adjusted diluted earnings per share, a non-GAAP measure defined under the
caption "Review of Consolidated Results - Adjusted Diluted Earnings per Share,"
was $2.63 per share for the second quarter of 2022 and $7.47 per share for the
first six months of 2022, compared to $2.29 and $6.57 per share for the
respective prior year periods.

•Free cash flow, a non-GAAP measure defined under the caption "Review of
Consolidated Results - Free Cash Flow," decreased in the first six months of
2022 by $212 million from the prior year period, to $1,063 million, reflecting a
decrease in cash flows from operations, partially offset by a $2 million
decrease in capital expenditures.

COVID-19 PANDEMIC


The COVID-19 pandemic has resulted, and may continue to result, in significant
economic disruption and volatility, although much progress has been made in the
development and distribution of vaccines, contributing to overall improved
economic conditions globally. We continue to closely monitor the situation and
its impacts on our business. We continue to be fully operational and in
compliance with governmental restrictions considering the impact on health and
safety of our colleagues, their families, and our clients. We continue to deploy
business continuity protocols and our Smart Working strategy to facilitate
remote working capabilities to ensure the health and safety of our colleagues,
to deliver results on behalf of clients, and to comply with public health and
travel guidelines and restrictions.

As the situation continues to evolve, the scale and duration of the disruption
and impact of COVID-19 cannot be predicted, and COVID-19 may adversely affect
our business and results of operations. However, for the three and six months
ended June 30, 2022 the impacts of COVID-19 on our business results have
lessened and we have seen overall strength across the firm. We continue to
monitor the situation closely.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE


For many companies, the management of ESG risks and opportunities has become
increasingly important, and ESG-related challenges, such as extreme weather
events, supply chain disruptions and public health crises continue to create
volatility and uncertainty for our clients. Aon offers a wide range of risk
assessment, consulting and advisory solutions designed to address and manage ESG
issues for clients, and to enable our clients to create more sustainable value.
We view ESG risks as presenting an important opportunity for Aon to work
together as one firm to address client needs and improve our impact on ESG
matters.

RUSSIAN WAR IN UKRAINE


The Russian war in Ukraine, initiated on February 24, 2022, has resulted in
certain sanctions being imposed by jurisdictions in which we operate, including
the U.S., the E.U., and the U.K., on Russia and certain Russian companies and
individuals. The Company's operations in Russia and Ukraine continue to
represent an immaterial portion of the Company's global operations and the war
has not had a material impact on the Company's global operations as of June 30,
2022.

The Company continues to monitor the potential impacts on the business and the ancillary impacts that the military conflict could have on other global operations.

                                       29
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REVIEW OF CONSOLIDATED RESULTS

Summary of Results

Our consolidated results are as follows (in millions):

                                                             Three Months Ended June 30,               Six Months Ended June 30,
                                                               2022                 2021                 2022                2021
Revenue
Total revenue                                            $        2,983          $  2,886          $       6,653          $  6,411
Expenses                                                                                                          0
Compensation and benefits                                         1,639             1,628                  3,406             3,347
Information technology                                              115               115                    238               229
Premises                                                             73                76                    145               153
Depreciation of fixed assets                                         40                41                     78                82
Amortization and impairment of intangible assets                     25                36                     53                76
Other general expense                                               391               318                    666               607
Total operating expenses                                          2,283             2,214                  4,586             4,494
Operating income                                                    700               672                  2,067             1,917
Interest income                                                       5                 3                      8                 6
Interest expense                                                   (102)              (78)                  (193)             (157)
Other income (expense)                                               30                (1)                    55                (3)
Income before income taxes                                          633               596                  1,937             1,763
Income tax expense                                                  119               203                    375               437

Net income                                                          514               393                  1,562             1,326
Less: Net income attributable to noncontrolling
interests                                                            13                14                        38                34
Net income attributable to Aon shareholders              $          501     

$ 379 $ 1,524 $ 1,292 Diluted net income per share attributable to Aon shareholders

                                             $         2.33     

$ 1.66 $ 7.07 $ 5.66


Weighted average ordinary shares outstanding -
diluted                                                           214.7             228.0                  215.6             228.1


Revenue

Total revenue increased $97 million, or 3%, in the second quarter of 2022
compared to the second quarter of 2021. This increase reflects organic revenue
growth of 8%, partially offset by a 4% unfavorable impact from foreign currency
translation and a 1% unfavorable impact from acquisitions, divestitures, and
other. For the first six months of 2022, revenue increased by $242 million, or
4% compared to the prior year period. This increase reflects organic revenue
growth of 8%, partially offset by a 3% unfavorable impact from foreign currency
translation and a 1% unfavorable impact from acquisitions, divestitures, and
other.

