Item 1. Financial Statements

127K characters. Original on sec.gov · Markdown

Item 1. Financial Statements

Aon plc

Condensed Consolidated Statements of Income

(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
(millions, except per share data)2024202320242023
Revenue
Total revenue$3,721$2,953$11,551$10,001
Expenses
Compensation and benefits2,1501,6856,1635,231
Information technology141135397403
Premises8874241217
Depreciation of fixed assets4742136119
Amortization and impairment of intangible assets1742031870
Other general expense4293001,232949
Accelerating Aon United Program expenses6963206
Total operating expenses3,0982,2628,8076,995
Operating income6236912,7443,006
Interest income496319
Interest expense(213)(119)(582)(360)
Other income (expense)35(21)346(105)
Income before income taxes4495602,5712,560
Income tax expense9493585439
Net income3554671,9862,121
Less: Net income attributable to redeemable and non-redeemable noncontrolling interests12114855
Net income attributable to Aon shareholders$343$456$1,938$2,066
Basic net income per share attributable to Aon shareholders$1.58$2.25$9.24$10.10
Diluted net income per share attributable to Aon shareholders$1.57$2.23$9.20$10.03
Weighted average ordinary shares outstanding - basic217.4202.9209.7204.6
Weighted average ordinary shares outstanding - diluted218.4204.6210.6206.0

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Aon plc

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
(millions)2024202320242023
Net income$355$467$1,986$2,121
Less: Net income attributable to redeemable and non-redeemable noncontrolling interests12114855
Net income attributable to Aon shareholders3434561,9382,066
Other comprehensive income, net of tax:
Change in fair value of financial instruments8(5)846
Foreign currency translation adjustments349(257)129(29)
Postretirement benefit obligation—203966
Total other comprehensive income (loss)357(242)25243
Less: Other comprehensive income attributable to noncontrolling interests—(1)—(1)
Total other comprehensive income (loss) attributable to Aon shareholders357(241)25244
Comprehensive income attributable to Aon shareholders$700$215$2,190$2,110

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Aon plc

Condensed Consolidated Statements of Financial Position

(Unaudited)
(millions, except nominal value)September 30, 2024December 31, 2023
Assets
Current assets
Cash and cash equivalents$1,103$778
Short-term investments196369
Receivables, net4,0043,254
Fiduciary assets17,59616,307
Other current assets754996
Total current assets23,65321,704
Goodwill15,6128,414
Intangible assets, net6,789234
Fixed assets, net650638
Operating lease right-of-use assets737650
Deferred tax assets1,2091,195
Prepaid pension650618
Other non-current assets585506
Total assets$49,885$33,959
Liabilities, redeemable noncontrolling interests, and equity (deficit)
Liabilities
Current liabilities
Accounts payable and accrued liabilities$2,588$2,262
Short-term debt and current portion of long-term debt—1,204
Fiduciary liabilities17,59616,307
Other current liabilities1,9141,878
Total current liabilities22,09821,651
Long-term debt17,0909,995
Non-current operating lease liabilities712641
Deferred tax liabilities1,086115
Pension, other postretirement, and postemployment liabilities1,1681,225
Other non-current liabilities1,1781,074
Total liabilities43,33234,701
Redeemable noncontrolling interests135—
Equity (deficit)
Ordinary shares - $0.01 nominal value Authorized: 500.0 shares (issued: 2024 - 216.5; 2023 - 198.6)22
Additional paid-in capital13,0456,944
Accumulated deficit(2,682)(3,399)
Accumulated other comprehensive loss(4,121)(4,373)
Total Aon shareholders' equity (deficit)6,244(826)
Nonredeemable noncontrolling interests17484
Total equity (deficit)6,418(742)
Total liabilities, redeemable noncontrolling interests and equity (deficit)$49,885$33,959

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Aon plc

Condensed Consolidated Statements of Shareholders’ Equity (Deficit)

(Unaudited)

(millions)SharesOrdinary Shares and Additional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Loss, Net of TaxNon- redeemable Non- controlling InterestsTotal
Balance at January 1, 2024198.6$6,946$(3,399)$(4,373)$84$(742)
Net income——1,071—221,093
Shares issued - employee stock compensation plans0.8(104)———(104)
Shares repurchased(0.8)—(250)——(250)
Share-based compensation expense—130———130
Dividends to shareholders ($0.615 per share)——(122)——(122)
Net change in fair value of financial instruments———75—75
Net foreign currency translation adjustments———(132)—(132)
Net postretirement benefit obligation———26—26
Purchases of subsidiary shares from nonredeemable noncontrolling interests—(1)———(1)
Dividends paid to nonredeemable noncontrolling interests on subsidiary common stock————(1)(1)
Balance at March 31, 2024198.6$6,971$(2,700)$(4,404)$105$(28)
Net income——524—12536
Shares issued - NFP Transaction19.05,882———5,882
Shares issued - employee stock compensation plans0.4(45)———(45)
Shares repurchased(0.8)—(250)——(250)
Share-based compensation expense—117———117
Dividends to shareholders ($0.675 per share)——(148)——(148)
Net change in fair value of financial instruments———1—1
Net foreign currency translation adjustments———(88)—(88)
Net postretirement benefit obligation———13—13
Purchases of subsidiary shares from nonredeemable noncontrolling interests————8686
Dividends paid to nonredeemable noncontrolling interests on subsidiary common stock————(35)(35)
Adjustments to redeemable noncontrolling interests—(13)———(13)
Balance at June 30, 2024217.2$12,912$(2,574)$(4,478)$168$6,028
Net income (1)——343—11354
Shares issued - employee stock compensation plans0.220———20
Shares repurchased(0.9)—(304)——(304)
Share-based compensation expense—114———114
Dividends to shareholders ($0.675 per share)——(147)——(147)
Net change in fair value of financial instruments———8—8
Net foreign currency translation adjustments———349—349
Net postretirement benefit obligation——————
Purchases of subsidiary shares from noncontrolling interests—1———1
Dividends paid to nonredeemable noncontrolling interests on subsidiary common stock————(5)(5)
Balance at September 30, 2024216.5$13,047$(2,682)$(4,121)$174$6,418

(1)The Company’s Net income totaled $355 million for the quarter ended September 30, 2024, which included $1 million of Net income related to redeemable noncontrolling interests.

