Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Aon plc

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of financial position of Aon plc (the Company) as of December 31, 2020 and 2019, 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, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, 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) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, 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 19, 2021, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

			Realizability of Deferred Tax Assets
Description of the Matter			As discussed in Note 10 “Income Taxes” of the Notes to Consolidated Financial Statements, the Company had net deferred tax assets of $462 million at December 31, 2020. Deferred tax assets are reduced by a valuation allowance if, based on the weight of all available evidence, in management’s judgment it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. Conclusions on the realizability of the net deferred tax assets involve significant management judgment including assumptions and estimates related to the amount and timing of future taxable income. Auditing the deferred tax asset calculation and the related forecast of future taxable income was especially challenging as it involved a high degree of auditor judgment around management’s assumptions and estimates.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and operating effectiveness of internal controls that address the risks of material misstatement relating to the realizability of deferred tax assets, including controls over management’s projections of future taxable income and the related assumptions. Among other audit procedures performed, we evaluated the assumptions used by the Company to develop projections of future taxable income by income tax jurisdiction and tested the completeness and accuracy of the underlying data used in the projections. For example, we inspected the growth rate used in the calculation, the estimates of the reversal of cumulative temporary differences by year and the capital and debt requirements by jurisdiction. We compared the projections of future taxable income with the actual results of prior periods, as well as management’s considerations of current industry and economic trends. Further, we involved tax subject matter professionals in the review of the information identified.

We have served as the Company’s auditor since 1986.

Chicago, Illinois

February 19, 2021

Aon plc

Consolidated Statements of Income

						Years ended December 31
(millions, except per share data)						2020						2019						2018
Revenue
Total revenue						$	11,066					$	11,013					$	10,770
Expenses
Compensation and benefits						5,905						6,054						6,103
Information technology						444						494						484
Premises						291						339						370
Depreciation of fixed assets						167						172						176
Amortization and impairment of intangible assets						246						392						593
Other general expense						1,232						1,393						1,500
Total operating expenses						8,285						8,844						9,226
Operating income						2,781						2,169						1,544
Interest income						6						8						5
Interest expense						(334)						(307)						(278)
Other income (expense)						12						1						(25)
Income from continuing operations before income taxes						2,465						1,871						1,246
Income tax expense						448						297						146
Net income from continuing operations						2,017						1,574						1,100
Net income (loss) from discontinued operations						1						(1)						74
Net income						2,018						1,573						1,174
Less: Net income attributable to noncontrolling interests						49						41						40
Net income attributable to Aon shareholders						$	1,969					$	1,532					$	1,134
Basic net income per share attributable to Aon shareholders
Continuing operations						$	8.49					$	6.42					$	4.32
Discontinued operations						—						—						0.30
Net income						$	8.49					$	6.42					$	4.62
Diluted net income per share attributable to Aon shareholders
Continuing operations						$	8.45					$	6.37					$	4.29
Discontinued operations						—						—						0.30
Net income						$	8.45					$	6.37					$	4.59
Weighted average ordinary shares outstanding - basic						231.9						238.6						245.2
Weighted average ordinary shares outstanding - diluted						233.1						240.6						247.0

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Comprehensive Income

						Years Ended December 31
(millions)						2020						2019						2018
Net income						$	2,018					$	1,573					$	1,174
Less: Net income attributable to noncontrolling interests						49						41						40
Net income attributable to Aon shareholders						1,969						1,532						1,134
Other comprehensive income (loss), net of tax:
Change in fair value of financial instruments						13						3						11
Foreign currency translation adjustments						263						14						(444)
Postretirement benefit obligation						(101)						(141)						17
Total other comprehensive income (loss)						175						(124)						(416)
Less: Other comprehensive income (loss) attributable to noncontrolling interests						3						—						(4)
Total other comprehensive income (loss) attributable to Aon shareholders						172						(124)						(412)
Comprehensive income attributable to Aon shareholders						$	2,141					$	1,408					$	722

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Financial Position

						As of December 31
(millions, except nominal value)						2020						2019
Assets
Current assets
Cash and cash equivalents						$	884					$	790
Short-term investments						308						138
Receivables, net						3,070						3,112
Fiduciary assets						13,798						11,834
Other current assets						624						602
Total current assets						18,684						16,476
Goodwill						8,666						8,165
Intangible assets, net						640						783
Fixed assets, net						599						621
Operating lease right-of-use assets						911						929
Deferred tax assets						724						645
Prepaid pension						1,280						1,216
Other non-current assets						610						570
Total assets						$	32,114					$	29,405
Liabilities and equity
Liabilities
Current liabilities
Accounts payable and accrued liabilities						$	2,016					$	1,939
Short-term debt and current portion of long-term debt						448						712
Fiduciary liabilities						13,798						11,834
Other current liabilities						1,171						1,086
Total current liabilities						17,433						15,571
Long-term debt						7,281						6,627
Non-current operating lease liabilities						897						944
Deferred tax liabilities						262						199
Pension, other postretirement, and postemployment liabilities						1,763						1,738
Other non-current liabilities						895						877
Total liabilities						28,531						25,956
Equity
Ordinary shares - $0.01 nominal value Authorized: 2020 - 500 shares; 2019 - 750 shares (issued: 2020 - 225.5; 2019 - 232.1)						2						2
Additional paid-in capital						6,312						6,152
Retained earnings						1,042						1,254
Accumulated other comprehensive loss						(3,861)						(4,033)
Total Aon shareholders' equity						3,495						3,375
Noncontrolling interests						88						74
Total equity						3,583						3,449
Total liabilities and equity						$	32,114					$	29,405

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Shareholders’ Equity

(millions, except per share data)						Shares						Ordinary Shares and Additional Paid-in Capital						Retained Earnings						Accumulated Other Comprehensive Loss, Net of Tax						Non-controlling Interests						Total
Balance at December 31, 2017						247.6						$	5,777					$	2,302					$	(3,496)					$	65					$	4,648
Adoption of new accounting guidance						—						—						493						(1)						—						492
Balance at January 1, 2018						247.6						5,777						2,795						(3,497)						65						5,140
Net income						—						—						1,134						—						40						1,174
Shares issued — employee stock compensation plans						2.5						(148)						—						—						—						(148)
Shares purchased						(10.0)						—						(1,454)						—						—						(1,454)
Share-based compensation expense						—						338						—						—						—						338
Dividends to shareholders ($1.56 per share)						—						—						(382)						—						—						(382)
Net change in fair value of financial instruments						—						—						—						11						—						11
Net foreign currency translation adjustments						—						—						—						(440)						(4)						(444)
Net postretirement benefit obligation						—						—						—						17						—						17
Net purchases of shares from noncontrolling interests						—						—						—						—						(1)						(1)
Dividends paid to noncontrolling interests on subsidiary common stock						—						—						—						—						(32)						(32)
Balance at December 31, 2018						240.1						5,967						2,093						(3,909)						68						4,219
Net income						—						—						1,532						—						41						1,573
Shares issued — employee stock compensation plans						2.5						(130)						(1)						—						—						(131)
Shares purchased						(10.5)						—						(1,960)						—						—						(1,960)
Share-based compensation expense						—						317						—						—						—						317
Dividends to shareholders ($1.72 per share)						—						—						(410)						—						—						(410)
Net change in fair value of financial instruments						—						—						—						3						—						3
Net foreign currency translation adjustments						—						—						—						14						—						14
Net postretirement benefit obligation						—						—						—						(141)						—						(141)
Dividends paid to noncontrolling interests on subsidiary common stock						—						—						—						—						(35)						(35)
Balance at December 31, 2019						232.1						6,154						1,254						(4,033)						74						3,449
Adoption of new accounting guidance						—						—						(6)						—						—						(6)
Balance at January 1, 2020						232.1						6,154						1,248						(4,033)						74						3,443
Net income						—						—						1,969						—						49						2,018
Shares issued — employee stock compensation plans						1.9						(154)						—						—						—						(154)
Shares purchased						(8.5)						—						(1,763)						—						—						(1,763)
Share-based compensation expense						—						317						—						—						—						317
Dividends to shareholders ($1.78 per share)						—						—						(412)						—						—						(412)
Net change in fair value of financial instruments						—						—						—						13						—						13
Net foreign currency translation adjustments						—						—						—						260						3						263
Net postretirement benefit obligation						—						—						—						(101)						—						(101)
Net purchases of shares from noncontrolling interests						—						(3)						—						—						(6)						(9)
Dividends paid to noncontrolling interests on subsidiary common stock						—						—						—						—						(32)						(32)
Balance at December 31, 2020						225.5						$	6,314					$	1,042					$	(3,861)					$	88					$	3,583

See accompanying Notes to Consolidated Financial Statements.

Aon plc

Consolidated Statements of Cash Flows

						Years ended December 31
(millions)						2020						2019						2018
Cash flows from operating activities
Net income						$	2,018					$	1,573					$	1,174
Less: Income from discontinued operations, net of income taxes						1						(1)						74
Adjustments to reconcile net income to cash provided by operating activities:
Loss (gain) from sales of businesses and investments, net						(25)						(13)						6
Depreciation of fixed assets						167						172						176
Amortization and impairment of intangible assets						246						392						593
Share-based compensation expense						312						317						338
Deferred income taxes						9						(36)						(225)
Change in assets and liabilities:
Fiduciary receivables						(1,140)						(409)						(679)
Short-term investments — funds held on behalf of clients						(316)						(1,246)						(320)
Fiduciary liabilities						1,456						1,655						999
Receivables, net						108						(371)						(127)
Accounts payable and accrued liabilities						186						(28)						25
Restructuring reserves						(127)						3						23
Current income taxes						(17)						(20)						34
Pension, other postretirement and postemployment liabilities						(141)						(156)						(259)
Other assets and liabilities						48						1						2
Cash provided by operating activities						2,783						1,835						1,686
Cash flows from investing activities
Proceeds from investments						64						61						71
Payments for investments						(97)						(113)						(80)
Net sales (purchases) of short-term investments — non-fiduciary						(167)						35						348
Acquisition of businesses, net of cash acquired						(368)						(39)						(58)
Sale of businesses, net of cash sold						30						52						(10)
Capital expenditures						(141)						(225)						(240)
Cash provided by (used for) investing activities						(679)						(229)						31
Cash flows from financing activities
Share repurchase						(1,763)						(1,960)						(1,470)
Issuance of shares for employee benefit plans						(149)						(131)						(149)
Issuance of debt						4,153						6,052						5,754
Repayment of debt						(3,882)						(4,941)						(5,417)
Cash dividends to shareholders						(412)						(410)						(382)
Noncontrolling interests and other financing activities						(35)						(103)						(35)
Cash used for financing activities						(2,088)						(1,493)						(1,699)
Effect of exchange rates on cash and cash equivalents						78						21						(118)
Net increase (decrease) in cash and cash equivalents						94						134						(100)
Cash and cash equivalents at beginning of year						790						656						756
Cash and cash equivalents at end of year						$	884					$	790					$	656
Supplemental disclosures:
Interest paid						$	326					$	289					$	266
Income taxes paid, net of refunds						$	455					$	353					$	337

See accompanying Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

1. Basis of Presentation

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

On April 1, 2020, a scheme of arrangement under English law was completed pursuant to which the Class A ordinary shares of Aon plc, a public limited company incorporated under the laws of England and Wales and the publicly traded parent company of Aon Global Limited, were cancelled and the holders thereof received, on a one-for-one basis, Class A ordinary shares of Aon plc, an Irish public limited company formerly known as Aon Limited (“Aon plc”), as described in the proxy statement filed with the SEC on December 20, 2019 (the “Ireland Reorganization”). Aon plc is a tax resident of Ireland. References in this report to “Aon,” the “Company,” “we,” “us,” or “our” for time periods prior to April 1, 2020 refer to Aon Global Limited. References in the Financial Statements to “Aon,” the “Company,” “we,” “us,” or “our” for time periods on or after April 1, 2020, refer to Aon plc.

