AON PLC, 10-Q filed on 7/31/2020
Quarterly Report
v3.20.2
Cover - shares
6 Months Ended
Jun. 30, 2020
Jul. 30, 2020
Entity Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
Document Transition Report false  
Entity File Number 1-7933  
Entity Registrant Name Aon plc  
Entity Incorporation, State or Country Code L2  
Entity Tax Identification Number 98-1539969  
Entity Address, Address Line One Metropolitan Building, James Joyce Street  
Entity Address, City or Town Dublin 1  
Entity Address, Country IE  
Entity Address, Postal Zip Code D01 K0Y8  
City Area Code 1  
Local Phone Number 266 6000  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   231,650,336
Entity Central Index Key 0000315293  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Class A Ordinary Shares $0.01 nominal value    
Entity Information [Line Items]    
Title of 12(b) Security Class A Ordinary Shares $0.01 nominal value  
Trading Symbol AON  
Security Exchange Name NYSE  
Guarantees of Aon plc’s 2.80% Senior Notes due 2021    
Entity Information [Line Items]    
Title of 12(b) Security Guarantees of Aon plc’s 2.80% Senior Notes due 2021  
Trading Symbol AON21  
Security Exchange Name NYSE  
Guarantees of Aon plc’s 4.00% Senior Notes due 2023    
Entity Information [Line Items]    
Title of 12(b) Security Guarantees of Aon plc’s 4.00% Senior Notes due 2023  
Trading Symbol AON23  
Security Exchange Name NYSE  
Guarantees of Aon plc’s 3.50% Senior Notes due 2024    
Entity Information [Line Items]    
Title of 12(b) Security Guarantees of Aon plc’s 3.50% Senior Notes due 2024  
Trading Symbol AON24  
Security Exchange Name NYSE  
Guarantees of Aon plc’s 3.875% Senior Notes due 2025    
Entity Information [Line Items]    
Title of 12(b) Security Guarantees of Aon plc’s 3.875% Senior Notes due 2025  
Trading Symbol AON25  
Security Exchange Name NYSE  
Guarantees of Aon plc’s 2.875% Senior Notes due 2026    
Entity Information [Line Items]    
Title of 12(b) Security Guarantees of Aon plc’s 2.875% Senior Notes due 2026  
Trading Symbol AON26  
Security Exchange Name NYSE  
Guarantees of Aon plc’s 4.25% Senior Notes due 2042    
Entity Information [Line Items]    
Title of 12(b) Security Guarantees of Aon plc’s 4.25% Senior Notes due 2042  
Trading Symbol AON24  
Security Exchange Name NYSE  
Guarantees of Aon plc’s 4.45% Senior Notes due 2043    
Entity Information [Line Items]    
Title of 12(b) Security Guarantees of Aon plc’s 4.45% Senior Notes due 2043  
Trading Symbol AON43  
Security Exchange Name NYSE  
Guarantees of Aon plc’s 4.60% Senior Notes due 2044    
Entity Information [Line Items]    
Title of 12(b) Security Guarantees of Aon plc’s 4.60% Senior Notes due 2044  
Trading Symbol AON44  
Security Exchange Name NYSE  
Guarantees of Aon plc’s 4.75% Senior Notes due 2045    
Entity Information [Line Items]    
Title of 12(b) Security Guarantees of Aon plc’s 4.75% Senior Notes due 2045  
Trading Symbol AON45  
Security Exchange Name NYSE  
v3.20.2
Condensed Consolidated Statements of Income (Unaudited) - USD ($)
shares in Millions, $ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenue        
Revenue $ 2,497 $ 2,606 $ 5,716 $ 5,749
Income (expense) from non-guarantor subsidiaries        
Compensation and benefits 1,361 1,501 2,883 3,085
Information technology 107 126 218 243
Premises 74 85 147 172
Depreciation of fixed assets 41 40 82 80
Amortization of intangible assets 58 97 155 194
Other general expense 262 344 604 690
Total operating expenses 1,903 2,193 4,089 4,464
Operating income 594 413 1,627 1,285
Interest income 0 1 2 3
Interest expense (89) (77) (172) (149)
Other income (expense) (10) 6 19 6
Income from continuing operations before income taxes 495 343 1,476 1,145
Income tax expense 85 56 274 182
Net income from continuing operations 410 287 1,202 963
Net income from discontinued operations 1 0 0 0
Net income 411 287 1,202 963
Less: Net income attributable to noncontrolling interests 13 10 32 27
Net income attributable to Aon shareholders $ 398 $ 277 $ 1,170 $ 936
Basic net income per share attributable to Aon shareholders        
Continuing operations (in dollars per share) $ 1.71 $ 1.15 $ 5.02 $ 3.88
Discontinued operations (in dollars per share) 0 0 0 0
Net income (in dollars per share) 1.71 1.15 5.02 3.88
Diluted net income per share attributable to Aon shareholders        
Continuing operations (in dollars per share) 1.70 1.14 5.00 3.85
Discontinued operations (in dollars per share) 0 0 0 0
Net income (in dollars per share) $ 1.70 $ 1.14 $ 5.00 $ 3.85
Weighted average ordinary shares outstanding - basic (in shares) 232.7 240.6 233.0 241.4
Weighted average ordinary shares outstanding - diluted (in shares) 233.6 242.8 234.1 243.2
v3.20.2
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Statement of Comprehensive Income [Abstract]        
Income (loss) from continuing operations $ 411 $ 287 $ 1,202 $ 963
Less: Net income attributable to noncontrolling interests 13 10 32 27
Net income (loss) attributable to Aon shareholders 398 277 1,170 936
Other comprehensive income (loss), net of tax:        
Change in fair value of financial instruments 3 (8) (2) (1)
Foreign currency translation adjustments 88 (103) (309) 30
Postretirement benefit obligation 23 14 47 45
Total other comprehensive income (loss) 114 (97) (264) 74
Less: Other comprehensive income attributable to noncontrolling interests 1 0 (1) 2
Total other comprehensive income (loss) attributable to Aon shareholders 113 (97) (263) 72
Comprehensive income attributable to Aon shareholders $ 511 $ 180 $ 907 $ 1,008
v3.20.2
Condensed Consolidated Statements of Financial Position - USD ($)
