Item 8. Financial Statements and Supplementary Data

Item 8. Financial Statements and Supplementary Data

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Years ended December 31

Risk Solutions

HR Solutions

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Aon plc

We have audited the accompanying consolidated statements of financial position of Aon plc as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of Aon plc’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Aon plc at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Aon plc’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 23, 2017 expressed an unqualified opinion thereon.

Chicago, Illinois

February 23, 2017

Aon plc

Consolidated Statements of Income



	Years ended December 31
(millions, except per share data)	2016			2015			2014
Revenue
Commissions, fees and other	$	11,605		$	11,661		$	12,019
Fiduciary investment income	22			21			26
Total revenue	11,627			11,682			12,045
Expenses
Compensation and benefits	6,914			6,837			7,014
Other general expenses	2,807			2,997			3,065
Total operating expenses	9,721			9,834			10,079
Operating income	1,906			1,848			1,966
Interest income	9			14			10
Interest expense	(282		)	(273		)	(255		)
Other income	36			100			44
Income before income taxes	1,669			1,689			1,765
Income taxes	239			267			334
Net income	1,430			1,422			1,431
Less: Net income attributable to noncontrolling interests	34			37			34
Net income attributable to Aon shareholders	$	1,396		$	1,385		$	1,397
Basic net income per share attributable to Aon shareholders	$	5.21		$	4.93		$	4.73
Diluted net income per share attributable to Aon shareholders	$	5.16		$	4.88		$	4.66
Cash dividends per share paid on ordinary shares	$	1.29		$	1.15		$	0.92
Weighted average ordinary shares outstanding - basic	268.1			280.8			295.5
Weighted average ordinary shares outstanding - diluted	270.3			283.8			299.6

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Comprehensive Income



	Years Ended December 31
(millions)	2016			2015			2014
Net income	$	1,430		$	1,422		$	1,431
Less: Net income attributable to noncontrolling interests	34			37			34
Net income attributable to Aon shareholders	$	1,396		$	1,385		$	1,397
Other comprehensive (loss) income, net of tax:
Change in fair value of financial instruments	(12		)	(8		)	4
Foreign currency translation adjustments	(495		)	(442		)	(507		)
Post-retirement benefit obligation	16			155			(260		)
Total other comprehensive loss	(491		)	(295		)	(763		)
Less: Other comprehensive loss attributable to noncontrolling interests	(2		)	(6		)	(3		)
Total other comprehensive loss attributable to Aon shareholders	(489		)	(289		)	(760		)
Comprehensive income attributable to Aon shareholders	$	907		$	1,096		$	637

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Financial Position



	As of December 31
(millions, except nominal value)	2016			2015
				(As Revised)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	431		$	384
Short-term investments	290			356
Receivables, net	2,589			2,564
Fiduciary assets	9,485			9,932
Other current assets	351			329
Total Current Assets	13,146			13,565
Goodwill	8,747			8,448
Intangible assets, net	2,223			2,180
Fixed assets, net	765			765
Deferred tax assets	322			300
Prepaid pension	858			1,033
Other non-current assets	554			592
TOTAL ASSETS	$	26,615		$	26,883
LIABILITIES AND EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	1,801		$	1,772
Short-term debt and current portion of long-term debt	336			562
Fiduciary liabilities	9,485			9,932
Other current liabilities	873			819
Total Current Liabilities	12,495			13,085
Long-term debt	5,869			5,138
Deferred tax liabilities	101			37
Pension, other post retirement, and post employment liabilities	1,774			1,795
Other non-current liabilities	844			769
TOTAL LIABILITIES	21,083			20,824
EQUITY
Ordinary shares - $0.01 nominal value Authorized: 750 shares (issued: 2016 - 262.0; 2015 - 269.8)	3			3
Additional paid-in capital	5,577			5,409
Retained earnings	3,807			4,013
Accumulated other comprehensive loss	(3,912		)	(3,423		)
TOTAL AON SHAREHOLDERS' EQUITY	5,475			6,002
Noncontrolling interests	57			57
TOTAL EQUITY	5,532			6,059
TOTAL LIABILITIES AND EQUITY	$	26,615		$	26,883

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Shareholders’ Equity



(millions)	Shares		Ordinary Shares and Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss, Net of Tax			Noncontrolling Interests			Total
						(As Revised)
Balance at January 1, 2014	300.7		$	4,788		$	5,627		$	(2,374	)	$	50		8,091
Net income	—		—			1,397			—			34			1,431
Shares issued — employee benefit plans	0.4		26			—			—			—			26
Shares issued — employee compensation	4.7		(131		)	—			—			—			(131		)
Shares purchased	(25.8	)	—			(2,250		)	—			—			(2,250		)
Tax benefit — employee benefit plans	—		89			—			—			—			89
Share-based compensation expense	—		328			—			—			—			328
Dividends to shareholders	—		—			(273		)	—			—			(273		)
Net change in fair value of financial instruments	—		—			—			4			—			4
Net foreign currency translation adjustments	—		—			—			(504		)	(3		)	(507		)
Net post-retirement benefit obligation	—		—			—			(260		)	—			(260		)
Net sales of subsidiary shares to noncontrolling interests	—		—			—			—			3			3
Dividends paid to noncontrolling interests on subsidiary common stock	—		—			—			—			(24		)	(24		)
Balance at December 31, 2014	280.0		5,100			4,501			(3,134		)	60			6,527
Net income	—		—			1,385			—			37			1,422
Shares issued — employee benefit plans	0.5		33			—			—			—			33
Shares issued — employee compensation	5.3		(188		)	—			—			—			(188		)
Shares purchased	(16.0	)	—			(1,550		)	—			—			(1,550		)
Tax benefit — employee benefit plans	—		126			—			—			—			126
Share-based compensation expense	—		340			—			—			—			340
Dividends to shareholders	—		—			(323		)	—			—			(323		)
Net change in fair value of financial instruments	—		—			—			(8		)	—			(8		)
Net foreign currency translation adjustments	—		—			—			(436		)	(6		)	(442		)
Net post-retirement benefit obligation	—		—			—			155			—			155
Net purchases of shares from noncontrolling interests	—		1			—			—			(7		)	(6		)
Dividends paid to noncontrolling interests on subsidiary common stock	—		—			—			—			(27		)	(27		)
Balance at December 31, 2015	269.8		5,412			4,013			(3,423		)	57			6,059
Net income	—		—			1,396			—			34			1,430
Shares issued — employee benefit plans	0.7		49			—			—			—			49
Shares issued — employee compensation	3.6		(174		)	—			—			—			(174		)
Shares purchased	(12.1	)	—			(1,257		)	—			—			(1,257		)
Tax benefit — employee benefit plans	—		(4		)	—			—			—			(4		)
Share-based compensation expense	—		331			—			—			—			331
Dividends to shareholders	—		—			(345		)	—			—			(345		)
Net change in fair value of financial instruments	—		—			—			(12		)	—			(12		)
Net foreign currency translation adjustments	—		—			—			(493		)	(2		)	(495		)
Net post-retirement benefit obligation	—		—			—			16			—			16
Net purchases of shares from noncontrolling interests	—		(34		)	—			—			(4		)	(38		)
Dividends paid to noncontrolling interests on subsidiary common stock	—					—			—			(28		)	(28		)
Balance at December 31, 2016	262.0		$	5,580		$	3,807		$	(3,912	)	$	57		$	5,532

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Cash Flows



	Years ended December 31
(millions)	2016			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,430		$	1,422		$	1,431
Adjustments to reconcile net income to cash provided by operating activities:
Gain from sales of businesses and investments, net	(39		)	(81		)	(44		)
Depreciation of fixed assets	232			229			242
Amortization of intangible assets	277			314			352
Share-based compensation expense	331			340			328
Deferred income taxes	(24		)	(223		)	(135		)
Change in assets and liabilities:
Fiduciary receivables	594			599			(19		)
Short-term investments — funds held on behalf of clients	(598		)	350			(403		)
Fiduciary liabilities	4			(949		)	422
Receivables, net	(86		)	(83		)	(25		)
Accounts payable and accrued liabilities	64			87			4
Current income taxes	49			116			42
Pension, other post-retirement and other post-employment liabilities	42			(230		)	(340		)
Other assets and liabilities	50			118			(43		)
CASH PROVIDED BY OPERATING ACTIVITIES	2,326			2,009			1,812
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments	43			220			52
Payments for investments	(64		)	(266		)	(20		)
Net sales (purchases) of short-term investments — non-fiduciary	61			9			110
Acquisition of businesses, net of cash acquired	(879		)	(16		)	(479		)
Proceeds from sale of businesses	107			205			48
Capital expenditures	(222		)	(290		)	(256		)
CASH USED FOR INVESTING ACTIVITIES	(954		)	(138		)	(545		)
CASH FLOWS FROM FINANCING ACTIVITIES
Share repurchase	(1,257		)	(1,550		)	(2,250		)
Issuance of shares for employee benefit plans	(129		)	(30		)	(105		)
Issuance of debt	3,467			5,351			5,239
Repayment of debt	(2,945		)	(5,098		)	(3,918		)
Cash dividends to shareholders	(345		)	(323		)	(273		)
Noncontrolling interests and other financing activities	(77		)	(39		)	4
CASH USED FOR FINANCING ACTIVITIES	(1,286		)	(1,689		)	(1,303		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(39		)	(172		)	(67		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	47			10			(103		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	384			374			477
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	431		$	384		$	374
Supplemental disclosures:
Interest paid	$	272		$	254		$	245
Income taxes paid, net of refunds	218			249			337

See accompanying Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

Basis of Presentation

The accompanying Consolidated Financial Statements and Notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Consolidated Financial Statements include the accounts of Aon plc and all of its controlled subsidiaries (“Aon” or the “Company”). All intercompany accounts and transactions have been eliminated. The Consolidated Financial Statements include, in the opinion of management, all adjustments necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for all periods presented.

Revision of Previously Issued Financial Statements

During the fourth quarter of 2016, the Company identified errors related to the recognition of revenue for certain brokerage fee arrangements, specifically the consideration for certain arrangements covering multiple insurance placements was not appropriately allocated to each individual placement.

Based on an analysis of quantitative and qualitative factors in accordance with SEC Staff Accounting Bulletins 99 and 108, the Company concluded that these errors were immaterial, individually and in the aggregate, to the Consolidated Statements of Financial Position, Consolidated Statements of Income, or Consolidated Statements of Cash Flows as presented in the Company’s quarterly and annual financial statements previously filed in the Company’s Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. While Aon concluded that the errors were immaterial to each of the prior reporting periods affected, the Company further concluded that correcting the errors cumulatively in fiscal year 2016 would materially misstate the Consolidated Statement of Income for the year ended December 31, 2016. As a result, amendment of such reports is not required.

In preparing the Company’s Consolidated Financial Statements for the year ended December 31, 2016, the Company made appropriate revisions to its financial statements for historical periods. Such changes are reflected for the years ended December 31, 2015 and 2014, included in these financial statements, and will also be reflected in the historical periods included in the Company’s subsequent quarterly and annual consolidated financial statements.

The impact to the Consolidated Statements of Financial Position was a decrease of $170 million to Receivables, net, an increase of $66 million to Deferred tax assets, and a decrease of $104 million to Retained earnings in all periods presented. The impact to the full year Consolidated Statements of Income and Consolidated Statements of Comprehensive Income was de minimis in all periods presented. and therefore remains unchanged. There was no impact to the full year cash provided by operating activities in the Consolidated Statements of Cash Flows.

The impact to the Consolidated Statements of Cash Flows previously filed in unaudited Quarterly Reports on Form 10-Q is as follows (in millions):



	Q1 2016							Q2 2016							Q3 2016
(Unaudited)	As Reported		Effect of Change(1)			As Revised		As Reported		Effect of Change(1)			As Revised		As Reported		Effect of Change(1)			As Revised
Net Income	$	327	$	10		$	337	$	607	$	38		$	645	$	921	$	50		$	971
Change in assets and liabilities:
Receivables, net	110		(13		)	97		175		(47		)	128		289		(61		)	228
Other assets and liabilities	$	69	$	3		$	72	$	56	$	9		$	65	$	83	$	11		$	94


(1)	No net impact to Cash Provided by Operating Activities.

Refer to Note 17 “Quarterly Financial Data” for the impact to the Company’s Condensed Consolidated Statements of Income previously filed in Quarterly Reports on Form 10-Q.

Reclassification

Certain amounts in prior years’ Consolidated Financial Statements and related notes have been reclassified to conform to the 2016 presentation.

In prior periods, cash outflows from Restructuring activities were shown as a separate line item within Cash Flows From Operating Activities in the Consolidated Statements of Cash Flows. Beginning in 2016, these amounts are disclosed as a component of the change in Other assets and liabilities within Cash Flows From Operating Activities in the Consolidated Statements of Cash Flows. Cash outflows for Restructuring reserves were $31 million at December 31, 2015 and $83 million at December 31, 2014.

Use of Estimates

The preparation of the accompanying Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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, and foreign currency exchange rate movements increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined, among other factors, 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.

Summary of Significant Accounting Principles and Practices

Revenue Recognition

Risk Solutions segment revenues primarily include insurance commissions and fees for services rendered and investment income on funds held on behalf of clients. Revenues are recognized when they are earned and realized or realizable. The Company considers revenues to be earned and realized or realizable when all of the following four conditions are met: (1) persuasive evidence of an arrangement exists, (2) the arrangement fee is fixed or determinable, (3) delivery or performance has occurred, and (4) collectability is reasonably assured. For brokerage commissions, revenue is typically recognized at the completion of the placement process, assuming all four criteria required to recognize revenue have been met. The placement process is typically considered complete on the effective date of the related policy. Commission revenues are recorded net of allowances for estimated policy cancellations, which are determined based on an evaluation of historical and current cancellation data.

HR Solutions segment revenues consist primarily of fees paid by clients for consulting advice and outsourcing contracts. Fees paid by clients for consulting services are typically charged on an hourly, project or fixed-fee basis. Revenues from time-and-materials or cost-plus arrangements are recognized as services are performed, assuming all four criteria to recognize revenue have been met. Revenues from fixed-fee contracts are recognized as services are provided using a proportional-performance model or at the completion of a project based on facts and circumstances of the client arrangement. Revenues from health care exchange arrangements are typically recognized upon successful enrollment of participants, net of a reserve for estimated cancellations, assuming all four criteria to recognize revenue have been met. Reimbursements received for out-of-pocket expenses are recorded as a component of revenues. The Company’s outsourcing contracts typically have three-to-five year terms for both benefits services and human resources business process outsourcing (“HR BPO”) services. The Company recognizes revenues as services are performed, assuming all criteria to recognize revenue have been met. The Company may also receive implementation fees from clients either up-front or over the ongoing services period as a component of the fee per participant. Lump sum implementation fees received from a client are typically deferred and recognized ratably over the ongoing contract service period. If a client terminates an outsourcing service arrangement prior to the end of the contract, a loss on the contract may be recorded, if necessary, and any remaining deferred implementation revenues would typically be recognized over the remaining service period through the termination date.

In connection with the Company’s long-term outsourcing service agreements, highly customized implementation efforts are often necessary to set up clients and their human resource or benefit programs on the Company’s systems and operating processes. Qualifying costs of implementation incurred prior to the services commencing are generally deferred and amortized over the period that the related ongoing services revenue is recognized. Deferred costs are assessed for recoverability on a periodic basis to the extent the deferred cost exceeds related deferred revenue.

Share-Based Compensation Costs

Share-based payments to employees, including grants of restricted share units and performance share awards, are measured based on estimated grant date fair value. The Company recognizes compensation expense over the requisite service period for awards expected to ultimately vest. Forfeitures are estimated on the date of grant and revised if actual or expected forfeiture activity differs materially from original estimates.

Pension and Other Post-Retirement Benefits

The Company records net period cost relating to its pension and other post-retirement benefit plans based on calculations that include various actuarial assumptions, including discount rates, assumed rates of return on plan assets, inflation rates, mortality rates, compensation increases, and turnover rates. The Company reviews its actuarial assumptions on an annual basis and modifies these assumptions based on current rates and trends. The effects of gains, losses, and prior service costs and credits are amortized over future service periods or future estimated lives if the plans are frozen. The funded status of each plan, calculated as the fair

value of plan assets less the benefit obligation, is reflected in the Company’s Consolidated Statements of Financial Position using a December 31 measurement date.

Net Income per Share

Basic net income per share is computed by dividing net income available to ordinary shareholders by the weighted-average number of ordinary shares outstanding, including participating securities, which consist of unvested share awards with non-forfeitable rights to dividends. Diluted net income per share is computed by dividing net income available to ordinary shareholders by the weighted-average number of ordinary shares outstanding, which have been adjusted for the dilutive effect of potentially issuable ordinary shares (excluding those that are considered participating securities), including certain contingently issuable shares. The diluted earnings per share calculation reflects the more dilutive effect of either (1) the two-class method that assumes that the participating securities have not been exercised, or (2) the treasury stock method.

Potentially issuable shares are not included in the computation of diluted income per share if their inclusion would be antidilutive.

Cash and Cash Equivalents and Short-term Investments

Cash and cash equivalents include cash balances and all highly liquid investments 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 December 31, 2016, Cash and cash equivalents and Short-term investments totaled $721 million compared to $740 million at December 31, 2015. Of the total balance, $82 million and $105 million was restricted as to its use at December 31, 2016 and 2015, respectively. Included within the December 31, 2016 and 2015 balances, respectively, were £43.3 million ($53.2 million at December 31, 2016 exchanges rates) and £43.3 million ($64.6 million at December 31, 2015 exchange rates) of operating funds required to be held by the Company in the U.K. by the Financial Conduct Authority, a U.K.-based regulator, which were included in Short-term investments. In addition, Cash and cash equivalents included restricted balances of $29 million and $40 million at December 31, 2016 and 2015, respectively.