Use of Estimates

The preparation of the 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, the disclosures of contingent assets and liabilities at the date of the Consolidated Financial Statements, and the reported amounts of reserves and expenses. These estimates and assumptions are based on management’s best estimates and judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Management believes its estimates to be reasonable given the current facts available. Aon adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, foreign currency exchange rate movements, and, recently, impacts from the COVID-19 pandemic increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment would, if applicable, be reflected in the Consolidated Financial Statements in future periods.

2. Summary of Significant Accounting Principles and Practices

Revenue Recognition

The Company generates revenues primarily through commissions, compensation from insurance and reinsurance companies for services provided to them, and fees from customers. Commissions and fees for brokerage services vary depending upon several factors, which may include the amount of premium, the type of insurance or reinsurance coverage provided, the particular services provided to a client, insurer, or reinsurer, and the capacity in which the Company acts. Compensation from insurance and reinsurance companies includes: (1) fees for consulting and analytics services and (2) fees and commissions for administrative and other services provided to or on behalf of insurers. In Aon’s capacity as an insurance and reinsurance broker, the service promised to the customer is placement of an effective insurance or reinsurance policy, respectively. At the completion of the insurance or reinsurance policy placement process once coverage is effective, the customer has obtained control over the services promised by the Company. Judgment is not typically required when assessing whether the coverage is effective. Fees from clients for advice and consulting services are dependent on the extent and value of the services provided. Payment terms for the Company’s principal service lines are discussed below; the Company believes these terms are consistent with current industry practices. Significant financing components are typically not present in Aon’s arrangements.

The Company recognizes revenue when control of the promised services is transferred to the customer in the amount that best reflects the consideration to which the Company expects to be entitled in exchange for those services. For arrangements where control is transferred over time, an input or output method is applied that represents a faithful depiction of the progress towards completion of the performance obligation. For arrangements that include variable consideration, the Company assesses whether any amounts should be constrained. For arrangements that include multiple performance obligations, the Company allocates consideration based on their relative fair values.

Costs incurred by the Company in obtaining a contract are capitalized and amortized on a systematic basis that is consistent with the transfer of control of the services to which the asset relates, considering anticipated renewals when applicable. Certain contract related costs, including pre-placement brokerage costs, are capitalized as a cost to fulfill and are amortized on a systematic basis consistent with the transfer of control of the services to which the asset relates, which is generally less than one year.

The Company has elected to apply practical expedients to not disclose the revenue related to unsatisfied performance obligations if (1) the contract has an original duration of 1 year or less, (2) the Company has recognized revenue for the amount in which it has the right to bill, and (3) the variable consideration is allocated entirely to an unsatisfied performance obligation which is recognized as a series of distinct goods or services that form a single performance obligation.

Disaggregation of Revenue

The following is a description of principal service lines from which the Company generates its revenue:

Commercial Risk Solutions includes retail brokerage, cyber solutions, global risk consulting, and captives. Revenue primarily includes insurance commissions and fees for services rendered. Revenue is predominantly recognized at a point in time upon the effective date of the underlying policy (or policies), or for a limited number of arrangements, over the term of the arrangement using output measures to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. For arrangements recognized over time, various output measures, including units transferred and time elapsed, are utilized to provide a faithful depiction of the progress towards completion of the performance obligation. Revenue is recorded net of allowances for estimated policy cancellations, which are determined based on an evaluation of historical and current cancellation data. Commissions and fees for brokerage services may be invoiced near the effective date of the underlying policy or over the term of the arrangement in installments during the policy period.

Reinsurance Solutions includes treaty and facultative reinsurance brokerage and capital markets. Revenue primarily includes reinsurance commissions and fees for services rendered. Revenue is predominantly recognized at a point in time upon the effective date of the underlying policy (or policies), or for a limited number of arrangements, over the term of the arrangement using output measures to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. For arrangements recognized over time, various output measures, including units delivered and time elapsed, are utilized to provide a faithful depiction of the progress towards completion of the performance obligation. Commissions and fees for brokerage services may be invoiced at the inception of the reinsurance period for certain reinsurance brokerage, or more commonly, over the term of the arrangement in installments based on deposit or minimum premiums for most treaty reinsurance arrangements.

Retirement Solutions includes core retirement, investment consulting, and human capital. Revenue consists primarily of fees paid by customers for consulting services, such as risk management strategies, health and benefits, and human capital consulting services. Revenue recognized for these arrangements is predominantly recognized over the term of the arrangement using input or output measures to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services, or for certain arrangements, at a point in time upon completion of the services. For consulting arrangements recognized over time, revenue will be recognized based on a measure of progress that depicts the transfer of control of the services to the customer, utilizing an appropriate input or output measure to provide a reasonable assessment of the progress towards completion of the performance obligation including units delivered or time elapsed. Fees paid by customers for consulting services are typically charged on an hourly, project or fixed-fee basis, and revenue for these arrangements is typically recognized based on time incurred, days elapsed, or reports delivered. Revenue from time-and-materials or cost-plus arrangements are recognized as services are performed using input or output measures to provide a reasonable assessment of the progress towards completion of the performance obligation including hours worked, and revenue for these arrangements is typically recognized based on time and materials incurred. Reimbursements received for out-of-pocket expenses are recorded as a component of revenue. Payment terms vary but are typically over the contract term in installments.

Health Solutions includes health and benefits brokerage and health care exchanges. Revenue primarily includes insurance commissions and fees for services rendered. For brokerage commissions, revenue is predominantly recognized at the effective date of the underlying policy (or policies), or for a limited number of arrangements, over the term of the arrangement to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services using input or output measures, including units delivered or time elapsed, to provide a faithful depiction of the progress towards completion of the performance obligation. Revenue from health care exchange arrangements are typically recognized upon successful enrollment of participants, net of a reserve for estimated cancellations. Commissions and fees for brokerage services may be invoiced at the effective date of the underlying policy or over the term of the arrangement in installments during the policy period. Payment terms for other services vary but are typically over the contract term in installments.

Data & Analytic Services includes Affinity, Aon Inpoint, CoverWallet, and ReView. Revenue consists primarily of fees for services rendered and is generally recognized over the term of the arrangement to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. Payment terms vary but are typically over the contract term in installments. For arrangements recognized over time, revenue will be recognized based on a measure of progress that depicts the transfer of control of the services to the customer, utilizing an appropriate input or output measure to provide a faithful depiction of the progress towards completion of the performance obligation, including units delivered or time elapsed. Input and output measures utilized vary based on the arrangement but typically include reports provided or days elapsed.

Share-based Compensation Expense

Share-based payments to employees, including grants of restricted share units and performance share awards, are measured based on 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 Postretirement Benefits

The Company records net periodic cost relating to its pension and other postretirement 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 as reflected in Other income (expense) within the Consolidated Statements of Income. 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, 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, 2020, Cash and cash equivalents and Short-term investments totaled $1,192 million compared to $928 million at December 31, 2019. Of the total balance, $102 million and $110 million was restricted as to its use at December 31, 2020 and 2019, respectively. Included within the December 31, 2020 and 2019 balances, respectively, were £44.4 million ($60.2 million at December 31, 2020 exchanges rates) and £42.7 million ($55.5 million at December 31, 2019 exchange rates) of operating funds required to be held by the Company in the U.K. by the FCA, which were included in Short-term investments.

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 Consolidated Statements of Financial Position.

Aon held fiduciary assets for premiums collected from insureds but not yet remitted to insurance companies and claims collected from insurance companies but not yet remitted to insureds of $5.7 billion and $5.2 billion at December 31, 2020 and

2019, 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 estimate for allowance for credit losses with respect to receivables is based on a combination of factors, including evaluation of forward-looking information, historical write-offs, aging of balances, and other qualitative and quantitative analyses. Receivables, net included an allowance for doubtful accounts of $98 million and $70 million at December 31, 2020 and 2019, respectively.

Fixed Assets

Fixed assets are stated at cost, less accumulated depreciation. Included in this category are certain capitalized costs incurred during the application development stage related to directly obtaining, developing, or enhancing internal use software. 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						Estimated Useful 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 acquired in the acquisition of a business. Goodwill is allocated to applicable reporting units. 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 may initially perform a qualitative analysis to determine if it is more likely than not that the goodwill balance is impaired. If a qualitative assessment is not performed or if a determination is made that it is not more likely than not that their value of the reporting unit exceeds its carrying amount, then the Company will perform a quantitative analysis. If the fair value of a reporting unit is determined to be greater than the carrying value of the reporting unit, goodwill is deemed not to be impaired and no further testing is necessary. If the fair value of a reporting unit is less than the carrying value, a goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value limited to the total amount of the goodwill allocated to the reporting unit. Any resulting difference will be a charge to Amortization and impairment of intangible assets 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.

We classify our intangible assets acquired as either tradenames, customer-related and contract-based, or technology and other. Amortization basis and estimated useful lives by intangible asset type are generally as follows:

Intangible Asset Description						Amortization Basis						Estimated Useful Life
Tradenames						Straight-line						1 to 3 years
Customer-related and contract-based						In line with underlying cash flows						7 to 20 years
Technology and other						Straight-line						5 to 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 counterparties 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: (1) a hedge of the change in fair value of a recognized asset or liability or firm commitment (“fair value hedge”), (2) a hedge of the variability in cash

flows from a recognized variable-rate asset or liability or forecasted transaction (“cash flow hedge”), and (3) 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, and the method for assessing the effectiveness of the hedge. 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 quarterly or more frequently if facts and circumstances require.

For a derivative designated as a fair value hedging instrument, 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 change in fair value of a hedging instrument is recognized in Accumulated other comprehensive income (“AOCI”) and subsequently reclassified to earnings in the same period the hedged item impacts earnings. For a net investment hedge, the change in fair value of the hedging instrument is recognized in AOCI as part of the cumulative translation adjustment.

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 (expense) in the Consolidated Statements of Income in the period of change.

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-U.S. 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. Further, gains and losses from the remeasurement of monetary assets and liabilities that are denominated in a non-functional currency of that entity are included in Other income (expense) within the Consolidated Statements of Income.

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. 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.

Leases

The Company leases office facilities, equipment, and automobiles under non-cancelable operating and finance leases. The Company’s lease obligations are primarily for the use of office facilities. The Company evaluates if a leasing arrangement exists upon inception of a contract. A contract contains a lease if the contract conveys the right to control the use of identified

tangible assets for a period of time in exchange for consideration. Identified property, plant, or equipment may include a physically distinct portion of a larger asset, or a portion of an asset that represents substantially all of the capacity of the asset but is not physically distinct. The Company assesses whether a contract implicitly contains the right to control the use of a tangible asset that is not already owned. In addition, the Company subleases certain real estate properties to third parties, which are classified as operating leases.

The Company’s leases expire at various dates and may contain renewal and expansion options. The exercise of lease renewal and expansion options are typically at the Company’s sole discretion and are only included in the determination of the lease term if the Company is reasonably certain to exercise the option. The Company’s leases do not typically contain termination options. In addition, the Company’s lease agreements typically do not contain any material residual value guarantees or restrictive covenants.

Right-of-use (“ROU”) assets and lease liabilities are based on the present value of the minimum lease payments over the lease term. The Company has elected the practical expedient related to lease and non-lease components, as an accounting policy election for all asset classes, which allows a lessee to not separate non-lease from lease components and instead account for consideration received in a contract as a single lease component.

The Company made a policy election to not recognize ROU assets and lease liabilities that arise from leases with an initial term of twelve months or less on the Consolidated Statements of Financial Position. However, the Company recognized these lease payments in the Consolidated Statements of Income on a straight-line basis over the lease term and variable lease payments in the period in which the expense was incurred. The Company chose to apply this accounting policy across all classes of underlying assets.