(millions)SharesOrdinary Shares and Additional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Loss, Net of TaxNon-redeemable Non- controlling InterestsTotal
Balance at January 1, 2023205.4$6,866$(2,772)$(4,623)$100$(429)
Net income——1,050—291,079
Shares issued - employee stock compensation plans0.9(131)(1)——(132)
Shares repurchased(1.8)—(550)——(550)
Share-based compensation expense—127———127
Dividends to shareholders ($0.56 per share)——(115)——(115)
Net change in fair value of financial instruments———3—3
Net foreign currency translation adjustments———54—54
Net postretirement benefit obligation———22—22
Dividends paid to noncontrolling interests on subsidiary common stock————(1)(1)
Balance at March 31, 2023204.5$6,862$(2,388)$(4,544)$128$58
Net income——560—15575
Shares issued - employee stock compensation plans0.4(52)———(52)
Shares repurchased(1.7)—(550)——(550)
Share-based compensation expense—99———99
Dividends to shareholders ($0.615 per share)——(127)——(127)
Net change in fair value of financial instruments———8—8
Net foreign currency translation adjustments———174—174
Net postretirement benefit obligation———24—24
Purchases of subsidiary shares from noncontrolling interests—(1)——(1)(2)
Dividends paid to noncontrolling interests on subsidiary common stock————(45)(45)
Balance at June 30, 2023203.2$6,908$(2,505)$(4,338)$97$162
Net income——456—11467
Shares issued - employee stock compensation plans0.214———14
Shares repurchased(2.6)—(850)——(850)
Share-based compensation expense—95———95
Dividends to shareholders ($0.615 per share)——(125)——(125)
Net change in fair value of financial instruments———(5)—(5)
Net foreign currency translation adjustments———(256)(1)(257)
Net postretirement benefit obligation———20—20
Dividends paid to noncontrolling interests on subsidiary common stock————(7)(7)
Balance at September 30, 2023200.8$7,017$(3,024)$(4,579)$100$(486)

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Aon plc

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,
(millions)20242023
Cash flows from operating activities
Net income$1,986$2,121
Adjustments to reconcile net income to cash provided by operating activities:
Gain from sales of businesses(333)—
Depreciation of fixed assets136119
Amortization and impairment of intangible assets31870
Share-based compensation expense361321
Deferred income taxes(146)(232)
Other, net(126)28
Change in assets and liabilities:
Receivables, net(384)(290)
Accounts payable and accrued liabilities(36)(357)
Accelerating Aon United Program liabilities43—
Current income taxes(119)58
Pension, other postretirement and postemployment liabilities(25)3
Other assets and liabilities160333
Cash provided by operating activities1,8352,174
Cash flows from investing activities
Proceeds from investments18659
Purchases of investments(136)(61)
Net sales of short-term investments - non fiduciary182274
Acquisition of businesses, net of cash and funds held on behalf of clients(3,011)(18)
Sale of businesses, net of cash and funds held on behalf of clients6861
Capital expenditures(163)(203)
Cash provided by (used for) investing activities(2,256)52
Cash flows from financing activities
Share repurchase(800)(1,950)
Proceeds from issuance of shares6163
Cash paid for employee taxes on withholding shares(190)(232)
Commercial paper issuances, net of repayments(591)(274)
Issuance of debt7,926744
Repayment of debt(4,878)—
Increase in fiduciary liabilities, net of fiduciary receivables609870
Cash dividends to shareholders(416)(366)
Redeemable and non-redeemable noncontrolling interests, and other financing activities(156)(56)
Cash provided by (used for) financing activities1,565(1,201)
Effect of exchange rates on cash and cash equivalents and funds held on behalf of clients177(57)
Net increase in cash and cash equivalents and funds held on behalf of clients1,321968
Cash, cash equivalents and funds held on behalf of clients at beginning of period7,7227,076
Cash, cash equivalents and funds held on behalf of clients at end of period$9,043$8,044
Reconciliation of cash and cash equivalents and funds held on behalf of clients:
Cash and cash equivalents$1,103$808
Cash and cash equivalents and funds held on behalf of clients classified as held for sale—6
Funds held on behalf of clients7,9407,230
Total cash and cash equivalents and funds held on behalf of clients$9,043$8,044
Supplemental disclosures:
Interest paid$538$309
Income taxes paid, net of refunds$850$613

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements and Notes thereto have been prepared in accordance with U.S. GAAP. The Condensed 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 Condensed 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.

Certain information and disclosures normally included in the Consolidated Financial Statements prepared in accordance with U.S. GAAP have been condensed or omitted. The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of operating results that may be expected for the full year ending December 31, 2024.

Use of Estimates

The preparation of the accompanying Condensed 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 Condensed 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, and foreign currency exchange rate movements 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 Condensed Consolidated Financial Statements in future periods.

2. Accounting Principles and Practices

The Company has not made any changes in our significant accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC, except for those described below, which have been added in connection with the acquisition of NFP.

Summary of Significant Accounting Principles and Practices

Contingent Consideration

Contingent consideration may be paid to the former owners of the business and typically will involve the acquired entity reaching specific financial results over a designated period. Contingent consideration payables are recorded at fair value and are included in the purchase price consideration at the time of the acquisition. Subsequent changes in the fair value of contingent consideration obligations are recorded in the Consolidated Statements of Income. The fair value of contingent consideration payables is based on the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. In determining fair value of the contingent consideration, the acquired business’s future performance is estimated using financial projections for the acquired business and measured against performance targets specified in each purchase agreement. Contingent consideration liabilities are classified as Level 3 in the fair value hierarchy due to the Company’s reliance on unobservable inputs.

Principles of Consolidations

The accompanying Condensed 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 model to the entity, otherwise, the entity is evaluated under the voting interest model. When 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. If the Company is the primary beneficiary of a VIE, the Company consolidates the entity and reflects any relevant noncontrolling interest of other beneficiaries of that entity on the Statement of Consolidated Financial Position. Aon’s interest in VIEs as of September 30, 2024 predominantly relates to assets and liabilities acquired through the acquisition of NFP

and are subject to purchase accounting adjustments. Total assets related to consolidated VIEs are approximately 1% of the Company’s Total assets on the Condensed Consolidated Statements of Financial Position for the period ended September 30, 2024.

Aon holds a controlling financial interest in entities that are not VIEs when it, directly or indirectly holds more than 50% of the voting rights and the noncontrolling interest holders do not hold substantive participating rights.

Redeemable Noncontrolling Interests

Redeemable noncontrolling interests represent interests for certain consolidated entities which are subject to redemption rights held by the noncontrolling interests owners outside of the Company’s control at fixed or determinable prices and dates. The interests are initially recorded at fair value and in subsequent reporting periods are adjusted to the estimated redemption value. The adjustments to the redemption value are recorded to additional paid-in capital or retained earnings, when appropriate, on the Consolidated Statements of Financial Position. The redeemable noncontrolling interests are considered temporary equity and reported outside of permanent equity on the Consolidated Statements of Financial Position. The interests are recorded at the greater of the carrying amount adjusted for the noncontrolling interest’s share of net income (loss) and distributions or its redemption value.