Fiduciary Assets and Liabilities

In its capacity as an insurance agent and broker, Aon collects premiums from insureds and, after deducting its commission, remits the premiums to the respective insurers. Aon also collects claims or refunds from insurers on behalf of insureds. Uncollected premiums from insureds and uncollected claims or refunds from insurers are recorded as Fiduciary assets in the Company’s Consolidated Statements of Financial Position. Unremitted insurance premiums and claims are held in a fiduciary capacity and the obligation to remit these funds is recorded as Fiduciary liabilities in the Company’s Consolidated Statements of Financial Position. Some of the Company’s outsourcing agreements also require it to hold funds to pay certain obligations on behalf of clients. These funds are also recorded as Fiduciary assets with the related obligation recorded as Fiduciary liabilities in the Company’s Consolidated Statements of Financial Position.

Aon maintained premium trust balances for premiums collected from insureds but not yet remitted to insurance companies of $3.8 billion and $3.4 billion at December 31, 2016 and 2015, respectively. These funds and a corresponding liability are included in Fiduciary assets and Fiduciary liabilities, respectively, in the accompanying Consolidated Statements of Financial Position.

Allowance for Doubtful Accounts

The Company’s allowance for doubtful accounts with respect to receivables is based on a combination of factors, including evaluation of historical write-offs, aging of balances, and other qualitative and quantitative analyses. Receivables, net included an allowance for doubtful accounts of $58 million at both December 31, 2016 and 2015.

Fixed Assets

Fixed assets are stated at cost, less accumulated depreciation. Included in this category is internal use software, which is software that is acquired, internally developed or modified solely to meet internal needs, with no plan to market externally. Costs related to directly obtaining, developing or upgrading internal use software are capitalized. Depreciation and amortization

are computed using the straight-line method over the estimated useful lives of the assets, which are generally as follows:



Asset Description		Asset Life
Software		Lesser of the life of an associated license, or 4 to 7 years
Leasehold improvements		Lesser of estimated useful life or lease term, not to exceed 10 years
Furniture, fixtures and equipment		4 to 10 years
Computer equipment		4 to 6 years
Buildings		35 years
Automobiles		6 years

Goodwill and Intangible Assets

Goodwill represents the excess of acquisition cost over the fair value of the net assets in the acquisition of a business. Goodwill is allocated to various reporting units, which are one reporting level below the operating segment. Upon disposition of a business entity, goodwill is allocated to the disposed entity based on the fair value of that entity compared to the fair value of the reporting unit in which it was included. Goodwill is not amortized, but instead is tested for impairment at least annually. The goodwill impairment test is performed at the reporting unit level. The Company initially performs a qualitative analysis to determine if it is more likely than not that the goodwill balance is impaired. If such a determination is made, then the Company will perform a two-step quantitative analysis. First, the fair value of each reporting unit is compared to its carrying value. If the fair value of the reporting unit is less than its carrying value, the Company performs a hypothetical purchase price allocation based on the reporting unit’s fair value to determine the fair value of the reporting unit’s goodwill. Any resulting difference will be a charge to Other general expenses in the Consolidated Statements of Income in the period in which the determination is made. Fair value is determined using a combination of present value techniques and market prices of comparable businesses.

Intangible assets are primarily comprised of tradenames and customer-related, contract-based, and technology assets. Tradenames are not amortized when such assets have been determined to have indefinite useful lives, and are tested at least annually for impairments using an analysis of expected future cash flows. Interim impairment testing may be performed when events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. Customer related and contract based assets are amortized over periods ranging from 1 to 16 years, with a weighted average original life of 11 years. Technology assets are typically amortized over 7 years.

Derivatives

Derivative instruments are recognized in the Consolidated Statements of Financial Position at fair value. Where the Company has entered into master netting agreements with counterparties, the derivative positions are netted by counterparty and are reported accordingly in other assets or other liabilities. Changes in the fair value of derivative instruments are recognized in earnings each period, unless the derivative is designated and qualifies as a cash flow or net investment hedge.

The Company has historically designated the following hedging relationships for certain transactions: (i) a hedge of the change in fair value of a recognized asset or liability or firm commitment (“fair value hedge”), (ii) a hedge of the variability in cash flows from a recognized variable-rate asset or liability or forecasted transaction (“cash flow hedge”), and (iii) a hedge of the net investment in a foreign operation (“net investment hedge”).

In order for a derivative to qualify for hedge accounting, the derivative must be formally designated as a fair value, cash flow, or a net investment hedge by documenting the relationship between the derivative and the hedged item. The documentation must include a description of the hedging instrument, the hedged item, the risk being hedged, Aon’s risk management objective and strategy for undertaking the hedge, the method for assessing the effectiveness of the hedge, and the method for measuring hedge ineffectiveness. Additionally, the hedge relationship must be expected to be highly effective at offsetting changes in either the fair value or cash flows of the hedged item at both the inception of the hedge and on an ongoing basis. Aon assesses the ongoing effectiveness of its hedges and measures and records hedge ineffectiveness, if any, at the end of each quarter or more frequently if facts and circumstances require.

For a derivative designated as a hedging instrument, the changes in the fair value of a recognized asset or liability or a firm commitment (a fair value hedge), the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect is to reflect in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For a cash flow hedge that qualifies for hedge accounting, the effective portion of the change in fair value of a hedging instrument is recognized in Other Comprehensive Income (“OCI”) and subsequently reclassified to earnings in the same period the hedged item impacts earnings. The ineffective portion of the change in fair value is recognized immediately in earnings. For a net investment hedge, the effective portion of the change in fair value

of the hedging instrument is recognized in OCI as part of the cumulative translation adjustment, while the ineffective portion is recognized immediately in earnings.

Changes in the fair value of a derivative that is not designated as part of a hedging relationship (commonly referred to as an “economic hedge”) are recorded in Other income in the Consolidated Statements of Income.

The Company discontinues hedge accounting prospectively when (1) the derivative expires or is sold, terminated, or exercised, (2) the qualifying criteria are no longer met, or (3) management removes the designation of the hedging relationship.

Foreign Currency

Certain of the Company’s non-US operations use their respective local currency as their functional currency. These operations that do not have the U.S. dollar as their functional currency translate their financial statements at the current rates of exchange in effect at the balance sheet date and revenues and expenses using rates that approximate those in effect during the period. The resulting translation adjustments are included in net foreign currency translation adjustments within the Consolidated Statements of Shareholders’ Equity. Gains and losses from the remeasurement of monetary assets and liabilities that are denominated in a non-functional currency are included in Other income within the Consolidated Statements of Income. The effect of foreign exchange gains and losses on the Consolidated Statements of Income were losses of $9 million, $11 million, and $1 million in 2016, 2015, and 2014, respectively. Included in these amounts were hedging losses of $7 million in 2016 and hedging losses of $19 million in both 2015 and 2014.

Income Taxes

Deferred income taxes are recognized for the effect of temporary differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted marginal tax rates and laws that are currently in effect. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in the period when the rate change is enacted.

Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be objectively verified. Deferred tax assets are realized by having sufficient future taxable income to allow the related tax benefits to reduce taxes otherwise payable. The sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carry-forwards, taxable income in carry-back years and tax planning strategies that are both prudent and feasible.

The Company recognizes the effect of income tax positions only if sustaining those positions is more likely than not. Tax positions that meet the more likely than not recognition threshold but are not highly certain are initially and subsequently measured based on the largest amount of benefit that is greater than 50% likely of being realized upon settlement with the taxing authority. Only information that is available at the reporting date is considered in the Company’s recognition and measurement analysis, and events or changes in facts and circumstances are accounted for in the period in which the event or change in circumstance occurs.

The Company records penalties and interest related to unrecognized tax benefits in Income taxes in the Company’s Consolidated Statements of Income.

New Accounting Pronouncements

Income Tax Consequences of Intercompany Transactions

In October 2016, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on the income tax consequences of intra-entity asset transfers other than inventory. The guidance will require that the seller and buyer recognize the consolidated current and deferred income tax consequences of a transaction in the period the transaction occurs rather than deferring to a future period and recognizing those consequences when the asset has been sold to an outside party or otherwise recovered through use (i.e. depreciated, amortized, impaired). An entity will apply the new guidance on a modified retrospective basis with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The new guidance is effective for Aon in the first quarter of 2018, and the Company is currently evaluating the impact that the standard will have on its Consolidated Financial Statements.

Statement of Cash Flows

In August 2016, the FASB issued new accounting guidance on the classification of certain cash receipts and cash payments. Under the new guidance, an entity will no longer have discretion to choose the classification for a number of transactions, including contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investees. The new standard will be effective for the Company in the first quarter of 2018, with early application permitted. An entity will apply the new guidance through retrospective adjustment to all periods presented. The retrospective approach includes a practical expedient that entities may apply should retrospective application be impracticable; in this case, the amendments for these issues may be applied prospectively as of the earliest date practicable. The guidance will not have a material impact upon the Company’s Consolidated Statement of Cash Flows.

Credit Losses

In June 2016, the FASB issued new accounting guidance on the measurement of credit losses on financial instruments. The new guidance 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. An entity will apply the new guidance through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The guidance is effective for Aon in the first quarter of 2020 and early adoption is permitted beginning in the first quarter of 2019. Aon is currently evaluating the impact that the standard will have on its Consolidated Financial Statements, as well as the method of transition and period of adoption.

Share-based Compensation

In March 2016, the FASB issued new accounting guidance on several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new guidance requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement and treated as discrete items in the reporting period. Further, excess tax benefits are required to be classified along with other income tax cash flows as an operating activity. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. The guidance is effective for Aon in the first quarter of 2017 and early adoption is permitted.

Upon the adoption of this guidance on January 1, 2017, the Company expects to recognize an increase to Deferred tax assets of approximately $49 million through a cumulative-effect adjustment to Retained earnings for excess tax benefits not previously recognized. On a prospective basis, excess tax benefits will be recognized in the Consolidated Statements of Income each quarter as share-based payment awards vest, which could have a significant impact on Income tax expense in the Consolidated Statement of Income and Additional paid-in capital in the Consolidated Statements of Financial Position. The impact will be driven, in part, by the difference between the Company’s share price at the time share-based payment transactions vest or options are exercised in the future periods and the fair value of the awards at the date of grant. Amendments related to the presentation of excess tax benefits on the Consolidated Statement of Cash Flows, which will be applied prospectively, may have a significant impact on Cash Flows from Operating Activities and Cash Flows from Financing Activities in the Consolidated Statements of Cash Flows. The impact will also be driven by the Company’s share price at the time share-based payment transactions vest in future periods. The Company does not expect other elements of the guidance to have a material impact on its Consolidated Financial Statements.

Leases

In February 2016, the FASB issued new accounting guidance on leases, which requires lessees to recognize assets and liabilities for most leases. Under the new guidance, a lessee should recognize in the Consolidated Statement of Financial Position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from currently effective U.S. GAAP. The new standard will be effective for the Company in the first quarter of 2019, with early application permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the

ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. Aon is currently evaluating the impact the standard will have on its Consolidated Financial Statements, as well as the method of transition and period of adoption.

Financial Assets and Liabilities

In January 2016, the FASB issued new accounting guidance on recognition and measurement of financial assets and financial liabilities. The amendments in the new guidance make targeted improvements, which include the requirement to measure equity investments with readily determinable fair values at fair value through net income, simplification of the impairment assessment for equity investments without readily determinable fair values, adjustments to existing and additional disclosure requirements, and additional tax considerations. An entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of the guidance. The guidance is effective for the Company in the first quarter of 2018 and early adoption is permitted. Aon is currently evaluating the impact that the standard will have on the its Consolidated Financial Statements, as well as the method of transition and period of adoption.

Presentation of Deferred Taxes

In November 2015, the FASB issued new accounting guidance on the balance sheet presentation of deferred taxes, which requires that deferred tax liabilities and assets be classified as non-current. Aon early adopted this guidance in the second quarter of 2016 and retrospectively applied its requirements to all periods presented. For the year ended December 31, 2015, Aon reclassified its current deferred tax positions to non-current and netted the new balances by jurisdiction, which increased Deferred tax assets by $93 million and decreased Deferred tax liabilities by $139 million on the Consolidated Statement of Financial Position.

Debt Issuance Costs

In April 2015, the FASB issued new accounting guidance on the presentation of debt issuance costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. Debt issuance costs related to its line-of-credit arrangements will be shown within Other non-current assets. This guidance was effective for Aon in the first quarter of 2016, which required retrospective application to prior year comparable periods. For the year ended December 31, 2015, Aon reclassified $4 million from Other current assets and $33 million from Other non-current assets to Long-term debt on the Consolidated Statement of Financial Position.

Consolidations

In February 2015, the FASB issued new accounting guidance on consolidations, which will eliminate the deferral granted to investment companies from applying the variable interest entities guidance and make targeted amendments to the current consolidation guidance. The new guidance applies to all entities involved with limited partnerships or similar entities and requires re-evaluation of these entities under the revised guidance, which could change previous consolidation conclusions. The guidance was effective for the Company in the first quarter of 2016. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

Revenue Recognition

In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers, which, when effective, will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principal of the standard is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The standard is effective for Aon in the first quarter of 2018 and early adoption is permitted beginning the first quarter of 2017. Two methods of transition are permitted upon adoption: full retrospective and modified retrospective. Under the full retrospective method, prior periods would be restated under the new revenue standard, providing a comparable view across all periods presented. Under the modified retrospective method, prior periods would not be restated. Rather, revenues and other disclosures for pre-2018 periods would be provided in the notes to the financial statements as previously reported under the current revenue standard. The Company will adopt this standard in the first quarter of 2018 and is evaluating both methods of transition; however, it is currently anticipated that a modified retrospective adoption approach will be used.

A preliminary assessment to determine the impacts of the new accounting standard has been performed. The Company is currently implementing accounting and operational processes which will be impacted by the new standard, but is unable to provide information on quantitative impacts at this time.

However, the primary impacts of the new standard to the Company’s product and service lines are anticipated to be as follows:

The Company currently recognizes revenue for certain brokerage activities within the Risk Solutions business over a period of time either due to the transfer of value to customers or as the remuneration becomes determinable. Under the new standard, this revenue will be recognized on the effective date of the associated policies when control of the policy transfers to the customer. As a result, revenue from these arrangements will be recognized in earlier periods under the new standard in comparison to the current guidance and will change the timing and amount of revenue recognized for annual and interim periods. Similarly, the Company is currently assessing the timing and measurement of revenue recognition under the new standard for outsourcing and consulting operations within the HR Solutions business.

Additionally, the new standard provides guidance on accounting for certain revenue-related costs including when to capitalize costs associated with obtaining and fulfilling a contract. These costs are currently expensed as incurred under existing U.S. GAAP. These assets recognized for the costs to obtain and/or fulfill a contract will be amortized on a on a systematic basis that is consistent with the transfer of the services to which the asset relates. The Company is quantifying the nature and amount of costs that would qualify for capitalization and the amount of amortization that will be recognized in each period.

Other Financial Data

Consolidated Statements of Income Information

Other Income

Other income consists of the following (in millions):



Years ended December 31	2016			2015			2014
Equity earnings	$	13		$	13		$	12
Net gain on disposals of businesses	39			82			24
Foreign currency remeasurement (loss) gain	(2		)	30			18
(Loss) income on financial instruments	(14		)	(24		)	(15		)
Other	—			(1		)	5
Total	$	36		$	100		$	44

Consolidated Statements of Financial Position Information

Allowance for Doubtful Accounts

An analysis of the allowance for doubtful accounts is as follows (in millions):



Years ended December 31	2016			2015			2014
Balance at January 1	$	58		$	74		$	90
Provision charged to operations	11			13			12
Accounts written off, net of recoveries	(14		)	(34		)	(33		)
Foreign currency translation	3			5			5
Balance at December 31	$	58		$	58		$	74

Other Current Assets

The components of Other current assets are as follows (in millions):



As of December 31	2016		2015
Taxes receivable	$	100	$	94
Prepaid expenses	125		130
Deferred project costs	87		92
Other	39		13
Total	$	351	$	329

Fixed Assets, net

The components of Fixed assets, net are as follows (in millions):



As of December 31	2016		2015
Software	$	948	$	1,095
Leasehold improvements	452		422
Computer equipment	417		358
Furniture, fixtures and equipment	300		315
Construction in progress	93		76
Other	115		115
Fixed assets, gross	2,325		2,381
Less: Accumulated depreciation	1,560		1,616
Fixed assets, net	$	765	$	765

Depreciation expense, which includes software amortization, was $232 million, $229 million, and $242 million for the years ended December 31, 2016, 2015, and 2014, respectively.

Other Non-Current Assets

The components of Other non-current assets are as follows (in millions):



As of December 31	2016		2015
Deferred project costs	$	183	$	210
Investments	119		135
Taxes receivable	82		82
Other	170		165
Total	$	554	$	592

Other Current Liabilities

The components of Other current liabilities are as follows (in millions):



As of December 31	2016		2015
Deferred revenue	$	393	$	394
Taxes payable	78		94
Other	402		331
Total	$	873	$	819

Other Non-Current Liabilities

The components of Other non-current liabilities are as follows (in millions):



As of December 31	2016		2015
Taxes payable	$	288	$	223
Leases	169		166
Deferred revenue	140		159
Compensation and benefits	56		59
Other	191		162
Total	$	844	$	769

Acquisitions and Dispositions of Businesses

Acquisitions

The number of acquisitions completed within each reportable segment is as follows:



Years ended December 31	2016	2015
Risk Solutions	5	4
HR Solutions	3	3
Total	8	7

2016 Acquisitions

On January 1, 2016, the Company completed the transaction to acquire Globe Events Management, an insurance, retirement, and investment consulting business company based in Australia.

On February 1, 2016, the Company completed the transaction to acquire Modern Survey, an employee survey and talent analytics solutions provider based in Minneapolis.