A portion of the Company’s lease agreements include variable lease payments that are not recorded in the initial measurement of the lease liability and ROU asset balances. For real estate arrangements, base rental payments may be escalated according to annual changes in the Consumer Price Index (“CPI”) or other indices. The escalated rental payments based on the estimated CPI at the lease commencement date are included within minimum rental payments; however, changes in CPI are considered variable in nature and are recognized as variable lease costs in the period in which the obligation is incurred. Additionally, real estate lease agreements may include other variable payments related to operating expenses charged by the landlord based on actual expenditures. Information technology equipment agreements may include variable payments based on usage of the equipment. These expenses are also recognized as variable lease costs in the period in which the expense is incurred.

The Company utilizes discount rates to determine the present value of the lease payments based on information available at the commencement date of the lease. As the rate implicit in each lease is not typically readily available, the Company uses an incremental borrowing rate based on factors such as the lease term and the economic environment where the lease exists to determine the appropriate present value of future lease payments. When determining the incremental borrowing rate, the Company considers the rate of interest it would pay on a secured borrowing in an amount equal to the lease payments for the underlying asset under similar terms.

Operating leases are included in Operating lease ROU assets, Other current liabilities, and Non-current operating lease liabilities on the Consolidated Statements of Financial Position. Finance leases are included in Other non-current assets, Other current liabilities, and Other non-current liabilities on the Consolidated Statements of Financial Position.

Principles of Consolidation

The accompanying Consolidated Financial Statements include the accounts of Aon plc and those entities in which the Company has a controlling financial interest. To determine if Aon holds a controlling financial interest in an entity, the Company first evaluates if it is required to apply the variable interest entity (“VIE”) model to the entity, otherwise, the entity is evaluated under the voting interest model. Where Aon holds rights that give it the power to direct the activities of a VIE that most significantly impact the VIE's economic performance, combined with a variable interest that gives the right to receive potentially significant benefits or the obligation to absorb potentially significant losses, the Company has a controlling financial interest in that VIE. Aon holds a controlling financial interest in entities that are not VIEs where it, directly or indirectly, holds more than 50% of the voting rights or where it exercises control through substantive participating rights or as a general partner.

New Accounting Pronouncements

Adoption of New Accounting Standards

Cloud Computing Arrangements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. The new guidance aligns capitalization requirements for certain implementation costs incurred in cloud computing arrangements with existing requirements for capitalizing implementation costs for internal-use software. These costs will be deferred over the term of the hosting arrangement, including any optional renewal periods the entity is reasonably certain to exercise. An entity may apply the new guidance on either a prospective or retrospective basis. The new guidance was effective for Aon in the first quarter of 2020 and was adopted on a prospective basis for all implementation costs incurred after the date of initial adoption. The adoption of this guidance had no significant impact on the Financial Statements.

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued new accounting guidance on simplifying the test for goodwill impairment. Previously the standard required an entity to perform a two-step test to determine the amount, if any, of goodwill impairment. In Step 1, an entity compared the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the entity performed Step 2 and compared the implied fair value of goodwill with the carrying amount of that goodwill for that reporting unit. An impairment charge equal to the amount by which the carrying amount of goodwill for the reporting unit exceeds the implied fair value of that goodwill was recorded, limited to the amount of goodwill allocated to that reporting unit. The new guidance removes Step 2. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. The new guidance was effective for Aon in the first quarter of 2020 and was adopted on a prospective basis. The adoption of this guidance had no impact on the Financial Statements.

Credit Losses

In June 2016, the FASB issued a new accounting standard on the measurement of credit losses on financial instruments. The new standard replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted the new standard as of January 1, 2020 using the modified retrospective approach. Under this approach, prior periods were not restated. Rather, the cumulative effect of initially applying the new standard was recognized as an adjustment to retained earnings. Upon the adoption of this guidance on January 1, 2020, the Company recognized a cumulative adjustment of $6 million to decrease retained earnings.

Financial Disclosures about Guarantors

In March 2020, the SEC issued a final rule that amended the disclosure requirements related to certain registered securities under SEC Regulation S-X Rules 3-10 and 3-16 of Regulation S-X. The changes are intended to provide investors with material information given the specific facts and circumstances, make disclosures easier to understand, and reduce the cost and burdens to registrants. The final rule replaces the requirement to provide condensed consolidated financial information with a requirement to present summarized financial information of the issuers and guarantors in the registrant’s Management Discussion and Analysis section or in the financial statements and reduces the periods for which summarized financial information is presented to the most recent annual period and year-to-date interim period. The amendments became effective January 4, 2021, with early adoption permitted.

The Company elected to early adopt the final rule in the second quarter of 2020 and elected to present these disclosures in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued new accounting guidance that simplifies the accounting for income taxes by removing certain exceptions to the general principles in the existing guidance. It also clarifies certain aspects of the existing guidance to promote more consistent application. The new guidance is effective for Aon in the first quarter of 2021, with early adoption permitted. Different components of the guidance require retrospective, modified retrospective, or prospective adoption. The Company elected to early adopt this guidance in the fourth quarter of 2020 without an impact on the Financial Statements.

Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued new accounting guidance related to the disclosure requirements for employers that sponsor defined benefit pension and other postretirement benefit plans. The guidance requires sponsors of these plans to provide additional disclosures, including weighted average interest rates used in the entity’s cash balance pension plans and a narrative description of reasons for any significant gains or losses impacting the benefit obligation for the period, and eliminates certain previous disclosure requirements. The new guidance is effective for Aon for the year ended December 31, 2020 and was adopted retrospectively in the Notes to Consolidated Financial Statements. There was no significant impact upon adoption.

3. Revenue from Contracts with Customers

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers by principal service line (in millions):

						Years ended December 31
						2020						2019						2018
Commercial Risk Solutions						$	4,690					$	4,673					$	4,652
Reinsurance Solutions						1,814						1,686						1,563
Retirement Solutions						1,753						1,817						1,865
Health Solutions						1,655						1,667						1,596
Data & Analytic Services						1,171						1,184						1,105
Elimination						(17)						(14)						(11)
Total revenue						$	11,066					$	11,013					$	10,770

Consolidated revenue from contracts with customers by geographic area, which is attributed on the basis of where the services are performed, is as follows (in millions):

						Years ended December 31
						2020						2019						2018
U.S.						$	5,032					$	5,016					$	4,677
Americas other than U.S.						911						919						940
U.K.						1,579						1,502						1,555
Ireland						84						75						80
Europe, Middle East, & Africa other than U.K. and Ireland						2,236						2,263						2,333
Asia Pacific						1,224						1,238						1,185
Total revenue						$	11,066					$	11,013					$	10,770

Contract Costs

Changes in the net carrying amount of costs to fulfill contracts with customers are as follows (in millions):

						2020						2019
Balance at beginning of period						$	335					$	329
Additions						1,360						1,453
Amortization						(1,360)						(1,447)
Impairment						—						—
Foreign currency translation and other						4						—
Balance at end of period						$	339					$	335

Changes in the net carrying amount of costs to obtain contracts with customers are as follows (in millions):

						2020						2019
Balance at beginning of period						$	171					$	156
Additions						61						58
Amortization						(47)						(44)
Impairment						—						—
Foreign currency translation and other						(1)						1
Balance at end of period						$	184					$	171

4. Other Financial Data

Consolidated Statements of Income Information

Other Income (Expense)

The components of Other income (expense) are as follows (in millions):

			Years ended December 31
			2020						2019						2018
Foreign currency remeasurement			$	(12)					$	9					$	25
Disposal of businesses			25						13						(6)
Pension and other postretirement			13						9						1
Equity earnings			4						4						4
Extinguishment of debt			(7)						—						—
Financial instruments			(11)						(34)						(49)
Total			$	12					$	1					$	(25)

Consolidated Statements of Financial Position Information

Allowance for Doubtful Accounts

Changes in the net carrying amount of allowance for doubtful accounts are as follows (in millions):

			2020						2019						2018
Balance at beginning of period			$	70					$	62					$	59
Adoption of new accounting guidance (1)			7						—						—
Adjusted balance at beginning of period			77						62						59
Provision			29						27						24
Accounts written off, net of recoveries			(6)						(19)						(25)
Foreign currency translation and other			(2)						—						4
Balance at end of period			$	98					$	70					$	62

(1) The allowance for doubtful accounts resulted in a $7 million charge from the adoption of the new accounting standard on the measurement of credit losses on January 1, 2020. After tax impacts, this resulted in a $6 million decrease to Retained earnings. Refer to Note 2 “Summary of Significant Accounting Principles and Practices” for further information.

Other Current Assets

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

As of December 31			2020						2019
Costs to fulfill contracts with customers			$	339					$	335
Taxes receivable			95						88
Prepaid expenses			111						97
Other (1)			79						82
Total			$	624					$	602

(1)December 31, 2019 includes $4 million previously classified as “Receivables from the Divested Business”.

Fixed Assets, net

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

As of December 31			2020						2019
Software			$	808					$	727
Leasehold improvements			375						358
Computer equipment			249						250
Furniture, fixtures and equipment			246						225
Construction in progress			155						183
Other			34						37
Fixed assets, gross			1,867						1,780
Less: Accumulated depreciation			1,268						1,159
Fixed assets, net			$	599					$	621

Depreciation expense, which includes software amortization, was $167 million, $172 million, and $176 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Other Non-current Assets

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

As of December 31			2020						2019
Costs to obtain contracts with customers			$	184					$	171
Investments			74						53
Leases			89						100
Taxes receivable			125						102
Other			138						144
Total			$	610					$	570

Other Current Liabilities

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

As of December 31			2020						2019
Deferred revenue (1)			$	296					$	270
Taxes payable			80						93
Leases			234						210
Other			561						513
Total			$	1,171					$	1,086

(1)$454 million and $532 million was recognized in the Consolidated Statements of Income during the twelve months ended December 31, 2020 and December 31, 2019, respectively.

Other Non-current Liabilities

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

As of December 31			2020						2019
Taxes payable (1)			$	561					$	525
Leases			65						76
Compensation and benefits			53						49
Deferred revenue			76						62
Other			140						165
Total			$	895					$	877

(1)Includes $145 million for the non-current portion of the Transition Tax, as of December 31, 2020 and December 31, 2019. Refer to Note 11 “Income Taxes” for further information on the Transition Tax.

5. Restructuring

In 2017, Aon initiated a global restructuring plan (the “Restructuring Plan”) in connection with the Divested Business. The Restructuring Plan was intended to streamline operations across the organization and deliver greater efficiency, insight, and connectivity. The Company incurred all remaining costs for the Restructuring Plan, and the Restructuring Plan was closed in the fourth quarter of 2019. As such, for the year ended December 31, 2020, no charges were taken under the Restructuring Plan. For the years ended December 31, 2019 and 2018, $451 million and $485 million of restructuring expenses were charged under the Restructuring Plan.

As of December 31, 2019, the remaining liabilities for the Restructuring Plan were $204 million. During the year ended December 31, 2020, the Company made cash payments of $127 million, and the effect of foreign currency translation and other non-cash activity was $32 million, resulting in restructuring liabilities of $45 million as of December 31, 2020.

6. Acquisitions and Dispositions of Businesses

Completed Acquisitions

The Company completed six acquisitions during the year ended December 31, 2020 and three acquisitions during the year ended December 31, 2019. The following table includes the preliminary fair values of consideration transferred, assets acquired, and liabilities assumed as a result of the Company’s acquisitions (in millions):

			For the year ended December 31, 2020
Consideration transferred
Cash			$	385
Deferred, contingent, and other consideration			34
Aggregate consideration transferred			$	419
Assets acquired
Cash and cash equivalents			$	17
Receivables, net			19
Goodwill			314
Intangible assets, net			83
Current assets			16
Non-current assets			12
Total assets acquired			461
Liabilities assumed
Current liabilities			27
Non-current liabilities			15
Total liabilities assumed			42
Net assets acquired			$	419

Intangible assets are primarily technology and customer-related and contract-based assets. Those intangible assets acquired as part of a business acquisition in 2020 had a weighted average useful economic life of 6 years. Acquisition related costs for completed acquisitions incurred and recognized within Other general expense for the year ended December 31, 2020 were $7 million. Total revenue for these acquisitions included in the Company’s Consolidated Statement of Income for the year ended December 31, 2020 was approximately $44 million.

