Q3 FY2023 Earnings Slides

Aon plcThirdQuarter2023ResultsOctober27, 2023~PAGE-BREAK~Greg CaseChief Executive OfficerChrista DaviesChief Financial OfficerEric AndersenPresident~PAGE-BREAK~Safe Harbor StatementThiscommunicationcontainscertainstatementsrelatedtofutureresults,orstatesAon'sintentions,beliefsandexpectationsorpredictionsforthefuture,allofwhichareforward-lookingstatementsasthattermisdefinedinthePrivateSecuritiesLitigationReformActof1995.Theseforward-lookingstatementsaresubjecttocertainrisksanduncertaintiesthatcouldcauseactualresultstodiffermateriallyfromeitherhistoricaloranticipatedresultsdependingonavarietyoffactors.Theseforward-lookingstatementsincludeinformationaboutpossibleorassumedfutureresultsofAon'soperations.Allstatements,otherthanstatementsofhistoricalfacts,thataddressactivities,eventsordevelopmentsthatAonexpectsoranticipatesmayoccurinthefuture,includingsuchthingsasitsoutlook,theimpactsoftheAcceleratingAonUnitedProgram,futurecapitalexpenditures,growthincommissionsandfees,changestothecompositionorlevelofitsrevenues,cashflowandliquidity,expectedtaxrates,expectedforeigncurrencytranslationimpacts,businessstrategies,competitivestrengths,goals,thebenefitsofnewinitiatives,growthofitsbusinessandoperations,plans,andreferencestofuturesuccesses,areforward-lookingstatements.Also,whenAonuseswordssuchas"anticipate","believe","continue","could","estimate","expect","forecast","intend","lookingforward","may","might","plan","potential","opportunity","commit","probably","project","should","will","would"orsimilarexpressions,itismakingforward-lookingstatements.Thefollowingfactors,amongothers,couldcauseactualresultstodifferfromthosesetforthinoranticipatedbytheforwardlookingstatements:changesinthecompetitiveenvironment,duetomacroeconomicconditions(includingimpactsfrominstabilityinthebankingorcommercialrealestatesectors)orotherwise,ordamagetoAon'sreputation;fluctuationsincurrencyexchange,interest,orinflationratesthatcouldimpactourfinancialconditionorresults;changesinglobalequityandfixedincomemarketsthatcouldaffectthereturnoninvestedassets;changesinthefundedstatusofAon'svariousdefinedbenefitpensionplansandtheimpactofanyincreasedpensionfundingresultingfromthosechanges;thelevelofAon'sdebtandthetermsthereofreducingAon'sflexibilityorincreasingborrowingcosts;ratingagencyactionsthatcouldlimitAon'saccesstocapitalandourcompetitiveposition;volatilityinAon'sglobaltaxrateduetobeingsubjecttoavarietyofdifferentfactors,includingtheadoptionandimplementationofOECDtaxproposals;changesinAon'saccountingestimatesorassumptionsonAon'sfinancialstatements;limitsonAon'ssubsidiaries'abilitytopaydividendsorotherwisemakepaymentstoAon;theimpactoflegalproceedingsandothercontingencies,includingthosearisingfromacquisitionordispositiontransactions,errorsandomissionsandotherclaimsagainstAon;theimpactof,andpotentialchallengesincomplyingwith,lawsandregulationsinthejurisdictionsinwhichAonoperates,particularlygiventheglobalnatureofAon'soperationsandthepossibilityofdifferingorconflictinglawsandregulations,ortheapplicationorinterpretationthereof,acrossjurisdictionsinwhichAondoesbusiness;theimpactofanyregulatoryinvestigationsbroughtinIreland,theU.K.,theU.S.andothercountries;failuretoprotectintellectualpropertyrightsorallegationsthatAoninfringesontheintellectualpropertyrightsofothers;generaleconomicandpoliticalconditionsindifferentcountriesinwhichAondoesbusinessaroundtheworld;thefailuretoretain,attractanddevelopexperiencedandqualifiedpersonnel;internationalrisksassociatedwithAon'sglobaloperations,includingimpactsfrommilitaryconflictsorpoliticalinstability,suchastheongoingRussianwarinUkraineandtheIsrael-Hamasconflict;theeffectsofnaturalorman-madedisasters,includingtheeffectsoftheCOVID-19andotherhealthpandemicsandtheimpactsofclimatechange;anysystemornetworkdisruptionorbreachresultinginoperationalinterruptionorimproperdisclosureofconfidential,personal,orproprietarydata,andresultingliabilitiesordamagetoourreputation