$ in Millions
Jun. 30, 2020
Dec. 31, 2019
Current assets    
Cash and cash equivalents $ 757 $ 790
Short-term investments 654 138
Receivables, net 3,314 3,112
Fiduciary assets 13,794 11,834
Other current assets 471 602
Total current assets 18,990 16,476
Goodwill 8,356 8,165
Intangible assets, net 699 783
Fixed assets, net 615 621
Operating lease right-of-use assets 941 929
Deferred tax assets 654 645
Prepaid pension 1,192 1,216
Other non-current assets 548 570
Total assets 31,995 29,405
Current liabilities    
Accounts payable and accrued liabilities 1,488 1,939
Short-term debt and current portion of long-term debt 782 712
Fiduciary liabilities 13,794 11,834
Other current liabilities 1,319 1,086
Total current liabilities 17,383 15,571
Long-term debt 7,229 6,627
Non-current operating lease liabilities 947 944
Deferred tax liabilities 200 199
Pension, other postretirement, and postemployment liabilities 1,641 1,738
Other non-current liabilities 900 877
Total liabilities 28,300 25,956
Equity    
Ordinary shares - $0.01 nominal value Authorized: 500 shares (issued: 2020 - 231.5; 2019 - 232.1) 2 2
Additional paid-in capital 6,144 6,152
Retained earnings 1,751 1,254
Accumulated other comprehensive loss (4,296) (4,033)
Total Aon shareholders' equity 3,601 3,375
Noncontrolling interests 94 74
Total equity 3,695 3,449
Total liabilities and equity $ 31,995 $ 29,405
Common stock, nominal or par value (in dollars per share) $ 0.01 $ 0.01
Common stock, authorized shares (in shares) 500,000,000 500,000,000
Common stock, issued shares (in shares) 231,500,000 232,100,000
v3.20.2
Condensed Consolidated Statements of Financial Position (Parenthetical) - $ / shares
Jun. 30, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Common stock, nominal or par value (in dollars per share) $ 0.01 $ 0.01
Common stock, authorized shares (in shares) 500,000,000 500,000,000
Common stock, issued shares (in shares) 231,500,000 232,100,000
v3.20.2
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($)
$ in Millions
Total
Ordinary Shares and Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss, Net of Tax
Non- controlling Interests
Cumulative Effect, Period Of Adoption, Adjustment
Cumulative Effect, Period Of Adoption, Adjustment
Retained Earnings
Cumulative Effect, Period Of Adoption, Adjusted Balance
Cumulative Effect, Period Of Adoption, Adjusted Balance
Ordinary Shares and Additional Paid-in Capital
Cumulative Effect, Period Of Adoption, Adjusted Balance
Retained Earnings
Cumulative Effect, Period Of Adoption, Adjusted Balance
Accumulated Other Comprehensive Loss, Net of Tax
Cumulative Effect, Period Of Adoption, Adjusted Balance
Non- controlling Interests
Beginning Balance (in shares) at Dec. 31, 2018   240,100,000                    
Beginning Balance at Dec. 31, 2018 $ 4,219 $ 5,967 $ 2,093 $ (3,909) $ 68              
Increase (Decrease) in Shareholders' Equity                        
Income (loss) from continuing operations 676   659   17              
Shares issued - employee stock compensation plans (in shares)   1,400,000                    
Shares issued - employee stock compensation plans (96) $ (96)                    
Shares purchased (in shares)   (600,000)                    
Shares purchased (101)   (101)                  
Share-based compensation expense 89 $ 89                    
Dividends to shareholders (96)   (96)                  
Net change in fair value of financial instruments 7     7                
Net foreign currency translation adjustments 133     131 2              
Net postretirement benefit obligation 31     31                
Ending Balance (in shares) at Mar. 31, 2019   240,900,000                    
Ending Balance at Mar. 31, 2019 $ 4,862 $ 5,960 2,555 (3,740) 87              
Increase (Decrease) in Shareholders' Equity                        
Dividends (in dollars per share) $ 0.40                      
Beginning Balance (in shares) at Dec. 31, 2018   240,100,000                    
Beginning Balance at Dec. 31, 2018 $ 4,219 $ 5,967 2,093 (3,909) 68              
Increase (Decrease) in Shareholders' Equity                        
Income (loss) from continuing operations 963                      
Net change in fair value of financial instruments (1)                      
Net foreign currency translation adjustments 30                      
Net postretirement benefit obligation 45                      
Ending Balance (in shares) at Jun. 30, 2019   235,700,000                    
Ending Balance at Jun. 30, 2019 3,913 $ 6,004 1,669 (3,837) 77              
Beginning Balance (in shares) at Mar. 31, 2019   240,900,000                    
Beginning Balance at Mar. 31, 2019 4,862 $ 5,960 2,555 (3,740) 87              
Increase (Decrease) in Shareholders' Equity                        
Income (loss) from continuing operations 287   277   10              
Shares issued - employee stock compensation plans (in shares)   600,000                    
Shares issued - employee stock compensation plans (47) $ (47)                    
Shares purchased (in shares)   (5,800,000)                    
Shares purchased (1,056)   (1,056)                  
Share-based compensation expense 91 $ 91                    
Dividends to shareholders (107)   (107)                  
Net change in fair value of financial instruments (8)     (8)                
Net foreign currency translation adjustments (103)     (103)                
Net postretirement benefit obligation 14     14                
Dividends paid to noncontrolling interests on subsidiary common stock (20)       (20)              
Ending Balance (in shares) at Jun. 30, 2019   235,700,000                    