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

2020 Acquisitions

On April 6, 2020, the Company completed the acquisition of 100% share capital of Farmington Administrative Services LLC, a U.S.-based national provider of enrollment solutions and voluntary benefits, and certain assets of other Farmington companies.

On January 31, 2020, the Company completed the acquisition of 100% share capital of Cytelligence Inc., a Canadian-based cyber security firm that provides incident response advisory, digital forensic expertise, security consulting services, and cyber security training for employees to help organizations respond to cyber security threats and strengthen their security position.

On January 3, 2020, the Company completed the acquisition of 100% share capital of CoverWallet, Inc., a U.S.-based digital insurance platform for small- and medium-sized businesses.

On January 1, 2020, the Company completed the acquisition of 100% share capital of TRIUM GmbH Insurance Broker, an insurance broker based in Germany.

On January 1, 2020, the Company completed the acquisition of 100% share capital of Assimedia SA, an insurance broker based in Switzerland.

On January 1, 2020, the Company completed the acquisition of 100% share capital of Apollo Conseil et Courtage, an insurance broker based in France.

2019 Acquisitions

On July 31, 2019, the Company completed the transaction to acquire Ovatio Courtage SAS, an insurance broker based in France.

On July 31, 2019, the Company completed the transaction to acquire Zalba-Caldu Correduria de Seguros, S.A., a Spanish insurance broker.

On January 1, 2019, the Company completed the transaction to acquire Chapka Assurances SAS based in France.

Completed Dispositions

The Company completed one disposition during the year ended December 31, 2020. The Company completed eight dispositions during the year ended December 31, 2019 and four dispositions during the year ended December 31, 2018.

Total pretax gains, net of losses, for the years ended December 31, 2020 and 2019 were $25 million and $13 million, respectively. Total pretax losses, net of gains, for the year ended December 31, 2018 was $6 million. Gains and losses recognized as a result of a disposition are included in Other income (expense) in the Consolidated Statements of Income.

During 2018, the Company recorded a non-cash impairment charge of $176 million related to certain assets and liabilities held for sale. The impairment charge was recognized in Amortization and impairment of intangible assets on the Consolidated Statement of Income.

Other Significant Activity

On March 9, 2020, Aon and WTW, entered into the Combination, which is expected to close in the first half of 2021, subject to regulatory approval and other customary closing conditions. Refer to “Business Combination Agreement” within Part II Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information.

7. Goodwill and Other Intangible Assets

The changes in the net carrying amount of goodwill for the years ended December 31, 2020 and 2019, respectively, are as follows (in millions):

Balance as of January 1, 2019			$	8,171
Goodwill related to current year acquisitions			34
Goodwill related to disposals			(11)
Goodwill related to prior year acquisitions			2
Foreign currency translation			(31)
Balance as of December 31, 2019			$	8,165
Goodwill related to current year acquisitions			314
Goodwill related to disposals			(3)
Foreign currency translation			190
Balance as of December 31, 2020			$	8,666

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

			As of December 31
			2020																		2019
			Gross Carrying Amount						Accumulated Amortization and Impairment						Net Carrying Amount						Gross Carrying Amount						Accumulated Amortization and Impairment						Net Carrying Amount
Customer-related and contract-based			$	2,337					$	1,775					$	562					$	2,264					$	1,600					$	664
Tradenames (1)			14						13						1						1,029						956						73
Technology and other			435						358						77						380						334						46
Total			$	2,786					$	2,146					$	640					$	3,673					$	2,890					$	783

(1)In 2020, Aon wrote off $1.0 billion of fully amortized tradenames, including the Hewitt and Benfield tradenames. The company no longer expects to receive economic benefits from these tradenames.

Amortization expense and impairment charges from finite lived intangible assets were $246 million, $392 million, and $593 million for the years ended December 31, 2020, 2019, and 2018, respectively.

The estimated future amortization for finite-lived intangible assets as of December 31, 2020 is as follows (in millions):

						Estimated Future Amortization
For the years ended
2021						$	144
2022						102
2023						91
2024						73
2025						59
Thereafter						171
Total						$	640

8. Debt

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

As of December 31			2020						2019
Commercial paper			$	—					$	112
5.00% Senior Notes due September 2020			—						600
2.80% Senior Notes due March 2021 (1)			400						399
2.20% Senior Notes due November 2022			498						497
4.00% Senior Notes due November 2023			349						348
3.50% Senior Notes due June 2024			597						597
3.875% Senior Notes due December 2025			747						746
2.875% Senior Notes due May 2026 (EUR 500M)			606						550
8.205% Junior Subordinated Notes due January 2027			521						521
4.50% Senior Notes due December 2028			347						346
3.75% Senior Notes due May 2029			744						744
2.80% Senior Notes due May 2030			992						—
6.25% Senior Notes due September 2040			296						296
4.25% Senior Notes due December 2042			200						199
4.45% Senior Notes due May 2043			247						246
4.60% Senior Notes due June 2044			544						544
4.75% Senior Notes due May 2045			593						593
Other			48						1
Total debt			7,729						7,339
Less: Short-term debt and current portion of long-term debt			448						712
Total long-term debt			$	7,281					$	6,627

(1) The 2.80% Senior Notes due March 2021 were repaid in full on February 16, 2021.

Notes

On May 29, 2020, Aon Corporation, a Delaware corporation and a wholly owned subsidiary of Aon Corporation, issued an irrevocable notice of redemption to holders of its 5.00% Senior Notes, which were set to mature on September 30, 2020, for the redemption of all $600 million outstanding aggregate principal amount of the notes. The redemption date was on June 30, 2020 and resulted in a loss of $7 million due to extinguishment.

On May 12, 2020, Aon Corporation issued $1 billion 2.80% Senior Notes due May 2030. Aon Corporation used a portion of the net proceeds on June 30, 2020 to repay its outstanding 5.00% Senior Notes, which were set to mature on September 30, 2020. The Company intends to use the remainder to repay other borrowings and for general corporate purposes.

In March 2020, the Company’s $400 million 2.80% Senior Notes due March 2021 were classified as Short-term debt and current portion of long-term debt in the Consolidated Statements of Financial Position as the date of maturity is in less than one year.

On November 15, 2019, Aon Corporation issued $500 million 2.20% Senior Notes due November 2022. The Company used the net proceeds of the offering to pay down a portion of outstanding commercial paper and for general corporate purposes.

On May 2, 2019, Aon Corporation issued $750 million 3.75% Senior Notes due May 2029. The Company used the net proceeds of the offering to pay down a portion of outstanding commercial paper and for general corporate purposes.

Each of the notes issued by Aon Corporation is fully and unconditionally guaranteed by Aon Global Limited, Aon plc, and Aon Global Holding plc. Each of the notes issued by Aon Global Limited is fully and unconditionally guaranteed by Aon plc, Aon Global Holdings plc, and Aon Corporation. Refer to “Guarantee of Registered Securities” within Part II Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information regarding guarantees of outstanding debt securities. Each of the notes described 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, 2020.

Subsequent Events

On January 13, 2021, Aon Global Limited, a limited company organized under the laws of England and Wales and a wholly owned subsidiary of Aon plc, issued an irrevocable notice of redemption to holders of its 2.80% Senior Notes, which were set to mature in March 2021, for the redemption of all $400 million outstanding aggregate principal amount of the notes. The redemption date was on February 16, 2021 and resulted in an insignificant loss due to extinguishment.

Repayments of total debt as of December 31, 2020 are as follows (in millions):

2021			$	448
2022			500
2023			350
2024			600
2025			750
Thereafter			5,187
Total Repayments			7,835
Unamortized discounts, premiums, and debt issuance costs			(106)
Total Debt			$	7,729

Revolving Credit Facilities

As of December 31, 2020, Aon plc had two primary committed credit facilities outstanding: its $900 million multi-currency U.S. credit facility expiring in February 2022 and its $750 million multi-currency U.S. credit facility expiring in October 2023. Effective February 27, 2020, the $750 million multi-currency U.S. credit facility was increased by $350 million from the original $400 million. In aggregate, these two facilities provide $1.65 billion in available credit.

Each of these primary committed credit facilities includes customary representations, warranties, and covenants, including financial covenants that require Aon to maintain specified ratios of adjusted consolidated earnings before interest, taxes, depreciation, and amortization (“EBITDA”) to consolidated interest expense and consolidated debt to adjusted consolidated EBITDA, in each case, tested quarterly. At December 31, 2020, Aon did not have borrowings under either of these primary committed credit facilities, and was in compliance with the financial covenants and all other covenants contained therein during the rolling 12 months ended December 31, 2020.

Commercial Paper

Aon Corporation has established a U.S. commercial paper program (the “U.S. Program”) and Aon Global Holdings plc has established a European multi-currency commercial paper program (the “European Program” and, together with the U.S. Program, the “Commercial Paper Programs”). On April 1, 2020 the Company entered into an agreement increasing the aggregate outstanding borrowings under the U.S. Program by $300 million, to an aggregate amount equal to $900 million. On August 5, 2020, Aon Global Holdings plc established the European Program with aggregate amount equal to €625 million. Subsequently on September 30, 2020, a European multi-currency commercial paper program previously established by Aon Global Limited, which had an aggregate amount equal to €525 million, was withdrawn. The Commercial Paper Programs remain fully backed by the committed credit facilities.

Commercial paper may be issued in aggregate principal amounts of up to $900 million under the U.S. Program and €625 million under the European Program, not to exceed the amount of the Company’s committed credit facilities, which was $1.65 billion at December 31, 2020. In connection with the Ireland Reorganization, on April 1, 2020, Aon plc and Aon Global Holdings plc, a company incorporated under the laws of England and Wales, entered into various agreements pursuant to which they agreed to guarantee the U.S. Program, which was previously solely guaranteed by Aon Global Limited, and the European Program, which was previously solely guaranteed by Aon Corporation. As of December 31, 2020, the U.S. Program was fully and unconditionally guaranteed by Aon plc, Aon Global Limited and Aon Global Holdings plc and the European Program was fully and unconditionally guaranteed by Aon plc, Aon Global Limited, and Aon Corporation.

Commercial paper outstanding, which is included in Short-term debt and current portion of long-term debt in the Company’s Consolidated Statements of Financial Position, is as follows (in millions):

As of December 31						2020						2019
Commercial paper outstanding						$	—					$	112

The weighted average commercial paper outstanding and its related interest rates are as follows (in millions, except percentages):

						Years Ended December 31
						2020						2019
Weighted average commercial paper outstanding						$	343					$	511
Weighted average interest rate of commercial paper outstanding						1.47		%				0.27		%

9. Lease Commitments

The classification of operating and finance lease asset and liability balances within the Consolidated Statement of Financial Position is as follows (in millions):

As of December 31						2020			2019
Assets
Operating lease assets			Operating lease right-of-use assets			$	911		$	929
Finance lease assets			Other non-current assets			89			100
Total lease assets						$	1,000		$	1,029
Liabilities
Current lease liabilities
Operating			Other current liabilities			$	204		$	186
Finance			Other current liabilities			30			24
Non-current lease liabilities
Operating			Non-current operating lease liabilities			897			944
Finance			Other non-current liabilities			65			76
Total lease liabilities						$	1,196		$	1,230

The components of lease costs are as follows (in millions):

			Years Ended December 31
			2020			2019
Operating lease cost			$	221		$	234
Finance lease costs
Amortization of leased assets			25			26
Interest on lease liabilities			3			2
Variable lease cost			48			60
Short-term lease cost (1)			10			5
Sublease income			(32)			(32)
Net lease cost			$	275		$	295

(1) Short-term lease cost does not include expenses related to leases with a lease term of one month or less.