;Aon'sabilitytodevelop,implement,updateandenhancenewsystems;theactionstakenbythirdpartiesthatperformaspectsofAon'sbusinessoperationsandclientservices;theextenttowhichAonisexposedtocertainrisks,includinglawsuits,relatedtoactionsAonmaytakeinbeingresponsibleformakingdecisionsonbehalfofclientsinAon'sinvestmentbusinessesorinotheradvisoryservicesthatAoncurrentlyprovides,ormayprovideinthefuture;Aon'sabilitytocontinue,andthecostsandrisksassociatedwith,growing,developingandintegratingacquiredbusiness,andenteringintonewlinesofbusinessorproducts;Aon'sabilitytosecureregulatoryapprovalandcompletetransactions,andthecostsandrisksassociatedwiththefailuretoconsummateproposedtransactions;changesincommercialpropertyandcasualtymarkets,commercialpremiumratesormethodsofcompensation;Aon'sabilitytodevelopandimplementinnovativegrowthstrategiesandinitiativesintendedtoyieldcostsavings(includingtheAcceleratingAonUnitedProgram),andtheabilitytoachievesuchgrowthorcostsavings;theeffectsofIrishlawonAon'soperatingflexibilityandtheenforcementofjudgmentsagainstAon;andadverseeffectsonthemarketpriceofAon'ssecuritiesand/oroperatingresults.AnyorallofAon'sforward-lookingstatementsmayturnouttobeinaccurate,andtherearenoguaranteesaboutAon'sperformance.Thefactorsidentifiedabovearenotexhaustive.Aonanditssubsidiariesoperateinadynamicbusinessenvironmentinwhichnewrisksmayemergefrequently.Accordingly,youshouldnotplaceunduerelianceonforward-lookingstatements,whichspeakonlyasofthedatesonwhichtheyaremade.Inaddition,resultsforpriorperiodsarenotnecessarilyindicativeofresultsthatmaybeexpectedforanyfutureperiod.FurtherinformationconcerningAonanditsbusinesses,includingfactorsthatpotentiallycouldmateriallyaffectAon'sfinancialresults,iscontainedinAon'sfilingswiththeSEC.SeeAon'sAnnualReportonForm10-KfortheyearendedDecember31,2022forafurtherdiscussionoftheseandotherrisksanduncertaintiesapplicabletoAonanditsbusinesses.ThesefactorsmayberevisedorsupplementedinsubsequentreportsfiledwiththeSEC.Aonisnotunder,andexpresslydisclaims,anyobligationtoupdateoralteranyforward-lookingstatementthatitmaymakefromtimetotime,whetherasaresultofnewinformation,futureeventsorotherwise.~PAGE-BREAK~2023U.S.GAAPFinancialsExplanation of Non-GAAP MeasuresThiscommunicationincludessupplementalinformationnotcalculatedinaccordancewithgenerallyacceptedaccountingprinciplesintheUnitedStates("U.S.GAAP"),includingorganicrevenuegrowth,freecashflow,adjustedoperatingincome,adjustedoperatingmargin,adjustedearningspershare,adjustednetincomeattributabletoAonshareholders,adjusteddilutednetincomepershare,adjustedeffectivetaxrate,adjustedotherincome(expense)-pensions,adjustedotherincome(expense),andadjustedincomebeforeincometaxesthatexcludetheeffectsofintangibleassetamortizationandimpairment,pensionsettlements,AcceleratingAonUnitedProgramexpenses,capitalexpenditures,andcertainothernoteworthyitemsthataffectedresultsforthecomparableperiods.Organicrevenuegrowthincludestheimpactofintercompanyactivityandexcludesforeignexchangeratechanges,acquisitions,divestitures,transfersbetweenrevenuelines,fiduciaryinvestmentincome,andgainsorlossesonderivativesaccountedforashedges.Currencyimpactrepresentstheeffectonprioryearperiodresultsiftheyweretranslatedatcurrentperiodforeignexchangerates.ReconciliationstotheclosestU.S.GAAPmeasureforeachnon-GAAPmeasurepresentedinthiscommunicationareprovidedintheattachedappendices.SupplementalorganicrevenuegrowthinformationandadditionalmeasuresthatexcludetheeffectsofcertainitemsnotedabovedonotaffectnetincomeoranyotherU.S.GAAPreportedamounts.Freecashflowiscashflowsfromoperatingactivitylesscapitalexpenditures.Theadjustedeffectivetaxrateexcludestheapplicabletaximpactassociatedwithexpensesforestimatedintangibleassetamortizationandimpairment,andcertainothernoteworthyitems.Managementbelievesthatthesemeasuresareimportanttomakemeaningfulperiod-to-periodcomparisonsandthatthissupplementalinformationishelpfultoinvestors.Managementalsousesthesemeasurestoassessoperatingperformanceandperformanceforcompensation.Non-GAAPmeasuresshouldbeviewedinadditionto,notinlieuof,Aon'sConsolidatedFinancialStatements.Industrypeersprovidesimilarsupplementalinformationregardingtheirperformance,althoughtheymaynotmakeidenticaladjustments.Q3'23  