On April 11, 2016, the Company completed the transaction to acquire Nexus Insurance Brokers Limited and Bayfair Insurance Centre Limited, insurance brokerage firms located in New Zealand.

On June 1, 2016, the Company completed the transaction to acquire Univers Workplace Solutions, a leading elective benefit enrollment and communication services firm based in New Jersey.

On August 19, 2016, the Company completed the transaction to acquire Cammack Health LLC, a leading health and benefits consulting firm that serves large health care organizations in the Eastern region of the U.S., including health plans, health systems and employers.

On October 31, 2016, the Company completed the transaction to acquire Stroz, Friedberg, Inc., a leading global cyber risk management firm based in New York City, with offices across the U.S. and in London, Zurich, Dubai and Hong Kong.

On November 11, 2016 the Company completed the transaction to acquire CoCubes, a leading hiring assessment company based in India.

On December 26, 2016, the Company completed the transaction to acquire Admix, a leading health and benefits brokerage and solutions firm based in Brazil.

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):



Year ended December 31	2016
Cash	$	891
Deferred and contingent consideration	43
Aggregate consideration transferred	934
Assets acquired:
Cash and cash equivalents	12
Receivables, net	52
Goodwill	642
Intangible assets, net	366
Fixed assets, net	30
Other assets	2
Total assets acquired	1,104
Liabilities assumed:
Current liabilities	163
Other liabilities	7
Total liabilities assumed	170
Net assets acquired	$	934

Intangible assets are primarily customer-related and contract-based assets; those acquired as part of a business acquisition in 2016 had a weighted average useful economic life of 13 years. Acquisition related costs incurred and recognized within Other general expenses for the year ended December 31, 2016 were $8 million. Total revenue for these acquisitions included in the Company’s Consolidated Statement of Income for the year ended December 31, 2016 was $68 million.

The results of operations of these acquisitions are included in the Consolidated Financial Statements as of the acquisition date. The results of operations of the Company would not have been materially different if these acquisitions had been reported from the beginning of the period in which they were acquired.

2015 Acquisitions

The following table includes the preliminary fair values of consideration transferred and intangible assets acquired as a result of the Company’s acquisitions (in millions):



Year ended December 31	2015
Consideration	$	27
Intangible assets:
Goodwill	$	18
Other intangible assets	6
Total intangible assets	$	24

Dispositions

The number of dispositions completed within each reportable segment is as follows:

Total pretax gains, net of losses, recognized were $39 million, $82 million, and $24 million, respectively, for the years ended December 31, 2016, 2015, and 2014. Gains and losses recognized as a result of a disposition are included in Other income in the Consolidated Statements of Income.

Goodwill and Other Intangible Assets

The changes in the net carrying amount of goodwill by reportable segment for the years ended December 31, 2016 and 2015, respectively, are as follows (in millions):



	Risk Solutions			HR Solutions			Total
Balance as of January 1, 2015	$	5,911		$	2,949		$	8,860
Goodwill related to current year acquisitions	2			16			18
Goodwill related to disposals	(1		)	(76		)	(77		)
Goodwill related to prior year acquisitions	—			—			—
Foreign currency translation	(319		)	(34		)	(353		)
Balance as of December 31, 2015	$	5,593		$	2,855		$	8,448
Goodwill related to current year acquisitions	632			10			642
Goodwill related to disposals	(8		)	(26		)	(34		)
Goodwill related to prior year acquisitions	4			—			4
Foreign currency translation	(268		)	(45		)	(313		)
Balance as of December 31, 2016	$	5,953		$	2,794		$	8,747

Other intangible assets by asset class are as follows (in millions):



	As of December 31
	2016						2015
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets with indefinite lives:
Tradenames	$	998	$	—	$	998	$	1,019	$	—	$	1,019
Intangible assets with finite lives:
Customer related and contract based	3,108		1,971		1,137		2,886		1,809		1,077
Technology and other	574		486		88		541		457		84
Total	$	4,680	$	2,457	$	2,223	$	4,446	$	2,266	$	2,180

Amortization expense from finite-lived intangible assets was $277 million, $314 million and $352 million during 2016, 2015 and 2014, respectively.

The estimated future amortization for finite-lived intangible assets as of December 31, 2016 is as follows (in millions):



	Risk Solutions		HR Solutions		Total
2017	$	123	$	136	$	259
2018	118		91		209
2019	107		73		180
2020	97		61		158
2021	66		53		119
Thereafter	239		61		300
Total	$	750	$	475	$	1,225

Debt

The following is a summary of outstanding debt (in millions):



As of December 31	2016		2015 (1)
3.875% Senior Notes due December 2025	$	744	$	—
5.00% Senior Notes due September 2020	598		597
4.75% Senior Notes due May 2045	592		591
3.50% Senior Notes due June 2024	594		593
4.60% Senior Notes due June 2044	543		543
2.875% Senior Notes due May 2026 (EUR 500M)	516		541
8.205% Junior Subordinated Notes due January 2027	521		521
3.125% Senior Notes due May 2016	—		500
2.80% Senior Notes due March 2021	397		396
4.00% Senior Notes due November 2023	347		347
6.25% Senior Notes due September 2040	295		295
4.76% Senior Notes due March 2018 (CAD 375M)	277		270
4.45% Senior Notes due May 2043	246		246
4.25% Senior Notes due December 2042	197		195
Commercial paper	329		50
Other	9		15
Total debt	6,205		5,700
Less short-term and current portion of long-term debt	336		562
Total long-term debt	$	5,869	$	5,138

(1) Amended to reflect the adoption of new guidance related to the presentation of debt issuance costs as described in Note 2 “Summary of Significant Accounting Principles and Practices.”

On May 27, 2016, $500 million of 3.125% Senior Notes due May 2016 issued by Aon Corporation matured and were repaid in full.

On March 1, 2016, Aon plc issued $750 million of 3.875% Senior Notes due December 2025. The Company used the proceeds of the issuance for general corporate purposes.

On November 13, 2015, Aon plc issued $400 million of 2.80% Senior Notes due March 2021. The Company used the proceeds of the issuance for general corporate purposes.

On September 30, 2015, $600 million of 3.50% Senior Notes issued by Aon Corporation matured and were repaid in full.

On May 20, 2015, Aon plc issued $600 million of 4.750% Senior Notes due May 2045. The Company used the proceeds of the issuance for general corporate purposes.

Each of the notes issued by Aon plc and described above is fully and unconditionally guaranteed by Aon Corporation. The 4.76% Senior Notes due March 2018 identified in the table above were issued by a Canadian subsidiary of Aon Corporation and are fully and unconditionally guaranteed by Aon plc and Aon Corporation. Refer to Note 16 “Guarantee of Registered Securities” for additional information regarding guarantees of outstanding debt securities. Each of the notes described above and identified in the table above contains customary representations, warranties and covenants, and the Company was in compliance with all such covenants as of December 31, 2016.

Repayments of total debt are as follows (in millions):



2017	$	336
2018	278
2019	—
2020	600
2021	400
Thereafter	4,700
Total Repayments	6,314
Unamortized discount, premium, and debt issuance cost	(109		)
Total Debt	$	6,205

Revolving Credit Facilities

As of December 31, 2016, Aon plc had two primary committed credit facilities outstanding: its $400 million U.S. credit facility expiring in March 2017 (the “2017 Facility”) and its $900 million multi-currency U.S. credit facility expiring in February 2021 (the “2021 Facility”). The Company plans to let the 2017 facility expire but may evaluate obtaining additional committed credit in the future. Each of these facilities includes customary representations, warranties and covenants, including financial covenants that require Aon plc to maintain specified ratios of adjusted consolidated EBITDA to consolidated interest expense and consolidated debt to adjusted consolidated EBITDA, in each case, tested quarterly. At December 31, 2016, Aon plc did not have borrowings under either the 2017 Facility or the 2021 Facility, and was in compliance with all covenants contained therein during the twelve months ended December 31, 2016.

Commercial Paper

Aon Corporation, a wholly-owned subsidiary of Aon plc, has established a U.S. commercial paper program, which provides for commercial paper to be issued in an aggregate principal amount of up to $900 million, and Aon plc has established a European multi-currency commercial paper program that provides for commercial paper to be issued in an aggregate principal amount of up to €300 million. The U.S. commercial paper program is fully and unconditionally guaranteed by Aon plc and the European commercial paper program is fully and unconditionally guaranteed by Aon Corporation. In the aggregate, the Company had $329.2 million and $50.0 million of commercial paper outstanding at December 31, 2016 and 2015, respectively, which was included in Short-term debt and current portion of long-term debt in the Company’s Consolidated Statements of Financial Position. The weighted average commercial paper outstanding for 2016 and 2015 was $265.0 million and $402.0 million, respectively. The weighted average interest rate of the commercial paper outstanding during 2016 and 2015 was 0.22% and 0.50%, respectively.

Lease Commitments

The Company leases office facilities, equipment, and automobiles under non-cancelable operating leases. These leases expire at various dates and may contain renewal and expansion options. In addition to base rental costs, occupancy lease agreements generally provide for rent escalations resulting from increased assessments for real estate taxes and other charges. The Company’s lease obligations are primarily for the use of office space.

Rental expenses (including amounts applicable to taxes, insurance and maintenance) for operating leases are as follows (in millions):



Years ended December 31	2016			2015			2014
Rental expense	$	400		$	454		$	455
Less: Sub lease rental income	(64		)	(83		)	(75		)
Net rental expense	$	336		$	371		$	380

At December 31, 2016, future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year are as follows (in millions):



Years ended December 31, 2016	Gross rental commitments		Rentals from subleases			Net rental commitments
2017	$	355	$	(55	)	$	300
2018	317		(44		)	273
2019	283		(38		)	245
2020	237		(34		)	203
2021	214		(33		)	181
Thereafter	696		(47		)	649
Total minimum payments required	$	2,102	$	(251	)	$	1,851

Income Taxes

Income before income tax and the provision for income tax consist of the following (in millions):



Years ended December 31	2016			2015			2014
Income before income taxes:
U.K.	$	(202	)	$	149		$	347
U.S.	(104		)	(51		)	(55		)
Other	1,975			1,591			1,473
Total	$	1,669		$	1,689		$	1,765
Income tax expense (benefit):
Current:
U.K.	$	(54	)	$	43		$	1
U.S. federal	94			137			156
U.S. state and local	—			54			75
Other	223			256			236
Total current tax expense	$	263		$	490		$	468
Deferred tax expense (benefit):
U.K.	$	59		$	(39	)	$	38
U.S. federal	(47		)	(140		)	(133		)
U.S. state and local	6			(14		)	(24		)
Other	(42		)	(30		)	(15		)
Total deferred tax benefit	$	(24	)	$	(223	)	$	(134	)
Total income tax expense	$	239		$	267		$	334

Income before income taxes shown above is based on the location of the business unit to which such earnings are attributable for tax purposes. In addition, because the earnings shown above may in some cases be subject to taxation in more than one country, the income tax provision shown above as U.K., U.S. or Other may not correspond to the geographic attribution of the earnings.

The Company performs a reconciliation of the income tax provisions based on its domicile and statutory rate at each reporting period. The 2016, 2015, and 2014 reconciliations are based on the U.K. statutory corporate tax rate of 20.0%, 20.3%, and 21.5%, respectively. The reconciliation to the provisions reflected in the Consolidated Financial Statements is as follows:



Years ended December 31	2016	2015	2014
Statutory tax rate	20.0%	20.3%	21.5%
U.S. state income taxes, net of U.S. federal benefit	0.7	0.5	1.5
Taxes on international operations (1)	(8.5)	(6.0)	(8.9)
Nondeductible expenses	1.2	2.2	1.7
Adjustments to prior year tax requirements	(1.0)	(1.3)	0.9
Adjustments to valuation allowances	(1.8)	(1.2)	0.6
Change in uncertain tax positions	3.0	1.4	1.7
Other — net	0.7	(0.1)	(0.1)
Effective tax rate	14.3%	15.8%	18.9%


(1)	The Company determines the adjustment for taxes on international operations based on the difference between the statutory tax rate applicable to earnings in each foreign jurisdiction and the enacted rate of 20.0%, 20.3% and 21.5% at December 31, 2016, 2015, and 2014, respectively. The benefit to the Company’s effective income tax rate from taxes on international operations relates to benefits from lower-taxed global operations, primarily due to the use of global funding structures.

(1)

The Company determines the adjustment for taxes on international operations based on the difference between the statutory tax rate applicable to earnings in each foreign jurisdiction and the enacted rate of 20.0%, 20.3% and 21.5% at December 31, 2016, 2015, and 2014, respectively. The benefit to the Company’s effective income tax rate from taxes on international operations relates to benefits from lower-taxed global operations, primarily due to the use of global funding structures.

The components of the Company’s deferred tax assets and liabilities are as follows (in millions):



As of December 31	2016			2015
Deferred tax assets:
Employee benefit plans	$	661		$	635
Net operating/capital loss and tax credit carryforwards	399			336
Accrued interest	166			293
Other accrued expenses	102			98
Brokerage fee arrangements (1)	66			66
Deferred revenue	57			65
Investment basis differences	48			56
Other	60			57
Total	1,559			1,606
Valuation allowance on deferred tax assets	(130		)	(162		)
Total	$	1,429		$	1,444
Deferred tax liabilities:
Intangibles and property, plant and equipment	$	(982	)	$	(961	)
Other accrued expenses	(101		)	(99		)
Deferred costs	(20		)	(30		)
Unrealized foreign exchange gains	(26		)	(29		)
Unremitted earnings	(29		)	(18		)
Other	(50		)	(44		)
Total	$	(1,208	)	$	(1,181	)
Net deferred tax asset	$	221		$	263

(1) Refer to Note 1 “Basis of Presentation” for details regarding the Revision of Previously Issued Financial Statements.

Deferred income taxes (assets and liabilities have been netted by jurisdiction) have been classified in the Consolidated Statements of Financial Position as follows (in millions):



As of December 31	2016			2015
Deferred tax assets — non-current (2)	$	322		$	300
Deferred tax liabilities — non-current (2)	(101		)	(37		)
Net deferred tax asset	$	221		$	263

(2) For the year ended December 31, 2015, Aon reclassified its current deferred tax positions to non-current and netted the new balances by jurisdiction. Refer to Note 2 “Summary of Significant Accounting Principles and Practices” for additional details.

Valuation allowances have been established primarily with regard to the tax benefits of certain net operating loss, capital loss and interest expense carryforwards. Valuation allowances decreased by $32 million as of December 31, 2016, when compared to December 31, 2015, primarily attributable to the reversal of a valuation allowance and the impact of foreign currency translation.

The Company recognized, as an adjustment to additional paid-in-capital, income tax benefits attributable to employee stock compensation of $(4) million, $126 million and $89 million in 2016, 2015, and 2014, respectively. The year-over-year change is primarily attributable to excess tax benefits not recorded in 2016 because the deduction did not decrease income taxes payable.

Deferred income taxes of $11 million were accrued in 2016 on undistributed earnings that are not permanently reinvested. Undistributed earnings of non-U.S. entities were approximately $2.3 billion at December 31, 2016. U.S. income taxes have not been provided on these undistributed earnings because they are considered to be permanently reinvested in those subsidiaries. It is not practicable to estimate the amount of unrecognized deferred tax liabilities, if any, for these undistributed foreign earnings.

The Company had the following operating and capital loss carryforwards (in millions):



As of December 31	2016		2015
UK
Operating loss carryforwards	$	325	$	449
Capital loss carryforwards	294		360

US
Federal operating loss carryforwards	$	196	$	8
State operating loss carryforwards	474		443

Other Non-US
Operating loss carryforwards	$	350	$	245
Capital loss carryforwards	218		206

As of December 31, 2016, the Company had $126 million of federal operating loss carryforwards and $110 million of state operating loss carryforwards for which a benefit will be recorded in APIC when realized.

The U.K. operating losses and capital losses have an indefinite carryforward. The federal operating loss carryforwards as of December 31, 2016 expire at various dates from 2020 to 2036 and the state operating losses as of December 31, 2016 expire at various dates from 2017 to 2036. Operating and capital losses in other non-US jurisdictions have various carryforward periods and will begin to expire in 2019.

During 2012, the Company was granted a tax holiday for the period from October 1, 2012 through September 30, 2022, with respect to withholding taxes and certain income derived from services in Singapore. This tax holiday and reduced withholding tax rate may be extended when certain conditions are met or may be terminated early if certain conditions are not met. The benefit realized was approximately $46 million, $23 million, and $7 million during the years ended December 31, 2016, 2015, and 2014, respectively. The impact of this tax holiday on diluted earnings per share was $0.17, $0.08, and $0.02 during the years ended December 31, 2016, 2015, and 2014, respectively.

Uncertain Tax Positions

The following is a reconciliation of the Company’s beginning and ending amount of uncertain tax positions (in millions):



	2016			2015
Balance at January 1	$	238		$	211
Additions based on tax positions related to the current year	36			31
Additions for tax positions of prior years	20			53
Reductions for tax positions of prior years	(12		)	(18		)
Settlements	—			(32		)
Business combinations	2			—
Lapse of statute of limitations	(5		)	(5		)
Foreign currency translation	(1		)	(2		)
Balance at December 31	$	278		$	238

The Company’s liability for uncertain tax positions as of December 31, 2016, 2015, and 2014, includes $240 million, $200 million, and $174 million, respectively, related to amounts that would impact the effective tax rate if recognized. It is possible that the amount of unrecognized tax benefits may change in the next twelve months; however, the Company does not expect the change to have a significant impact on its consolidated statements of income or consolidated balance sheets. These changes may be the result of settlements of ongoing audits. At this time, an estimate of the range of the reasonably possible outcomes within the twelve months cannot be made.