Ending Balance at Jun. 30, 2019 $ 3,913 $ 6,004 1,669 (3,837) 77              
Increase (Decrease) in Shareholders' Equity                        
Dividends (in dollars per share) $ 0.44                      
Beginning Balance (in shares) at Dec. 31, 2019 232,100,000 232,100,000                    
Beginning Balance at Dec. 31, 2019 $ 3,449 $ 6,154 1,254 (4,033) 74 $ (6) $ (6) $ 3,443 $ 6,154 $ 1,248 $ (4,033) $ 74
Increase (Decrease) in Shareholders' Equity                        
Income (loss) from continuing operations 791   772   19              
Shares issued - employee stock compensation plans (in shares)   1,200,000                    
Shares issued - employee stock compensation plans (112) $ (112)                    
Shares purchased (in shares)   (2,200,000)                    
Shares purchased (463)   (463)                  
Share-based compensation expense 81 $ 81                    
Dividends to shareholders (102)   (102)                  
Net change in fair value of financial instruments (5)     (5)                
Net foreign currency translation adjustments (397)     (395) (2)              
Net postretirement benefit obligation 24     24                
Ending Balance (in shares) at Mar. 31, 2020   231,100,000                    
Ending Balance at Mar. 31, 2020 $ 3,260 $ 6,123 1,455 (4,409) 91              
Increase (Decrease) in Shareholders' Equity                        
Dividends (in dollars per share) $ 0.44                      
Beginning Balance (in shares) at Dec. 31, 2019 232,100,000 232,100,000                    
Beginning Balance at Dec. 31, 2019 $ 3,449 $ 6,154 1,254 (4,033) 74 $ (6) $ (6) $ 3,443 $ 6,154 $ 1,248 $ (4,033) $ 74
Increase (Decrease) in Shareholders' Equity                        
Income (loss) from continuing operations 1,202                      
Net change in fair value of financial instruments (2)                      
Net foreign currency translation adjustments (309)                      
Net postretirement benefit obligation $ 47                      
Ending Balance (in shares) at Jun. 30, 2020 231,500,000 231,500,000                    
Ending Balance at Jun. 30, 2020 $ 3,695 $ 6,146 1,751 (4,296) 94              
Beginning Balance (in shares) at Mar. 31, 2020   231,100,000                    
Beginning Balance at Mar. 31, 2020 3,260 $ 6,123 1,455 (4,409) 91              
Increase (Decrease) in Shareholders' Equity                        
Income (loss) from continuing operations 411   398   13              
Shares issued - employee stock compensation plans (in shares)   400,000                    
Shares issued - employee stock compensation plans (45) $ (45)                    
Share-based compensation expense 64 64                    
Dividends to shareholders (102)   (102)                  
Net change in fair value of financial instruments 3     3                
Net foreign currency translation adjustments 88     87 1              
Net postretirement benefit obligation 23     23                
Purchases of subsidiary shares from noncontrolling interests   $ 4     (4)              
Dividends paid to noncontrolling interests on subsidiary common stock $ (7)       (7)              
Ending Balance (in shares) at Jun. 30, 2020 231,500,000 231,500,000                    
Ending Balance at Jun. 30, 2020 $ 3,695 $ 6,146 $ 1,751 $ (4,296) $ 94              
Increase (Decrease) in Shareholders' Equity                        
Dividends (in dollars per share) $ 0.44                      
v3.20.2
Condensed Consolidated Statement of Shareholders' Equity Unaudited (Parenthetical) - $ / shares
3 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Statement of Stockholders' Equity [Abstract]        
Dividends (in dollars per share) $ 0.44 $ 0.44 $ 0.44 $ 0.40
v3.20.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Cash flows from operating activities    
Income (loss) from continuing operations $ 1,202 $ 963
Net income from discontinued operations 0 0
Adjustments to reconcile net income to cash provided by operating activities:    
(Gain) loss from sales of businesses, net (25) (7)
Depreciation of fixed assets 82 80
Amortization and impairment of intangible assets 155 194
Share-based compensation expense 140 180
Deferred income taxes (15) (25)
Change in assets and liabilities:    
Fiduciary receivables (1,640) (926)
Short-term investments — funds held on behalf of clients (622) (961)
Fiduciary liabilities 2,262 1,887
Receivables, net (262) (477)
Accounts payable and accrued liabilities (323) (579)
Restructuring reserves (82) (18)
Current income taxes 186 10
Pension, other postretirement and postemployment liabilities (62) (92)
Other assets and liabilities 223 132
Cash provided by operating activities 1,219 361
Cash flows from investing activities    
Proceeds from investments 17 14
Payments for investments (60) (60)
Net sales (purchases) of short-term investments — non-fiduciary (522) (62)
Acquisition of businesses, net of cash acquired (368) (15)
Sale of businesses, net of cash sold 30 7
Capital expenditures (89) (106)
Cash used for investing activities (992) (222)
Cash flows from financing activities    
Share repurchase (463) (1,155)
Issuance of shares for employee benefit plans (157) (144)
Issuance of debt 4,153 3,559
Repayment of debt (3,547) (2,228)
Cash dividends to shareholders (204) (203)
Noncontrolling interests and other financing activities 14 (61)
Cash used for financing activities (204) (232)
Effect of exchange rates on cash and cash equivalents (56) 18
Net increase (decrease) in cash and cash equivalents (33) (75)
Cash and cash equivalents at beginning of period 790 656