New Accounting Pronouncements

Accounting Standards Issued But Not Yet Adopted

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued new accounting guidance, requiring new segment disclosures under ASC 280, Segment Reporting, including disclosure of significant segment expense categories and amounts that are regularly reported to the CODM and included in the segment’s profit or loss. Additionally, all disclosure requirements under ASC 280, including new requirements under this new guidance, will be required on an interim basis. The new guidance is effective for Aon for the year ended December 31, 2024 and interim periods thereafter. An entity will apply the new guidance on a retrospective basis for all periods presented. The Company is currently evaluating the impact the guidance will have on the Notes to Consolidated Financial Statements.

Improvements to Income Tax Disclosures

In December 2023, the FASB issued new accounting guidance under ASC 740, Income Taxes, which requires additional income tax disclosures on an annual basis, including disaggregation of information presented within the reconciliation of the expected tax to the reported tax by specific categories, with certain reconciling items 5% or greater broken out by nature and/or jurisdiction. The new guidance also requires disclosure of income taxes paid, net of refunds, broken out by federal, state/local, and foreign, including disclosure of individual jurisdictions when greater than 5% of total net income taxes paid. The new guidance is effective for Aon for the year ended December 31, 2025, with early adoption permitted. The Company is evaluating the period of adoption and transition approach, as well as the impact the disclosures will have on the Notes to Consolidated Financial Statements.

Securities and Exchange Commission Final Rules

The Enhancement and Standardization of Climate-Related Disclosures for Investors

In March 2024, the SEC adopted final rules to enhance and standardize climate-related disclosures. The final rules will require the Company to provide certain climate-related information in Item 7, Management’s Discussion and Analysis regarding material climate-related risks, activities to mitigate or adapt to such risks, information regarding oversight and management of climate-related risks, information on climate-related targets or goals, and disclosure of Scope 1 and 2 GHG emissions. Additionally, within the Notes to Consolidated Financial Statements, the Company will be required to disclose the financial statement effects of severe weather events and other natural conditions. The final rules are effective for Aon for the year ended December 31, 2025, with the exception of GHG emissions disclosures which are effective for Aon for the year ended December 31, 2026. After the adoption of the final rules, the final rules became subject to several legal challenges, and on April 4, 2024 the SEC voluntarily stayed the final rules pending judicial review. The Company is currently evaluating the impact that the guidance will have on our disclosures and will monitor the judicial process for impacts on the disclosure requirements.

3. Revenue from Contracts with Customers

Disaggregation of Revenue

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

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Commercial Risk Solutions$1,852$1,585$5,675$5,137
Reinsurance Solutions5034652,3052,149
Health Solutions8705522,2651,670
Wealth Solutions4993521,3321,054
Eliminations(3)(1)(26)(9)
Total revenue$3,721$2,953$11,551$10,001

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

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
United States$2,083$1,400$5,432$4,322
Americas other than United States263281948890
United Kingdom4373961,5681,456
Ireland382410682
Europe, Middle East, & Africa other than United Kingdom and Ireland4924792,2672,093
Asia Pacific4083731,2301,158
Total revenue$3,721$2,953$11,551$10,001

Contract Costs

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

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Balance at beginning of period$264$242$370$355
Additions4003571,1661,074
Amortization(367)(321)(1,235)(1,156)
Impairment————
Foreign currency translation and other5(5)1—
Balance at end of period$302$273$302$273

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

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Balance at beginning of period$196$186$195$185
Additions19145137
Amortization(13)(13)(40)(38)
Impairment————
Foreign currency translation and other—(1)(4)2
Balance at end of period$202$186$202$186

4. Accelerating Aon United Program

In the third quarter of 2023, Aon initiated a three-year restructuring program called the Accelerating Aon United Program (the “Program”) with the purpose of streamlining the Company’s technology infrastructure, optimizing its leadership structure and resource alignment, and reducing its real estate footprint to align to its hybrid working strategy. The Program includes technology-related costs to facilitate streamlining and simplifying operations, headcount reduction costs, and costs associated with asset impairments, including real estate consolidation and technology costs.

Program charges are recognized within Accelerating Aon United Program expenses on the accompanying Condensed Consolidated Statements of Income and consists of the following cost activities:

*•*Technology and other – includes costs associated with actions taken to rationalize certain applications and to optimize technology across the Company. These costs may include contract termination fees and other non-capitalizable costs associated with Program initiatives, which include professional service fees.

*•*Workforce optimization – includes costs associated with headcount reduction and other separation-related costs.

*•*Asset impairments – includes non-cash costs associated with impairment of assets, as they are identified, including ROU lease assets, leasehold improvements, and other capitalized assets no longer providing economic benefit.

The Program is currently expected to result in cumulative costs of approximately $1.0 billion, consisting of approximately $900 million of cash charges and approximately $100 million of non-cash charges. For the three and nine months ended September 30, 2024, total Program costs incurred were $69 million and $320 million, respectively. The Company expects to continue to review the implementation of elements of the Program throughout the course of the Program and, therefore, there may be changes to expected timing, estimates of expected costs, and related savings.

The Company’s unpaid liabilities for charges under the Program are primarily included in Accounts payable and accrued liabilities in the Condensed Consolidated Statements of Financial Position.

The changes in the Company’s liabilities for the Program as of September 30, 2024 are as follows (in millions):

Technology and otherWorkforce optimizationAsset impairmentsTotal
Liability balance as of January 1, 2024$14$86$—$100
Charges8717360320
Cash payments(63)(120)—(183)
Foreign currency translation and other—2—2
Non-cash charges (1)(24)(10)(60)(94)
Liability balance as of September 30, 2024$14$131$—$145
Total costs incurred from inception to date$101$276$78$455

(1)During the three and nine months ended September 30, 2024, the Company recognized $4 million and $24 million, respectively, of accelerated ROU asset amortization or impairments due to the Company’s decision to exit certain leased properties as a result of the Program. The amounts are presented in Technology and other, where the corresponding liability is reflected within Other current liabilities and Non-current operating lease liabilities, which will ultimately be settled in cash.

5. Cash and Cash Equivalents and Short-Term Investments

Cash and cash equivalents include cash balances and all highly liquid instruments with initial maturities of three months or less. Short-term investments consist of money market funds. The estimated fair value of Cash and cash equivalents and Short-term investments approximates their carrying values.

At September 30, 2024, Cash and cash equivalents and Short-term investments were $1.3 billion compared to $1.1 billion at December 31, 2023. Of the total balances, $121 million and $120 million were restricted as to their use at September 30, 2024 and December 31, 2023, respectively. Included within Short-term investments as of September 30, 2024 and December 31, 2023, were £61 million ($82 million at September 30, 2024 exchange rates) and £63 million ($80 million at December 31, 2023 exchange rates), respectively, of operating funds required to be held by the Company in the U.K. by the FCA, a U.K.-based regulator.