The Company recognizes interest and penalties related to uncertain tax positions in its provision for income taxes. The Company accrued potential interest and penalties of $15 million, $2 million, and $4 million in 2016, 2015, and 2014, respectively. The

Company recorded a liability for interest and penalties of $48 million, $33 million, and $31 million as of December 31, 2016, 2015, and 2014, respectively.

The Company and its subsidiaries file income tax returns in their respective jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through 2007. Material U.S. state and local income tax jurisdiction examinations have been concluded for years through 2005. The Company has concluded income tax examinations in its primary non-U.S. jurisdictions through 2005.

Shareholders’ Equity

Distributable Reserves

As a U.K. incorporated company, the Company is required under U.K. law to have available “distributable reserves” to make share repurchases or pay dividends to shareholders. Distributable reserves may be created through the earnings of the U.K. parent company and, amongst other methods, through a reduction in share capital approved by the English Companies Court. Distributable reserves are not linked to a U.S. GAAP reported amount (e.g., retained earnings). As of December 31, 2016 and 2015, the Company had distributable reserves in excess of $1.6 billion and $2.1 billion, respectively.

Ordinary Shares

In April 2012, the Company’s Board of Directors authorized a share repurchase program under which up to $5.0 billion of Class A Ordinary Shares may be repurchased (“2012 Share Repurchase Program”). In November 2014, the Company’s Board of Directors authorized a new $5.0 billion share repurchase program in addition to the existing program (“2014 Share Repurchase Program” and, together with the 2012 Share Repurchase Program, the “Repurchase Programs”). Subsequent to the close of the fourth quarter 2016, the Board of Directors authorized a $5.0 billion increase to the existing remaining authorization under its share repurchase program. Under each program, 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.

During 2016, the Company repurchased 12.2 million shares at an average price per share of $102.66 for a total cost of $1.3 billion under the 2014 Share Repurchase Program. The Company recorded an additional $6 million of transaction costs associated with the repurchase to retained earnings during 2016. During 2015, the Company repurchased 16.0 million shares at an average price per share of $97.04 for a total cost of $1.6 billion under the Repurchase Programs. In August 2015, the $5 billion of Class A Ordinary Shares authorized under the 2012 Share Repurchase Program was exhausted. At December 31, 2016, the remaining authorized amount for share repurchase under the 2014 Share Repurchase Program is $2.8 billion. Under the Repurchase Programs, the Company has repurchased a total of 90.2 million shares for an aggregate cost of $7.2 billion.

Net Income Per Share

Weighted average shares outstanding are as follows (in millions):



	Year ended December 31,
	2016	2015	2014
Basic weighted-average ordinary shares outstanding	268.1	280.8	295.5
Dilutive effect of potentially issuable shares	2.2	3.0	4.1
Diluted weighted-average ordinary shares outstanding	270.3	283.8	299.6

Potentially issuable shares are not included in the computation of diluted net income per share if their inclusion would be antidilutive. There were no shares excluded from the calculation for in 2016, 2015, or 2014.

Dividends

During 2016, 2015, and 2014, the Company paid dividends on its Class A Ordinary Shares of $345.0 million, $323.0 million, and $273.0 million, respectively. Dividends paid per Class A Ordinary Share were $1.29, $1.15 and $0.92 for the years ended December 31, 2016, 2015, and 2014 respectively.

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			Post-Retirement Benefit Obligation (2)			Total
Balance at January 1, 2014	$	(21	)	$	169		$	(2,522	)	$	(2,374	)
Other comprehensive loss before reclassifications:
Other comprehensive loss before reclassifications	(13		)	(492		)	(563		)	(1,068		)
Tax benefit	4			(12		)	229			221
Other comprehensive loss before reclassifications, net	(9		)	(504		)	(334		)	(847		)
Amounts reclassified from accumulated other comprehensive loss:
Amounts reclassified from accumulated other comprehensive loss	20			—			106			126
Tax benefit	(7		)	—			(32		)	(39		)
Amounts reclassified from accumulated other comprehensive loss, net	13			—			74			87
Net current period other comprehensive (loss) income	4			(504		)	(260		)	(760		)
Balance at December 31, 2014	(17		)	(335		)	(2,782		)	(3,134		)
Other comprehensive loss before reclassifications:
Other comprehensive loss before reclassifications	(4		)	(467		)	82			(389		)
Tax benefit	1			31			(9		)	23
Other comprehensive loss before reclassifications, net	(3		)	(436		)	73			(366		)
Amounts reclassified from accumulated other comprehensive loss:
Amounts reclassified from accumulated other comprehensive loss	11			—			117			128
Tax benefit	(16		)	—			(35		)	(51		)
Amounts reclassified from accumulated other comprehensive loss, net	(5		)	—			82			77
Net current period other comprehensive (loss) income	(8		)	(436		)	155			(289		)
Balance at December 31, 2015	(25		)	(771		)	(2,627		)	(3,423		)
Other comprehensive loss before reclassifications:
Other comprehensive loss before reclassifications	(25		)	(490		)	(276		)	(791		)
Tax benefit	6			(3		)	74			77
Other comprehensive loss before reclassifications, net	(19		)	(493		)	(202		)	(714		)
Amounts reclassified from accumulated other comprehensive loss:
Amounts reclassified from accumulated other comprehensive loss	10			—			322			332
Tax benefit	(3		)	—			(104		)	(107		)
Amounts reclassified from accumulated other comprehensive loss, net	7			—			218			225
Net current period other comprehensive (loss) income	(12		)	(493		)	16			(489		)
Balance at December 31, 2016	$	(37	)	$	(1,264	)	$	(2,611	)	$	(3,912	)


(1)	Reclassifications from this category included in Accumulated other comprehensive loss are recorded in Other income


(2)	Reclassifications from this category included in Accumulated other comprehensive loss are recorded in Compensation and benefits

Employee Benefits

Defined Contribution Savings Plans

Aon maintains defined contribution savings plans for the benefit of its U.S., U.K., Netherlands and Canada employees. The expense recognized for these plans is included in Compensation and benefits in the Consolidated Statements of Income, as follows (in millions):



Years ended December 31	2016		2015		2014
U.S.	$	142	$	133	$	123
U.K.	43		42		42
Netherlands and Canada	27		25		30
Total	$	212	$	200	$	195

Pension and Other Post-retirement Benefits

The Company sponsors defined benefit pension and post-retirement health and welfare plans that provide retirement, medical, and life insurance benefits. The post-retirement healthcare plans are contributory, with retiree contributions adjusted annually, and the life insurance and pension plans are generally noncontributory. The significant U.S., U.K., Netherlands and Canadian pension plans are closed to new entrants.

Pension Plans

The following tables provide a reconciliation of the changes in the projected benefit obligations and fair value of assets for the years ended December 31, 2016 and 2015 and a statement of the funded status as of December 31, 2016 and 2015, for the material U.K. plans, U.S. plans and other major plans, which are located in the Netherlands and Canada. These plans represent approximately 92% of the Company’s projected benefit obligations.



	U.K.						U.S.						Other
(millions)	2016			2015			2016			2015			2016			2015
Change in projected benefit obligation
At January 1	$	4,985		$	5,529		$	3,160		$	3,350		$	1,177		$	1,399
Service cost	—			1			—			—			—			—
Interest cost	158			198			111			131			29			33
Plan amendment	(20		)	27			—			—			—			(10		)
Settlements	(159		)	—			(281		)	—			—			—
Plan transfer and acquisitions	—			(2		)	—			(18		)	—			—
Actuarial loss (gain)	32			(83		)	(43		)	(25		)	(7		)	24
Benefit payments	(242		)	(217		)	(139		)	(133		)	(39		)	(38		)
Change in discount rate	1,079			(247		)	100			(145		)	100			(66		)
Foreign currency impact	(959		)	(221		)	—			—			(33		)	(165		)
At December 31	$	4,874		$	4,985		$	2,908		$	3,160		$	1,227		$	1,177
Accumulated benefit obligation at end of year	$	4,874		$	4,985		$	2,908		$	3,160		$	1,191		$	1,135
Change in fair value of plan assets
At January 1	$	5,903		$	6,224		$	1,951		$	2,036		$	1,019		$	1,161
Actual return on plan assets	1,233			91			116			(60		)	111			8
Employer contributions	67			65			36			108			20			21
Settlements	(159		)	—			(281		)	—			—			—
Plan transfer and acquisitions	—			(3		)	—			—			—			—
Benefit payments	(242		)	(217		)	(139		)	(133		)	(39		)	(38		)
Foreign currency impact	(1,127		)	(257		)	—			—			(35		)	(133		)
At December 31	$	5,675		$	5,903		$	1,683		$	1,951		$	1,076		$	1,019
Market related value at end of year	$	5,675		$	5,903		$	1,819		$	2,064		$	1,076		$	1,019
Amount recognized in Statement of Financial Position at December 31
Funded status	$	801		$	918		$	(1,225	)	$	(1,209	)	$	(151	)	$	(158	)
Unrecognized prior-service cost	19			46			6			9			(6		)	(7		)
Unrecognized loss	1,237			1,465			1,612			1,723			400			389
Net amount recognized	$	2,057		$	2,429		$	393		$	523		$	243		$	224

In March 2016, the Company entered into an insurance contract that covers a portion of the assets within select U.K. pension schemes. The transaction resulted in a decrease in Prepaid pension assets and Accumulated other comprehensive income of $267 million.

Amounts recognized in the Consolidated Statements of Financial Position consist of (in millions):



	U.K.						U.S.						Other
	2016			2015			2016			2015			2016			2015
Prepaid benefit cost (1)	$	836		$	1,012		$	—		$	—		$	—		$	—
Accrued benefit liability (2)	(35		)	(94		)	(1,225		)	(1,209		)	(151		)	(158		)
Accumulated other comprehensive loss	1,256			1,511			1,618			1,732			394			382
Net amount recognized	$	2,057		$	2,429		$	393		$	523		$	243		$	224


(1)	Included in Prepaid pension


(2)	Included in Other current liabilities and Pension, other post retirement, and post employment liabilities

Amounts recognized in Accumulated other comprehensive loss (income) that have not yet been recognized as components of net periodic benefit cost at December 31, 2016 and 2015 consist of (in millions):



	U.K.				U.S.				Other
	2016		2015		2016		2015		2016			2015
Net loss	$	1,237	$	1,465	$	1,612	$	1,723	$	400		$	389
Prior service cost (income)	19		46		6		9		(6		)	(7		)
Total	$	1,256	$	1,511	$	1,618	$	1,732	$	394		$	382

In 2016, U.S. plans with a projected benefit obligation (“PBO”) and an accumulated benefit obligation (“ABO”) in excess of the fair value of plan assets had a PBO of $2.9 billion, an ABO of $2.9 billion, and plan assets with a fair value of $1.7 billion. U.K. plans with a PBO in excess of the fair value of plan assets had a PBO of $1.2 billion and plan assets with a fair value of $1.1 billion, and plans with an ABO in excess of the fair value of plan assets had an ABO of $1.2 billion and plan assets with a fair value of $1.1 billion. Other plans with a PBO in excess of the fair value of plan assets had a PBO of $1.2 billion and plan assets with a fair value of $1.0 billion, and plans with an ABO in excess of the fair value of plan assets had an ABO of $1.1 billion and plan assets with a fair value of $1.0 billion.

In 2015, U.S. plans with a PBO and an ABO in excess of the fair value of plan assets had a PBO of $3.2 billion, an ABO of $3.2 billion, and plan assets of $2.0 billion. U.K. plans with a PBO in excess of the fair value of plan assets had a PBO of $1.2 billion and plan assets with a fair value of $1.1 billion, and plans with an ABO in excess of the fair value of plan assets had an ABO of $1.2 billion and plan assets with a fair value of $1.1 billion. Other plans with a PBO in excess of the fair value of plan assets had a PBO of $1.2 billion and plan assets with a fair value of $1.0 billion, and plans with an ABO in excess of the fair value of plan assets had an ABO of $1.1 billion and plan assets with a fair value of $1.0 billion.

The following table provides the components of net periodic benefit (income) cost for the plans (in millions):



	U.K.									U.S.									Other
	2016			2015			2014			2016			2015			2014			2016			2015			2014
Service cost	$	—		$	1		$	1		$	—		$	—		$	2		$	—		$	—		$	—
Interest cost	158			198			230			111			131			129			29			33			47
Expected return on plan assets, net of administration expenses	(243		)	(307		)	(326		)	(156		)	(154		)	(157		)	(48		)	(50		)	(59		)
Amortization of prior-service cost	2			1			1			2			2			2			—			—			—
Amortization of net actuarial loss	31			41			52			50			54			42			10			11			10
Net periodic benefit (income) cost	(52		)	(66		)	(42		)	7			33			18			(9		)	(6		)	(2		)
Settlement expense	61			—			—			158			—			—			—			—			—
Curtailment gain and other	—			—			—			—			—			—			—			—			(2		)
Total net periodic benefit cost (income)	$	9		$	(66	)	$	(42	)	$	165		$	33		$	18		$	(9	)	$	(6	)	$	(4	)

Beginning in 2016, the Company has elected to utilize a full yield curve approach in the estimation of the service and interest cost components of net periodic pension and post-retirement benefit cost for its major pension and other post-retirement benefit plans by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected

cash flows. In 2015 and prior years, the Company estimated these components of net periodic pension and post-retirement benefit cost by applying a single weighted-average discount rate, derived from the yield curve used to measure the benefit obligation at the beginning of the period.

In March 2016, the Company announced a plan to offer a voluntary one-time lump sum payment option to certain eligible former employees under one of the Company’s U.K. pension plans, that if accepted, would settle the Company’s pension obligations to them. The lump sum cash payment offer closed during the second quarter of 2016. In total, lump sum payments from plan assets of £116 million ($159 million using June 30, 2016 exchange rates) were paid. As a result of this settlement, the Company remeasured the assets and liabilities of the U.K. pension plan during the second quarter of 2016, which in aggregate resulted in a reduction to the projected benefit obligation of £103 million ($141 million using June 30, 2016 Exchange rates) as well as a non-cash settlement charge of £42 million ($61 million using average June 2016 exchange rate) in the second quarter of 2016.

In August 2016, the Company announced a plan to offer a voluntary one-time lump sum payment option to certain eligible former employees under one of the Company’s U.S. pension plans, that if accepted, would settle the Company’s pension obligations to them. The lump sum cash payment offer closed during the fourth quarter of 2016. In total, lump sum payments from plan assets of $281 million were paid. As a result of this settlement, the Company remeasured the assets and liabilities of the U.S. pension plan during the fourth quarter of 2016, which in aggregate resulted in a reduction to the projected benefit obligation of $325 million as well as a non-cash settlement charge of $158 million in the fourth quarter of 2016.

The weighted-average assumptions used to determine benefit obligations are as follows:



	U.K.		U.S.		Other
	2016	2015	2016	2015	2016	2015
Discount rate	2.77%	3.96%	3.53-4.11%	3.69-4.43%	1.85-3.81%	2.43-3.96%
Rate of compensation increase	3.70 - 4.20%	3.63-4.13%	N/A	N/A	1.00-3.50%	2.00-3.50%
Underlying price inflation	1.83%	1.88%	N/A	N/A	2.00-2.50%	2.00-2.50%

The weighted-average assumptions used to determine the net periodic benefit cost are as follows:



	U.K.			U.S.			Other
	2016	2015	2014	2016	2015	2014	2016	2015	2014
Discount rate	3.96%	3.70%	4.55%	3.69 - 4.43%	3.37 - 4.08%	3.97 - 4.87%	2.43 - 3.96%	2.03 - 3.91%	3.60 - 4.71%
Expected return on plan assets, net of administration expenses	4.55%	5.09%	6.00%	7.81%	7.96%	8.80%	3.47 - 4.95%	3.99 - 5.21%	4.70 - 6.50%
Rate of compensation increase	3.63 - 4.13%	3.55 - 4.05%	3.70 - 4.40%	N/A	N/A	N/A	2.00 - 3.50%	2.25 - 3.50%	2.25 - 3.50%

The amounts in Accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost during 2017 are $52 million in the U.S. and $41 million outside the U.S.

Expected Return on Plan Assets

To determine the expected long-term rate of return on plan assets, the historical performance, investment community forecasts and current market conditions are analyzed to develop expected returns for each asset class used by the plans. The expected returns for each asset class are weighted by the target allocations of the plans. The expected return on plan assets in the U.S. of 7.81% reflects a portfolio that is seeking asset growth through a higher equity allocation while maintaining prudent risk levels. The portfolio contains certain assets that have historically resulted in higher returns and other financial instruments to minimize downside risk.

No plan assets are expected to be returned to the Company during 2017.

Fair value of plan assets

The Company determined the fair value of plan assets through numerous procedures based on the asset class and available information. Refer to Note 13 “Fair Value Measurements and Financial Instruments” for a description of the procedures performed to determine the fair value of the plan assets.

The fair values of the Company’s U.S. pension plan assets at December 31, 2016 and December 31, 2015, by asset category, are as follows (in millions):



			Fair Value Measurements Using
Asset Category	Balance at December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents (1)	$	100	$	100	$	—	$	—
Equity investments:
Large cap domestic	268		268		—		—
Small cap domestic	15		15		—		—
International	64		64		—		—
Equity derivatives	81		78		3		—
Pooled funds:
International (2)	196		—		—		—
Small cap domestic (2)	52		—		—		—
Fixed income investments: (3)
Corporate bonds	105		—		105		—
Government and agency bonds	132		76		56		—
Asset-backed securities	—		—		—		—
Fixed income derivatives	65		65		—		—
Pooled funds:
Corporate bonds (2)	255		—		—		—
Other investments:
Commodity derivatives (4)	22		—		22		—
Real estate and REITS (5)	61		61		—		—
Alternative investments (2) (6)	267		—		—		—
Total	$	1,683	$	727	$	186	$	—


(1)	Consists of cash and institutional short-term investment funds.


