Aon Reports First Quarter 2021 Results

Net income attributable to Aon shareholders was $913 million, or $4.00 per share, compared to $772 million, or $3.29 per share, in the prior year period...

First Quarter Key Metrics

• Total revenue increased 10% to $3.5 billion, including organic revenue growth of 6%
• Operating margin increased 320 basis points to 35.3%, and operating margin, adjusted for certain items, increased 170 basis points to 37.4%
• EPS increased 22% to $4.00, and EPS, adjusted for certain items, increased 16% to $4.28
• For the first three months of 2021, cash flows from operations increased 66% to $561 million, and free cash flow increased 91% to $532 million

First Quarter Highlights

• Repurchased 0.2 million Class A Ordinary Shares for approximately $50 million
• Published our 2020 Aon Impact Report, highlighting ongoing actions to strengthen our inclusive Aon United culture and commitment to net-zero greenhouse gas emissions by 2030, using Science Based Targets
• Announced the future executive committee that will lead the combined firm upon the completion of the pending combination of Aon and Willis Towers Watson
• Subsequent to the close of the quarter, announced a new solution, through broad industry collaboration, that will provide supply chain protection for global COVID-19 vaccine shipments
• Subsequent to the close of the quarter, announced an 11% increase to the quarterly cash dividend

Aon plc has reported results for the three months ended March 31, 2021.

Net income per share attributable to Aon shareholders, adjusted for certain items, increased 16% to $4.28, including a favorable impact of $0.18 per share if the Company were to translate prior year period results at current period foreign exchange rates ("foreign currency translation"), compared to $3.68 in the prior year period. Certain items that impacted first quarter results and comparisons with the prior year period are detailed in the "Reconciliation of Non-GAAP Measures - Operating Income and Diluted Earnings Per Share" on page 10 of this press release.

"In the first quarter, our colleagues delivered an outstanding operational performance including 6% organic revenue growth and 170 basis points of margin improvement, building on over a decade of progress on our key financial metrics, creating momentum for 2021, and demonstrating the power of Aon United," said Greg Case, Chief Executive Officer. "Today, clients are justifiably focused on the unprecedented impact of the COVID-19 pandemic, but they are also increasingly aware of other challenges like climate change, supply chain disruption, the future of work, and the growing health-wealth gap. Our strategy is built to bring the best innovation, insight, and solutions from across our firm, and our potential to address client need only increases with our pending combination with Willis Towers Watson."

FIRST QUARTER 2021 FINANCIAL SUMMARY

Total revenue in the first quarter increased 10% to $3.5 billion compared to the prior year period driven by 6% organic revenue growth and a 4% favorable impact from foreign currency translation.

Total operating expenses in the first quarter increased 4% to $2.3 billion compared to the prior year period due primarily to a $73 million unfavorable impact from foreign currency translation, an increase in expense associated with 6% organic revenue growth, and a $17 million increase in transaction costs related to the pending combination with Willis Towers Watson, partially offset by a $55 million decrease from accelerated amortization related to certain tradenames that were fully amortized in the second quarter of 2020 and expense discipline, including lower travel and entertainment expense.

Foreign currency translation in the first quarter had a $40 million, or $0.17 per share, favorable impact on U.S. GAAP net income and a $42 million, or $0.18 per share, favorable impact on adjusted net income. If currency were to remain stable at today's rates, the Company would expect a favorable impact of approximately $0.04 per share in the second quarter of 2021, $0.02 per share in the third quarter of 2021, and $0.01 per share in the fourth quarter of 2021.

Effective tax rate used in the Company's U.S. GAAP financial statements in the first quarter was 20.1%, compared to 19.3% in the prior year period. After adjusting to exclude the applicable tax impact associated with certain non-GAAP adjustments, the adjusted effective tax rate for the first quarter of 2021 increased to 19.7% compared to 19.4% in the prior year period, primarily driven by changes in the geographical distribution of income and a net favorable impact from discrete items. The prior year period also included a net favorable impact from discrete items.

Weighted average diluted shares outstanding decreased to 228.1 million in the first quarter compared to 234.5 million in the prior year period. The Company repurchased 0.2 million Class A Ordinary Shares for approximately $50 million in the first quarter. As of March 31, 2021, the Company had $5.2 billion of remaining authorization under its share repurchase program.

YEAR TO DATE 2021 CASH FLOW SUMMARY
Cash flows provided by operations for the first three months of 2021 increased $223 million, or 66%, to $561 million compared to the prior year period, primarily due to strong operational improvement and a $45 million decrease in restructuring cash outlays.

Free cash flow, defined as cash flows from operations less capital expenditures, increased 91%, to $532 million for the first three months of 2021 compared to the prior year period, reflecting an increase in cash flows from operations and a $30 million decrease in capital expenditures.

FIRST QUARTER 2021 REVENUE REVIEW
The first quarter revenue reviews provided below include supplemental information related to organic revenue growth (decline), which is a non-GAAP measure that is described in detail in "Reconciliation of Non-GAAP Measures - Organic Revenue Growth (Decline) and Free Cash Flow" on page 9 of this press release.

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