Commercial Risk Solutions revenue increased $49 million, or 3%, to $1.7 billion
in the second quarter of 2022, compared to $1.6 billion in the second quarter of
2021. Organic revenue growth was 7% in the second quarter of 2022, driven by
growth across every major geography, reflecting strong retention and management
of the renewal book portfolio. Strength in retail brokerage was highlighted by
double-digit growth in EMEA, the Pacific, and Latin America, driven by continued
strength in core P&C, as well as strong growth in project-related work,
partially offset by a decline in transaction solutions due to lower external
deal volume. Results also reflect solid growth globally in the affinity business
across both consumer and business solutions, including growth in the travel and
events practice. On average globally, exposures and pricing were modestly
positive, resulting in a modestly positive market impact. For the first six
months of 2022, revenue increased $128 million, or 4%, to $3.4 billion, compared
to $3.3 billion in the first six months of 2021. Organic revenue growth was 8%
in the first six months of 2022, driven by growth across every major geography,
including double-digit growth in Asia and the Pacific, driven by strong
retention and management of the renewal book portfolio. Results also reflect
strong growth in project-related work, partially offset by a decline in
transaction solutions due to lower external deal volume. On average globally,
exposures and pricing were modestly positive, resulting in a modestly positive
market impact overall.

                                       30
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Reinsurance Solutions revenue increased $37 million, or 7%, to $537 million in
the second quarter of 2022, compared to $500 million in the second quarter of
2021. Organic revenue growth was 9% in the second quarter of 2022, driven by
double-digit growth in treaty, reflecting continued net new business generation
globally and strong retention, as well as strong growth in facultative
placements. For the first six months of 2022 revenue increased $91 million, or
6%, to $1.5 billion, compared to $1.4 billion in the first six months of 2021.
Organic revenue growth was 8% in the first six months of 2022, driven by
continued net new business generation in treaty and strong growth in facultative
placements. Market impact was modestly positive on results for the three and six
months ended June 30, 2022. The majority of revenue in our treaty portfolio is
recurring in nature and is recorded in connection with the major renewal periods
that take place throughout the first half of the year, while the second half of
the year is largely driven by facultative placements and capital markets that
are more transactional in nature.

Health Solutions revenue increased $23 million, or 6%, to $414 million in the
second quarter of 2022, compared to $391 million in the second quarter of 2021.
Organic revenue growth was 11% in the second quarter of 2022, driven by
double-digit growth across every major geography. Growth in core health and
benefits brokerage was driven by strong retention and management of the renewal
book portfolio, as well as a positive impact from the timing of certain
revenues. Strength in health and benefits included continued growth in advisory
work related to wellbeing and resilience. Results also reflect double-digit
growth in Human Capital, driven by data and advisory solutions. For the first
six months of 2022, revenue increased $46 million, or 5%, to $1,052 million,
compared to $1,006 million in the first six months of 2021. Organic revenue
growth was 9% in the first six months of 2022, reflecting growth globally in
core health and benefits brokerage, driven by strong retention and management of
the renewal book portfolio. Strength in health and benefits included growth in
advisory work related to wellbeing and resilience. Results also reflect
double-digit growth in Human Capital, driven by data and advisory solutions.

Wealth Solutions revenue decreased $13 million, or 4%, to $343 million in the
second quarter of 2022, compared to $356 million in the second quarter of 2021.
Organic revenue growth was 3% overall in the second quarter of 2022, driven by
growth in Retirement Consulting, driven by higher utilization rates and
project-related work related to pension de-risking and ongoing impacts of
regulatory changes. Results also reflect growth in Investments, driven by
performance fees, partially offset by a decline in AUM-based delegated
investment management revenue. For the first six months of 2022, revenue
decreased $23 million, or 3%, to $688 million, compared to $711 million in the
first six months of 2021. Organic revenue growth was 2% in the first six months
of 2022, reflecting growth in delegated investment management, as well as growth
in Retirement Consulting, primarily from higher utilization rates and
project-related work.