(2)	Certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the above table are intended to permit reconciliation of the fair values to the amounts presented in the plan assets contained in this Note.


(3)	Consists of corporate and government bonds, asset-backed securities, and fixed income derivatives.


(4)	Consists of long-dated options and swaps on a commodity index.


(5)	Consists of exchange traded real estate investment trusts (“REITS”).


(6)	Consists of limited partnerships, private equity and hedge funds.



			Fair Value Measurements Using
Asset Category	Balance at December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents (1)	$	33	$	33	$	—	$	—
Equity investments:
Large cap domestic	299		299		—		—
Small cap domestic	30		30		—		—
International	52		52		—		—
Equity derivatives	203		170		33		—
Pooled funds:
International (2)	210		—		—		—
Small cap domestic (2)	58		—		—		—
Fixed income investments: (3)
Corporate bonds	148		—		148		—
Government and agency bonds	128		52		76		—
Asset-backed securities	—		—		—		—
Fixed income derivatives	69		47		22		—
Pooled funds:
Corporate bonds (2)	336		—		—		—
Other investments:
Commodity derivatives (4)	13		—		13		—
Real estate and REITS (5)	67		67		—		—
Alternative investments (2) (6)	305		—		—		—
Total	$	1,951	$	750	$	292	$	—


(1)	Consists of cash and institutional short-term investment funds.


(2)	Certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the above table are intended to permit reconciliation of the fair values to the amounts presented in the plan assets contained in this Note.


(3)	Consists of corporate and government bonds, asset-backed securities, and fixed income derivatives.


(4)	Consists of long-dated options on a commodity index.


(5)	Consists of exchange traded REITS.


(6)	Consists of limited partnerships, private equity and hedge funds.

The fair values of the Company’s major U.K. pension plan assets at December 31, 2016 and December 31, 2015, by asset category, are as follows (in millions):



			Fair Value Measurements Using
	Balance at December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents (1)	$	86	$	86	$	—	$	—
Equity investments:
Global	135		135		—		—
Pooled funds:
Global (2)	365		—		—		—
Europe (2)	18		—		—		—
Fixed income investments: (3)
Derivatives (4)	10		—		10		—
Fixed income securities (5)	2,129		1,726		403		—
Annuities	1,773		—		—		1,773
Pooled funds:
Derivatives (2)	62		—		—		—
Fixed income securities (2)	223		—		—		—
Other investments:
Real estate (2) (6)	101		—		—		—
Alternative investments (2) (7)	773		—		—		—
Total	$	5,675	$	1,947	$	413	$	1,773


(1)	Consists of cash and institutional short-term investment funds.


(2)	Certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the above table are intended to permit reconciliation of the fair values to the amounts presented in the plan assets contained in this Note.


(3)	Consists of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles.


(4)	Consists of equity securities and equity derivatives.


(5)	Consists of corporate and government bonds and fixed income derivatives.


(6)	Consists of property funds and trusts holding direct real estate investments.


(7)	Consists of limited partnerships, private equity and hedge funds.



			Fair Value Measurements Using
	Balance at December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents (1)	$	159	$	159	$	—	$	—
Equity investments:
Derivatives	66		—		66		—
Global	133		133		—		—
Pooled funds:
Global (2)	360		—		—		—
Europe (2)	17		—		—		—
Fixed income investments: (3)
Derivatives (4)	111		—		111		—
Fixed income securities (5)	3,145		2,268		877		—
Annuities	827		—		—		827
Pooled funds:
Fixed income securities (2)	283		—		—		—
Other investments:
Real estate (2) (6)	85		—		—		—
Alternative investments (2) (7)	717		—		—		—
Total	$	5,903	$	2,560	$	1,054	$	827


(1)	Consists of cash and institutional short-term investment funds.


(2)	Certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the above table are intended to permit reconciliation of the fair values to the amounts presented in the plan assets contained in this Note.


(3)	Consists of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles.


(4)	Consists of equity securities and equity derivatives.


(5)	Consists of corporate and government bonds and fixed income derivatives.


(6)	Consists of property funds and trusts holding direct real estate investments.


(7)	Consists of limited partnerships, private equity and hedge funds.

The following table presents the changes in the Level 3 fair-value category in the Company’s U.K. pension plans for the years ended December 31, 2016 and December 31, 2015 (in millions):



Fair Value Measurements Using Level 3 Inputs	Annuities
Balance at January 1, 2015	$	836
Actual return on plan assets:
Relating to assets still held at December 31, 2015	(32		)
Purchases, sales and settlements—net	58
Foreign exchange	(35		)
Balance at December 31, 2015	827
Actual return on plan assets:
Relating to assets still held at December 31, 2016	7
Purchases, sales and settlements—net	1,248
Foreign exchange	(309		)
Balance at December 31, 2016	$	1,773

The fair values of the Company’s other major pension plan assets at December 31, 2016 and December 31, 2015, by asset category, are as follows (in millions):



			Fair Value Measurements Using
	Balance at December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	11	$	11	$	—	$	—
Equity investments:
Pooled funds:
Global (1)	322		—		—		—
North America (1)	36		—		—		—
Derivatives (1)	20		—		—		—
Fixed income investments:
Fixed income securities (2)	166		—		166		—
Derivatives (2)	37		—		37		—
Pooled funds:
Fixed income securities (1)	469		—		—		—
Other investments:
Alternative investments (1) (3)	9		—		—		—
Pooled funds:
REITS (1) (4)	6		—		—		—
Total	$	1,076	$	11	$	203	$	—


(1)	Certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the above table are intended to permit reconciliation of the fair values to the amounts presented in the plan assets contained in this Note.


(2)	Consists of corporate and government bonds and fixed income derivatives.


(3)	Consists of limited partnerships, private equity and hedge funds.


(4)	Consists of property funds and trusts holding direct real estate investments.



			Fair Value Measurements Using
	Balance at December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	11	$	11	$	—	$	—
Equity investments:
Pooled funds:
Global (1)	270		—		—		—
North America (1)	37		—		—		—
Derivatives (1)	21		—		—		—
Fixed income investments:
Fixed income securities (2)	30		—		30		—
Derivatives (2)	48		—		48		—
Pooled funds:
Fixed income securities (1)	576		—		—		—
Derivatives (1)	12		—		—		—
Other investments:
Alternative investments (1) (3)	9		—		—		—
Pooled funds:
Commodities (1)	2		—		—		—
REITS (1) (4)	3		—		—		—
Total	$	1,019	$	11	$	78	$	—


(1)	Certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the above table are intended to permit reconciliation of the fair values to the amounts presented in the plan assets contained in this Note.


(2)	Consists of corporate and government bonds and fixed income derivatives.


(3)	Consists of limited partnerships, private equity and hedge funds.


(4)	Consists of property funds and trusts holding direct real estate investments.

Investment Policy and Strategy

The U.S. investment policy, as established by the Aon Retirement Plan Governance and Investment Committee (“RPGIC”), seeks reasonable asset growth at prudent risk levels within target allocations, which are 41% equity investments, 30% fixed income investments, and 29% other investments. Aon believes that plan assets are well-diversified and are of appropriate quality. The investment portfolio asset allocation is reviewed quarterly and re-balanced to be within policy target allocations. The investment policy is reviewed at least annually and revised, as deemed appropriate by the RPGIC. The investment policies for international plans are generally established by the local pension plan trustees and seek to maintain the plans’ ability to meet liabilities and to comply with local minimum funding requirements. Plan assets are invested in diversified portfolios that provide adequate levels of return at an acceptable level of risk. The investment policies are reviewed at least annually and revised, as deemed appropriate to ensure that the objectives are being met. At December 31, 2016, the weighted average targeted allocation for the U.K. and non-U.S. plans was 14% for equity investments, 77% for fixed income investments, and 9% for other investments.

Cash Flows

Contributions

Based on current assumptions, in 2017, the Company expects to contribute approximately $80 million, $87 million, and $18 million to its U.K., U.S. and other significant international pension plans, respectively.

Estimated Future Benefit Payments

Estimated future benefit payments for plans are as follows at December 31, 2016 (in millions):



	U.K.		U.S.		Other
2017	$	124	$	168	$	39
2018	130		180		40
2019	140		187		40
2020	148		191		41
2021	156		185		42
2022 – 2026	892		893		228

U.S. and Canadian Other Post-Retirement Benefits

The following table provides an overview of the accumulated projected benefit obligation, fair value of plan assets, funded status and net amount recognized as of December 31, 2016 and 2015 for the Company’s other significant post-retirement benefit plans located in the U.S. and Canada (in millions):



	2016			2015
Accumulated projected benefit obligation	$	110		$	105
Fair value of plan assets	18			18
Funded status	(92		)	(87		)
Unrecognized prior-service credit	(3		)	(3		)
Unrecognized loss	10			7
Net amount recognized	$	(85	)	$	(83	)

Other information related to the Company’s other post-retirement benefit plans are as follows:



	2016	2015	2014
Net periodic benefit cost recognized (millions)	$5	$6	$3
Weighted-average discount rate used to determine future benefit obligations	3.71-4.15%	3.99-4.33%	3.83 - 4.08
Weighted-average discount rate used to determine net periodic benefit costs	3.99-4.33%	3.83-4.08%	4.44 - 4.95

Amounts recognized in Accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at December 31, 2016 are $10 million and $3 million of net loss and prior service credit, respectively. The amount in Accumulated other comprehensive income expected to be recognized as a component of net periodic benefit cost during 2017 is $0.2 million and $0.3 million of net gain and prior service credit, respectively.

Based on current assumptions, the Company expects:


•	To contribute $4 million to fund significant other post-retirement benefit plans during 2017.


•	Estimated future benefit payments will be approximately $6 million each year for 2017 through 2021, and $30 million in aggregate for 2022-2026.

The accumulated post-retirement benefit obligation is increased by $7 million and decreased by $6 million by a respective 1% increase or decrease to the assumed healthcare trend rate. The service cost and interest cost components of net periodic benefits cost is increased by $0.6 million and decreased by $0.5 million by a respective 1% increase or decrease to the assumed healthcare trend rate.

For most of the participants in the U.S. plan, Aon’s liability for future plan cost increases for pre-65 and Medical Supplement plan coverage is limited to 5% per annum. Although the net employer trend rates range from 4% to 8.5% per year, because of this cap, these plans are effectively limited to 5% per year in the future.

Share-Based Compensation Plans

The following table summarizes share-based compensation expense recognized in the Consolidated Statements of Income in Compensation and benefits (in millions):



Years ended December 31	2016		2015		2014
Restricted share units (“RSUs”)	$	194	$	201	$	187
Performance share awards ("PSAs")	125		127		132
Employee share purchase plans	12		11		9
Total share-based compensation expense	331		339		328
Tax benefit	94		95		94
Share-based compensation expense, net of tax	$	237	$	244	$	234

Restricted Share Units

RSUs generally vest between three and five years. The fair value of RSUs is based upon the market value of Aon ordinary shares at the date of grant. With certain limited exceptions, any break in continuous employment will cause the forfeiture of all non-vested awards. Compensation expense associated with RSUs is recognized on a straight-line basis over the requisite service period. Dividend equivalents are paid on certain RSUs, based on the initial grant amount.

A summary of the status of the Company’s RSUs is as follows (shares in thousands):



Years ended December 31	2016				2015				2014
	Shares		Fair Value (1)		Shares		Fair Value (1)		Shares		Fair Value (1)
Non-vested at beginning of year	7,167		$	77	8,381		$	63	9,759		$	51
Granted	2,252		101		2,459		97		2,844		84
Vested	(2,845	)	70		(3,385	)	58		(3,732	)	49
Forfeited	(379	)	82		(288	)	71		(490	)	58
Non-vested at end of year	6,195		89		7,167		77		8,381		63


(1)	Represents per share weighted average fair value of award at date of grant.

The fair value of RSUs that vested during 2016, 2015 and 2014 was $200 million, $196 million and $183 million, respectively.

Unamortized deferred compensation expense amounted to $382 million as of December 31, 2016, with a remaining weighted-average amortization period of approximately 2.1 years.

Performance Share Awards

The vesting of PSAs is contingent upon meeting a cumulative level of earnings per share performance over a three-year period. The actual issue of shares may range from 0-200% of the target number of PSAs granted, based on the terms of the plan and level of achievement of the related performance target. The grant date fair value of PSAs is based upon the market price of an Aon ordinary share at the date of grant. The performance conditions are not considered in the determination of the grant date fair value for these awards. Compensation expense is recognized over the performance period based on management’s estimate of the number of units expected to vest. Management evaluates its estimate of the actual number of shares expected to be issued at the end of the programs on a quarterly basis. The cumulative effect of the change in estimate is recognized in the period of change as an adjustment to Compensation and benefits expense, if necessary. Dividend equivalents are not paid on PSAs.

Information regarding the Company’s target PSAs granted and shares that would be issued at current performance levels for PSAs granted during the years ended December 31, 2016, 2015, and 2014, respectively, is as follows (shares in thousands, dollars in millions, except fair value):



	2016		2015		2014
Target PSAs granted per share	783		993		816
Weighted average fair value per share at date of grant	$	100	$	96	$	81
Number of shares that would be issued based on current performance levels	777		1,437		1,540
Unamortized expense, based on current performance levels	$	57	$	48	$	—

During 2016, the Company issued approximately 1.3 million shares in connection with performance achievements related to the 2013-2015 Leadership Performance Plan (“LPP”) cycle. During 2015, the Company issued approximately 1.6 million shares in connection with performance achievements related to the 2012-2014 LPP cycle. During 2014, the Company issued approximately 0.8 million shares in connection with performance achievements related to the 2011-2013 LPP cycle and 0.2 million shares related to other performance plans.

Derivatives and Hedging

The Company is exposed to market risks, including changes in foreign currency exchange rates and interest rates. To manage the risk related to these exposures, the Company enters into various derivative instruments that reduce these risks by creating offsetting exposures. The Company does not enter into derivative transactions for trading or speculative purposes.

Foreign Exchange Risk Management

The Company is exposed to foreign exchange risk when it earns revenues, pays expenses, enters into monetary intercompany transfers denominated in a currency that differs from its functional currency, or enters into other transactions that are denominated in a currency other than its functional currency. The Company uses foreign exchange derivatives, typically forward contracts, options and cross-currency swaps, to reduce its overall exposure to the effects of currency fluctuations on cash flows. These exposures are hedged, on average, for less than two years. These derivatives are accounted for as hedges, and changes in fair value are recorded each period in Other comprehensive income (loss) in the Consolidated Statements of Comprehensive Income.

The Company also uses foreign exchange derivatives, typically forward contracts and options to economically hedge the currency exposure of the Company’s global liquidity profile, including monetary assets or liabilities that are denominated in a non-functional currency of an entity, typically on a rolling 30-day basis, but may be for up to one year in the future. These derivatives are not accounted for as hedges, and changes in fair value are recorded each period in Other income in the Consolidated Statements of Income.

The notional and fair values of derivative instruments are as follows (in millions):



	Notional Amount				Derivative Assets (1)				Derivative Liabilities (2)
As of December 31	2016		2015		2016		2015		2016		2015
Foreign exchange contracts:
Accounted for as hedges	$	758	$	778	$	14	$	32	$	13	$	18
Not accounted for as hedges (3)	189		280		1		—		1		—
Total	$	947	$	1,058	$	15	$	32	$	14	$	18


(1)	Included within Other current assets ($6 million in 2016 and $15 million in 2015, respectively) or Other non-current assets ($9 million in 2016 and $17 million in 2015, respectively)


(2)	Included within Other current liabilities ($7 million in 2016 and $13 million in 2015, respectively) or Other non-current liabilities ($7 million in 2016 and $5 million in 2015, respectively)


(3)	These contracts typically are for 30 day durations and executed close to the last day of the most recent reporting month, thereby resulting in nominal fair values at the balance sheet date.

Offsetting of financial assets and derivatives assets are as follows (in millions):



	Gross Amounts of Recognized Assets				Gross Amounts Offset in the Statement of Financial Position						Net Amounts of Assets Presented in the Statement of Financial Position (1)
Derivatives accounted for as hedges:	2016		2015		2016			2015			2016		2015
Foreign exchange contracts	$	14	$	32	$	(1	)	$	(13	)	$	13	$	19


(1)	Included within Other current assets ($4 million in 2016 and $6 million in 2015, respectively) or Other non-current assets ($9 million in 2016 and $13 million in 2015, respectively)

Offsetting of financial liabilities and derivative liabilities are as follows (in millions):



	Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Statement of Financial Position						Net Amounts of Liabilities Presented in the Statement of Financial Position (1)
Derivatives accounted for as hedges:	2016		2015		2016			2015			2016		2015
Foreign exchange contracts	$	13	$	18	$	(1	)	$	(13	)	$	12	$	5


(1)	Included within Other current liabilities ($5 million in 2016 and $4 million in 2015, respectively) or Other non-current liabilities ($7 million in 2016 and $1 million in 2015, respectively)

The amounts of derivative gains (losses) recognized in the Consolidated Financial Statements are as follows (in millions):



Cash Flow Hedge - Foreign Exchange Contracts	Location of future reclassification from Accumulated Other Comprehensive Loss										Gain (Loss) Recognized in Accumulated Other Comprehensive Loss:
	Compensation and Benefits		Other General Expenses			Interest Expense		Other Income (Expense)			Total
2016	$	8	$	(13	)	$	—	$	(20	)	$	(25	)
2015	4		(3		)	—		(10		)	(9		)
2014	11		(3		)	—		(10		)	(2		)



Cash Flow Hedge - Foreign Exchange Contracts													Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion):
	Compensation and Benefits			Other General Expenses			Interest Expense			Other Income			Total
2016	$	2		$	(4	)	$	(1	)	$	(7	)	$	(10	)
2015	4			(1		)	(9		)	(11		)	(17		)
2014	(5		)	3			(10		)	(2		)	(14		)

The Company recognized no gain (loss) in Interest expense for fair value hedges related to fixed rate debt for 2016 and 2015. There was a gain of $9 million recognized in 2014.