Cash and cash equivalents at end of period 757 581
Supplemental disclosures:    
Interest paid 176 147
Income taxes paid, net of refunds $ 102 $ 197
v3.20.2
Basis of Presentation
6 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements and Notes thereto (the “Financial Statements”) have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Financial Statements include the accounts of Aon plc, an Irish public limited company, and all of its controlled subsidiaries. Intercompany accounts and transactions have been eliminated. The Financial Statements include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for all periods presented.
Certain information and disclosures normally included in the Financial Statements prepared in accordance with U.S. GAAP have been condensed or omitted. The Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, including amendments and additions disclosed on Form 8-K issued April 1, 2020. The results for the three and six months ended June 30, 2020 are not necessarily indicative of operating results that may be expected for the full year ending December 31, 2020, particularly in light of the continuing effect of the COVID-19 pandemic.
On April 1, 2020, a scheme of arrangement under English law was completed pursuant to which the Class A ordinary shares of Aon plc, a public limited company incorporated under the laws of England and Wales and the publicly traded parent company of the Aon group (“Aon Global Limited”), were cancelled and the holders thereof received, on a one-for-one basis, Class A ordinary shares of Aon plc, an Irish public limited company formerly known as Aon Limited (“Aon plc”), as described in the proxy statement filed with SEC on December 20, 2019 (the “Ireland Reorganization”). Aon plc is a tax resident of Ireland. References in this report to “Aon,” the “Company,” “we,” “us,” or “our” for time periods prior to April 1, 2020 refer to Aon Global Limited. References in the Financial Statements to “Aon,” the “Company,” “we,” “us,” or “our” for time periods on or after April 1, 2020, refer to Aon plc.
Use of Estimates
The preparation of the Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the Financial Statements, and the reported amounts of reserves and expenses. These estimates and assumptions are based on management’s best estimates and judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Management believes its estimates to be reasonable given the current facts available. Aon adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, foreign currency exchange rate movements, and, recently, impacts from the COVID-19 pandemic increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment would, if applicable, be reflected in the Financial Statements in future periods.
v3.20.2
Accounting Principles and Practices
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Accounting Principles and Practices Accounting Principles and Practices
Adoption of New Accounting Standards
Cloud Computing Arrangements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. The new guidance aligns capitalization requirements for certain implementation costs incurred in cloud computing arrangements with existing requirements for capitalizing implementation costs for internal-use software. These costs will be deferred over the term of the hosting arrangement, including any optional renewal periods the entity is reasonably certain to exercise. An entity may apply the new guidance on either a prospective or retrospective basis. The new guidance was effective for Aon in the first quarter of 2020 and was adopted on a prospective basis for all implementation costs incurred after the date of initial adoption. The adoption of this guidance had no significant impact on the Financial Statements.
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued new accounting guidance on simplifying the test for goodwill impairment. Currently the standard requires an entity to perform a two-step test to determine the amount, if any, of goodwill impairment. In Step 1, an entity compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the entity performs Step 2 and compares the implied fair value of goodwill with the carrying amount of that goodwill for that reporting unit. An impairment charge equal to the amount by which the carrying
amount of goodwill for the reporting unit exceeds the implied fair value of that goodwill is recorded, limited to the amount of goodwill allocated to that reporting unit. The new guidance removes Step 2. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. The new guidance was effective for Aon in the first quarter of 2020 and was adopted on a prospective basis. The adoption of this guidance had no impact on the Financial Statements.
Credit Losses
In June 2016, the FASB issued a new accounting standard on the measurement of credit losses on financial instruments. The new standard replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted the new standard as of January 1, 2020 using the modified retrospective approach. Under this approach, prior periods were not restated. Rather, the cumulative effect of initially applying the new standard was recognized as an adjustment to retained earnings. Upon the adoption of this guidance on January 1, 2020, the Company recognized a cumulative adjustment of $6 million to decrease retained earnings.
The Company’s estimate for allowance for credit losses with respect to receivables is based on a combination of factors, including evaluation of forward-looking information, historical write-offs, aging of balances, and other qualitative and quantitative analyses.