Compensation and Benefits


Compensation and benefits expenses increased $11 million, or 1%, in the second
quarter of 2022 compared to the second quarter of 2021. This increase was
primarily driven by an increase in expense associated with 8% organic revenue
growth, partially offset by a $71 million favorable impact from foreign currency
translation. For the first six months of 2022, compensation and benefits
increased $59 million, or 2%, compared to the first six months of 2021. The
increase was primarily driven by an increase in expense associated with 8%
organic revenue growth, partially offset by a $108 million favorable impact from
foreign currency translation.

Information Technology

Information technology expenses, which represent costs associated with
supporting and maintaining our infrastructure, was flat in the second quarter of
2022 compared to the second quarter of 2021. For the first six months of 2022,
Information technology increased $9 million, or 4%, compared to the first six
months of 2021. The increase was primarily driven by an increase in expense
associated with 8% organic revenue growth, partially offset by a $5 million
favorable impact from foreign currency translation.

Premises

Premises expenses, which represent the cost of occupying offices in various locations throughout the world, decreased $3 million, or 4%, in the second quarter of 2022 compared to the second quarter of 2021. This decrease was primarily driven by a $4 million favorable impact from foreign currency translation. For the first six months of 2022, Premises expenses decreased $8 million, or 5%, compared to the first six months of 2021. This decrease was primarily driven by a $6 million favorable impact from foreign currency translation.

Depreciation of Fixed Assets


Depreciation of fixed assets primarily relates to software, leasehold
improvements, furniture, fixtures, and equipment, computer equipment, buildings,
and automobiles. Depreciation of fixed assets decreased $1 million, or 2%, in
the second quarter of 2022 compared to the second quarter of 2021. For the first
six months of 2022, Depreciation of fixed assets decreased $4 million, or 5%,
compared to the first six months of 2021.

                                       31
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Amortization and Impairment of Intangible Assets


Amortization and impairment of intangible assets primarily relates to
finite-lived tradenames and customer-related, contract-based, and technology
assets. Amortization and impairment of intangible assets decreased $11 million,
or 31%, in the second quarter of 2022 compared to the second quarter of 2021.
For the first six months of 2022, Amortization and impairment of intangibles
decreased $23 million, or 30%, compared to the first six months of 2021.

Other General Expense


Other general expense in the second quarter of 2022 increased $73 million, or
23%, compared to the second quarter of 2021 due primarily to an increase in
expense associated with 8% organic revenue growth, including an increase in
travel and entertainment expense, and a $58 million charge in connection with
certain legal settlements reached, partially offset by a $38 million decrease in
transaction costs. For the first six months of 2022, Other general expense
increased $59 million, or 10%, compared to the prior year period due primarily
to an increase in expense associated with 8% organic revenue growth, including
an increase in travel and entertainment expense, and a $58 million charge in
connection with certain legal settlements reached, partially offset by a $73
million decrease in transaction costs.

Interest Income


Interest income represents income earned on operating cash balances and other
income-producing investments. It does not include interest earned on funds held
on behalf of clients. During the second quarter of 2022, Interest income was $5
million, compared to $3 million in the second quarter of 2021. For the first six
months of 2022, Interest income was $8 million, compared to $6 million in the
first six months of 2021.

Interest Expense

Interest expense, which represents the cost of our debt obligations, was $102
million for the second quarter of 2022, an increase of $24 million, or 31%, from
the second quarter of 2021. The increase was driven primarily by higher
outstanding term debt. For the first six months of 2022, Interest expense was
$193 million, an increase of $36 million, or 23%, from the prior year period.
The increase was driven primarily by higher outstanding term debt.

Other Income (Expense)


Other income was $30 million for the second quarter of 2022, compared to Other
expense of $1 million for the second quarter of 2021. Other income for the
second quarter of 2022 primarily reflects a gain on sale of a business in
Commercial Risk Solutions. Other income was $55 million for the first six months
of 2022, compared to $3 million of Other expense for the first six months of
2021. Other income includes $47 million of gains from the disposal of businesses
in Commercial Risk Solutions and Wealth Solutions, compared to $1 million in the
prior year period.