The Company estimates that approximately $12 million of pretax losses currently included within Accumulated other comprehensive loss will be reclassified in to earnings in the next twelve months.

The amount of gain (loss) recognized in income on the ineffective portion of derivatives for 2016, 2015, and 2014 was immaterial.

The Company recorded a loss of $0.2 million for 2016 and a loss of $8 million and $18 million in Other income for foreign exchange derivatives not designated or qualifying as hedges for 2015 and 2014, respectively.

Net Investments in Foreign Operations Risk Management

The Company uses non-derivative financial instruments to protect the value of its investments in a number of foreign subsidiaries. In 2016, the Company designated a portion of its Euro-denominated commercial paper issuances as a non-derivative economic hedge of the foreign currency exposure of a net investment in its European operations. The change in fair value of the designated portion of the Euro-denominated commercial paper due to changes in foreign currency exchange rates is recorded in Foreign currency translation adjustment, a component of Accumulated other comprehensive income (loss), to the extent it is effective as a hedge. The foreign currency translation adjustment of the hedged net investments that is also recorded in Accumulated other comprehensive income (loss). Ineffective portions of net investment hedges, if any, are reclassified from Accumulated other comprehensive income (loss) into earnings during the period of change.

As of December 31, 2016, the Company has €217 million ($227 million at December 31, 2016 exchange rates) of outstanding Euro-denominated commercial paper designated as a hedge of the foreign currency exposure of its net investment in its European operations. As of December 31, 2016, the unrealized gain recognized in Accumulated other comprehensive income (loss) related to the net investment non derivative hedging instrument was $18 million.

The Company did not reclassify any deferred gains or losses related to net investment hedges from Accumulated other comprehensive income (loss) to earnings during the twelve months ended December 31, 2016. In addition, the Company did not incur any ineffectiveness related to net investment hedges during the twelve months ended December 31, 2016.

Fair Value Measurements and Financial Instruments

Accounting standards establish a three tier fair value hierarchy that prioritizes the inputs used in measuring fair values as follows:


•	Level 1 — observable inputs such as quoted prices for identical assets in active markets;


•	Level 2 — inputs other than quoted prices for identical assets in active markets, that are observable either directly or indirectly; and


•	Level 3 — unobservable inputs in which there is little or no market data which requires the use of valuation techniques and the development of assumptions.

The following methods and assumptions are used to estimate the fair values of the Company’s financial instruments, including pension assets (refer to Note 10 “Employee Benefits”):

Money market funds consist of institutional prime, treasury, and government money market funds. The Company reviews these funds to obtain reasonable assurance that the fund net asset value is $1 per share.

Cash and cash equivalents consist of cash and institutional short-term investment funds. The Company reviews the short-term investment funds to obtain reasonable assurance that the fund net asset value is $1 per share.

Equity investments consist of domestic and international equity securities and equity derivatives valued using the closing stock price on a national securities exchange. Over the counter equity derivatives are valued using observable inputs such as underlying prices of the underlying security and volatility. On a sample basis the Company reviews the listing of Level 1 equity securities in the portfolio and agrees the closing stock prices to a national securities exchange, and independently verifies the observable inputs for Level 2 equity derivatives and securities.

Fixed income investments consist of certain categories of bonds and derivatives. Corporate, government, and agency bonds are valued by pricing vendors who estimate fair value using recently executed transactions and proprietary models based on observable inputs, such as interest rate spreads, yield curves, and credit risk. Asset-backed securities are valued by pricing vendors who estimate fair value using discounted cash flow models utilizing observable inputs based on trade and quote activity of securities with similar features. Fixed income derivatives are valued by pricing vendors using observable inputs such as interest rates and yield curves. The Company obtains an understanding of the models, inputs, and assumptions used in developing prices provided by its vendors through discussions with the fund managers. The Company independently verifies the observable inputs, as well as assesses assumptions used for reasonableness based on relevant market conditions and internal Company guidelines. If an assumption is deemed unreasonable, based on the Company’s guidelines, it is then reviewed by management and the fair value estimate provided by the vendor is adjusted, if deemed appropriate. These adjustments do not occur frequently and historically are not material to the fair value estimates used in the Consolidated Financial Statements.

Pooled funds consist of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles. Pooled investment funds fair value is estimated based on the proportionate share ownership in the underlying net assets of the investment, which is based on the fair value of the underlying securities that trade on a national securities exchange. The Company gains an understanding of the investment guidelines and valuation policies of the fund and discusses fund performance with pooled fund managers. The Company obtains audited fund manager financial statements, when available. If the pooled fund is designed to replicate a publicly traded index, the Company compares the performance of the fund to the index to assess the reasonableness of the fair value measurement.

Alternative investments consist of limited partnerships, private equity, and hedge funds. Alternative investment fair value is generally estimated based on the proportionate share ownership in the underlying net assets of the investment as determined by the general partner or investment manager. The valuations are based on various factors depending on investment strategy, proprietary models, and specific financial data or projections. The Company obtains audited fund manager financial statements, when available. The Company obtains a detailed understanding of the models, inputs, and assumptions used in developing prices provided by the investment managers (or appropriate party) through regular discussions. The Company also obtains the investment manger’s valuation policies and assesses the assumptions used for reasonableness based on relevant market conditions and internal Company guidelines. If an assumption is deemed unreasonable, based on the Company’s guidelines, it is then reviewed by management and the fair value estimate provided by the vendor is adjusted, if deemed appropriate. These adjustments do not occur frequently and historically are not material to the fair value estimates in the Consolidated Financial Statements.

Derivatives are carried at fair value, based upon industry standard valuation techniques that use, where possible, current market-based or independently sourced pricing inputs, such as interest rates, currency exchange rates, or implied volatilities.

Annuity contracts consist of insurance group annuity contracts purchased to match the pension benefit payment stream owed to certain selected plan participant demographics within a few major U.K. defined benefit plans. Annuity contracts are valued using a discounted cash flow model utilizing assumptions such as discount rate, mortality, and inflation.

Real estate and REITs consist of publicly traded real estate investment trusts (“REITs”) and direct real estate investments. Level 1 REITs are valued using the closing stock price on a national securities exchange. Non Level 1 values are based on the proportionate share of ownership in the underlying net asset value as determined by the investment manager. The Company independently reviews the listing of Level 1 REIT securities in the portfolio and agrees the closing stock prices to a national securities exchange. The Company gains an understanding of the investment guidelines and valuation policies of the non Level 1 real estate funds and discusses performance with the fund managers. The Company obtains audited fund manager financial statements, when available. See the description of “Alternative investments” for further detail on valuation procedures surrounding non Level 1 REITs.

Debt is carried at outstanding principal balance, less any unamortized discount or premium. Fair value is based on quoted market prices or estimates using discounted cash flow analyses based on current borrowing rates for similar types of borrowing arrangements.

The following tables present the categorization of the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2016 and December 31, 2015, respectively (in millions):



			Fair Value Measurements Using
	Balance at December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (1)	$	1,371	$	1,371	$	—	$	—
Other investments:
Government bonds	1		—		1		—
Equity investments	9		6		3		—
Derivatives (2):
Foreign exchange contracts	15		—		15		—
Liabilities:
Derivatives:
Foreign exchange contracts	14		—		14		—


(1)	Included within Fiduciary assets, Short-term investments or Cash and cash equivalents in the Consolidated Statements of Financial Position, depending on their nature and initial maturity.


(2)	Refer to Note 12 “Derivatives and Hedging” for additional information regarding the Company’s derivatives and hedging activity.



			Fair Value Measurements Using
	Balance at December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (1)	$	1,396	$	1,396	$	—	$	—
Other investments:
Government bonds	1		—		1		—
Equity investments	10		6		4		—
Derivatives (2):
Foreign exchange contracts	32		—		32		—
Liabilities:
Derivatives:
Foreign exchange contracts	18		—		18		—


(1)	Included within Fiduciary assets, Short-term investments or Cash and cash equivalents in the Consolidated Statements of Financial Position, depending on their nature and initial maturity.


(2)	Refer to Note 12 “Derivatives and Hedging” for additional information regarding the Company’s derivatives and hedging activity.

There were no transfers of assets or liabilities between fair value hierarchy levels during 2016 or 2015. The Company recognized no realized or unrealized gains or losses in the Consolidated Statements of Income related to assets and liabilities measured at fair value using unobservable inputs in 2016, 2015, or 2014.

The fair value of Long-term debt is classified as Level 2 of the fair value hierarchy. The following table discloses the Company’s financial instruments where the carrying amounts and fair values differ (in millions):



	2016				2015
As of December 31	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt	$	5,869	$	6,264	$	5,138	$	5,386

Commitments and Contingencies

Legal

Aon and its subsidiaries are subject to numerous claims, tax assessments, lawsuits and proceedings that arise in the ordinary course of business, which frequently include errors and omissions (“E&O”) claims. The damages claimed in these matters are or may be substantial, including, in many instances, claims for punitive, treble or extraordinary damages. While Aon maintains meaningful E&O insurance and other insurance programs to provide protection against certain losses that arise in such matters, Aon has exhausted or materially depleted its coverage under some of the policies that protect the Company and, consequently, is self-insured or materially self-insured for some claims. Accruals for these exposures, and related insurance receivables, when applicable, are included in the Consolidated Statements of Financial Position and have been recognized in Other general expenses in the Consolidated Statements of Income to the extent that losses are deemed probable and are reasonably estimable. These amounts are adjusted from time to time as developments warrant. Matters that are not probable and reasonably estimable are not accrued for in the financial statements.

The Company has included in the current matters described below certain matters in which (1) loss is probable (2) loss is reasonably possible; that is, more than remote but not probable, or (3) there exists the reasonable possibility of loss greater than the accrued amount. In addition, the Company may from time to time disclose matters for which the probability of loss could be remote but the claim amounts associated with such matters are potentially significant. The reasonably possible range of loss for the matters described below, in excess of amounts that are deemed probable and estimable and therefore already accrued, is estimated to be between $0 and $0.2 billion, exclusive of any insurance coverage. These estimates are based on currently available information. As available information changes, the matters for which Aon is able to estimate may change, and the estimates themselves may change. In addition, many estimates involve significant judgment and uncertainty. For example, at the time of making an estimate, Aon may only have limited information about the facts underlying the claim, and predictions and assumptions about future court

rulings and outcomes may prove to be inaccurate. Although management at present believes that the ultimate outcome of all matters described below, individually or in the aggregate, will not have a material adverse effect on the consolidated financial position of Aon, legal proceedings are subject to inherent uncertainties and unfavorable rulings or other events. Unfavorable resolutions could include substantial monetary or punitive damages imposed on Aon or its subsidiaries. If unfavorable outcomes of these matters were to occur, future results of operations or cash flows for any particular quarterly or annual period could be materially adversely affected.

Current Matters

A retail insurance brokerage subsidiary of Aon was sued on September 14, 2010 in the Chancery Court for Davidson County, Tennessee Twentieth Judicial District, at Nashville by a client, Opry Mills Mall Limited Partnership (“Opry Mills”) that sustained flood damage to its property in May 2010. The lawsuit seeks $200 million in coverage from numerous insurers with whom this Aon subsidiary placed the client’s property insurance coverage. The insurers contend that only $50 million in coverage (which has already been paid) is available for the loss because the flood event occurred on property in a high hazard flood zone. Opry Mills is seeking full coverage from the insurers for the loss and has sued this Aon subsidiary in the alternative for the same $150 million difference on various theories of professional liability if the court determines there is not full coverage. In addition, Opry Mills seeks prejudgment interest, attorneys’ fees and enhanced damages which could substantially increase Aon’s exposure. In March 2015, the trial court granted partial summary judgment in favor of plaintiffs and against the insurers, holding generally that the plaintiffs are entitled to $200 million in coverage under the language of the policies. In August 2015, a jury returned a verdict in favor of Opry Mills and against the insurers in the amount of $204 million. The insurers have appealed both of these trial court decisions. Aon believes it has meritorious defenses and intends to vigorously defend itself against these claims.

On June 1, 2007, the International Road Transport Union (“IRU”) sued Aon in the Geneva Tribunal of First Instance in Switzerland. IRU alleges, among other things, that, between 1995 and 2004, a business acquired by Aon and, later, an Aon subsidiary (1) accepted commissions for certain insurance placements that violated a fee agreement entered between the parties and (2) negligently failed to ask certain insurance carriers to contribute to the IRU’s risk management costs. IRU sought damages of approximately CHF 46 million ($45 million at December 31, 2016 exchange rates) and $3 million, plus legal fees and interest of approximately $30 million. On December 2, 2014, the Geneva Tribunal of First Instance entered a judgment that accepted some, and rejected other, of IRU’s claims. The judgment awarded IRU CHF 16.8 million ($16 million at December 31, 2016 exchange rates) and $3 million, plus interest and adverse costs. The entire amount of the judgment, including interest through December 31, 2014, totaled CHF 27.9 million ($27 million at December 31, 2016 exchange rates) and $5 million. On January 26, 2015, in return for IRU agreeing not to appeal the bulk of its dismissed claims, the Aon subsidiary agreed not to appeal a part of the judgment and to pay IRU CHF 12.8 million ($14 million at January 31, 2015 exchange rates) and $4.7 million without Aon admitting liability. The Aon subsidiary appealed those aspects of the judgment it retained the right to appeal. IRU did not appeal. The Geneva Appellate Court affirmed the judgment of the Geneva Tribunal of First Instance. The Aon subsidiary filed an appeal (which is now under submission) to the Swiss Supreme Court. The Aon subsidiary’s maximum liability on appeal is limited to CHF 8.7 million ($8 million at December 31, 2016 exchange rates) and $115,000 (plus interest and costs) beyond what the subsidiary has already paid.

A pensions consulting and administration subsidiary of Aon provided advisory services to the Trustees of the Gleeds pension fund in the United Kingdom and, on occasion, to the relevant employer of the fund. In April 2014, the High Court, Chancery Division, London found that certain governing documents of the fund that sought to alter the fund’s benefit structure and that had been drafted by Aon were procedurally defective and therefore invalid. No lawsuit naming Aon as a party was filed, although a tolling agreement was entered. The High Court decision says that the additional liabilities in the pension fund resulting from the alleged defect in governing documents amount to approximately £45 million ($55 million at December 31, 2016 exchange rates). In December 2014, the Court of Appeal granted the employer leave to appeal the High Court decision. At a hearing in October 2016, the Court of Appeal approved a settlement of the pending litigation. On October 31, 2016, the fund’s trustees and employer sued Aon in the High Court, Chancery Division, London, alleging negligence and breach of duty in relation to the governing documents. The proceedings were served on Aon on December 20, 2016. The claimants seek damages of approximately £70 million ($86 million at December 31, 2016 exchange rates). Aon believes that it has meritorious defenses and intends to vigorously defend itself against this potential claim.

On June 29, 2015, Lyttelton Port Company Limited (“LPC”) sued Aon New Zealand in the Christchurch Registry of the High Court of New Zealand. LPC alleges, among other things, that Aon was negligent and in breach of contract in arranging LPC’s property insurance program for the period covering June 30, 2010, to June 30, 2011. LPC contends that acts and omissions by Aon caused LPC to recover less than it otherwise would have from insurers for losses suffered in the 2010/2011 Canterbury Earthquakes. LPC claims damages of approximately NZD $184 million ($127 million at December 31, 2016 exchange rates) plus interest and costs. Aon believes that it has meritorious defenses and intends to vigorously defend itself against these claims.

Settled/Closed Matters

A pensions consulting and administration subsidiary of Hewitt before its acquisition by Aon provided advisory services to the trustees of the Philips UK pension fund and the relevant employer of fund beneficiaries. On January 2, 2014, Philips Pension Trustees Limited and Philips Electronics UK Limited (together, “Philips”) sued Aon in the High Court, Chancery Division, London alleging negligence and breach of duty. The proceedings assert Philips’ right to claim damages related to Philips’ use of a credit default swap hedging strategy pursuant to the supply of the advisory services, which is said to have resulted in substantial damages to Philips. Philips sought approximately £189 million ($232 million at December 31, 2016 exchange rates), plus interest and costs. In June 2015, the High Court ordered Philips to clarify several aspects of its claim. In its clarification, Philips increased the amount of its claim to £290 million ($356 million at December 31, 2016 exchange rates), plus interest and costs. In October 2016, all parties reached an agreement to settle this case, and the settlement is now concluded. The terms of this settlement did not have a material impact on Aon’s results of operations or financial condition.

Guarantees and Indemnifications

In connection with the redomicile of Aon’s headquarters (the “Redomestication”), the Company on April 2, 2012 entered into various agreements pursuant to which it agreed to guarantee the obligations of its subsidiaries arising under issued and outstanding debt securities. Those agreements included the (1) Amended and Restated Indenture, dated as of April 2, 2012, among Aon Corporation, Aon plc, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”) (amending and restating the Indenture, dated as of September 10, 2010, between Aon Corporation and the Trustee), (2) Amended and Restated Indenture, dated as of April 2, 2012, among Aon Corporation, Aon plc and the Trustee (amending and restating the Indenture, dated as of December 16, 2002, between Aon Corporation and the Trustee), (3) Amended and Restated Indenture, dated as of April 2, 2012, among Aon Corporation, Aon plc and the Trustee (amending and restating the Indenture, dated as of January 13, 1997, as supplemented by the First Supplemental Indenture, dated as of January 13, 1997), and (4) First Supplemental Indenture, dated as of April 2, 2012, among Aon Finance N.S. 1, ULC, as issuer, Aon Corporation, as guarantor, Aon plc, as guarantor, and Computershare Trust Company of Canada, as trustee.