Accounting Standards Issued But Not Yet Adopted
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued new accounting guidance that simplifies the accounting for income taxes by eliminating some exceptions to the general approach in the existing guidance. It also clarifies certain aspects of the existing guidance to promote more consistent application. The new guidance is effective for Aon in the first quarter of 2021, with early adoption permitted. Different elements of the guidance permit retrospective, modified retrospective, or prospective adoption. The Company does not expect there to be a significant impact on the Financial Statements and will adopt the new accounting guidance in the first quarter of 2021.
Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued new accounting guidance related to the disclosure requirements for employers that sponsor defined benefit pension and other postretirement benefit plans. The guidance requires sponsors of these plans to provide additional disclosures, including weighted average interest rates used in the entity’s cash balance pension plans and a narrative description of reasons for any significant gains or losses impacting the benefit obligation for the period, and eliminates certain previous disclosure requirements. The new guidance is effective for Aon in the first quarter of 2021, with early adoption permitted and will be applied retrospectively. The Company is currently evaluating the impact that the guidance will have on the Financial Statements and the period of adoption.
Securities and Exchange Commission Final Rules
Financial Disclosures about Guarantors
In March 2020, the SEC issued a final rule that amended the disclosure requirements related to certain registered securities under SEC Regulation S-X Rules 3-10 and 3-16 of Regulation S-X. The changes are intended to provide investors with material information given the specific facts and circumstances, make disclosures easier to understand, and reduce the cost and burdens to registrants. The final rule replaces the requirement to provide condensed consolidated financial information with a requirement to present summarized financial information of the issuers and guarantors in the registrant’s Management Discussion and Analysis section or in the financial statements and reduces the periods for which summarized financial information is presented to the most recent annual period and year-to-date interim period. The amendments are effective January 4, 2021, with early adoption permitted.
The Company elected to early adopt the final rule in the second quarter of 2020 and elected to present these disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
v3.20.2
Revenue from Contracts with Customers
6 Months Ended
Jun. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue from Contracts with Customers Revenue from Contracts with Customers
Disaggregation of Revenue
The following table summarizes revenue from contracts with customers by principal service line (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Commercial Risk Solutions$1,126  $1,167  $2,272  $2,285  
Reinsurance Solutions448  420  1,296  1,208  
Retirement Solutions393  419  790  839  
Health Solutions258  317  760  803  
Data & Analytic Services274  286  605  622  
Elimination(2) (3) (7) (8) 
Total revenue$2,497  $2,606  $5,716  $5,749  
Consolidated revenue from contracts with customers by geographic area, which is attributed on the basis of where the services are performed, is as follows (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
United States$1,107  $1,146  $2,334  $2,307  
Americas other than United States219  241  447  467  
United Kingdom444  400  944  852  
Ireland21  20  44  42  
Europe, Middle East, & Africa other than United Kingdom and Ireland404  481  1,359  1,468  
Asia Pacific302  318  588  613  
Total revenue$2,497  $2,606  $5,716  $5,749  

Contract Costs
An analysis of the changes in the net carrying amount of costs to fulfill contracts with customers are as follows (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Balance at beginning of period$229  $236  $335  $329  
Additions274  336  592  682  
Amortization(313) (357) (729) (796) 
Impairment—  —  —  —  
Foreign currency translation and other  (5)  
Balance at end of period$193  $216  $193  $216  

An analysis of the changes in the net carrying amount of costs to obtain contracts with customers are as follows (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Balance at beginning of period$167  $155  $171  $156  
Additions16  17  28  26  
Amortization(11) (11) (23) (22) 
Impairment—  —  —  —  
Foreign currency translation and other—  —  (4)  
Balance at end of period$172  $161  $172  $161  
v3.20.2
Cash and Cash Equivalents and Short-term Investments
6 Months Ended
Jun. 30, 2020
Cash, Cash Equivalents, and Short-term Investments [Abstract]  
Cash and Cash Equivalents and Short-term Investments Cash and Cash Equivalents and Short-Term Investments
Cash and cash equivalents include cash balances and all highly liquid instruments with initial maturities of three months or less. Short-term investments consist of money market funds. The estimated fair value of cash and cash equivalents and short-term investments approximates their carrying values.
At June 30, 2020, Cash and cash equivalents and Short-term investments were $1,411 million compared to $928 million at December 31, 2019, an increase of $483 million. Of the total balances, $103 million and $110 million were restricted as to their use at June 30, 2020 and December 31, 2019, respectively. Included within Short-term investments as of June 30, 2020 and December 31, 2019 were £42.7 million ($52.7 million at June 30, 2020 exchange rates and $55.5 million at December 31, 2019 exchange rates) of operating funds required to be held by the Company in the U.K. by the Financial Conduct Authority (the “FCA”), a U.K.-based regulator.