Income before Income Taxes

Due to the factors discussed above, Income before income taxes for the second
quarter of 2022 was $633 million, a 6% increase from $596 million in the second
quarter of 2021 and Income before income taxes was $1.9 billion for the first
six months of 2022, a 10% increase from $1.8 billion for the first six months of
2021.

Income Taxes

The effective tax rates on Net income were 18.8% and 34.1% for the second quarter of 2022 and 2021, respectively. The effective tax rates on Net income were 19.4% and 24.8% for the first six months ended June 30, 2022 and 2021, respectively.


For the six months ended June 30, 2022, the tax rate was primarily driven the
geographical distribution of income and certain discrete items, primarily the
favorable impacts of share-based payments.

For the six months ended June 30, 2021, the tax rate was primarily driven by the
geographical distribution of income and certain discrete items, primarily the
unfavorable impact of the U.K. tax rate increase offset by the favorable impact
of share-based payments. The UK enacted legislation on June 10, 2021, which
increases the corporate income tax rate from 19% to 25% with effect from April
1, 2023. As a result, the Company remeasured its U.K. deferred tax assets and
liabilities based on the tax rate in effect when the deferred tax assets and
liabilities are expected to be realized.

Net Income Attributable to Aon Shareholders


Net income attributable to Aon shareholders for the second quarter of 2022
increased to $501 million, or $2.33 per diluted share, from $379 million, or
$1.66 per diluted share, in the prior year period. Net income attributable to
Aon shareholders for the first six months of 2022 increased to $1,524 million,
or $7.07 per diluted share, from $1,292 million, or $5.66 per diluted share, in
the prior year period.

                                       32
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Non-GAAP Metrics


In our discussion of consolidated results, we sometimes refer to certain
non-GAAP supplemental information derived from consolidated financial
information specifically related to organic revenue growth, adjusted operating
margin, adjusted diluted earnings per share, free cash flow, and the impact of
foreign exchange rate fluctuations on operating results. 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. This non-GAAP supplemental information should be
viewed in addition to, not instead of, our Condensed Consolidated Financial
Statements.

Organic Revenue Growth


We use supplemental information related to organic revenue growth to help us and
our investors evaluate business growth from existing operations. Organic revenue
growth is a non-GAAP measure that includes the impact of certain intercompany
activity and excludes the impact of changes in foreign exchange rates, fiduciary
investment income, acquisitions, divestitures, transfers between revenue lines,
and gains or losses on derivatives accounted for as hedges. This supplemental
information related to organic revenue growth represents a measure not in
accordance with U.S. GAAP and should be viewed in addition to, not instead of,
our Condensed Consolidated Financial Statements. Industry peers provide similar
supplemental information about their revenue performance, although they may not
make identical adjustments. A reconciliation of this non-GAAP measure to the
reported Total revenue is as follows (in millions, except percentages):

                                        Three Months Ended June 30,
                                                                                                                       Less: Fiduciary                                       Organic
                                                                                                Less: Currency        Investment Income        Less: Acquisitions,        Revenue Growth
                                           2022              2021            % Change             Impact (1)                 (2)              Divestitures & Other             (3)

Revenue

Commercial Risk Solutions               $  1,692          $ 1,643                   3  %                  (4) %                    -  %                        -  %                 7  %
Reinsurance Solutions                        537              500                   7                     (5)                      -                           3                    9
Health Solutions                             414              391                   6                     (3)                      -                          (2)                  11
Wealth Solutions                             343              356                  (4)                    (5)                      -                          (2)                   3
Eliminations                                  (3)              (4)                   N/A                    N/A                     N/A                         N/A                  N/A
Total revenue                           $  2,983          $ 2,886                   3  %                  (4) %                    -  %                       (1) %                 8  %