The Company provides a variety of guarantees and indemnifications to its customers and others. The maximum potential amount of future payments represents the notional amounts that could become payable under the guarantees and indemnifications if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or other methods. These amounts may bear no relationship to the expected future payments, if any, for these guarantees and indemnifications. Any anticipated amounts payable are included in the Company’s Consolidated Financial Statements, and are recorded at fair value.

The Company expects that, as prudent business interests dictate, additional guarantees and indemnifications may be issued from time to time.

Letters of Credit

Aon has entered into a number of arrangements whereby the Company’s performance on certain obligations is guaranteed by a third party through the issuance of a letter of credit (“LOCs”). The Company had total LOCs outstanding of approximately $90 million at December 31, 2016, compared to $58 million at December 31, 2015. These letters of credit cover the beneficiaries related to certain of Aon’s U.S. and Canadian non-qualified pension plan schemes and secure deductible retentions for Aon’s own workers compensation program. The Company has also obtained LOCs to cover contingent payments for taxes and other business obligations to third parties, and other guarantees for miscellaneous purposes at its international subsidiaries.

Premium Payments

The Company has certain contractual contingent guarantees for premium payments owed by clients to certain insurance companies. The maximum exposure with respect to such contractual contingent guarantees was approximately $95 million at December 31, 2016 compared to $104 million at December 31, 2015.

Segment Information

The Company has two reportable segments: Risk Solutions and HR Solutions. Unallocated income and expenses, when combined with the reportable segments and after the elimination of intersegment revenues and expenses, equal the amounts in the Consolidated Financial Statements. The accounting policies of the reportable segments are the same as those described in Note 2 “Summary of Significant Accounting Principles and Practices.”

Reportable operating segments have been determined using a management approach, which is consistent with the basis and manner in which Aon’s chief operating decision maker (“CODM”) uses financial information for the purposes of allocating resources and evaluating performance. The CODM assesses performance based on a number of factors including revenue growth, expense discipline, return on invested capital, and other factors. The Company does not present net assets by reportable segment as this information is not reviewed by the CODM.

Risk Solutions acts as an advisor and insurance and reinsurance broker, helping clients manage their risks, via consultation, as well as negotiation and placement of insurance risk with insurance carriers through Aon’s global distribution network.

HR Solutions partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance by designing, implementing, communicating, and administering a wide range of human capital, retirement, investment management, health care, compensation, and talent management strategies.

Aon’s total revenue is as follows (in millions):



Years ended December 31	2016			2015			2014
Risk Solutions	$	7,485		$	7,426		$	7,834
HR Solutions	4,183			4,303			4,264
Intersegment eliminations	(41		)	(47		)	(53		)
Total revenue	$	11,627		$	11,682		$	12,045

Commissions, fees and other revenues by product are as follows (in millions):



Years ended December 31	2016			2015			2014
Retail brokerage	$	6,096		$	6,044		$	6,334
Reinsurance brokerage	1,367			1,361			1,474
Total Risk Solutions Segment	7,463			7,405			7,808
Consulting services	1,662			1,686			1,700
Outsourcing	2,557			2,658			2,607
Intrasegment	(36		)	(41		)	(43		)
Total HR Solutions Segment	4,183			4,303			4,264
Intersegment	(41		)	(47		)	(53		)
Total commissions, fees and other revenue	$	11,605		$	11,661		$	12,019

Fiduciary investment income by segment is as follows (in millions):



Years ended December 31	2016		2015		2014
Risk Solutions	$	22	$	21	$	26
HR Solutions	—		—		—
Total fiduciary investment income	$	22	$	21	$	26

A reconciliation of segment operating income before tax to income before income taxes is as follows (in millions):



Years ended December 31	2016			2015			2014
Risk Solutions	$	1,587		$	1,506		$	1,648
HR Solutions	557			536			485
Segment income before income taxes	2,144			2,042			2,133
Unallocated expenses	(238		)	(194		)	(167		)
Interest income	9			14			10
Interest expense	(282		)	(273		)	(255		)
Other income	36			100			44
Income before income taxes	$	1,669		$	1,689		$	1,765

Unallocated expenses include administrative or other costs not attributable to the operating segments, such as corporate governance costs. Interest income represents income earned on Cash and cash equivalents and Short-term investments. Interest expense represents the cost of debt obligations.

Other income consists of equity earnings, realized gains or losses on the sale of investments, gains or losses on the disposal of businesses, gains or losses on derivatives, and gains or losses on foreign currency remeasurement.

Revenues are generally attributed to geographic areas based on the location of the resources producing the revenues. Intercompany revenues and expenses are eliminated in consolidated results.

Consolidated Revenue by geographic area, which is attributed on the basis of where the services are performed, is as follows (in millions):



Years ended December 31	Total	United States		Americas other than U.S.		United Kingdom		Europe, Middle East, & Africa		Asia Pacific
2016	11,627	$	6,078	$	995	$	1,378	$	1,760	$	1,416
2015	11,682	6,063		1,053		1,527		1,909		1,130
2014	12,045	5,824		1,176		1,623		2,189		1,233

Consolidated Non-current assets by geographic area are as follows (in millions):



As of December 31, 2016	Total	United States		Americas other than U.S.		United Kingdom		Europe, Middle East, & Africa		Asia Pacific
Fixed assets, net	765	$	443	$	62	$	65	$	85	$	110
Goodwill, intangible assets and other	12,382	6,947		887		2,091		2,054		403
Total	13,147	7,390		949		2,156		2,139		513



As of December 31, 2015	Total	United States		Americas other than U.S.		United Kingdom		Europe, Middle East, & Africa		Asia Pacific
Fixed assets, net	765	$	432	$	48	$	89	$	89	$	107
Goodwill, intangible assets and other	12,253	6,635		368		2,606		2,181		463
Total	13,018	7,067		416		2,695		2,270		570

Guarantee of Registered Securities

As described in Note 14 “Commitments and Contingencies,” in connection with the Redomestication, Aon plc entered into various agreements pursuant to which it agreed to guarantee the obligations of Aon Corporation arising under issued and outstanding debt securities, including the 5.00% Notes due September 2020, the 8.205% Notes due January 2027 and the 6.25% Notes due September 2040 (collectively, the “Aon Corp Notes”). Aon Corporation is a 100% indirectly owned subsidiary of Aon plc. All guarantees of Aon plc are full and unconditional. There are no other subsidiaries of Aon plc that are guarantors of the Aon Corp Notes.

In addition, Aon Corporation entered into an agreement pursuant to which it agreed to guarantee the obligations of Aon plc arising under the 4.250% Notes due 2042 exchanged for Aon Corporation’s outstanding 8.205% Notes due January 2027 and also agreed to guarantee the obligations of Aon plc arising under the 4.45% Notes due 2043, the 4.00% Notes due November 2023, the 2.875% Notes due May 2026, the 3.50% Notes due June 2024, the 4.60% Notes due June 2044, the 4.75% Notes due May 2045, the 2.80% Notes due March 2021, and the 3.875% Notes due December 2025 (collectively, the “Aon plc Notes”). In each case, the guarantee of Aon Corporation is full and unconditional. There are no subsidiaries of Aon plc, other than Aon Corporation, that are guarantors of the Aon plc Notes. As a result of the existence of these guarantees, the Company has elected to present the financial information set forth in this footnote in accordance with Rule 3-10 of Regulation S-X.

The following tables set forth Condensed Consolidating Statements of Income and Condensed Consolidating Statements of Comprehensive Income for the years ended December 31, 2016, 2015, and 2014, Condensed Consolidating Statements of Financial Position as of December 31, 2016 and December 31, 2015, and Condensed Consolidating Statements of Cash Flows for the years ended December 31, 2016, 2015, and 2014, in accordance with Rule 3-10 of Regulation S-X. The condensed consolidating financial information includes the accounts of Aon plc, the accounts of Aon Corporation, and the combined accounts of the non-guarantor subsidiaries. The condensed consolidating financial statements are presented in all periods as a merger under common control. The principal consolidating adjustments are to eliminate the investment in subsidiaries and intercompany balances and transactions.

In January 2015, Aon plc transferred its ownership of all of its directly held subsidiaries to Aon Global Holdings Limited, an intermediate holding company. The financial results of Aon Global Holdings Limited are included in the Other Non-Guarantor Subsidiaries column of the Condensed Consolidating Financial Statements. The Company has reflected the transfer of Aon Corporation from Aon plc to Aon Global Holdings Limited below for all periods presented.

Certain amounts in prior year’s consolidating statements of income have been reclassified and adjusted to conform to the 2016 presentation. In prior periods, other income (expense) from intercompany transactions were recognized in Compensation and benefits and Other general expenses. These amounts are now included in Intercompany other income (expense) in the Condensed Consolidating Statements of Income. The Company believes this provides greater clarity into the income generated from operations and intercompany transactions.

Condensed Consolidating Statement of Income



	Year Ended December 31, 2016
(millions)	Aon plc			Aon Corporation			Other Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenue
Commissions, fees and other	$	—		$	—		$	11,605		$	—		$	11,605
Fiduciary investment income	—			—			22			—			22
Total revenue	—			—			11,627			—			11,627
Expenses
Compensation and benefits	130			171			6,613			—			6,914
Other general expenses	—			2			2,805			—			2,807
Total operating expenses	130			173			9,418			—			9,721
Operating (loss) income	(130		)	(173		)	2,209			—			1,906
Interest income	—			16			22			(29		)	9
Interest expense	(196		)	(101		)	(14		)	29			(282		)
Intercompany interest income (expense)	14			(541		)	527			—			—
Intercompany other income (expense)	274			(361		)	87			—			—
Other income (expense)	15			(5		)	44			(18		)	36
Income (loss) before taxes	(23		)	(1,165		)	2,875			(18		)	1,669
Income tax expense (benefit)	(55		)	(325		)	619			—			239
Income (loss) before equity in earnings of subsidiaries	32			(840		)	2,256			(18		)	1,430
Equity in earnings of subsidiaries, net of tax	1,382			1,219			379			(2,980		)	—
Net income	1,414			379			2,635			(2,998		)	1,430
Less: Net income attributable to noncontrolling interests	—			—			34			—			34
Net income attributable to Aon shareholders	$	1,414		$	379		$	2,601		$	(2,998	)	$	1,396

Condensed Consolidating Statement of Income



	Year Ended December 31, 2015
(millions)	Aon plc			Aon Corporation			Other Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenue
Commissions, fees and other	$	—		$	—		$	11,661		$	—		$	11,661
Fiduciary investment income	—			—			21			—			21
Total revenue	—			—			11,682			—			11,682
Expenses
Compensation and benefits	136			32			6,669			—			6,837
Other general expenses	8			7			2,982			—			2,997
Total operating expenses	144			39			9,651			—			9,834
Operating (loss) income	(144		)	(39		)	2,031			—			1,848
Interest income	—			14			19			(19		)	14
Interest expense	(140		)	(130		)	(22		)	19			(273		)
Intercompany interest income (expense)	429			(479		)	50			—			—
Intercompany other income (expense)	302			(422		)	120			—			—
Other income (expense)	(1		)	—			101			—			100
Income (loss) before taxes	446			(1,056		)	2,299			—			1,689
Income tax expense (benefit)	45			(262		)	484			—			267
Income (loss) before equity in earnings of subsidiaries	401			(794		)	1,815			—			1,422
Equity in earnings of subsidiaries, net of tax	984			1,290			496			(2,770		)	—
Net income	1,385			496			2,311			(2,770		)	1,422
Less: Net income attributable to noncontrolling interests	—			—			37			—			37
Net income attributable to Aon shareholders	$	1,385		$	496		$	2,274		$	(2,770	)	$	1,385

Condensed Consolidating Statement of Income



	Year Ended December 31, 2014
(millions)	Aon plc			Aon Corporation			Other Non-Guarantor Subsidiaries			Consolidating Adjustment			Consolidated
Revenue
Commissions, fees and other	$	—		$	—		$	12,019		$	—		$	12,019
Fiduciary investment income	—			—			26			—			26
Total revenue	—			—			12,045			—			12,045
Expenses
Compensation and benefits	140			16			6,858			—			7,014
Other general expenses	3			5			3,057			—			3,065
Total operating expenses	143			21			9,915			—			10,079
Operating (loss) income	(143		)	(21		)	2,130			—			1,966
Interest income	—			2			17			(9		)	10
Interest expense	(84		)	(139		)	(41		)	9			(255		)
Intercompany interest (expense) income	449			(298		)	(151		)	—			—
Intercompany other (expense) income	342			(390		)	48			—			—
Other income	2			5			37			—			44
Income (loss) before taxes	566			(841		)	2,040			—			1,765
Income tax (benefit) expense	74			(192		)	452			—			334
Income (loss) before equity in earnings of subsidiaries	492			(649		)	1,588			—			1,431
Equity in earnings of subsidiaries, net of tax	905			1,195			546			(2,646		)	—
Net income	1,397			546			2,134			(2,646		)	1,431
Less: Net income attributable to noncontrolling interests	—			—			34			—			34
Net income attributable to Aon shareholders	$	1,397		$	546		$	2,100		$	(2,646	)	$	1,397

Condensed Consolidating Statement of Comprehensive Income



	Year Ended December 31, 2016
(millions)	Aon plc			Aon Corporation			Other Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income	$	1,414		$	379		$	2,635		$	(2,998	)	$	1,430
Less: Net income attributable to noncontrolling interests	—			—			34			—			34
Net income attributable to Aon shareholders	$	1,414		$	379		$	2,601		$	(2,998	)	$	1,396
Other comprehensive (loss) income, net of tax:
Change in fair value of financial instruments	—			(1		)	(11		)	—			(12		)
Foreign currency translation adjustments	(2		)	21			(532		)	18			(495		)
Post-retirement benefit obligation	—			68			(52		)	—			16
Total other comprehensive income (loss)	(2		)	88			(595		)	18			(491		)
Equity in other comprehensive loss of subsidiaries, net of tax	(505		)	(547		)	(459		)	1,511			—
Less: Other comprehensive loss attributable to noncontrolling interests	—			—			(2		)	—			(2		)
Total other comprehensive loss attributable to Aon shareholders	(507		)	(459		)	(1,052		)	1,529			(489		)
Comprehensive income (loss) attributable to Aon shareholders	$	907		$	(80	)	$	1,549		$	(1,469	)	$	907

Condensed Consolidating Statement of Comprehensive Income



	Year Ended December 31, 2015
(millions)	Aon plc			Aon Corporation			Other Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income	$	1,385		$	496		$	2,311		$	(2,770	)	$	1,422
Less: Net income attributable to noncontrolling interests	—			—			37			—			37
Net income attributable to Aon shareholders	$	1,385		$	496		$	2,274		$	(2,770	)	$	1,385
Other comprehensive income (loss), net of tax:
Change in fair value of financial instruments	—			—			(8		)	—			(8		)
Foreign currency translation adjustments	—			(47		)	(395		)	—			(442		)
Post-retirement benefit obligation	—			12			143			—			155
Total other comprehensive loss	—			(35		)	(260		)	—			(295		)
Equity in other comprehensive loss of subsidiaries, net of tax	(289		)	(259		)	(294		)	842			—
Less: Other comprehensive loss attributable to noncontrolling interests	—			—			(6		)	—			(6		)
Total other comprehensive loss attributable to Aon shareholders	(289		)	(294		)	(548		)	842			(289		)
Comprehensive income attributable to Aon shareholders	$	1,096		$	202		$	1,726		$	(1,928	)	$	1,096

Condensed Consolidating Statement of Comprehensive Income



	Year Ended December 31, 2014
(millions)	Aon plc			Aon Corporation			Other Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income	$	1,397		$	546		$	2,134		$	(2,646	)	$	1,431
Less: Net income attributable to noncontrolling interests	—			—			34			—			34
Net income attributable to Aon shareholders	$	1,397		$	546		$	2,100		$	(2,646	)	$	1,397
Other comprehensive income (loss), net of tax:
Change in fair value of financial instruments	—			(3		)	7			—			4
Foreign currency translation adjustments	—			(31		)	(476		)	—			(507		)
Post-retirement benefit obligation	—			(315		)	55			—			(260		)
Total other comprehensive loss	—			(349		)	(414		)	—			(763		)
Equity in other comprehensive loss of subsidiaries, net of tax	(760		)	(409		)	(758		)	1,927			—
Less: Other comprehensive loss attributable to noncontrolling interests	—			—			(3		)	—			(3		)
Total other comprehensive loss attributable to Aon shareholders	(760		)	(758		)	(1,169		)	1,927			(760		)
Comprehensive income (loss) attributable to Aon shareholders	$	637		$	(212	)	$	931		$	(719	)	$	637