6. Other Financial Data

Condensed Consolidated Statements of Income Information

Other Income (Expense)

Other income (expense) consists of the following (in millions):

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Gain from sales of businesses$76$—$333$—
Equity earnings2254
Extinguishment of debt(1)—(7)—
Pension and other postretirement(14)(18)(35)(78)
Foreign currency remeasurement(30)8(21)(48)
Financial instruments and other (1)2(13)7117
Total$35$(21)$346$(105)

(1)During the three and nine months ended September 30, 2024, a $2 million and $84 million gain was recognized, respectively, related to deferred consideration from the affiliates of The Blackstone Group L.P. and the other designated purchasers related to a divestiture completed in a prior year period. Refer to Note 7 “Acquisitions and Dispositions of Businesses” for additional information.

Condensed 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):

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Balance at beginning of period$87$83$79$76
Provision231312
Accounts written off, net of recoveries(6)(2)(8)(5)
Foreign currency translation and other2(2)1(1)
Balance at end of period$85$82$85$82

Other Current Assets

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

As ofSeptember 30, 2024December 31, 2023
Costs to fulfill contracts with customers (1)302370
Prepaid expenses172100
Taxes receivable7735
Assets held for sale—354
Other203137
Total$754$996

(1)Refer to Note 3 “Revenue from Contracts with Customers” for further information.

Other Non-Current Assets

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

As ofSeptember 30, 2024December 31, 2023
Costs to obtain contracts with customers (1)$202$195
Taxes receivable89100
Investments8745
Leases1326
Other194140
Total$585$506

(1)Refer to Note 3 “Revenue from Contracts with Customers” for further information.

Other Current Liabilities

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

As ofSeptember 30, 2024December 31, 2023
Deferred revenue (1)$312$270
Leases199182
Taxes payable186291
Contingent consideration111—
Liabilities held for sale—69
Other1,1061,066
Total$1,914$1,878

(1)During the three and nine months ended September 30, 2024, revenue of $240 million and $618 million, respectively, was recognized in the Condensed Consolidated Statements of Income. During the three and nine months ended September 30, 2023, revenue of $158 million and $494 million, respectively, was recognized in the Condensed Consolidated Statements of Income.

Other Non-Current Liabilities

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

As ofSeptember 30, 2024December 31, 2023
Taxes payable (1)$872$827
Contingent consideration135—
Compensation and benefits7059
Deferred revenue3233
Leases—10
Other69145
Total$1,178$1,074

(1)Includes $72 million for the non-current portion of the one-time mandatory transition tax on accumulated foreign earnings as of December 31, 2023.

7. Acquisitions and Dispositions of Businesses

Completed Acquisitions

On April 25, 2024 (the “Acquisition Date”), the Company completed the acquisition of NFP (the “NFP Transaction”), a leading middle market property and casualty broker, benefits consultant, wealth manager, and retirement plan advisor, with more than 7,700 colleagues. The Transaction expands Aon’s presence in the large and fast-growing middle-market and enhances NFP’s strong existing client relationships and distribution, by bringing Aon’s data and analytics-based content, capabilities, and expertise, delivered through the Aon Business Services platform.

The Company completed eight and fifteen other acquisitions during the three and nine months ended September 30, 2024, respectively. Total consideration transferred for these acquisitions was $280 million and $396 million for the three and nine months ended September 30, 2024, respectively. The Company completed one and two acquisitions during the three and nine months ended September 30, 2023, respectively. Total consideration transferred was $14 million and $23 million for the three and nine months ended September 30, 2023, respectively.

Acquisition of NFP

The Company acquired 100% of the outstanding equity interests of NFP Intermediate Holdings A Corp. in a cash-and-stock merger for an aggregate U.S. GAAP preliminary purchase price totaling $9.1 billion, including approximately $3.2 billion used to settle indebtedness of NFP and cash consideration to the selling shareholders, and approximately 19 million class A ordinary shares with a fair value of approximately $5.9 billion, based on the Company’s closing stock price on April 25, 2024. In addition, the Company had other adjustments of $3.9 billion for cash and certain assumed liabilities. As part of the NFP Transaction, the Company acquired certain less-than-wholly owned entities, resulting in the recognition of noncontrolling interests which are described further below.

The Company financed the NFP Transaction, in part, with the net proceeds from Senior Notes issued on March 1, 2024 totaling to an aggregate amount of $6.0 billion and proceeds from a $2.0 billion delayed draw term loan which was drawn on April 25, 2024. Refer to Note 9 “Debt” for further information.

Aon accounted for its business combinations under the acquisition method of accounting. The acquisition method requires the Company to measure identifiable assets acquired and liabilities assumed at their fair values as of the Acquisition Date, with the excess of the consideration transferred over those fair values recorded as goodwill. Determining the fair value of intangible assets acquired requires significant judgements, assumptions, and estimates about future events, which the Company believes are reasonable. Use of different estimates and judgements could produce materially different results. The preliminary fair values of consideration transferred, assets acquired, liabilities assumed, and redeemable and nonredeemable noncontrolling interests are subject to adjustment when purchase accounting is finalized. The following table includes these amounts recognized as a result of the Company’s acquisitions (in millions):

Nine months ended September 30, 2024
NFP AcquisitionOther AcquisitionsTotal
Consideration transferred:
Cash$3,247$377$3,624
Deferred and contingent consideration—1919
Class A ordinary shares issued5,882—5,882
Aggregate consideration transferred$9,129$396$9,525
Assets acquired:
Cash and cash equivalents$293$5$298
Receivables32528353
Fiduciary assets (1)41154465
Goodwill6,9872057,192
Other intangible assets:
Customer-related and contract-based5,8252076,032
Tradenames8001801
Technology and other25126
Operating lease right-of-use assets1404144
Current assets369
Non-current assets1692171
Total assets acquired14,97851315,491
Liabilities assumed:
Accounts payable and accrued liabilities$283$32$315
Fiduciary liabilities41154465
Current liabilities2322234
Long-term debt3,422—3,422
Non-current operating lease liabilities1253128
Deferred tax liabilities1,038241,062
Non-current liabilities1452147
Total liabilities assumed5,6561175,773
Less: Fair value of redeemable noncontrolling interests (2)(108)—(108)
Less: Fair value of nonredeemable noncontrolling interests(85)—(85)
Net assets acquired$9,129$396$9,525

(1)Includes $315 million of funds held on behalf of clients.

(2)The fair value of the noncontrolling interests acquired was estimated using a discounted cash flow model under the income approach and used estimated financial projections developed by management applying market participant assumptions.

During the quarter ended September 30, 2024, the Company made measurement period adjustments related to the NFP Transaction. Measurement period adjustments consisted of a decrease of acquired assets of $106 million primarily related to a decrease in the fair value of acquired notes receivable (recorded within other current assets), a decrease of assumed liabilities of $77 million primarily related to a decrease of deferred tax liabilities resulting from an adjustment to deferred state tax rates and deferred taxes recorded on other measurement period adjustments, and a $5 million increase in the fair value of redeemable

noncontrolling interests. Collectively, these adjustments resulted in a $34 million increase to goodwill. The net income effect associated with the measurement period adjustments during the three months ended September 30, 2024 was immaterial.