YTD'23Total Revenue Growth  +10%  +7%Operating Margin  23.4%  30.1%Earnings Per Share  $2.23  $10.03Cash Flows from Operations  $2,174~PAGE-BREAK~01Executive SummaryTable of Contents02Quarterly Performance  03Delivering Long- Term Growth04Free Cash Flow Drives Long-Term Shareholder Value05Appendices~PAGE-BREAK~61.Includes approximately $55 billion of captive premium.2.As of 6/30/2022, includes non-discretionary assets advised by Aon and its global affiliates which includes retainer clients and clients in which Aon and its global affiliates have performed project services for over the past 12 months.Project clients may not currently engage Aon at the time of the calculation of assets under advisement as the project may have concluded earlier during preceding 12-month period.~PAGE-BREAK~Executive Summary1~PAGE-BREAK~8Quarterly Performance and Focus on Long-Term Strategy¹1.The results presented on this page are non-GAAP measures that are reconciled to their corresponding U.S. GAAP measures in the Appendices of this presentation.Quarterly Performance on Key Financial Metrics• Organic Revenue growth of +6%; driven by ongoing strong retention, management of the renewal book, and net new business generation• Adjusted Operating Margin expansion of +120 basis points and adjusted operating income growth of +15%; reflecting organic revenue growth and increased fiduciary investment income, partially offset by increased expenses and investments in long-term growth• Adjusted Earnings per Share (EPS) growth of +15%; primarily reflecting strong organic revenue growth and effective capital management, partially offset by a ($0.01)unfavorable impact from FXAccelerating our Aon United strategy with 3 commitments to be delivered over the next 3 years• Leveraging our Risk Capital and Human Capital structure and capability to unlock new integrated solutions across our core business that also address new requirements in client demand• Embedding the Aon Client Leadership model across our structure to further strengthen and expand our client relationships• Accelerating Aon Business Services to set a new standard for service delivery and next generation analytical tools by standardizing operation, integrating operating platforms and increasing product innovation and development~PAGE-BREAK~Aon United -Driving Top and Bottom-Line Results1,2Committed to Mid-Single-Digit or Greater Organic Revenue Growth Over the Long-Term• Track record of +4% average annual organic revenue growth from 2010-2022, with +6% organic revenue growth in 2022• Driven by three areas:  Delivering client value with continued improvement in core businesses, portfolio mix-shift towards areasof faster growing client demand and data-driven solutions, and net new opportunities that increase our total addressable market Sustainable Operating Margin Expansion Net of Investment in Long-Term Growth• From 2010-2022, increased adjusted operating margins by +1,120 bps or over +90 bps per year• Driven by three areas: Top-line growth, portfolio mix-shift to higher contribution margin businesses, and increased operating leverage from ongoing productivity improvements from our Aon Business Services platformExpected Free Cash Flow Growth Over the Long-Term• Expect to deliver high-single-digit free cash flow growth in 2023.