Weighted average remaining lease term and discount rate related to operating and finance leases are as follows:

As of December 31			2020			2019
Weighted average remaining lease term (years)
Operating leases			7.4			7.9
Finance leases			4.2			4.4
Weighted average discount rate
Operating leases			2.9		%	3.2		%
Finance leases			1.0		%	2.0		%

Other cash and non-cash related activities are as follows (in millions):

			Years Ended December 31
			2020			2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases			$	236		$	264
Financing cash flows for finance leases			$	12		$	17
Non-cash related activities
ROU assets obtained in exchange for new operating lease liabilities			$	146		$	155
ROU assets obtained in exchange for new finance lease liabilities			$	13		$	48
Operating lease ROU asset expense (1)			$	178		$	195
Changes in Non-current operating lease liabilities (1)			$	(47)		$	(70)

(1)The Company has recorded non-cash changes in Operating lease ROU assets and Non-current operating lease liabilities through Other assets and liabilities in Cash flows from operations within the Consolidated Statement of Cash Flows.

Maturity analysis of operating and finance leases as of December 31, 2020 are as follows (in millions):

			Operating Leases						Finance Leases						Total
2021			$	226					$	31					$	257
2022			209						20						229
2023			160						18						178
2024			130						18						148
2025			110						10						120
Thereafter			382						—						382
Total undiscounted future minimum lease payments			1,217						97						1,314
Less: Imputed interest			(116)						(2)						(118)
Present value of lease liabilities			$	1,101					$	95					$	1,196

10. Income Taxes

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

Years ended December 31			2020						2019						2018
Income (loss) before income taxes:
Ireland			$	(86)					$	200					$	208
U.K.			634						228						(240)
U.S.			(29)						(219)						(601)
Other			1,946						1,662						1,879
Total			$	2,465					$	1,871					$	1,246
Income tax expense:
Current:
Ireland			$	2					$	1					$	2
U.K.			30						20						21
U.S. federal			126						22						101
U.S. state and local			22						41						35
Other			259						249						212
Total current tax expense			$	439					$	333					$	371
Deferred tax expense (benefit):
Ireland			$	(1)					$	(1)					$	(1)
U.K.			39						35						19
U.S. federal			(72)						(20)						(165)
U.S. state and local			(4)						(27)						(56)
Other			47						(23)						(22)
Total deferred tax expense (benefit)			$	9					$	(36)					$	(225)
Total income tax expense			$	448					$	297					$	146

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 Ireland, 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. Due to the Ireland Reorganization, the 2020 reconciliation is based on the Irish statutory corporate tax rate of 25.0%, while the 2019 and 2018 reconciliations are based on the U.K. statutory corporate tax rate of 19.0% and 19.0%, respectively. The reconciliation to the provisions from continuing operations reflected in the Consolidated Financial Statements is as follows:

Years ended December 31			2020						2019						2018
Statutory tax rate			25.0%						19.0%						19.0%
U.S. state income taxes, net of U.S. federal benefit			1.0						0.5						(0.4)
Taxes on international operations (1) (4)			(9.8)						(6.0)						(7.3)
Nondeductible expenses			2.1						1.6						2.7
Adjustments to prior year tax requirements (4)			—						0.1						0.9
Deferred tax adjustments, including statutory rate changes			0.7						—						—
Deferred tax adjustments, international earnings			0.7						—						—
Adjustments to valuation allowances			—						1.8						3.8
Change in uncertain tax positions			1.5						2.2						0.9
Excess tax benefits related to shared based compensation (2)			(2.2)						(2.8)						(3.6)
U.S. Tax Reform impact (3)			—						(0.3)						7.1
Loss on disposition			—						—						(10.2)
Capital Losses			(1.8)						—						—
Non-deductible transaction costs			1.3						—						—
Other — net			(0.3)						(0.2)						(1.2)
Effective tax rate			18.2%						15.9%						11.7%

(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 25.0%, 19.0% and 19.0% at December 31, 2020, 2019, and 2018, 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 and the tax holiday in Singapore.

(2)Excess tax benefits and deficiencies from share-based payment transactions are recognized as income tax expense or benefit in the Company’s Consolidated Statements of Income.

(3)The impact of the Tax Reform Act including the Transition Tax, the re-measurement of U.S. deferred tax assets and liabilities from 35% to 21%, withholding tax accruals, and the allocation of tax benefit between continuing operations and discontinued operations related to utilization of foreign tax credits.

(4)In July 2020, final U.S. tax regulations were issued regarding the global intangible low-tax income (“GILTI”) high tax election, allowing taxpayers to exclude from GILTI the income of a Controlled Foreign Corporation that incurs a foreign tax rate more than 90% of the top U.S. corporate tax rate. A GILTI high tax election may be made on an annual basis, and taxpayers may choose to apply the election to taxable years beginning after December 31, 2017. The Company expects to make the GILTI high-tax election for 2020 and 2019 and therefore recorded the impact of making the election for both years.

The Company has elected to account for global intangible low-taxed income (“GILTI”) in the period in which it is incurred, and therefore has not provided deferred tax impacts of GILTI in its Consolidated Financial Statements.

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

As of December 31			2020						2019
Deferred tax assets:
Net operating loss, capital loss, interest, and tax credit carryforwards			$	653					$	440
Employee benefit plans			312						373
Lease liabilities			248						247
Other accrued expenses			103						68
Deferred revenue			36						24
Investment basis differences			28						28
Lease and service guarantees			2						3
Accrued interest			—						116
Other			54						57
Total			1,436						1,356
Valuation allowance on deferred tax assets			(205)						(200)
Total			$	1,231					$	1,156
Deferred tax liabilities:
Intangibles and property, plant and equipment			$	(291)					$	(251)
Lease right-of-use asset			(211)						(219)
Deferred costs			(141)						(128)
Unremitted earnings			(37)						(28)
Unrealized foreign exchange gains			(26)						(26)
Other accrued expenses			(22)						(25)
Other			(41)						(33)
Total			$	(769)					$	(710)
Net deferred tax asset			$	462					$	446

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			2020						2019
Deferred tax assets — non-current			$	724					$	645
Deferred tax liabilities — non-current			(262)						(199)
Net deferred tax asset			$	462					$	446

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized and adjusts the valuation allowance accordingly. Considerations with respect to the realizability of deferred tax assets include the period of expiration of the deferred tax asset, historical earnings and projected future taxable income by jurisdiction as well as tax liabilities for the tax jurisdiction to which the tax asset relates. Significant management judgment is required in determining the assumptions and estimates related to the amount and timing of future taxable income. Valuation allowances have been established primarily with regard to the tax benefits of certain net operating loss, capital loss, and interest carryforwards. Valuation allowances increased by $5 million as of December 31, 2020, when compared to December 31, 2019. The change is primarily attributable to an increase in valuation allowances related to capital losses carryforwards offset by the release of the valuation allowance related to certain interest carryforwards.

The Company generally intends to limit distributions from foreign subsidiaries to earnings previously taxed in the U.S., primarily as a result of the Transition Tax or GILTI, or to repatriations that would otherwise not generate a U.S. tax liability. As of December 31, 2020, the Company has accrued $37 million for local country income taxes, withholding taxes and state income taxes on those undistributed earnings that are not indefinitely reinvested. The Company has not provided for deferred taxes on outside basis differences in our investments in our foreign subsidiaries that are unrelated to these accumulated undistributed earnings, as these outside basis differences are indefinitely reinvested. A determination of the unrecognized deferred taxes related to these other components of our outside basis differences is not practicable.

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

As of December 31			2020						2019
U.K.
Operating loss carryforwards			$	266					$	438
Capital loss carryforwards			$	577					$	411
Interest carryforwards			$	121					$	203
U.S.
Federal operating loss carryforwards			$	49					$	1
Federal capital loss carryforwards			$	112					$	112
Federal interest carryforwards			$	1,220					$	355
State operating loss carryforwards			$	378					$	376
State capital loss carryforwards			$	123					$	123
State interest carryforwards			$	573					$	172
Other Non-U.S.
Operating loss carryforwards			$	400					$	308
Capital loss carryforwards			$	42					$	29
Interest carryforwards			$	34					$	159

The U.K. operating losses, capital losses, and interest carryforward each have an indefinite carryforward period. The federal operating loss carryforwards generated through December 31, 2017 expire at various dates between 2034 and 2036 while federal operating loss carryforwards generated after this date have indefinite carryforward periods. State net operating losses as of December 31, 2020 have various carryforward periods and will begin to expire in 2021. Federal and state capital losses can be carried forward until 2023. Federal and state interest carryforwards have indefinite carryforward periods. Operating and capital losses in other non-U.S. jurisdictions have various carryforward periods and will begin to expire in 2021. The interest carryforwards in other non-U.S. jurisdictions have various carryforward periods and will begin to expire in 2025.

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 $97 million, $90 million, and $77 million during the years ended December 31, 2020, 2019, and 2018, respectively. The impact of this tax holiday on diluted earnings per share was $0.42, $0.37, and $0.31 during the years ended December 31, 2020, 2019, and 2018, respectively.

Uncertain Tax Positions

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

			2020						2019
Balance at January 1			$	299					$	279
Additions based on tax positions related to the current year			25						23
Additions for tax positions of prior years			7						12
Reductions for tax positions of prior years			(3)						(5)
Settlements			—						(5)
Business combinations			—						—
Lapse of statute of limitations			(7)						(5)
Foreign currency translation			—						—
Balance at December 31			$	321					$	299

The Company’s liability for uncertain tax positions as of December 31, 2020, 2019, and 2018, includes $270 million, $248 million, and $228 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 $21 million, $24 million, and $22 million in 2020, 2019, and 2018, respectively. The Company recorded a liability for interest and penalties of $120 million, $99 million, and $77 million as of December 31, 2020, 2019, and 2018, 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 2008. The Company has concluded income tax examinations in its primary non-U.S. jurisdictions through 2008.

11. Shareholders’ Equity

Distributable Profits

The Company is required under Irish law to have available “distributable profits” to make share repurchases or pay dividends to shareholders. Distributable profits are created through the earnings of the Irish parent company and, among other methods, through intercompany dividends or a reduction in share capital approved by the High Court of Ireland. Distributable profits are not linked to a U.S. GAAP reported amount (e.g., retained earnings). Following the Ireland Reorganization, we must reestablish distributable profits of the parent entity and will regularly create distributable profits as required to meet our capital needs. As of December 31, 2020 and 2019 (associated with Aon Global Limited), the Company had distributable profits in excess of $0.2 billion and $32.4 billion, respectively. We believe that we have the ability to create sufficient distributable profits for the foreseeable future.

Ordinary Shares

Aon has a share repurchase program authorized by the Company’s Board of Directors. The Repurchase Program was established in April 2012 with $5.0 billion in authorized repurchases, and was increased by $5.0 billion in authorized repurchases in each of November 2014, June 2017, and November 2020 for a total of $20.0 billion in repurchase authorizations.

Under the Repurchase Program, the Company’s Class A Ordinary Shares may be repurchased through the open market or in privately negotiated transactions, from time to time, based on prevailing market conditions, and will be funded from available capital.

The following table summarizes the Company’s share repurchase activity (in millions, except per share data):

						Twelve months ended December 31
						2020						2019
Shares repurchased						8.5						10.5
Average price per share						$	206.28					$	186.33
Costs recorded to retained earnings
Total repurchase cost						$	1,761					$	1,950
Additional associated costs						2						10
Total costs recorded to retained earnings						$	1,763					$	1,960

Due to COVID-19 the Company temporarily suspended share repurchases in the second quarter and resumed the Repurchase Program during the third quarter of 2020. At December 31, 2020, the remaining authorized amount for share repurchases under the Repurchase Program was approximately $5.3 billion. Under the Repurchase Program, the Company has repurchased a total of 137.3 million shares for an aggregate cost of approximately $14.7 billion.