The purchase price related to the NFP Transaction exceeded the estimated fair value of the tangible and identifiable intangible assets acquired and liabilities assumed and, as a result of the purchase allocation, the Company recorded goodwill of approximately $7.0 billion, which is fully allocated to the Aon United segment and is not deductible for tax purposes. The goodwill recognized is attributable primarily to anticipated growth opportunities and synergies as a result of the NFP Transaction which provides the Company with an expanded presence in the large and fast-growing middle-market.

The fair value of the assets acquired and liabilities assumed in the NFP Transaction approximated their carrying values as of the Acquisition Date with the exception of certain intangible assets acquired and liabilities assumed. The Company used independent third-party valuation specialists to assist in determining the fair value of these intangible assets and liabilities. Provisional estimates of fair value are established at the time of the NFP Transaction. Such estimates are preliminary in nature and, therefore, could be subject to material adjustments. Any necessary adjustments must be finalized within one year of the Acquisition Date. There are significant estimates used in determining the fair values of certain intangible assets acquired, which consist of customer-related and contract-based assets, tradename, and technology, as well as certain liabilities assumed, which consist of contingent consideration obligations.

  • Customer-related and contract-based assets: The fair value was estimated based on a multi-period excess earnings method of the income approach and used estimated financial projections developed by management applying market participant assumptions. The customer relationships are amortized over 20 years based upon the estimated economic benefits received.

  • Tradename: The fair value was estimated based on a relief from royalty method of the income approach, considering publicly available third-party trade name royalty rates as well as expected revenue generated by the use of the tradename over its anticipated life. The trade name is amortized over 10 years based upon the estimated economic benefits received.

  • Technology: The fair value was estimated based on a replacement cost method of the cost approach which estimates the cost the Company would incur in rebuilding the technology. The technology is amortized over 7 years based upon the estimated economic benefits received.

  • Contingent Consideration: The fair value of assumed contingent consideration was estimated based on a Monte Carlo simulation in a risk-neutral framework. Key assumptions for estimating fair value include projected revenue and EBITDA, as well as the discount rate and volatility associated with the relevant metric. Contingent consideration liabilities are classified as Level 3 because of the Company’s reliance on unobservable inputs.

The estimates described above directly impact the amount of identified intangible assets recognized and the related amortization expense in future periods as well as certain liabilities assumed. Intangible assets acquired had a weighted average useful economic life of 19 years. As of September 30, 2024, the aggregate intangible assets relating to the NFP Transaction of approximately $6.7 billion were recorded in Intangible assets, net on the Condensed Consolidated Balance Sheets. These amounts are considered preliminary and, therefore, the Company may refine estimates and adjust the assets acquired and liabilities assumed over a measurement period, not to exceed one year from the Acquisition Date. These adjustments are made in the period in which the amounts are determined, and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the Acquisition Date.

For the three and nine months ended September 30, 2024, the Company recognized less than $1 million and $90 million, respectively, of transaction costs in Other general expenses. Additional transaction costs include $6 million of debt extinguishment charges recognized in Other income (expense) in the second quarter of 2024 in connection with the extinguishment of assumed long-term debt through cash tender offers on April 26, 2024.

The Company’s Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2024 include the operations of NFP from the Acquisition Date. The following table presents the NFP revenue and earnings as reported in the Company’s Condensed Consolidated Statements of Income (in millions):

Three Months Ended September 30, 2024Nine Months Ended September 30, 2024
Revenue$601$1,043
Net loss attributable to Aon shareholders$(19)$(38)

Supplemental Pro Forma Combined Information (Unaudited)

The following unaudited pro forma combined financial information presents the combined results of operations of the Company as if the NFP Transaction occurred on January 1, 2023. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the NFP Transaction had taken place on the date indicated or of results that may occur in the future (in millions):

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Revenue$3,721$3,506$12,249$11,605
Net income attributable to Aon shareholders3433281,7451,596

The unaudited pro forma financial information is based on historical information of the Company and NFP, along with certain material pro forma adjustments. The material pro forma adjustments primarily consist of (i) incremental amortization expense based on the preliminary fair values of the intangible assets acquired; (ii) interest expense to reflect Aon’s borrowings under the Senior Notes offering and delayed draw term loan; (iii) increased compensation expense relating to the issuance of certain cash and equity plans related to the NFP Transaction; (iv) nonrecurring transaction costs; (v) accounting policy alignment adjustments, and (vi) income tax impact of the aforementioned pro forma adjustments. In addition, during the three months ended September 30, 2024, the Company reflected pro forma adjustments related to measurement period adjustments.

Completed Dispositions

The Company completed two and five dispositions during the three and nine months ended September 30, 2024, respectively, and no dispositions during the three and nine months ended September 30, 2023.

There were $76 million and $333 million of pretax gains recognized related to dispositions for the three and nine months ended September 30, 2024, respectively. There were no pretax gains recognized related to dispositions for the three and nine months ended September 30, 2023. Gains recognized as a result of a disposition are included in Other income (expense) in the Condensed Consolidated Statements of Income. There were no losses related to dispositions for the three months ended September 30, 2024 and $2 million in losses for the nine months ended September 30, 2024 recognized in Accelerating Aon United Program expenses in the Condensed Consolidated Statements of Income. There were no losses related to dispositions recognized for the three and nine months ended September 30, 2023.

Other Significant Activity

On May 1, 2017, the Company completed the sale of its benefits administration and business process outsourcing business (the “Divested Business”) to an entity controlled by affiliates of The Blackstone Group L.P. (the “Buyer”) and certain designated purchasers that are direct or indirect subsidiaries of the Buyer. The Buyer purchased all of the outstanding equity interests of the Divested Business, plus certain related assets and liabilities for a purchase price of $4.3 billion in cash paid at closing and deferred consideration of up to $500 million. During the three and nine months ended September 30, 2024, the Company earned $2 million and $84 million, respectively, of deferred consideration from the Buyer and the other designated purchasers.

8. Goodwill and Other Intangible Assets

The changes in the net carrying amount of goodwill for the nine months ended September 30, 2024 are as follows (in millions):

Balance as of December 31, 2023$8,414
Goodwill related to current year acquisitions7,192
Goodwill related to current year disposals(82)
Foreign currency translation and other88
Balance as of September 30, 2024$15,612

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

September 30, 2024December 31, 2023
Gross Carrying AmountAccumulated Amortization and ImpairmentNet Carrying AmountGross Carrying AmountAccumulated Amortization and ImpairmentNet Carrying Amount
Customer-related and contract-based$7,931$1,967$5,964$1,873$1,686$187
Tradenames813467671212—
Technology and other3843265835931247
Total$9,128$2,339$6,789$2,244$2,010$234

The estimated future amortization for finite-lived intangible assets as of September 30, 2024 is as follows (in millions):

Remainder of 2024$180
2025751
2026678
2027616
2028564
2029521
Thereafter3,479
Total$6,789

9. Debt

Notes

In June 2024, Aon Global Limited’s $600 million 3.50% Senior Notes matured and were repaid in full.