v3.20.2
Other Financial Data
6 Months Ended
Jun. 30, 2020
Other Financial Data [Abstract]  
Other Financial Data Other Financial Data
Condensed Consolidated Statements of Income Information
Other Income (Expense)
Other income (expense) consists of the following (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Extinguishment of debt$(7) $—  $(7) $—  
Financial instruments(4) (13) (47) (12) 
Foreign currency remeasurement(2) 11  40  $—  
Pension and other postretirement   $ 
Equity earnings   $ 
Disposal of businesses—   25  $ 
Total
$(10) $ $19  $ 
Condensed Consolidated Statements of Financial Position Information
Allowance for Doubtful Accounts
An analysis of the allowance for doubtful accounts is as follows (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2020 (1)
2019
2020 (1)
2019
Balance at beginning of period$81  $64  $70  $64  
Adoption of new accounting guidance (2)
—  —   —  
Adjusted balance at beginning of period81  64  77  64  
Provision  15  12  
Accounts written off, net of recoveries(3) (3) (11) (11) 
Foreign currency translation and other—  —   —  
Balance at end of period$84  $65  $84  $65  
(1)The Company’s estimate for allowance for credit losses with respect to receivables is based on a combination of factors, including evaluation of forward-looking information, historical write-offs, aging of balances, and other qualitative and quantitative analyses. Refer to Note 2 “Accounting Principles and Practices” for further information.
(2)The allowance for doubtful accounts resulted in a $7 million charge from the adoption of the new accounting standard on the measurement of credit losses on January 1, 2020. After tax impacts, this resulted in a $6 million decrease to Retained earnings. Refer to Note 2 “Accounting Principles and Practices” for further information.
Other Current Assets
The components of Other current assets are as follows (in millions):
As ofJune 30,
2020
December 31,
2019
Costs to fulfill contracts with customers (1)
$193  $335  
Prepaid expenses133  97  
Taxes receivable83  88  
Other (2)
62  82  
Total$471  $602  
(1)Refer to Note 3 “Revenue from Contracts with Customers” for further information.
(2)December 31, 2019 includes $4 million previously classified as “Receivables from the Divested Business”.

Other Non-Current Assets
The components of Other non-current assets are as follows (in millions):
As of June 30,
2020
December 31,
2019
Costs to obtain contracts with customers (1)
$172  $171  
Taxes receivable100  102  
Leases101  100  
Investments51  53  
Other124  144  
Total$548  $570  
(1)Refer to Note 3 “Revenue from Contracts with Customers” for further information.
Other Current Liabilities
The components of Other current liabilities are as follows (in millions):
As ofJune 30,
2020
December 31,
2019
Deferred revenue (1)
$294  $270  
Taxes payable242  93  
Leases216  210  
Other567  513  
Total
$1,319  $1,086  
(1)During the three and six months ended June 30, 2020, $171 million and $288 million was recognized in the Condensed Consolidated Statement of Income. During the three and six months ended June 30, 2019, $95 million and $241 million was recognized in the Consolidated Statement of Income.
Other Non-Current Liabilities
The components of Other non-current liabilities are as follows (in millions):
As ofJune 30,
2020
December 31,
2019
Taxes payable (1)
$548  $525  
Leases78  76  
Deferred revenue69  62  
Compensation and benefits47  49  
Other158  165  
Total
$900  $877  
(1)Includes $145 million for the non-current portion of the one-time mandatory transition tax on accumulated foreign earnings as of June 30, 2020 and December 31, 2019.
v3.20.2
Restructuring
6 Months Ended
Jun. 30, 2020
Restructuring and Related Activities [Abstract]  
Restructuring Restructuring
In 2017, Aon initiated a global restructuring plan (the “Restructuring Plan”) in connection with the sale of the benefits administration and business process outsourcing business (the “Divested Business”). The Restructuring Plan was intended to streamline operations across the organization and deliver greater efficiency, insight, and connectivity. The Company incurred all remaining costs for the Restructuring Plan, and the Restructuring Plan was closed in the fourth quarter of 2019. As such, for the three and six months ended June 30, 2020, no charges were taken under the Restructuring Plan. For the three and six months ended June 30, 2019, $127 million and $218 million of restructuring expenses were charged under the Restructuring Plan.
As of December 31, 2019, the remaining liabilities for the Restructuring Plan were $204 million. During the six months ended June 30, 2020, the Company made cash payments of $82 million, and the effect of foreign currency translation and other non-cash activity was $24 million, resulting in restructuring liabilities of $98 million as of June 30, 2020.
v3.20.2
Acquisitions and Dispositions of Businesses
6 Months Ended
Jun. 30, 2020
Business Combinations [Abstract]  
Acquisitions and Dispositions of Businesses Acquisitions and Dispositions of Businesses
Completed Acquisitions
The Company completed six acquisitions during the six months ended June 30, 2020 and one acquisition during the six months ended June 30, 2019. The following table includes the preliminary fair values of consideration transferred, assets acquired, and liabilities assumed as a result of the Company’s acquisitions (in millions):
Six Months Ended June 30, 2020
Consideration transferred
Cash$385  
Deferred, contingent, and other consideration33  
Aggregate consideration transferred$418  
Assets acquired
Cash and cash equivalents$17  
Receivables21  
Goodwill315  
Intangible assets83  
Current assets15  
Non-current assets 
Total assets acquired456  
Liabilities assumed
Current liabilities27  
Non-current liabilities11  
Total liabilities assumed38  
Net assets acquired$418  
The results of operations of these acquisitions are included in the Financial Statements as of the respective acquisition dates. The Company’s results of operations would not have been materially different if these acquisitions had been reported from the beginning of the period in which they were acquired.
2020 Acquisitions
On April 6, 2020, the Company completed the acquisition of 100% share capital of Farmington Administrative Services LLC, a U.S.-based national provider of enrollment solutions and voluntary benefits, and certain assets of other Farmington companies.