                                            Six Months Ended June 30,
                                                                                                                            Less: Fiduciary                                       Organic
                                                                                                     Less: Currency        Investment Income        Less: Acquisitions,        Revenue Growth
                                              2022                2021            % Change             Impact (1)                 (2)              Divestitures & Other             (3)
Revenue
Commercial Risk Solutions               $       3,411          $ 3,283                   4  %                  (3) %                    -  %                       (1) %                 8  %
Reinsurance Solutions                           1,513            1,422                   6                     (3)                      -                           1                    8
Health Solutions                                1,052            1,006                   5                     (3)                      -                          (1)                   9
Wealth Solutions                                  688              711                  (3)                    (3)                      -                          (2)                   2
Eliminations                                      (11)             (11)                   N/A                    N/A                     N/A                         N/A                  N/A
Total revenue                           $       6,653          $ 6,411                   4  %                  (3) %                    -  %                       (1) %                 8  %


(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 June 30, 2022 and
2021, respectively, was $7 million and $2 million. Fiduciary investment income
for the six months ended June 30, 2022 and 2021, respectively, was $9 million
and $4 million.
(3)Organic revenue growth includes the impact of certain intercompany activity
and excludes the impact of changes in foreign exchange rates, fiduciary
investment income, acquisitions, divestitures, transfers between revenue lines,
and gains or losses on derivatives accounted for as hedges.

Adjusted Operating Margin


We use adjusted operating margin as a non-GAAP measure of our core operating
performance. Adjusted operating margin excludes the impact of certain items, as
listed below, because management does not believe these expenses are the best
indicators of our core operating performance. This supplemental information
related to adjusted operating margin represents a measure not in accordance with
U.S. GAAP and should be viewed in addition to, not instead of, our Condensed
Consolidated Financial Statements.

                                       33
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A reconciliation of this non-GAAP measure to the reported operating margin is as follows (in millions, except percentages):

                                                      Three Months Ended June 30,               Six Months Ended June 30,
                                                        2022                 2021                 2022                2021
Revenue                                           $       2,983           $  2,886          $      6,653           $  6,411

Operating income - as reported                    $         700           $    672          $      2,067           $  1,917
Amortization and impairment of intangible
assets                                                       25                 36                    53                 76

Transaction costs and other charges related
to the combination and resulting
termination (1)                                               -                 38                     -                 73
Legal settlements (2)                                        58                  -                    58                  -
Operating income - as adjusted                    $         783           $    746          $      2,178           $  2,066

Operating margin - as reported                             23.5   %           23.3  %               31.1   %           29.9  %
Operating margin - as adjusted                             26.2   %           25.8  %               32.7   %           32.2  %


(1)As part of the proposed combination with WTW, which was subsequently
terminated in the third quarter of 2021, certain transaction costs were incurred
by the Company through the first and second quarter of 2021. These costs
included advisory, legal, accounting, valuation, and other professional or
consulting fees related to the combination, including planned divestitures, some
of which were terminated.
(2)In connection with certain legal settlements reached, a $58 million charge
was recognized in the second quarter of 2022.

Adjusted Diluted Earnings per Share


We use adjusted diluted earnings per share as a non-GAAP measure of our core
operating performance. Adjusted diluted earnings per share excludes the items
identified above, along with certain pension settlements, when applicable, and
related income taxes, because management does not believe these expenses are
representative of our core earnings. This supplemental information related to
adjusted diluted earnings per share represents a measure not in accordance with
U.S. GAAP and should be viewed in addition to, not instead of, our Condensed
Consolidated Financial Statements. A reconciliation of this non-GAAP measure to
reported diluted earnings per share is as follows (in millions, except per share
data and percentages):

                                                                               Three Months Ended June 30, 2022
                                                                                                                Non-GAAP
                                                                      U.S. GAAP            Adjustments          Adjusted
Operating income                                                    $      700           $         83          $    783
Interest income                                                              5                      -                 5
Interest expense                                                          (102)                     -              (102)
Other income (expense)                                                      30                      -                30
Income before income taxes                                                 633                     83               716
Income tax expense (1)                                                     119                     19               138

Net income                                                                 514                     64               578
Less: Net income attributable to noncontrolling interests                   13                      -                13
Net income attributable to Aon shareholders                         $      501           $         64          $    565

Diluted net income per share attributable to Aon shareholders $ 2.33

           $       0.30          $   2.63

Weighted average ordinary shares outstanding - diluted                   214.7                      -             214.7
Effective tax rates (1)                                                   18.8   %                                 19.3  %