On April 25, 2024, Aon North America, Inc. drew its $2 billion delayed draw term loan and used proceeds, together with the proceeds of the Senior Notes issued on March 1, 2024 described below, to pay a portion of cash consideration in connection with the NFP Transaction, to repay certain debt of NFP, and to pay related fees and expenses. The term loan matures on April 24, 2027 and is prepayable at any time. As of September 30, 2024, Aon North America, Inc. repaid $850 million of the outstanding balance. The remaining outstanding balance is $1.2 billion. Aon plc incurred $1 million of debt extinguishment charges in the third quarter of 2024 related to the delayed draw term loan.

On April 2, 2024, Aon plc announced that its wholly owned subsidiary, Randolph Acquisition Corp., commenced cash tender offers for any and all of the outstanding 6.875% Senior Notes due 2028, 4.875% Senior Secured Notes due 2028, 7.500% Senior Secured Notes due 2030 and 8.500% Senior Secured Notes due 2031, each issued by NFP Corp. (together, the “NFP Notes”), upon the terms and subject to the conditions set forth in the Offer to Purchase and Consent Solicitation Statement, dated as of April 2, 2024. The total amount tendered pursuant to the tender offers was approximately $3.3 billion, excluding premiums. On April 26, 2024, Randolph Acquisition Corp. purchased those NFP Notes that were validly tendered and not validly withdrawn prior to April 15, 2024, effecting the early settlement of the offers (the “Early Settlement”). In addition, on April 16, 2024, NFP Corp. delivered notices of redemption of all NFP Notes not validly tendered pursuant to the offers and purchased at the Early Settlement, at a purchase price equal to the price paid to holders of the NFP Notes in connection with the Early Settlement, with a redemption date of April 26, 2024. As a result of the Early Settlement of the offers and the related redemption which occurred on April 26, 2024, no NFP Notes remain outstanding. Aon plc incurred $6 million of debt extinguishment charges in the second quarter of 2024 related to costs related to the NFP Transaction.

On March 1, 2024, Aon North America, Inc. issued $600 million 5.125% Senior Notes due in March 2027, $1 billion 5.150% Senior Notes due in March 2029, $650 million 5.300% Senior Notes due in March 2031, $1.75 billion 5.450% Senior Notes due in March 2034, and $2 billion 5.750% Senior Notes due in March 2054, totaling to an aggregate amount of $6 billion. The Company intends to use the net proceeds from the offering for general corporate purposes, including a portion of which that was used to pay a portion of the cash consideration in connection with the NFP Transaction, to repay certain debt of NFP, and to pay related fees and expenses.

In November 2023, Aon Global Limited’s $350 million 4.00% Senior Notes matured and were repaid in full.

On February 28, 2023, Aon Corporation, a Delaware corporation, and Aon Global Holdings plc, a public limited company formed under the laws of England and Wales, both wholly owned subsidiaries of the Company, co-issued $750 million 5.35% Senior Notes due in February 2033. The Company intends to use the net proceeds from the offering for general corporate purposes.

Revolving Credit Facilities

As of September 30, 2024, Aon had two primary committed credit facilities outstanding: its $1.0 billion multi-currency U.S. credit facility expiring in September 2027 and its $1.0 billion multi-currency U.S. credit facility expiring in October 2028. In aggregate, these two facilities provide $2.0 billion in available credit.

Each of these primary committed credit facilities and the delayed draw term loan includes customary representations, warranties, and covenants, including financial covenants that require Aon to maintain specified ratios of adjusted consolidated EBITDA to consolidated interest expense and consolidated debt to adjusted consolidated EBITDA, in each case, tested quarterly. Aon did not have borrowings under either of these primary committed credit facilities as of September 30, 2024 and December 31, 2023, respectively. Additionally, Aon was in compliance with the financial covenants and all other covenants contained therein during the rolling 12 months ended September 30, 2024 and December 31, 2023, respectively.

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 Program”). Commercial paper may be issued in aggregate principal amounts of up to approximately $1.3 billion under the U.S. Program and €625 million ($699 million at September 30, 2024 exchange rates) under the European Program, not to exceed the amount of the Company’s committed credit facilities, which was $2.0 billion at September 30, 2024. The aggregate capacity of the Commercial Paper Program remains fully backed by the Company’s committed credit facilities. The U.S. Program was fully and unconditionally guaranteed by Aon plc, Aon Global Limited, Aon North America, Inc., and Aon Global Holdings plc and the European Program was fully and unconditionally guaranteed by Aon plc, Aon Global Limited, Aon North America, Inc., and Aon Corporation.

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

September 30, 2024December 31, 2023
Commercial paper outstanding$—$597

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

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Weighted average commercial paper outstanding$56$316$157$381
Weighted average interest rate of commercial paper outstanding5.51%5.47%5.62%4.54%

10. Income Taxes

The effective tax rate on Net income was 20.9% and 22.8% for the three and nine months ended September 30, 2024, respectively. The effective tax rate on Net income was 16.6% and 17.1% for the three and nine months ended September 30, 2023, respectively.

For the three and nine months ended September 30, 2024, the quarter-to-date tax rate was primarily driven by the geographical distribution of income and certain discrete items. The year-to-date tax rate was primarily driven by the geographical distribution of income and certain discrete items, including the favorable impacts of share-based payments offset by the unfavorable impact of other discrete items.

For the three and nine months ended September 30, 2023, the quarter-to-date tax rate was primarily driven by the geographical distribution of income and certain discrete items, including the tax benefit from the release of a valuation allowance due to a change in judgement about the realizability of deferred tax assets. The year-to-date tax rate was primarily driven by the geographical distribution of income and certain discrete items, including the tax benefits associated with the release of a valuation allowance, share-based payments, and the anticipated sale of certain assets and liabilities classified as held for sale.

Ireland, the U.K., and many E.U. member states, among others, have enacted legislation to implement the global minimum tax that are consistent with the OECD’s proposed Pillar Two tax regime. There remains significant uncertainty as to how the proposed Pillar Two tax regime and the OECD’s past and potentially future Pillar Two guidance will ultimately apply to the Company. The Company is actively monitoring developments in this area and continues to evaluate the guidance and the potential impacts this may have on its global effective tax rate, results of operations, cash flows, and financial condition in 2024 and future periods.