• While free cash flow will be reduced in the near term by the restructuring program, we expect to retuto our trajectory of double-digit free cash flow growth over the long term, driven by growth in operating income and ~$500 million long-term improvement opportunity in working capitalDisciplined Portfolio Management and Capital Allocation based on Retuon Invested Capital (ROIC)• Strong history of M&A and portfolio management, including completion of 164 acquisitions for ~$5.8 billion and 141 divestitures for ~$5.8 billion from 2010-2022³• All capital allocation decisions based on ROIC.Share repurchase continues to be our highest retuopportunity, based on our strong free cash flow generation outlook, noting history of $22.5 billion in share buyback from 2010-2022, or a net share reduction of approximately 38%, and $4.1billion remaining repurchase authorization as of the end of Q3 2023• Significant financial flexibility to deploy capital driven by strong free cash flow generation and opportunity for increased debtTranslating into a Significant Shareholder Value Creation Opportunity• Going forward, we expect to build on our demonstrated track record of free cash flow growth combined with an expected reduction in total shares outstanding, representing a significant long-term shareholder value creation opportunity1.The results presented on this page are non-GAAP measures that are reconciled to their corresponding U.S. GAAP measures for historical periods in the Appendices of this presentation.2.Reflects the Company's best estimates as of October27, 2023, and the Company disclaims any obligations to update whether a result of new information, future events, or otherwise.Actual results may differ materially.3.Includes asset deals and share transactions with joint venture partners.4.Calculated as the change in actual shares outstanding from December 31, 2010to December31, 2022.~PAGE-BREAK~2023 Supplemental Financial Information¹ Organic Revenue:• Expect to deliver mid-single-digit or greater organic revenue growth for full year 2023 and over the long-term Expense Outlook:• Expect to deliver adjusted operating margin expansion for full year 2023 and over the long-term Foreign Currency:• If currency were to remain stable at today's rates, the Company would expect a favorable impact of $0.03 per share in the fourthquarter of 2023, totaling an unfavorable impact of approximately $(0.17) per share for full year 2023 Free Cash Flow:• Expect to deliver high-single-digit free cash flow growth in 2023.• While free cash flow will be reduced in the near term by the restructuring program, we expect to retuto our trajectory of double-digit free cash flow growth over the long term, driven by operating income growth and ongoing working capital improvements Interest Expense:• Based on the Company's debt structure at the end of the third quarter, expect $126 million of interest expense in the fourth quarter of 2023, compared to $119 million of interest expense in the third quarter Other Income (Expense) -as adjusted:• Based on current assumptions, expect ~$15m of non-cash pension expense in the fourth quarter of 2023, totaling ~$66 million of non-cash pension expense for full year 2023, excluding all other items we do not forecast that could be favorable or unfavorable in any given period Accelerating Aon United Program:• Expect todeliver total annual, run-rate savings of ~$350 million, to be achieved by the end of 2026• Savings will ramp over the program with annual, run-rate savings of ~$100 million in 2024, contributing to long-term margin expansion• Cash restructuring charges of ~$900 million, for a savings ratio of 2.6x, largely for technology costs and workforce rationalization• Additional ~$100 million of non-cash restructuring charges, largely for asset impairment of legacy software and lease impairments aligned with Smart Working1.  Reflects the Company's best estimates as of October27, 2023, and the Company disclaims any obligations to update whether a result of new information, future events, or otherwise. Actual results may differ materially.~PAGE-BREAK~

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AON plc published this content on 27 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 October 2023 10:00:50 UTC.