Net Income Per Share

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

Years ended December 31			2020						2019						2018
Basic weighted average ordinary shares outstanding			231.9						238.6						245.2
Dilutive effect of potentially issuable shares			1.2						2.0						1.8
Diluted weighted average ordinary shares outstanding			233.1						240.6						247.0

Potentially issuable shares are not included in the computation of Diluted net income per share attributable to Aon shareholders if their inclusion would be antidilutive. There were no shares excluded from the calculation in any of the years presented.

Accumulated Other Comprehensive Loss

Changes in Accumulated other comprehensive loss by component, net of related tax, are as follows (in millions):

			Change in Fair Value of Financial Instruments (1)						Foreign Currency Translation Adjustments						Postretirement Benefit Obligation (2)						Total
Balance at December 31, 2017			$	(25)					$	(879)					$	(2,592)					(3,496)
Adoption of new accounting guidance			(1)						—						—						(1)
Balance at January 1, 2018			(26)						(879)						(2,592)						(3,497)
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications			(15)						(437)						(124)						(576)
Tax benefit (expense)			18						(3)						28						43
Other comprehensive income (loss) before reclassifications, net			3						(440)						(96)						(533)
Amounts reclassified from accumulated other comprehensive income (loss)
Amounts reclassified from accumulated other comprehensive income (loss)			11						—						146						157
Tax benefit (expense)			(3)						—						(33)						(36)
Amounts reclassified from accumulated other comprehensive income (loss), net (3)			8						—						113						121
Net current period other comprehensive income (loss)			11						(440)						17						(412)
Balance at December 31, 2018			(15)						(1,319)						(2,575)						(3,909)
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications			(10)						15						(287)						(282)
Tax benefit (expense)			1						(1)						58						58
Other comprehensive income (loss) before reclassifications, net			(9)						14						(229)						(224)
Amounts reclassified from accumulated other comprehensive income (loss)
Amounts reclassified from accumulated other comprehensive income (loss)			14						—						109						123
Tax benefit (expense)			(2)						—						(21)						(23)
Amounts reclassified from accumulated other comprehensive income (loss), net (3)			12						—						88						100
Net current period other comprehensive income (loss)			3						14						(141)						(124)
Balance at December 31, 2019			(12)						(1,305)						(2,716)						(4,033)
Other comprehensive income (loss) before reclassifications
Other comprehensive income (loss) before reclassifications			1						258						(255)						4
Tax benefit (expense)			—						2						60						62
Other comprehensive income (loss) before reclassifications, net			1						260						(195)						66
Amounts reclassified from accumulated other comprehensive income (loss)
Amounts reclassified from accumulated other comprehensive income (loss)			15						—						125						140
Tax benefit (expense)			(3)						—						(31)						(34)
Amounts reclassified from accumulated other comprehensive income (loss), net (3)			12						—						94						106
Net current period other comprehensive income (loss)			13						260						(101)						172
Balance at December 31, 2020			$	1					$	(1,045)					$	(2,817)					$	(3,861)

(1)Reclassifications from this category included in Accumulated other comprehensive loss are recorded in Total revenue, Interest expense, and Compensation and benefits in the Consolidated Statements of Income. Refer to Note 14 “Derivatives and Hedging” for further information regarding the Company’s derivative and hedging activity.

(2)Reclassifications from this category included in Accumulated other comprehensive loss are recorded in Other income (expense) in the Consolidated Statements of Income.

(3)It is the Company’s policy to release income tax effects from Accumulated other comprehensive loss using the portfolio approach.

12. Employee Benefits

Defined Contribution Savings Plans

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

Years ended December 31			2020						2019						2018
U.S.			$	87					$	98					$	98
U.K.			42						41						45
Netherlands and Canada			26						25						25
Total			$	155					$	164					$	168

Pension and Other Postretirement Benefits

The Company sponsors defined benefit pension and postretirement health and welfare plans that provide retirement, medical, and life insurance benefits. The postretirement health care 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 Canada 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, 2020 and 2019, and a statement of the funded status as of December 31, 2020 and 2019, for Aon’s significant U.K., U.S., and other major pension plans, which are located in the Netherlands and Canada. These plans represent approximately 91% of the Company’s projected benefit obligations.

			U.K.												U.S.												Other
(millions)			2020						2019						2020						2019						2020						2019
Change in projected benefit obligation
At January 1			$	4,779					$	4,129					$	3,192					$	2,877					$	1,425					$	1,271
Service cost			—						—						—						—						—						—
Interest cost			88						109						85						108						19						27
Plan amendment			3						10						—						—						—						—
Settlements			(7)						(22)						—						—						—						—
Actuarial loss (gain)			520						594						274						373						112						177
Benefit payments			(209)						(168)						(171)						(166)						(44)						(42)
Foreign currency impact			232						127						—						—						113						(8)
As of December 31			$	5,406					$	4,779					$	3,380					$	3,192					$	1,625					$	1,425
Accumulated benefit obligation at end of year			$	5,406					$	4,779					$	3,380					$	3,192					$	1,592					$	1,391
Change in fair value of plan assets
At January 1			$	5,959					$	5,225					$	2,066					$	1,796					$	1,303					$	1,155
Actual return on plan assets			618						687						289						398						109						182
Employer contributions			8						78						92						38						20						19
Settlements			(7)						(22)						—						—						—						—
Benefit payments			(209)						(168)						(171)						(166)						(44)						(42)
Foreign currency impact			283						159						—						—						109						(11)
As of December 31			$	6,652					$	5,959					$	2,276					$	2,066					$	1,497					$	1,303
Market related value at end of year			$	6,652					$	5,959					$	2,076					$	1,969					$	1,497					$	1,303
Amount recognized in Statement of Financial Position as of December 31
Funded status			$	1,246					$	1,180					$	(1,104)					$	(1,126)					$	(128)					$	(122)
Unrecognized prior-service cost			43						40						—						1						(7)						(6)
Unrecognized loss			1,286						1,204						1,812						1,762						521						460
Net amount recognized			$	2,575					$	2,424					$	708					$	637					$	386					$	332

During 2020 and 2019, the net actuarial losses increased the benefit obligation primarily due to the decrease in discount rates.

In November 2020, the Company entered into an insurance contract that covers a portion of the assets within a select U.K. pension scheme. The transaction resulted in a decrease in Prepaid pension assets and Accumulated other comprehensive income of $94 million.

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

			U.K.												U.S.												Other
			2020						2019						2020						2019						2020						2019
Prepaid benefit cost (1)			$	1,268					$	1,200					$	—					$	—					$	—					$	—
Accrued benefit liability - current (2)			(1)						(1)						(52)						(50)						(5)						(5)
Accrued benefit liability - non-current (3)			(21)						(19)						(1,052)						(1,076)						(123)						(117)
Accumulated other comprehensive loss			1,329						1,244						1,812						1,763						514						454
Net amount recognized			$	2,575					$	2,424					$	708					$	637					$	386					$	332

(1)Included in Prepaid pension

(2)Included in Other current liabilities

(3)Included in Pension, other postretirement, and postemployment 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, 2020 and 2019 consist of (in millions):

			U.K.												U.S.												Other
			2020						2019						2020						2019						2020						2019
Net loss			$	1,286					$	1,204					$	1,812					$	1,762					$	521					$	460
Prior service cost (income)			43						40						—						1						(7)						(6)
Total			$	1,329					$	1,244					$	1,812					$	1,763					$	514					$	454

In 2020, 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 $3.3 billion, an ABO of $3.3 billion, and plan assets with a fair value of $2.2 billion. U.K. plans with a PBO and an ABO in excess of the fair value of plan assets had a PBO of $54 million, an ABO of $54 million and plan assets with a fair value of $32 million. Other plans with a PBO in excess of the fair value of plan assets had a PBO of $1.6 billion and plan assets with a fair value of $1.4 billion, and other plans with an ABO in excess of the fair value of plan assets had an ABO of $443 million and plan assets with a fair value of $342 million.

In 2019, U.S. plans with a PBO and an ABO in excess of the fair value of plan assets had a PBO of $3.1 billion, an ABO of $3.1 billion, and plan assets of $2.0 billion. U.K. plans with a PBO and an ABO in excess of the fair value of plan assets had a PBO of $54 million, an ABO of $54 million and plan assets with a fair value of $34 million. Other plans with a PBO in excess of the fair value of plan assets had a PBO of $1.4 billion and plan assets with a fair value of $1.3 billion, and plans with an ABO in excess of the fair value of plan assets had an ABO of $406 million and plan assets with a fair value of $311 million.

Service cost is reported in Compensation and benefits and all other components are reported in Other income (expense) as follows (in millions):

			U.K.																		U.S.																		Other
			2020						2019						2018						2020						2019						2018						2020						2019						2018
Service cost			$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—
Interest cost			88						109						109						85						108						99						19						27						27
Expected return on plan assets, net of administration expenses			(159)						(191)						(192)						(134)						(136)						(144)						(34)						(40)						(45)
Amortization of prior-service cost			2						1						1						1						2						2						—						—						—
Amortization of net actuarial loss			30						29						28						68						53						59						12						12						12
Net periodic benefit (income) cost			(39)						(52)						(54)						20						27						16						(3)						(1)						(6)
Settlement expense			2						5						37						—						—						—						—						—						—
Total net periodic benefit cost (income)			$	(37)					$	(47)					$	(17)					$	20					$	27					$	16					$	(3)					$	(1)					$	(6)

The Company uses a full-yield curve approach in the estimation of the service and interest cost components of net periodic pension and postretirement benefit cost for its major pension and other postretirement benefit plans. This estimation was obtained by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

Transfer payments from certain U.K. pension plans exceeded the plan’s service and interest cost in 2020 and 2019. This triggered settlement accounting which required immediate recognition of a portion of the accumulated losses associated with the plan. Consequently, the Company recognized a non-cash settlement charge for approximately £2 million in 2020 ($2 million using December 31, 2020 exchange rates) and approximately £4 million in 2019 ($5 million using December 31, 2019 exchange rates).

The Company approved a plan to offer a voluntary one-time lump sum payment option to certain eligible employees 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 in 2018. As of December 31, 2018, lump sum payments from plan assets of £139 million ($176 million using December 31, 2018 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 fourth quarter of 2018, which in aggregate resulted in a reduction to the projected benefit obligation of £122 million ($154 million using December 31, 2018 exchange rates) as well as a non-cash settlement charge of £28 million ($37 million using average exchange rates) for the year ended December 31, 2018.

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

			U.K.												U.S. (1)												Other
			2020						2019						2020						2019						2020						2019
Discount rate			1.45%						2.09%						1.74 - 2.45%						2.72 - 3.17%						0.38 - 2.47%						0.91 - 3.10%
Rate of compensation increase			3.22 - 3.72%						3.24 - 3.74%						N/A						N/A						1.00 - 3.00%						1.00 - 3.00%
Underlying price inflation			2.12%						1.78%						N/A						N/A						2.00%						2.00%

(1)U.S. pension plans are frozen and therefore not impacted by compensation increases or price inflation.

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

			U.K.																		U.S.																		Other
			2020						2019						2018						2020						2019						2018						2020						2019						2018
Discount rate			1.89%						2.95%						2.63%						2.36 - 2.76%						3.92 - 4.26%						3.27 - 3.61%						0.74 - 2.90%						1.89 - 3.88%						1.78 - 3.39%
Expected return on plan assets, net of administration expenses			2.74%						3.64%						3.34%						3.30 - 7.04%						7.05%						7.71%						2.10 - 3.10%						2.50 - 4.10%						1.70 - 4.85%
Rate of compensation increase			3.24 - 3.74%						3.73 - 4.23%						3.70 - 4.20%						N/A						N/A						N/A						1.00 - 3.00%						1.00 - 3.00%						1.00 - 3.00%

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 of 7.04% on U.S. plan assets 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, as well as other financial instruments to minimize downside risk.

No plan assets are expected to be returned to the Company during 2021.

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 15 “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, 2020 and December 31, 2019, by asset category, are as follows (in millions):

									Fair Value Measurements Using
Asset Category			Balance at December 31, 2020						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)			$	79					$	79					$	—					$	—
Equity investments:
Equity securities			207						207						—						—
Equity derivatives			62						—						62						—
Pooled funds (2)			640						90						—						—
Fixed income investments:
Corporate bonds			167						—						167						—
Government and agency bonds			233						200						33						—
Pooled funds (2)			543						212						—						—
Other investments:
Real estate (2) (3)			163						—						—						—
Alternative investments (2) (4)			182						—						—						—
Total			$	2,276					$	788					$	262					$	—

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

(2)Certain investments 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 property funds and trusts holding direct real estate investments.

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

									Fair Value Measurements Using
Asset Category			Balance at December 31, 2019						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)			$	77					$	77					$	—					$	—
Equity investments:
Equity securities			195						195						—						—
Equity derivatives			22						—						22						—
Pooled funds (2)			583						—						—						—
Fixed income investments:
Corporate bonds			128						—						128						—
Government and agency bonds			199						162						37						—
Asset-backed securities			3						—						3						—
Pooled funds (2)			545						—						—						—
Other investments:
Real estate and REITs (3)			133						—						—						—
Alternative investments (2) (4)			181						—						—						—
Total			$	2,066					$	434					$	190					$	—

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

(2)Certain investments 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 property funds and trusts holding direct real estate investments.

(4)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, 2020 and December 31, 2019, by asset category, are as follows (in millions):

									Fair Value Measurements Using
			Balance at December 31, 2020						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)			$	182					$	182					$	—					$	—
Equity investments:
Pooled funds (2)			4						—						—						—
Fixed income investments:
Derivatives (3)			(1,424)						—						(1,424)						—
Corporate bonds			4						4
Government and agency bonds			2,872						2,872						—						—
Annuities			2,625						—						—						2,625
Pooled funds (2)			875						—						—						—
Other investments:
Real estate (2) (4)			117						—						—						—
Pooled funds (2) (5)			1,397						4						—						—
Total			$	6,652					$	3,062					$	(1,424)					$	2,625

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

(2)Certain investments 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 equity securities and equity derivatives, including repurchase agreements.

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

(5)Consists of multi-strategy limited partnerships, private equity, hedge funds, and collective investment schemes with a diversified portfolio of cash, equities, equity related securities, derivatives, and/or fixed income securities.

									Fair Value Measurements Using
			Balance at December 31, 2019						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)			$	81					$	81					$	—					$	—
Equity investments:
Pooled funds (2)			119						—						—						—
Fixed income investments:
Derivatives (3)			(1,205)						—						(1,205)						—
Government and agency bonds			2,667						2,667						—						—
Annuities			1,849						—						—						1,849
Pooled funds (2)			1,486						—						—						—
Other investments:
Real estate (2) (4)			180						—						—						—
Pooled funds (2) (5)			782						—						—						—
Total			$	5,959					$	2,748					$	(1,205)					$	1,849

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

(2)Certain investments 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 equity securities and equity derivatives, including repurchase agreements.

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

(5)Consists of multi-strategy limited partnerships, private equity, hedge funds, and collective investment schemes with a diversified portfolio of cash, equities, equity related securities, derivatives, and/or fixed income securities.

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, 2020 and December 31, 2019 (in millions):

Fair Value Measurements Using Level 3 Inputs			Annuities
Balance at January 1, 2019			$	1,688
Actual return on plan assets:
Relating to assets still held at December 31, 2019			113
Foreign exchange			48
Balance at December 31, 2019			1,849
Actual return on plan assets:
Relating to assets still held at December 31, 2020			13
Purchases, sales and settlements-net			682
Foreign exchange			81
Balance at December 31, 2020			$	2,625

The fair values of the Company’s other major pension plan assets at December 31, 2020 and December 31, 2019, by asset category, are as follows (in millions):

									Fair Value Measurements Using
			Balance at December 31, 2020						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)			$	37					$	37					$	—					$	—
Equity investments:
Equity securities			75						75						—						—
Pooled funds (2)			290						—						—						—
Fixed income investments:
Government and agency bonds			395						395						—						—
Pooled funds (2)			627						—						—						—
Other investments:
Alternative investments (2) (3)			63						—						—						—
Real estate (2) (4)			10						—						—						—
Total			$	1,497					$	507					$	—					$	—

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

(2)Certain investments 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 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, 2019						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)			$	5					$	5					$	—					$	—
Equity investments:
Pooled funds (2)			323						—						—						—
Fixed income investments:
Pooled funds (2)			907						—						—						—
Other investments:
Alternative investments (2) (3)			62						—						—						—
Real estate (2) (4)			6						—						—						—
Total			$	1,303					$	5					$	—					$	—

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

(2)Certain investments 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 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 weighted average target allocations. At December 31, 2020, the weighted average targeted allocation for the U.S. plans was 35% for equity investments, 30% for fixed income investments, and 35% for 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, 2020, the weighted average targeted allocation for the U.K. and non-U.S. plans was 6% for equity investments, 84% for fixed income investments, and 11% for other investments.

Cash Flows

Contributions

Based on current assumptions, in 2021, the Company expects to contribute approximately $8 million, $95 million, and $19 million to its significant U.K., U.S., and other major pension plans, respectively.

Estimated Future Benefit Payments

Estimated future benefit payments for plans, not including voluntary one-time lump sum payments, are as follows at December 31, 2020 (in millions):

						U.K.						U.S.						Other
2021						$	161					$	192					$	48
2022						$	167					$	193					$	49
2023						$	174					$	190					$	50
2024						$	180					$	192					$	51
2025						$	185					$	183					$	52
2026 – 2030						$	1,007					$	893					$	274

U.S. and Canadian Other Postretirement 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, 2020 and 2019 for the Company’s other significant postretirement benefit plans located in the U.S. and Canada (in millions):

			2020						2019
Accumulated projected benefit obligation			$	117					$	103
Fair value of plan assets			17						16
Funded status			(100)						(87)
Unrecognized prior-service credit			(1)						(1)
Unrecognized loss			13						3
Net amount recognized			$	(88)					$	(85)

Other information related to the Company’s other postretirement benefit plans are as follows:

			2020						2019						2018
Net periodic benefit cost recognized (millions)			$4						$3						$3
Weighted-average discount rate used to determine future benefit obligations			2.10 - 2.58%						2.93 - 3.25%						3.91 - 4.26%
Weighted-average discount rate used to determine net periodic benefit costs			2.93 - 3.25%						3.91 - 4.26%						3.32 - 3.64%

Based on current assumptions, the Company expects:

• The amount in Accumulated other comprehensive income expected to be recognized as a component of net periodic benefit cost during 2021 is $0.4 million net loss and $0.2 million of prior-service credit.

• To contribute $5 million to fund significant other postretirement benefit plans during 2021.

• Estimated future benefit payments will be approximately $5 million each year for 2021 through 2025, and $26 million in aggregate for 2026-2030.

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 7% per year, because of this cap, these plans are effectively limited to 5% per year in the future.

13. 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			2020						2019						2018
Restricted share units (“RSUs”)			$	186					$	198					$	186
Performance share awards (“PSAs”)			116						110						143
Employee share purchase plans			10						9						9
Total share-based compensation expense			312						317						338
Tax benefit			61						66						74
Share-based compensation expense, net of tax			$	251					$	251					$	264

Restricted Share Units

RSUs generally vest between three and five years. The fair value of RSUs is based upon the market value of the Company’s Class A 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.

The following table summarizes the status of the Company’s RSUs (shares in thousands, except fair value):

			2020												2019												2018
Years ended December 31			Shares						Fair Value at Date of Grant (1)						Shares						Fair Value at Date of Grant (1)						Shares						Fair Value at Date of Grant (1)
Non-vested at beginning of year			3,634						$	143					4,208						$	120					4,849						$	104
Granted			1,329						$	185					1,306						$	175					1,500						$	141
Vested			(1,426)						$	133					(1,661)						$	113					(1,943)						$	97
Forfeited			(228)						$	157					(219)						$	131					(198)						$	114
Non-vested at end of year			3,309						$	163					3,634						$	143					4,208						$	120

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

The fair value of RSUs that vested during 2020, 2019 and 2018 was $190 million, $187 million, and $189 million, respectively.

Unamortized deferred compensation expense amounted to $377 million as of December 31, 2020, 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 related performance over a three-year period. The actual issuance 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 the Company’s Class A ordinary shares 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 in the Consolidated Statements of Income, if necessary. Dividend equivalents are not paid on PSAs.

The following table summarizes 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, 2020, 2019, and 2018, respectively (shares in thousands and dollars in millions, except fair value):

			2020						2019						2018
Target PSAs granted during period			500						467						564
Weighted average fair value per share at date of grant			$	161					$	165					$	134
Number of shares that would be issued based on current performance levels			495						784						830
Unamortized expense, based on current performance levels			$	58					$	41					$	—

During 2020, the Company issued approximately 0.6 million shares in connection with performance achievements related to the 2017-2019 LPP. During 2019, the Company issued approximately 0.7 million shares in connection with performance achievements related to the 2016-2018 LPP cycle. During 2018, the Company issued approximately 1.0 million shares in connection with performance achievements related to the 2015-2017 LPP cycle.

14. 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 or other transactions denominated in a currency that differs from 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 90-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 (expense) in the Consolidated Statements of Income.

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

			Notional Amount												Net Amount of Derivative Assets Presented in the Statements of Financial Position (1)												Net Amount of Derivative Liabilities Presented in the Statements of Financial Position (2)
As of December 31			2020						2019						2020						2019						2020						2019
Foreign exchange contracts
Accounted for as hedges			$	633					$	579					$	33					$	16					$	—					$	1
Not accounted for as hedges (3)			367						297						1						2						1						—
Total			$	1,000					$	876					$	34					$	18					$	1					$	1

(1)Included within Other current assets ($11 million in 2020 and $7 million in 2019) or Other non-current assets ($23 million in 2020 and $11 million in 2019).

(2)Included within Other current liabilities ($1 million in 2020 and $1 million in 2019).

(3)These contracts typically are for 90-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.

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

						2020						2019						2018
Gain (Loss) recognized in Accumulated other comprehensive loss						$	1					$	(9)					$	(18)

The amounts of derivative gains (losses) reclassified from Accumulated other comprehensive loss to the Consolidated Statements of Income are as follows (in millions):

						Years Ended December 31
						2020						2019						2018
Total revenue						$	(14)					$	(12)					$	—
Compensation and benefits						—						(1)						1
Other general expense						—						—						(2)
Interest expense						(1)						(1)						(2)
Other income (expense)						—						—						(8)
Total						$	(15)					$	(14)					$	(11)

The Company estimates that approximately $7 million of pretax losses currently included within Accumulated other comprehensive loss will be reclassified into earnings in the next twelve months.

The Company recorded a gain of $1 million for 2020, a loss of $18 million in 2019, and a loss of $27 million in 2018 in Other income (expense) for foreign exchange derivatives not designated or qualifying as hedges.

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. The Company has designated a portion of its euro-denominated commercial paper issuances as a non-derivative 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 loss, to the extent it is effective as a hedge. The foreign currency translation adjustment of the hedged net investments is also recorded in Accumulated other comprehensive loss. Ineffective portions of net investment hedges, if any, are reclassified from Accumulated other comprehensive loss into earnings during the period of change.

The Company had no outstanding euro-denominated commercial paper at December 31, 2020 designated as a hedge of the foreign currency exposure of its net investment in its European operations. The Company had €101 million ($112 million at December 31, 2019 exchange rates) of outstanding euro-denominated commercial paper at December 31 2019 designated as a hedge of the foreign currency exposure of its net investment in its European operations. The unrealized gain recognized in Accumulated other comprehensive loss related to the net investment non-derivative hedging instrument was $29 million, as of December 31, 2020 and 2019.

The Company did not reclassify any deferred gains or losses related to net investment hedges from Accumulated other comprehensive loss to earnings for 2020, 2019, and 2018.

15. 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 12 “Employee Benefits”):

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

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 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, 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 internal Company 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, 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. The underlying securities typically trade on a national securities exchange or may be valued by the fund managers using applicable models, inputs, and assumptions. 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 volatility.

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 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 issuance costs, 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, 2020 and December 31, 2019 (in millions):

									Fair Value Measurements Using
			Balance at December 31, 2020						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)			$	2,781					$	2,781					$	—					$	—
Other investments
Government bonds			$	1					$	—					$	1					$	—
Equity investments			$	3					$	—					$	3					$	—
Derivatives (2)
Gross foreign exchange contracts			$	38					$	—					$	38					$	—
Liabilities
Derivatives (2)
Gross foreign exchange contracts			$	5					$	—					$	5					$	—

									Fair Value Measurements Using
			Balance at December 31, 2019						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)			$	2,007					$	2,007					$	—					$	—
Other investments
Government bonds			$	1					$	—					$	1					$	—
Equity investments			$	1					$	—					$	1					$	—
Derivatives (2)
Gross foreign exchange contracts			$	21					$	—					$	21					$	—
Liabilities
Derivatives (2)
Gross foreign exchange contracts			$	4					$	—					$	4					$	—

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

(2)Refer to Note 14 “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 2020 or 2019. 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 2020, 2019, or 2018.

The fair value of debt is classified as Level 2 of the fair value hierarchy. The following table provides the carrying value and fair value for the Company’s term debt (in millions):

			2020												2019
As of December 31			Carrying Value						Fair Value						Carrying Value						Fair Value
Current portion of long-term debt			$	400					$	401					$	600					$	614
Long-term debt			$	7,281					$	8,752					$	6,627					$	7,442

16. Claims, Lawsuits, and Other 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 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 expense 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 Consolidated 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 for which loss is estimable, in excess of amounts that are deemed probable and estimable and therefore already accrued, is estimated to be between $0 and $0.8 billion, exclusive of any insurance coverage. These estimates are based on available information as of the date of this filing. 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

On October 3, 2017, Christchurch City Council (“CCC”) invoked arbitration to pursue a claim that it asserts against Aon New Zealand. Aon provided insurance broking services to CCC in relation to CCC’s 2010-2011 material damage and business interruption program. In December 2015, CCC settled its property and business interruption claim for its losses arising from the 2010-2011 Canterbury earthquakes against the underwriter of its material damage and business interruption program and the reinsurers of that underwriter. CCC contends that acts and omissions by Aon caused CCC to recover less in that settlement than it otherwise would have. CCC claims damages of approximately NZD 528 million ($376 million at December 31, 2020 exchange rates) plus interest and costs. Aon believes that it has meritorious defenses and intends to vigorously defend itself against these claims.

Aon Hewitt Investment Consulting, Inc, now known as Aon Investments USA, Inc. (“Aon Investments”), Lowe’s Companies, Inc. and the Administrative Committee of Lowe’s Companies, Inc. (collectively “Lowe’s”) were sued on April 27, 2018 in the U.S. District Court for the Western District of North Carolina in a class action lawsuit brought on behalf of participants in the Lowe’s 401(k) Plan (the “Plan”). Aon Investments provided investment consulting services to Lowe’s under the Employee Retirement Income Security Act of 1974 (“ERISA”). The plaintiffs contend that in 2015 Lowe’s imprudently placed the Hewitt Growth Fund in the Plan’s lineup of investments, the Hewitt Growth Fund underperformed its benchmarks, and that Aon had a conflict of interest in recommending the proprietary fund for the Plan. The plaintiffs allege the Plan suffered over $100 million in investment losses when compared to the eight funds it replaced. The plaintiffs allege that Aon Investments breached its duties of loyalty and prudence pursuant to the ERISA statute. Aon believes it has meritorious defenses and intends to vigorously defend itself against these claims.

A retail insurance brokerage subsidiary of Aon was sued on September 6, 2018 in the U.S. District Court for the Southern District of New York by a client, Pilkington North America, Inc., that sustained damage from a tornado to its Ottawa, Illinois property. The lawsuit seeks between $45 million and $85 million in property and business interruption damages from either its insurer or Aon. The insurer contends that insurance proceeds were limited to $15 million in coverage by a windstorm sub-limit purportedly contained in the policy procured by Aon for Pilkington. The insurer therefore has tendered $15 million to Pilkington and denied coverage for the remainder of the loss. Pilkington sued the insurer and Aon seeking full coverage for the loss from the insurer or, in the alternative, seeking the same damages against Aon on various theories of professional liability if the court finds that the $15 million sub-limit applies to the claim. Aon believes it has meritorious defenses and intends to vigorously defend itself against these claims.

Aon faces legal action arising out of a fatal plane crash in November 2016. Aon UK Limited placed an aviation civil liability reinsurance policy for the Bolivian insurer of the airline. After the crash, the insurer determined that there was no coverage under the airline’s insurance policy due to the airline’s breach of various policy conditions. In November 2018, the owner of the aircraft filed a claim in Bolivia against Aon, the airline, the insurer and the insurance broker. The claim is for $15.5 million plus any liability the owner has to third parties. In November 2019, a federal prosecutor in Brazil filed a public civil action naming three Aon entities as defendants, along with the airline, the insurer, and the lead reinsurer. That claim seeks pecuniary damages for families affected by the crash in the sum of $300 million; or, in the alternative, $50 million; or, in the alternative, $25 million; plus “moral damages” of an equivalent sum. Separately, in March 2020, the Brazilian Federal Senate invited Aon to give evidence to a Parliamentary Commission of Inquiry in an investigation into the accident. Aon is cooperating with that inquiry. Finally, in August 2020, 43 individuals (surviving passengers and estates of the deceased) filed a motion in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida, seeking permission to commence proceedings against Aon (and the insurer and reinsurers) for claims totaling $844 million. Aon believes that it has meritorious defenses and intends to vigorously defend itself against these claims.

Aon Investments and Allianz Global Investors U.S. LLC (“AGI”) were sued on September 16, 2020, in the U.S. District Court for the Southern District of New York by the Blue Cross and Blue Shield Association National Employee Benefits Committee (the “NEBC”). Aon Investments and its predecessors provided investment advisory services to NEBC since 2009. The NEBC contends that it suffered investment losses exceeding $2 billion in several Structured Alpha funds managed by AGI and recommended by Aon. The NEBC is pursuing claims against Aon Investments for breach of fiduciary duty and breach of co-fiduciary duty. The NEBC alleges that Aon Investments and AGI are jointly and severally liable for damages, which include the restoration of investment losses, disgorgement of fees and profits, and attorneys’ fees. Aon believes that it has meritorious defenses and intends to vigorously defend itself against these claims.

In April 2017, the FCA announced an investigation relating to suspected competition law breaches in the aviation and aerospace broking industry, which, for Aon in 2016, represented less than $100 million in global revenue. The European Commission assumed jurisdiction over the investigation in place of the FCA, and the European Commission has now closed its investigation. Other antitrust agencies outside the E.U. are conducting formal or informal investigations regarding these matters. Aon intends to work diligently with all antitrust agencies concerned to ensure they can carry out their work as efficiently as possible. At this time, in light of the uncertainties and many variables involved, Aon cannot estimate the ultimate impact on our company from these investigations or any related private litigation, nor any damages, penalties, or fines related to them.

Guarantees and Indemnifications

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 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.

Guarantee of Registered Securities

In connection with the Company’s 2012 redomestication to the U.K. (the “2012 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 April 2, 2012, among Aon Corporation, Aon Global Limited, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”) (amending and restating the Indenture, dated September 10, 2010, between Aon Corporation and the Trustee); (2) Amended and Restated Indenture, dated April 2, 2012, among Aon Corporation, Aon Global Limited and the Trustee (amending and restating the Indenture, dated December 16, 2002, between Aon Corporation and the Trustee); and (3) Amended and Restated Indenture, dated April 2, 2012, among Aon Corporation, Aon Global Limited and the Trustee (amending and restating the Indenture, dated January 13, 1997, between Aon Corporation and the Trustee, as supplemented by the First Supplemental Indenture, dated January 13, 1997).

In connection with the Ireland Reorganization, on April 1, 2020, Aon plc and Aon Global Holdings plc entered into various agreements pursuant to which they agreed to guarantee the obligations of Aon Corporation arising under issued and outstanding debt securities, which were previously guaranteed solely by Aon Global Limited, and the obligations of Aon Global Limited arising under issued and outstanding debt securities, which were previously guaranteed solely by Aon Corporation. Those agreements include: (1) Second Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon Global Limited, Aon plc, and Aon Global Holdings plc and the Trustee (amending and restating the Amended and Restated Indenture, dated April 2, 2012, among Aon Corporation, Aon Global Limited and the Trustee); (2) Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon Global Limited, Aon plc, Aon Global Holdings plc and the Trustee (amending and restating the Indenture, dated December 12, 2012, among Aon Corporation, Aon Global Limited plc and the Trustee); (3) Second Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon Global Limited, Aon plc, Aon Global Holdings plc and the Trustee (amending and restating the Amended and Restated Indenture, dated May 20, 2015, among Aon Corporation, Aon Global Limited and the Trustee); (4) Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon Global Limited, Aon plc, Aon Global Holdings plc and the Trustee (amending and restating the Indenture, dated November 13, 2015, among Aon Corporation, Aon Global Limited and the Trustee); and (5) Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon Global Limited, Aon plc, Aon Global Holdings plc and the Trustee (amending and restating the Indenture, dated December 3, 2018, among Aon Corporation, Aon Global Limited and the Trustee).

Sale of the Divested Business

In connection with the sale of the Divested Business, the Company guaranteed future operating lease commitments related to certain facilities assumed by the Buyer. The Company is obligated to perform under the guarantees if the Divested Business defaults on the leases at any time during the remainder of the lease agreements, which expire on various dates through 2025. As of December 31, 2020, the undiscounted maximum potential future payments under the lease guarantee were $55 million, with an estimated fair value of $8 million. No cash payments were made in connection to the lease commitments during the year ended December 31, 2020.

Additionally, the Company is subject to performance guarantee requirements under certain client arrangements that were assumed by the Buyer. Should the Divested Business fail to perform as required by the terms of the arrangements, the Company would be required to fulfill the remaining contract terms, which expire on various dates through 2023. As of December 31, 2020, the undiscounted maximum potential future payments under the performance guarantees were $104 million, with an estimated fair value of $1 million. No cash payments were made in connection to the performance guarantees during the year ended December 31, 2020.

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 LOCs. The Company had total LOCs outstanding of approximately $79 million at December 31, 2020, compared to $73 million at December 31, 2019. These LOCs 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 $113 million at December 31, 2020, compared to $110 million at December 31, 2019.

17. Segment Information

The Company operates as one segment that includes all of Aon’s continuing operations, which as a global professional services firm provides advice and solutions to clients focused on risk, retirement, and health through five revenue lines which make up its principal products and services. The Chief Operating Decision Maker (the “CODM”) assesses the performance of the Company and allocates resources based on one segment: Aon United.

The Company’s reportable operating segment has been determined using a management approach, which is consistent with the basis and manner in which Aon’s CODM uses financial information for the purposes of allocating resources and evaluating performance. The CODM assesses performance and allocates resources based on total Aon results against its key four metrics, including organic revenue growth (decline), expense discipline, and collaborative behaviors that maximize value for Aon and its shareholders, regardless of which revenue line it benefits.

As Aon operates as one segment, segment profit or loss is consistent with consolidated reporting as disclosed in the Consolidated Statements of Income. Refer to Note 3 “Revenue from Contracts with Customers” for further information on revenue by principal service line.

Consolidated long-lived assets, net by geographic area are as follows (in millions):

Years ended December 31			Total						United States						Americas other than U.S.						United Kingdom						Ireland						Other Europe, Middle East, & Africa						Asia Pacific
2020			$	1,599					681						127						213						11						357						210
2019			$	1,550					686						145						225						10						309						175