11. Shareholders’ Equity (Deficit)

Ordinary Shares

Aon has a share repurchase program authorized by the Company’s Board of Directors (“the Repurchase Program”). The Repurchase Program was established in April 2012 with $5.0 billion in authorized repurchases, and was increased by $5.0 billion in authorized repurchases in each of November 2014, June 2017, and November 2020, and by $7.5 billion in February 2022 for a total of $27.5 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):

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Shares repurchased (1)0.92.62.56.1
Average price per share$339.31$330.98$316.57$321.40
Repurchase costs recorded to accumulated deficit$304$850$804$1,950

(1) Included in the 0.9 million and 2.5 million shares repurchased during the three and nine months ended September 30, 2024, respectively, were 10.5 thousand shares that did not settle until October 2024. These shares were settled at an average price per share of $345.04 and total cost of $3.6 million.

At September 30, 2024, the remaining authorized amount for share repurchases under the Repurchase Program was approximately $2.5 billion. Under the Repurchase Program, the Company has repurchased a total of 171.6 million shares for an aggregate cost of approximately $25.0 billion.

Weighted Average Ordinary Shares

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

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Basic weighted average ordinary shares outstanding217.4202.9209.7204.6
Dilutive effect of potentially issuable shares1.01.70.91.4
Diluted weighted average ordinary shares outstanding218.4204.6210.6206.0

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 and 0.1 million shares excluded from the calculation for the three and nine months ended September 30, 2024, respectively. There were no shares excluded from the calculation for the three and nine months ended September 30, 2023.

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 AdjustmentsPostretirement Benefit Obligation (2)Total
Balance at January 1, 2024$2$(1,584)$(2,791)$(4,373)
Other comprehensive income (loss) before reclassifications, net85129(40)174
Amounts reclassified from accumulated other comprehensive income
Amounts reclassified from accumulated other comprehensive income (loss)(1)—106105
Tax expense——(27)(27)
Amounts reclassified from accumulated other comprehensive income (loss), net(1)—7978
Net current period other comprehensive income (loss)8412939252
Balance at September 30, 2024$86$(1,455)$(2,752)$(4,121)
Change in Fair Value of Financial Instruments (1)Foreign Currency Translation AdjustmentsPostretirement Benefit Obligation (2)Total
Balance at January 1, 2023$(11)$(1,861)$(2,751)$(4,623)
Other comprehensive income (loss) before reclassifications, net1(28)(26)(53)
Amounts reclassified from accumulated other comprehensive income
Amounts reclassified from accumulated other comprehensive income7—124131
Tax expense(2)—(32)(34)
Amounts reclassified from accumulated other comprehensive income, net5—9297
Net current period other comprehensive income (loss)6(28)6644
Balance at September 30, 2023$(5)$(1,889)$(2,685)$(4,579)

(1)Reclassifications from this category included in Accumulated other comprehensive loss are recorded in Total revenue, Interest expense, and Compensation and benefits in the Condensed Consolidated Statements of Income. Refer to Note 13 “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 Condensed Consolidated Statements of Income.

12. Employee Benefits

The following table provides the components of the net periodic (benefit) cost recognized in the Condensed Consolidated Statements of Income for Aon’s significant U.K., U.S., and other major pension plans, which are located in the Netherlands and Canada. Service cost is reported in Compensation and benefits and all other components are reported in Other income (expense) as follows (in millions):

Three Months Ended September 30,
U.K.U.S.Other
202420232024202320242023
Service cost$—$—$—$—$—$—
Interest cost373823261010
Expected return on plan assets, net of administration expenses(48)(49)(33)(29)(14)(12)
Amortization of prior-service cost11————
Amortization of net actuarial loss21197843
Net periodic (benefit) cost119(3)5—1
Loss on pension settlement——————
Total net periodic (benefit) cost$11$9$(3)$5$—$1
Nine Months Ended September 30,
U.K.U.S.Other
202420232024202320242023
Service cost$—$—$—$—$—$—
Interest cost10811069782930
Expected return on plan assets, net of administration expenses(142)(143)(101)(89)(41)(36)
Amortization of prior-service cost22————
Amortization of net actuarial loss625622251010
Net periodic (benefit) cost3025(10)14(2)4
Loss on pension settlement—————27
Total net periodic (benefit) cost$30$25$(10)$14$(2)31

In May 2023, to further its pension de-risking strategy, the Company settled certain pension obligations in the Netherlands through the purchase of annuities, where certain pension assets were liquidated to purchase the annuities. A non-cash settlement charge totaling $27 million was recognized in the second quarter of 2023.

Contributions

Assuming no additional contributions are agreed to with, or required by, the pension plan trustees, the Company expects to make total cash contributions of approximately $2 million, $53 million, and $13 million (at December 31, 2023 exchange rates) to its significant U.K., U.S., and other major pension plans, respectively, during 2024. The following table summarizes contributions made to the Company’s significant pension plans (in millions):

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Contributions to U.K. pension plans$1$1$3$3
Contributions to U.S. pension plans1363127
Contributions to other major pension plans22910
Total contributions$16$9$43$40

13. 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 Condensed 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 Condensed Consolidated Statements of Income.

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

Notional AmountNet 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)
September 30, 2024December 31, 2023September 30, 2024December 31, 2023September 30, 2024December 31, 2023
Foreign exchange contracts
Accounted for as hedges$668$1,724$45$34$—$2
Not accounted for as hedges (3)434382—211
Total$1,102$2,106$45$36$1$3

(1)Included within Other current assets ($27 million at September 30, 2024 and $17 million at December 31, 2023) or Other non-current assets ($18 million at September 30, 2024 and $19 million at December 31, 2023).

(2)Included within Other current liabilities ($1 million at September 30, 2024 and $3 million at December 31, 2023).

(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 Condensed Consolidated Financial Statements are as follows (in millions):

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Gain (loss) recognized in Accumulated other comprehensive loss$13$(8)$114$1

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

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Gain (loss) recognized in Total revenue$2$(1)$—$(7)
Interest expense$1$—$1$—
Total$3$(1)$1$(7)

The Company estimates that approximately $14 million of pretax gains currently included within Accumulated other comprehensive loss will be reclassified into earnings in the next twelve months.

During the three and nine months ended September 30, 2024, the Company recorded gain of $9 million and $0 million, respectively, in Other income (expense) for foreign exchange derivatives not designated or qualifying as hedges. During the

three and nine months ended September 30, 2023, the Company recorded a loss of $13 million and a gain of $24 million, respectively, in Other income (expense) for foreign exchange derivatives not designated or qualifying as hedges.

14. 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:

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.

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 DCF 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 Condensed 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.