                                       34
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                                                                               Three Months Ended June 30, 2021
                                                                                                                Non-GAAP
                                                                      U.S. GAAP            Adjustments          Adjusted
Operating income                                                    $      672           $         74          $    746
Interest income                                                              3                      -                 3
Interest expense                                                           (78)                     -               (78)
Other income (expense)                                                      (1)                     -                (1)
Income before income taxes                                                 596                     74               670
Income tax expense (1)                                                     203                    (68)              135

Net income                                                                 393                    142               535
Less: Net income attributable to noncontrolling interests                   14                      -                14
Net income attributable to Aon shareholders                         $      379           $        142          $    521

Diluted net income per share attributable to Aon shareholders $ 1.66

           $       0.63          $   2.29

Weighted average ordinary shares outstanding - diluted                   228.0                      -             228.0
Effective tax rates (1)                                                   34.1   %                                 20.1  %


                                                                                Six Months Ended June 30, 2022
                                                                                                                 Non-GAAP
                                                                       U.S. GAAP            Adjustments          Adjusted
Operating income                                                    $     2,067           $        111          $ 2,178
Interest income                                                               8                      -                8
Interest expense                                                           (193)                     -             (193)
Other income (expense)                                                       55                      -               55
Income before income taxes                                                1,937                    111            2,048
Income tax expense (1)                                                      375                     25              400

Net income                                                                1,562                     86            1,648
Less: Net income attributable to noncontrolling interests                    38                      -               38
Net income attributable to Aon shareholders                         $     1,524           $         86          $ 1,610

Diluted net income per share attributable to Aon shareholders $ 7.07

           $       0.40          $  7.47

Weighted average ordinary shares outstanding - diluted                    215.6                      -            215.6
Effective tax rates (1)                                                    19.4   %                                19.5  %



                                       35
--------------------------------------------------------------------------------
                                                                                Six Months Ended June 30, 2021
                                                                                                                 Non-GAAP
                                                                       U.S. GAAP            Adjustments          Adjusted
Operating income                                                    $     1,917           $        149          $ 2,066
Interest income                                                               6                      -                6
Interest expense                                                           (157)                     -             (157)
Other income (expense)                                                       (3)                     -               (3)
Income before income taxes                                                1,763                    149            1,912
Income tax expense (1)                                                      437                    (57)             380

Net income                                                                1,326                    206            1,532
Less: Net income attributable to noncontrolling interests                    34                      -               34
Net income attributable to Aon shareholders                         $     1,292           $        206          $ 1,498

Diluted net income per share attributable to Aon shareholders $ 5.66

           $       0.91          $  6.57

Weighted average ordinary shares outstanding - diluted                    228.1                      -            228.1
Effective tax rates (1)                                                    24.8   %                                19.9  %


(1)Adjusted items are generally taxed at the estimated annual effective tax
rate, except for the applicable tax impact associated with certain transaction
costs and other charges related to the combination and resulting termination and
certain legal settlements, which are adjusted at the related jurisdictional
rate. In addition, income tax expense for the three and six months ended June
30, 2021 was adjusted to exclude the impact of remeasuring the net deferred tax
liabilities in the U.K. as a result of the corporate income tax rate increase
enacted in the second quarter of 2021.

Free Cash Flow


We use free cash flow, defined as cash flow provided by operations less capital
expenditures, as a non-GAAP measure of our core operating performance and
cash-generating capabilities of our business operations. This supplemental
information related to free cash flow represents a measure not in accordance
with U.S. GAAP and should be viewed in addition to, not instead of, our
Condensed Consolidated Financial Statements. The use of this non-GAAP measure
does not imply or represent the residual cash flow for discretionary
expenditures. A reconciliation of this non-GAAP measure to the reported Cash
provided by operating activities is as follows (in millions):

                                                  Six Months Ended June 30,
                                                      2022                 

2021

Cash provided by operating activities      $       1,131                 $ 1,345
Capital expenditures                                 (68)                    (70)
Free cash flow                             $       1,063                 $ 1,275

Impact of Foreign Exchange Rate Fluctuations


Because we conduct business in over 120 countries and sovereignties, foreign
exchange rate fluctuations may have a significant impact on our business.
Foreign exchange rate movements may be significant and may distort true
period-to-period comparisons of changes in revenue or pretax income. Therefore,
to give financial statement users meaningful information about our operations,
we have provided an illustration of the impact of foreign currency exchange
rates on our financial results. The methodology used to calculate this impact
isolates the impact of the change in currencies between periods by translating
the prior year quarter's revenue, expenses, and net income using the current
quarter's foreign exchange rates.