On January 31, 2020, the Company completed the acquisition of 100% share capital of Cytelligence Inc., a Canadian-based cyber security firm that provides incident response advisory, digital forensic expertise, security consulting services, and cyber security training for employees to help organizations respond to cyber security threats and strengthen their security position.
On January 3, 2020, the Company completed the acquisition of 100% share capital of CoverWallet, Inc., a U.S.-based digital insurance platform for small- and medium-sized businesses.
On January 1, 2020, the Company completed the acquisition of 100% share capital of TRIUM GmbH Insurance Broker, an insurance broker based in Germany.
On January 1, 2020, the Company completed the acquisition of 100% share capital of Assimedia SA, an insurance broker based in Switzerland.
On January 1, 2020, the Company completed the acquisition of 100% share capital of Apollo Conseil et Courtage, an insurance broker based in France.
2019 Acquisitions
On July 31, 2019, the Company completed the acquisition of 100% share capital of Ovatio Courtage SAS, an insurance broker based in France.
On July 31, 2019, the Company completed the acquisition of 100% share capital of Zalba-Caldu Correduria de Seguros, S.A., a Spanish insurance broker.
On January 1, 2019, the Company completed the acquisition of 100% share capital of Chapka Assurances SAS, based in France.
Completed Dispositions
The Company completed no dispositions during the three months ended June 30, 2020 and one disposition during the six months ended June 30, 2020. The Company completed three dispositions during the three months ended June 30, 2019 and four dispositions during the six months ended June 30, 2019.
Total pretax gains recognized for the three and six months ended June 30, 2020 were $0 million and $25 million, respectively. Total pretax gains recognized for the three and six months ended June 30, 2019 were $2 million and $7 million, respectively. Gains and losses recognized as a result of a disposition are included in Other income (expense) in the Condensed Consolidated Statements of Income.
Other Significant Activity
On March 9, 2020, Aon and Willis Towers Watson Public Limited Company, an Irish public limited company (“WTW”), entered into a business combination agreement (the “Business Combination Agreement”) with respect to a combination of the parties (the “Combination”). Refer to “Business Combination Agreement” within Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information.
v3.20.2
Goodwill and Other Intangible Assets
6 Months Ended
Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets
The changes in the net carrying amount of goodwill for the six months ended June 30, 2020 are as follows (in millions):
Balance as of December 31, 2019$8,165  
Goodwill related to current year acquisitions315  
Goodwill related to disposals(3) 
Foreign currency translation(121) 
Balance as of June 30, 2020$8,356  
Other intangible assets by asset class are as follows (in millions):
 June 30, 2020December 31, 2019
 Gross Carrying AmountAccumulated
Amortization and Impairment
Net Carrying AmountGross Carrying AmountAccumulated
Amortization and Impairment
Net Carrying Amount
Customer-related and contract-based$2,246  $1,635  $611  $2,264  $1,600  $664  
Tradenames (1)
18  15   1,029  956  73  
Technology and other416  331  85  380  334  46  
Total$2,680  $1,981  $699  $3,673  $2,890  $783  
(1)In the second quarter of 2020, Aon wrote off $1.0 billion of fully amortized tradenames, including the Hewitt and Benfield tradenames. The company no longer expects to receive economic benefits from these tradenames.
The estimated future amortization for finite-lived intangible assets as of June 30, 2020 is as follows (in millions):
Remainder of 2020$83  
2021138  
202298  
202387  
202470  
202552  
Thereafter171  
Total$699  
v3.20.2
Debt
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Debt Debt
Notes
On May 29, 2020, Aon Corporation, a Delaware corporation and a wholly owned subsidiary of the Company (“Aon Corporation”), issued an irrevocable notice of redemption to holders of its 5.00% Senior Notes, which mature on September 30, 2020, for the redemption of all $600 million outstanding aggregate principal amount of the notes. The redemption date was on June 30, 2020 and resulted in a loss of $7 million due to extinguishment.
On May 12, 2020, Aon Corporation issued $1 billion 2.80% Senior Notes due May 2030. Aon Corporation used a portion of the net proceeds on June 30, 2020 to repay its outstanding 5.00% Senior Notes, which were set to mature on September 30, 2020. The Company intends to use the remainder to repay other borrowings and for general corporate purposes.
In March 2020, the Company’s $400 million 2.80% Senior Notes due March 2021 were classified as Short-term debt and current portion of long-term debt in the Condensed Consolidated Statements of Financial Position as the date of maturity is in less than one year.
On November 15, 2019, Aon Corporation issued $500 million 2.20% Senior Notes due November 2022. The Company used the net proceeds of the offering to pay down a portion of outstanding commercial paper and for general corporate purposes.
On May 2, 2019, Aon Corporation issued $750 million 3.75% Senior Notes due May 2029. The Company used the net proceeds of the offering to pay down a portion of outstanding commercial paper and for general corporate purposes.
Revolving Credit Facilities
As of June 30, 2020, Aon plc had two primary committed credit facilities outstanding: its $900 million multi-currency U.S. credit facility expiring in February 2022 and its $750 million multi-currency U.S. credit facility expiring in October 2023. Effective February 27, 2020, the $750 million multi-currency U.S. credit facility was increased by $350 million from the original $400 million. In aggregate, these two facilities provide $1.65 billion in available credit.