Condensed Consolidating Statement of Financial Position



	As of December 31, 2016
(millions)	Aon plc		Aon Corporation			Other Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Cash and cash equivalents	$	—	$	1,633		$	660		$	(1,862	)	$	431
Short-term investments	—		140			150			—			290
Receivables, net	—		3			2,586			—			2,589
Fiduciary assets	—		—			9,485			—			9,485
Intercompany receivables	105		1,880			9,825			(11,810		)	—
Other current assets	—		25			326			—			351
Total Current Assets	105		3,681			23,032			(13,672		)	13,146
Goodwill	—		—			8,747			—			8,747
Intangible assets, net	—		—			2,223			—			2,223
Fixed assets, net	—		—			765			—			765
Deferred tax assets	134		726			168			(706		)	322
Intercompany receivables	366		261			8,711			(9,338		)	—
Prepaid Pension	—		5			853			—			858
Other non-current assets	2		119			433			—			554
Investment in subsidiary	10,107		17,137			(350		)	(26,894		)	—
TOTAL ASSETS	$	10,714	$	21,929		$	44,582		$	(50,610	)	$	26,615
LIABILITIES AND EQUITY
Accounts payable and accrued liabilities	$	585	$	44		$	3,034		$	(1,862	)	$	1,801
Short-term debt and current portion of long-term debt	279		50			7			—			336
Fiduciary Liabilities	—		—			9,485			—			9,485
Intercompany payables	142		10,399			1,269			(11,810		)	—
Other current liabilities	—		63			810			—			873
Total Current Liabilities	1,006		10,556			14,605			(13,672		)	12,495
Long-term debt	4,177		1,413			279			—			5,869
Deferred tax liabilities	—		—			759			(658		)	101
Pension, other post-retirement and other post-employment liabilities	—		1,356			418			—			1,774
Intercompany payables	—		8,877			461			(9,338		)	—
Other non-current liabilities	8		77			759			—			844
TOTAL LIABILITIES	5,191		22,279			17,281			(23,668		)	21,083
TOTAL AON SHAREHOLDERS’ EQUITY	5,523		(350		)	27,244			(26,942		)	5,475
Noncontrolling interests	—		—			57			—			57
TOTAL EQUITY	5,523		(350		)	27,301			(26,942		)	5,532
TOTAL LIABILITIES AND EQUITY	$	10,714	$	21,929		$	44,582		$	(50,610	)	$	26,615

Condensed Consolidating Statement of Financial Position



	As of December 31, 2015
(millions)	Aon plc		Aon Corporation			Other Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Cash and cash equivalents	$	—	$	2,083		$	1,242		$	(2,941	)	$	384
Short-term investments	—		209			147			—			356
Receivables, net	1		—			2,563			—			2,564
Fiduciary assets	—		—			9,932			—			9,932
Intercompany receivables	432		1,950			7,957			(10,339		)	—
Other current assets	—		19			310			—			329
Total Current Assets	433		4,261			22,151			(13,280		)	13,565
Goodwill	—		—			8,448			—			8,448
Intangible assets, net	—		—			2,180			—			2,180
Fixed assets, net	—		—			765			—			765
Deferred tax assets	154		756			207			(817		)	300
Intercompany receivables	375		526			8,633			(9,534		)	—
Prepaid Pension	—		6			1,027			—			1,033
Other non-current assets	—		119			557			(84		)	592
Investment in subsidiary	11,700		16,042			(123		)	(27,619		)	—
TOTAL ASSETS	$	12,662	$	21,710		$	43,845		$	(51,334	)	$	26,883
LIABILITIES AND EQUITY
Accounts payable and accrued liabilities	$	2,988	$	45		$	1,680		$	(2,941	)	$	1,772
Short-term debt and current portion of long-term debt	—		550			12			—			562
Fiduciary Liabilities	—		—			9,932			—			9,932
Intercompany payables	167		9,518			654			(10,339		)	—
Other current liabilities	47		56			716			—			819
Total Current Liabilities	3,202		10,169			12,994			(13,280		)	13,085
Long-term debt	3,451		1,412			275			—			5,138
Deferred tax liabilities	—		—			855			(818		)	37
Pension, other post-retirement and other post-employment liabilities	—		1,313			482			—			1,795
Intercompany payables	—		8,799			735			(9,534		)	—
Other non-current liabilities	7		140			705			(83		)	769
TOTAL LIABILITIES	6,660		21,833			16,046			(23,715		)	20,824
TOTAL AON SHAREHOLDERS’ EQUITY	6,002		(123		)	27,742			(27,619		)	6,002
Noncontrolling interests	—		—			57			—			57
TOTAL EQUITY	6,002		(123		)	27,799			(27,619		)	6,059
TOTAL LIABILITIES AND EQUITY	$	12,662	$	21,710		$	43,845		$	(51,334	)	$	26,883

Condensed Consolidating Statement of Cash Flows



	Year Ended December 31, 2016
(millions)	Aon plc			Aon Corporation			Other Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	2,705		$	(536	)	$	3,265		$	(3,108	)	$	2,326
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments	—			316			15			(288		)	43
Payments for investments	—			(35		)	(29		)	—			(64		)
Net (purchases) sales of short-term investments - non-fiduciary	—			70			(9		)	—			61
Acquisition of businesses, net of cash acquired	—			(335		)	(608		)	64			(879		)
Proceeds from sale of businesses	—			—			171			(64		)	107
Capital expenditures	—			—			(222		)	—			(222		)
CASH USED FOR INVESTING ACTIVITIES	—			16			(682		)	(288		)	(954		)
CASH FLOWS FROM FINANCING ACTIVITIES
Share repurchase	(1,257		)	—			—			—			(1,257		)
Advances from (to) affiliates and other (1)	(2,008		)	570			(3,037		)	4,475			—
Issuance of shares for employee benefit plans	(129		)	—			—			—			(129		)
Issuance of debt	1,879			1,588			—			—			3,467
Repayment of debt	(845		)	(2,088		)	(12		)	—			(2,945		)
Cash dividends to shareholders	(345		)	—			—			—			(345		)
Noncontrolling interests and other financing activities				—			(77		)	—			(77		)
CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES	(2,705		)	70			(3,126		)	4,475			(1,286		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	—			—			(39		)	—			(39		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			(450		)	(582		)	1,079			47
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	—			2,083			1,242			(2,941		)	384
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	—		$	1,633		$	660		$	(1,862	)	$	431

(1) Advances from (to) affiliates and other includes activity related to the Company’s intercompany and cash pooling arrangements.

Condensed Consolidating Statement of Cash Flows



	Year Ended December 31, 2015
(millions)	Aon plc			Aon Corporation			Other Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES	$	695		$	464		$	2,523		$	(1,673	)	$	2,009
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments	—			27			193			—			220
Payments for investments	(13		)	(47		)	(219		)	13			(266		)
Net purchases of short-term investments - non-fiduciary	—			(42		)	51			—			9
Acquisition of businesses, net of cash acquired	—			—			(16		)	—			(16		)
Proceeds from sale of businesses	—			—			205			—			205
Capital expenditures	—			—			(290		)	—			(290		)
CASH USED FOR INVESTING ACTIVITIES	(13		)	(62		)	(76		)	13			(138		)
CASH FLOWS FROM FINANCING ACTIVITIES
Share repurchase	(1,550		)	—			—			—			(1,550		)
Advances from (to) affiliates and other (1)	232			(326		)	(2,339		)	2,433			—
Issuance of shares for employee benefit plans	(29		)	—			(1		)	—			(30		)
Issuance of debt	1,318			4,026			7			—			5,351
Repayment of debt	(330		)	(4,746		)	(22		)	—			(5,098		)
Cash dividends to shareholders	(323		)	—			—			—			(323		)
Noncontrolling interests and other financing activities	—			—			(39		)	—			(39		)
CASH USED FOR FINANCING ACTIVITIES	(682		)	(1,046		)	(2,394		)	2,433			(1,689		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	—			—			(172		)	—			(172		)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	—			(644		)	(119		)	773			10
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	—			2,727			1,361			(3,714		)	374
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	—		$	2,083		$	1,242		$	(2,941	)	$	384

(1) Advances from (to) affiliates and other includes activity related to the Company’s intercompany and cash pooling arrangements.

Condensed Consolidating Statement of Cash Flows



	Year Ended December 31, 2014
(millions)	Aon plc			Aon Corporation			Other Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	769		$	(927	)	$	1,970		$	—		$	1,812
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments	—			39			13			—			52
Payments for investments	—			(20		)	—			—			(20		)
Net sales of short-term investments - non-fiduciary	—			(3		)	113			—			110
Acquisition of businesses, net of cash acquired	—			—			(479		)	—			(479		)
Proceeds from sale of businesses	—			—			48			—			48
Capital expenditures	—			—			(256		)	—			(256		)
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	—			16			(561		)	—			(545		)
CASH FLOWS FROM FINANCING ACTIVITIES
Share repurchase	(2,250		)	—			—			—			(2,250		)
Advances from (to) affiliates	19			3,215			(536		)	(2,698		)	—
Issuance of shares for employee benefit plans	(105		)	—			—			—			(105		)
Issuance of debt	2,908			2,326			5			—			5,239
Repayment of debt	(1,068		)	(2,150		)	(700		)	—			(3,918		)
Cash dividends to shareholders	(273		)	—			—			—			(273		)
Noncontrolling interests and other financing activities	—			—			4			—			4
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(769		)	3,391			(1,227		)	(2,698		)	(1,303		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	—			—			(67		)	—			(67		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			2,480			115			(2,698		)	(103		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	—			247			1,246			(1,016		)	477
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	—		$	2,727		$	1,361		$	(3,714	)	$	374

Quarterly Financial Data (Unaudited)

As discussed in Note 1 “Basis of Presentation,” the Company has identified certain accounting errors that affected consolidated financial amounts that were previously presented in its earlier Forms 10-Q and 10-K for the periods below. Selected quarterly financial data for the years ended December 31, 2016 and 2015 as reported, the effect of the change, and selected quarterly financial data for the years ended December 31, 2016 and 2015 as revised, are as follows (in millions, except per share data):



(As reported)	1Q		2Q		3Q		4Q		2016
INCOME STATEMENT DATA
Commissions, fees and other revenue	$	2,787	$	2,761	$	2,740	$	3,317	$	11,605
Fiduciary investment income	5		5		6		6		22
Total revenue	2,792		2,766		2,746		3,323		11,627
Operating income	450		405		422		629		1,906
Net income	327		280		314		509		1,430
Less: Net income attributable to noncontrolling interests	12		8		7		7		34
Net income attributable to Aon shareholders	$	315	$	272	$	307	$	502	$	1,396
PER SHARE DATA
Basic net income per share attributable to Aon shareholders	$	1.16	$	1.01	$	1.15	$	1.89	$	5.21
Diluted net income per share attributable to Aon shareholders	$	1.15	$	1.01	$	1.14	$	1.87	$	5.16



(Effect of change)	1Q		2Q		3Q		4Q			2016
INCOME STATEMENT DATA
Commissions, fees and other revenue	$	13	$	34	$	14	$	(61	)	$	—
Fiduciary investment income	—		—		—		—			—
Total revenue	13		34		14		(61		)	—
Operating income	13		34		14		(61		)	—
Net income	10		28		12		(50		)	—
Less: Net income attributable to noncontrolling interests	—		—		—		—			—
Net income attributable to Aon shareholders	$	10	$	28	$	12	$	(50	)	$	—
PER SHARE DATA
Basic net income per share attributable to Aon shareholders	$	0.04	$	0.11	$	0.04	$	(0.19	)	$	—
Diluted net income per share attributable to Aon shareholders	$	0.04	$	0.10	$	0.04	$	(0.19	)	$	—



(As revised)	1Q		2Q		3Q		4Q		2016
INCOME STATEMENT DATA
Commissions, fees and other revenue	$	2,800	$	2,795	$	2,754	$	3,256	$	11,605
Fiduciary investment income	5		5		6		6		22
Total revenue	2,805		2,800		2,760		3,262		11,627
Operating income	463		439		436		568		1,906
Net income	337		308		326		459		1,430
Less: Net income attributable to noncontrolling interests	12		8		7		7		34
Net income attributable to Aon shareholders	$	325	$	300	$	319	$	452	$	1,396
PER SHARE DATA
Basic net income per share attributable to Aon shareholders	$	1.20	$	1.12	$	1.19	$	1.70	$	5.21
Diluted net income per share attributable to Aon shareholders	$	1.19	$	1.11	$	1.18	$	1.68	$	5.16



(As reported)	1Q		2Q		3Q		4Q		2015
INCOME STATEMENT DATA
Commissions, fees and other revenue	$	2,842	$	2,800	$	2,736	$	3,283	$	11,661
Fiduciary investment income	5		5		6		5		21
Total revenue	2,847		2,805		2,742		3,288		11,682
Operating income	441		277		413		717		1,848
Net income	341		188		303		590		1,422
Less: Net income attributable to noncontrolling interests	13		10		8		6		37
Net income attributable to Aon shareholders	$	328	$	178	$	295	$	584	$	1,385
PER SHARE DATA
Basic net income per share attributable to Aon shareholders	$	1.15	$	0.63	$	1.05	$	2.12	$	4.93
Diluted net income per share attributable to Aon shareholders	$	1.14	$	0.62	$	1.04	$	2.09	$	4.88



(Effect of change)	1Q		2Q		3Q		4Q			2015
INCOME STATEMENT DATA
Commissions, fees and other revenue	$	20	$	31	$	10	$	(61	)	$	—
Fiduciary investment income	—		—		—		—			—
Total revenue	20		31		10		(61		)	—
Operating income	20		31		10		(61		)	—
Net income	16		26		8		(50		)	—
Less: Net income attributable to noncontrolling interests	—		—		—		—			—
Net income attributable to Aon shareholders	$	16	$	26	$	8	$	(50	)	$	—
PER SHARE DATA
Basic net income per share attributable to Aon shareholders	$	0.06	$	0.09	$	0.03	$	(0.18	)	$	—
Diluted net income per share attributable to Aon shareholders	$	0.06	$	0.09	$	0.03	$	(0.18	)	$	—



(As revised)	1Q		2Q		3Q		4Q		2015
INCOME STATEMENT DATA
Commissions, fees and other revenue	$	2,862	$	2,831	$	2,746	$	3,222	$	11,661
Fiduciary investment income	5		5		6		5		21
Total revenue	2,867		2,836		2,752		3,227		11,682
Operating income	461		308		423		656		1,848
Net income	357		214		311		540		1,422
Less: Net income attributable to noncontrolling interests	13		10		8		6		37
Net income attributable to Aon shareholders	$	344	$	204	$	303	$	534	$	1,385
PER SHARE DATA
Basic net income per share attributable to Aon shareholders	$	1.21	$	0.72	$	1.08	$	1.94	$	4.93
Diluted net income per share attributable to Aon shareholders	$	1.20	$	0.71	$	1.07	$	1.91	$	4.88

Subsequent Event - Disposition of Benefits Administration and Business Process Outsourcing

On February 9, 2017, Aon entered into a Purchase Agreement (the “Purchase Agreement”) with Tempo Acquisition, LLC (the “Buyer”). Pursuant to the Purchase Agreement, Aon has agreed to sell its benefits administration and business process outsourcing business (the “Tempo Business”) to the Buyer, an entity formed and controlled by affiliates of The Blackstone Group L.P. (the “Sponsor”), and certain designated purchasers that are direct or indirect subsidiaries of the Buyer.

The Tempo Business develops and implements software and services solutions, and provides to clients, health and welfare and retirement benefits administration services, hosted and cloud-based human resources business process outsourcing administration and implementation services, and other related communications consulting services.

Subject to the terms and conditions of the Purchase Agreement, the Buyer has agreed to purchase all of the outstanding equity interests of the Tempo Business, plus certain related assets, for a purchase price of (i) $4.3 billion in cash payable at closing, subject to customary adjustments set forth in the Purchase Agreement, and (ii) deferred consideration of up to $500 million, plus the assumption of certain liabilities (the “Transaction”). Under the Purchase Agreement, the deferred consideration is payable in cash in an amount equal to 20% of the incremental cash proceeds realized by the affiliates of the Sponsor and certain other equityholders of the Buyer from a liquidity event if (i) total realized cash proceeds to the Sponsor and such other equityholders over the life of their respective investments upon the closing of the Transaction (inclusive of all interim distributions) exceeds 2.25 times the amount of their equity investments in the Buyer at the closing of the Transaction and (ii) the internal rate of return over the life of their respective investments (inclusive of all interim distributions) exceeds 15%.

The completion of the Transaction is subject to customary closing conditions, including, among others: (i) the expiration or termination of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended; and (ii) the receipt of all approvals and the filing of all applicable filings under any relevant foreign jurisdictions that are required to be made or obtained as set forth in the Purchase Agreement. The Buyer’s obligations under the Purchase Agreement are not conditioned on receipt of financing; however, the Buyer is not required to complete the Transaction until after the completion of a customary fifteen days consecutive business-day marketing period to commence after the Company has provided required financial information to the Buyer. The Buyer has obtained an equity commitment (“Equity Commitment”) from affiliates of the Sponsor and debt financing commitments (“Debt Commitments”) from BofA Merrill Lynch, Barclays, Credit Suisse, Citigroup, Macquarie, Deutsche Bank, and Morgan Stanley, together with certain of their respective affiliates. The aggregate proceeds of the Equity Commitment and the Debt Commitments will be used by the Buyer (i) to pay the Purchase Price, and (ii) to pay fees and expenses incurred by the Buyer in connection with the Transaction.

The Purchase Agreement provides that the Buyer will be required to pay to Aon a $215 million termination fee, together with the reimbursement of certain expenses, if the Purchase Agreement is terminated under certain circumstances. Both Aon and the Buyer have the right to terminate the Purchase Agreement if the closing has not occurred on or before August 9, 2017. An affiliate of the Sponsor has guaranteed the payment of the termination fee to the Company, if and when due, under the Purchase Agreement, together with certain other reimbursement obligations of the Buyer under the Purchase Agreement.

Both Aon and the Buyer have agreed to indemnify each other for losses arising from certain breaches of the Purchase Agreement and for certain other liabilities, subject to certain limitations.

Aon and the Buyer have made representations and warranties and have agreed to covenants related to the Tempo Business and the Transaction. Between the date of the Purchase Agreement and the closing of the Transaction, Aon has agreed to operate the Tempo Business in the ordinary course substantially as operated immediately prior to the date of the Purchase Agreement and to preserve the goodwill of the suppliers, contractors, licensors, employees, customers, and distributors of, and others having business relations with the Tempo Business.

Aon and the Buyer have agreed to enter into certain Transaction-related agreements at the closing, including two commercial agreements, a transition services agreement, certain intellectual property license agreements, sub-leases and other customary agreements. Aon will continue to be a significant client of the Tempo Business and the Tempo Business has agreed to use Aon for its broking and other services.

In connection with the Transaction, the Company expects to implement a cost reduction program.

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