Currency fluctuations had an unfavorable impact of $0.09 and an unfavorable
impact of $0.28 on net income per diluted share during the three and six months
ended June 30, 2022, respectively, if prior year period results were translated
at current period foreign exchange rates. Currency fluctuations had a favorable
impact of $0.02 and a favorable impact of $0.19 on net income per diluted share
during the three and six months ended June 30, 2021, respectively, if 2020
results were translated at 2021 rates.

Currency fluctuations had an unfavorable impact of $0.10 and an unfavorable of
$0.29 on adjusted net income per diluted share during the three and six months
ended June 30, 2022, respectively, if prior year period results were translated
at current period foreign exchange rates. Currency fluctuations had a favorable
impact of $0.04 and a favorable impact of $0.22 on adjusted net income per
diluted share during the three and six months ended June 30, 2021, respectively,
if 2020 results were

                                       36
--------------------------------------------------------------------------------

translated at 2021 rates. These translations are performed for comparative and illustrative purposes only and do not impact the accounting policies or practices for amounts included in our Condensed Consolidated Financial Statements.

LIQUIDITY AND FINANCIAL CONDITION

Liquidity

Executive Summary


We believe that our balance sheet and strong cash flow provide us with adequate
liquidity. Our primary sources of liquidity in the near-term include cash flows
provided by operations and available cash reserves; primary sources of liquidity
in the long-term include cash flows provided by operations, debt capacity
available under our credit facilities, and capital markets. Our primary uses of
liquidity are operating expenses and investments, capital expenditures,
acquisitions, share repurchases, pension obligations, and shareholder dividends.
We believe that cash flows from operations, available credit facilities,
available cash reserves, and the capital markets will be sufficient to meet our
liquidity needs, including principal and interest payments on debt obligations,
capital expenditures, pension contributions, and anticipated working capital
requirements in the next twelve months and over the long-term. Although there
continues to be uncertainties around future economic conditions due to COVID-19,
we have largely returned to normal levels of liquidity and will continue to
monitor our needs as economic conditions change.

Cash on our balance sheet includes funds available for general corporate
purposes, as well as amounts restricted as to their use. Funds held on behalf of
clients in a fiduciary capacity are segregated and shown together with
uncollected insurance premiums in Fiduciary assets in our Condensed Consolidated
Statements of Financial Position, with a corresponding amount in Fiduciary
liabilities.

In our capacity as an insurance broker or agent, we collect premiums from
insureds and, after deducting our commission, remit the premiums to the
respective insurance underwriters. We also collect claims or refunds from
underwriters on behalf of insureds, which are then returned to the insureds.
Unremitted insurance premiums and claims are held by us in a fiduciary capacity.
The levels of funds held on behalf of clients and liabilities can fluctuate
significantly depending on when we collect the premiums, claims, and refunds,
make payments to underwriters and insureds, and collect funds from clients and
make payments on their behalf, and upon the impact of foreign currency
movements. Funds held on behalf of clients, because of their nature, are
generally invested in very liquid securities with highly rated, credit-worthy
financial institutions. Fiduciary assets include funds held on behalf of clients
comprised of cash and cash equivalents of $6.5 billion and $6.1 billion at
June 30, 2022 and December 31, 2021, respectively, and fiduciary receivables of
$10.4 billion and $8.3 billion at June 30, 2022 and December 31, 2021,
respectively. While we earn investment income on the funds held in cash and
money market funds, the funds cannot be used for general corporate purposes.

We maintain multicurrency cash pools with third-party banks in which various Aon
entities participate. Individual Aon entities are permitted to overdraw on their
individual accounts provided the overall global balance does not fall below
zero. At June 30, 2022, non-U.S. cash balances of one or more entities may have
been negative; however, the overall balance was positive.

The following table summarizes our Cash and cash equivalents, Short-term investments, and Fiduciary assets as of June 30, 2022 (in millions):

© Edgar Online, source Glimpses

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