Each of these primary committed credit facilities includes customary representations, warranties, and covenants, including financial covenants that require Aon to maintain specified ratios of adjusted consolidated earnings before interest, taxes, depreciation, and amortization (“EBITDA”) to consolidated interest expense and consolidated debt to adjusted consolidated EBITDA, in each case, tested quarterly. At June 30, 2020, Aon did not have borrowings under either of these primary committed credit facilities, and was in compliance with the financial covenants and all other covenants contained therein during the rolling 12 months ended June 30, 2020.
Commercial Paper
Aon Corporation has established a U.S. commercial paper program (the “U.S. Program”) and Aon Global Limited has established a European multi-currency commercial paper program (the “European Program” and, together with the U.S. Program, the “Commercial Paper Programs”). On April 1, 2020 the Company entered into an agreement increasing the aggregate outstanding borrowings under the U.S. Program by $300 million, to an aggregate amount equal to $900 million. The U.S. Program remains fully backed by the committed credit facilities.
Commercial paper may be issued in aggregate principal amounts of up to $900 million under the U.S. Program and €525 million under the European Program, not to exceed the amount of the Company’s committed credit, which was $1.65 billion at June 30, 2020. In connection with the Ireland Reorganization, on April 1, 2020, Aon plc and Aon Global Holdings plc, a company incorporated under the laws of England and Wales, entered into various agreements pursuant to which they agreed to guarantee the U.S. Program, which was previously solely guaranteed by Aon Global Limited, and the European Program, which
was previously solely guaranteed by Aon Corporation. As of June 30, 2020, the U.S. Program was fully and unconditionally guaranteed by Aon plc, Aon Global Limited and Aon Global Holdings plc and the European Program was fully and unconditionally guaranteed by Aon plc, Aon Global Holdings plc and Aon Corporation.
Commercial paper outstanding, which is included in Short-term debt and current portion of long-term debt in the Condensed Consolidated Statements of Financial Position, is as follows (in millions):
As ofJune 30, 2020December 31, 2019
Commercial paper outstanding$336  $112  
The weighted average commercial paper outstanding and its related interest rates are as follows (in millions, except percentages):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Weighted average commercial paper outstanding$808  $639  $632  $482  
Weighted average interest rate of commercial paper outstanding1.63 %0.70 %1.39 %0.63 %
v3.20.2
Income Taxes
6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The effective tax rates on Net income from continuing operations were 17.2% and 18.6% for the three and six months ended June 30, 2020. The effective tax rates on Net income from continuing operations were 16.3% and 15.9% for the three and six months ended June 30, 2019.
For the three and six months ended June 30, 2020, the tax rate was primarily driven by the geographical distribution of income and certain favorable discrete items, including the impact of share-based payments and the release of a valuation allowance due to a change in judgement about realizability of deferred tax assets in the UK.
For the three and six months ended June 30, 2019, the tax rate was primarily driven by the geographical distribution of income, including restructuring charges, and certain favorable discrete items, including the impact of shared-based payments and changes in the assertion for unremitted earnings.
v3.20.2
Shareholders' Equity
6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Shareholders' Equity Shareholders’ Equity
Ordinary Shares
Aon has a share repurchase program authorized by the Company’s Board of Directors (the “Repurchase Program”). The Repurchase Program was established in April 2012 with $5.0 billion in authorized repurchases, and was increased by $5.0 billion in authorized repurchases in each of November 2014 and June 2017 for a total of $15.0 billion in repurchase authorizations. The Repurchase Program was adopted by Aon plc’s Board of Directors on April 1, 2020.
Under the Repurchase Program, the Company’s Class A Ordinary Shares may be repurchased through the open market or in privately negotiated transactions, from time to time, based on prevailing market conditions, and will be funded from available capital.
The following table summarizes the Company’s share repurchase activity (in millions, except per share data):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Shares repurchased—  5.8  2.2  6.4  
Average price per share$—  $183.23  $212.78  $181.07  
Costs recorded to retained earnings
Total repurchase cost$—  $1,050  $461  $1,150  
Additional associated costs—     
Total costs recorded to retained earnings$—  $1,056  $463  $1,157  
At June 30, 2020, the remaining authorized amount for share repurchases under the Repurchase Program was $1.6 billion. Under the Repurchase Program, the Company has repurchased a total of 130.9 million shares for an aggregate cost of approximately $13.4 billion. Due to COVID-19, the Company temporarily suspended share repurchases.
Net Income Per Share
Weighted average ordinary shares outstanding are as follows (in millions):
 Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
Basic weighted average ordinary shares outstanding232.7  240.6  233.0  241.4  
Dilutive effect of potentially issuable shares0.9  2.2  1.1  1.8  
Diluted weighted average ordinary shares outstanding233.6  242.8  234.1  243.2  
Potentially issuable shares are not included in the computation of Diluted net income per share attributable to Aon shareholders if their inclusion would be antidilutive. There were 0.1 million shares and no shares excluded from the calculation for the three and six months ended June 30, 2020, respectively. There were no shares excluded from the calculation for the three and six months ended June 30, 2019.
Accumulated Other Comprehensive Loss
Changes in Accumulated other comprehensive loss by component, net of related tax, are as follows (in millions):
 
Change in Fair Value of Financial Instruments (1)
Foreign Currency Translation Adjustments
Postretirement Benefit Obligation (2)
Total