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 DCF 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 September 30, 2024 and December 31, 2023 (in millions):

Fair Value Measurements Using
Balance at September 30, 2024Quoted 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)$3,368$3,368$—$—
Other investments
Government bonds$1$—$1$—
Derivatives (2)
Gross foreign exchange contracts$66$—$66$—
Liabilities
Derivatives (2)
Gross foreign exchange contracts$22$—$22$—
Fair Value Measurements Using
Balance at December 31, 2023Quoted 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)$3,204$3,204$—$—
Other investments
Government bonds$1$—$1$—
Derivatives (2)
Gross foreign exchange contracts$49$—$49$—
Liabilities0
Derivatives (2)
Gross foreign exchange contracts$16$—$16$—

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

(2)Refer to Note 13 “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 in the three and nine months ended September 30, 2024 or 2023. The Company recognized no realized or unrealized gains or losses in the Condensed Consolidated Statements of Income during the three and nine months ended September 30, 2024 or 2023 related to assets and liabilities measured at fair value using unobservable inputs.

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):

September 30, 2024December 31, 2023
Carrying ValueFair ValueCarrying ValueFair Value
Current portion of long-term debt$—$—$600$595
Long-term debt$17,090$16,842$9,995$9,223

15. 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, including coverage from Aon’s self-insurance program. Accruals for these

exposures, and related insurance receivables, when applicable, are included in the Condensed Consolidated Statements of Financial Position and have been recognized in Other general expense in the Condensed Consolidated Statements of Income to the extent that losses are deemed probable and are reasonably estimable. These amounts are adjusted from time to time as developments warrant. Matters that are not probable and reasonably estimable are not accrued for in the financial statements.

The Company’s contingencies and exposures are subject to significant uncertainties, and the determination of likelihood of a loss and estimating any such loss can be complex. The Company is therefore, in certain matters, unable to estimate the range of reasonably possible loss. Although management at present believes that the ultimate outcome of such matters, 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. Certain significant legal proceedings involving us or our subsidiaries are described below.

Current Matters

Aon faces legal action arising out of a fatal plane crash in November 2016. Aon U.K. 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 $16 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 cooperated with that inquiry. 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. Finally, in April 2021, representatives of 16 passengers issued a claim against Aon in the High Court in England seeking damages under the Fatal Accidents Act 1976 in the sum of £29 million ($39 million at September 30, 2024 exchange rates). In February 2024, the claim brought by representatives of 16 passengers in the High Court in England was dismissed pursuant to an agreement among the parties. In December 2022, the High Court in England granted an anti-suit injunction, restricting the 43 individuals who previously filed a motion in the Circuit Court of the 11th Judicial Circuit in and for Miami Dade County, Florida, from continuing litigation in the Circuit Court of the 11th Judicial Circuit against Aon. Aon believes that it has meritorious defenses and intends to vigorously defend itself against the remaining claims.

Certain of the Company’s clients and counterparties have initiated or indicated that they may initiate legal proceedings against the Company following allegations in July 2023 that fraudulent letters of credit were issued in the name of third-party banks in connection with transactions for which capital was arranged by Vesttoo Ltd. (“Vesttoo”). Vesttoo is one of the third parties that identifies capital providers to collateralize insurance and reinsurance obligations of the Company’s clients and counterparties. In certain transactions in which Vesttoo identified third party capital providers to collateralize reinsurance obligations, including transactions in which the Company or its affiliates provided brokerage or other services, some letters of credit from third party banks are alleged to have been fraudulent. The pending or threatened legal proceedings against the Company allege, among other theories of liability, that in certain circumstances the Company failed to comply with its alleged duty to procure appropriate letters of credit. In particular, on November 30, 2023, Clear Blue Insurance Company and certain of its affiliates filed a lawsuit in New York State Supreme Court against Aon plc and Aon Insurance Managers (Bermuda) Ltd. alleging such claims. While Aon has settled and/or is in discussions to settle certain claims, Aon believes that it has meritorious defenses and intends to vigorously defend itself against those claims that are not settled. In the fourth quarter of 2023, the Company recognized actual or anticipated legal settlement expenses in connection with these matters of $197 million, of which a potentially significant amount may be recoverable in future periods. Aon may also seek recourse against third parties where appropriate, including in connection with bankruptcy proceedings filed by Vesttoo in the Bankruptcy Court for the U.S. District of Delaware. In addition, in August 2023, joint provisional liquidators were appointed over one of the Company’s subsidiaries in Bermuda with respect to segregated accounts that were impacted by the allegedly fraudulent letters of credit. The joint provisional liquidators were released from their appointment on July 3, 2024. Aon continues to cooperate with regulators in Bermuda, and other regulatory authorities could initiate investigations or proceedings against the Company or third parties.

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 Condensed Consolidated Financial Statements, and are recorded at fair value.

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

Guarantee of Registered Securities

On June 22, 2023, Aon plc, Aon Global Limited, Aon Global Holdings plc, Aon Corporation, and Aon North America, Inc., and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), as applicable, entered into supplemental indentures, each dated June 22, 2023, amending each of the following indentures (as amended, supplemented or modified from time to time) to add for the benefit of the holders of the instruments issued thereunder a full and unconditional guarantee of Aon North America, Inc. thereunder: (i) Second Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon plc, Aon Global Limited, Aon Global Holdings plc and the Trustee (amending and restating the Amended and Restated Indenture, dated April 2, 2012, amending and restating the Indenture, dated January 13, 1997); (ii) Second Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon plc, Aon Global Limited, Aon Global Holdings plc and the Trustee (amending and restating the Amended and Restated Indenture, dated April 2, 2012, amending and restating the Indenture, dated September 10, 2010); (iii) Amended and Restated Indenture, dated April 1, 2020, among Aon plc, Aon Corporation, Aon Global Limited, Aon Global Holdings plc and the Trustee (amending and restating the Indenture, dated December 12, 2012); (iv) Second Amended and Restated Indenture, dated April 1, 2020, among Aon plc, Aon Corporation, Aon Global Limited, Aon Global Holdings plc and the Trustee (amending and restating the Amended and Restated Indenture, dated May 20, 2015, amending and restating the Indenture, dated May 24, 2013); (v) Amended and Restated Indenture, dated April 1, 2020, among Aon plc, Aon Corporation, Aon Global Limited, Aon Global Holdings plc and the Trustee (amending and restating the Indenture, dated November 13, 2015); and (vi) Amended and Restated Indenture, dated April 1, 2020, among Aon Corporation, Aon plc, Aon Global Limited, Aon Global Holdings plc and the Trustee (amending and restating the Indenture, dated December 3, 2018).

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 $149 million at September 30, 2024, and $86 million at December 31, 2023. These LOCs cover the beneficiaries related to certain of Aon’s U.S. and Canadian secure non-qualified pension plan schemes, reinsurance obligations related to Aon’s own E&O liability insurance program, 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 $133 million at September 30, 2024 compared to $194 million at December 31, 2023.

16. Segment Information

The Company operates as one segment that includes all of Aon’s operations, which as a global professional services firm provides a broad range of Risk and Human Capital Solutions through four solution lines — Commercial risk, Reinsurance, Health, and Wealth, which make up its principal products and services. 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 the 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, expense discipline, and collaborative behaviors that maximize value for Aon and its shareholders, regardless of which solution line it benefits.

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

Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations