Slide 1: Aon plc Third Quarter 2023 Results
Aon plc Third Quarter 2023 Results October 27, 2023
Slide 2: Presenters: Greg Case, Christa Davies, Eric Andersen
Greg Case Chief Executive Officer Christa Davies Chief Financial Officer Eric Andersen President
Slide 3: Safe Harbor Statement
Safe Harbor Statement This communication contains certain statements related to future results, or states Aon’s intentions, beliefs and expectations or predictions for the future, all of which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1
Slide 4: 2023 U.S. GAAP Financials
2023 U.S. GAAP Financials Q3’23 YTD’23 Total Revenue Growth +10% +7% Operating Margin 23.4% 30.1% Earnings Per Share $2.23 $10.03 Cash Flows from Operations $2,174 Explanation of Non-GAAP Measures This communication includes supplemental information not calculated in accordance with generally accept
Slide 5: Table of Contents
Table of Contents 01 Executive 02 Quarterly 03 Delivering Long- Summary Performance Term Growth 04 Free Cash Flow 05 Appendices Drives Long-Term Shareholder Value 5
Slide 6: Aon at a glance
1. Includes approximately $55 billion of captive premium. 2. As of 6/30/2022, includes non-discretionary assets advised by Aon and its global affiliates which includes retainer clients and clients in which Aon and its global affiliates have performed project services for 6 over the past 12 months. P
Slide 7: Executive Summary
Executive Summary AON
Slide 8: Quarterly Performance and Focus on Long-Term Strategy
Quarterly Performance and Focus on Long-Term Strategy¹ Quarterly Performance on Key Financial Metrics • Organic Revenue growth of +6%; driven by ongoing strong retention, management of the renewal book, and net new business generation • Adjusted Operating Margin expansion of +120 basis points and ad
Slide 9: Aon United - Driving Top and Bottom-Line Results
Aon United - Driving Top and Bottom-Line Results1,2 Committed to Mid-Single-Digit or Greater Organic Revenue Growth Over the Long-Term • Track record of +4% average annual organic revenue growth from 2010-2022, with +6% organic revenue growth in 2022 • Driven by three areas: Delivering client value
Slide 10: 2023 Supplemental Financial Information
2023 Supplemental Financial Information¹ Organic Revenue: • Expect to deliver mid-single-digit or greater organic revenue growth for full year 2023 and over the long-term Expense Outlook: • Expect to deliver adjusted operating margin expansion for full year 2023 and over the long-term Foreign Curren
Slide 11: Quarterly Performance
Quarterly Performance AON
Slide 12: Performance Across Key Metrics
Performance Across Key Metrics¹ Q3'22 Q3’23 YTD’22 YTD’23 Organic Revenue +5% +6% +7% +7% Adjusted Operating Margin 23.1% 24.3% 30.0% 30.8% Year-over-Year +100 bps +120 bps +80 bps +80 bps Adjusted Earnings Per Share $2.02 $2.32 $9.51 $10.26 Year-over-Year +16% +15% +14% +8% Free Cash Flow $2,051M $
Slide 13: Organic Revenue - Growth Across All Solution Lines
Organic Revenue¹ - Growth Across All Solution Lines • Organic revenue growth of +6% overall in the third quarter, driven by ongoing strong retention, management of the renewal book, and net new business generation • Reported revenue growth of +10% in the third quarter, including a 2% favorable impac
Slide 14: Quarterly Summary of Organic Revenue Growth Across Solution Lines
Quarterly Summary of Organic Revenue Growth¹ Across Solution Lines Commercial Risk Solutions • Commercial Risk Solutions organic revenue growth of 4% reflects solid growth across most major geographies driven by strong retention, management of the renewal book, and net new business generation • Grow
Slide 15: Adjusted Operating Margin - Driving Strong Growth in Margin and Operating Income
Adjusted Operating Margin1 – Driving Strong Growth in Margin and Operating Income 1 Q3 Commentary ▪ Adjusted operating income growth of +15% and adjusted operating margin expansion of +120 bps reflects 6% organic revenue growth and $80 million fiduciary investment income, partially offset by increas
Slide 16: Adjusted EPS - Delivered Strong Growth
Adjusted EPS¹ - Delivered Strong Growth • Adjusted earnings per share growth in the quarter reflects strong organic revenue growth, operating margin expansion and effective capital management • FX translation had a $(0.01) per share unfavorable impact in the third quarter • If currency were to remai
Slide 17: Non-Operating Financials
Non-Operating Financials • Interest expense increased $16 million, ($ millions) Q3’22 Q3’23 reflecting an overall increase in total debt and higher interest rates. Interest Income $7 $9 • Total other income (expense) decreased $37 million, primarily due to the unfavorable impact Interest Expense $(1
Slide 18: Delivering Long-Term Growth
3 Delivering Long-Term Growth
Slide 19: Drivers of Sustainable Organic Revenue Growth
Drivers of Sustainable Organic Revenue Growth¹ • When we bring the best of the firm through our Aon United strategy, we can win more, retain more, and do more with Delivering Client clients Value in the • Our strong core business is largely recurring, non- Core discretionary, and with retention rate
Slide 20: Aon Business Services – Ongoing Evolution of How We Operate
Aon Business Services – Ongoing Evolution of How We Operate Operating principles and track record of progress… …are the foundation for our next stage of value creation Standardized Platforms • Investing in standardizing, digitizing and connecting platforms and technology across our ABS ecosystem Inn
Slide 21: Three Commitments Drive Ongoing Progress on Aon United
Three Commitments Drive Ongoing Progress on Aon United Our plan accelerates progress against existing strategy • Client need continues to evolve and increase, and Aon United enables a connected, stronger firm for clients and colleagues, as demonstrated by our long-term track record of progress • Whi
Slide 22: Accelerating Aon United Program to Drive ~$350m Expected Annual Savings
Accelerating Aon United Program to Drive ~$350m Expected Annual Savings We built Aon United in response to ongoing, increasing risk and demand from our clients and Cumulative Annual are now investing in: Expected Savings ($M) • Aon Business Services: investing in platform simplification and migratio
Slide 23: ESG at Aon - Better Decisions for a Better World
ESG at Aon - Better Decisions for a Better World At Aon, helping clients manage risk — including ESG risk — is at the core of what we do. We see significant opportunity in enhancing our impact and delivering innovative client solutions. Environmental Social Governance Progressing on our commitment t
Slide 24: Free Cash Flow Drives Long-Term Shareholder Value
4 Free Cash Flow Drives Long-Term Shareholder Value
Slide 25: Strong Financial Flexibility and Cash Generation
Strong Financial Flexibility and Cash Generation Free Cash Flow1 Balance Sheet Dec 31, Sep 30, ($ millions) ($ millions) 2022 2023 $1,971 Cash $690 $808 Short-term Investments $452 $175 Total Debt $10,770 $11,251 Shareholders’ Equity (Deficit)² $(529) $(586) • Cash flows from operations decreased $3
Slide 26: Our Annual Long-Term Track Record on Key Financial Metrics
Our Annual Long-Term Track Record on Key Financial Metrics¹ Driving Top and Bottom-Line Improvement FY 2010 FY 2022 12-Year Change Organic Revenue Growth +0% +6% +4% avg / year Adjusted Operating Margin 19.6% 30.8% 1,120 bps ~90 bps / year Adjusted Earnings Per Share $3.48 $13.39 +12% CAGR Free Cash
Slide 27: Appendices
Appendices AON
Slide 28: Commercial Risk Solutions
Commercial Risk Solutions Shifts in technology, economics and geopolitics are creating unprecedented volatility. We help clients identify, measure and manage their risk exposure. Place over Retail Brokerage: • Our dedicated teams of risk professionals utilize comprehensive analytics capabilities and
Slide 29: Reinsurance Solutions
Reinsurance Solutions Businesses, governments and communities need to become more resilient. Our expertise and insight help re/insurers navigate uncharted territories and create more relevant solutions. Treaty: • Addresses underwriting and capital objectives on a portfolio level, allowing our client
Slide 30: Health Solutions
Health Solutions Healthcare costs are skyrocketing and workers have vastly differing needs. We help companies improve employee health and wellbeing while managing costs. Consulting & Brokerage: • Develops and implements innovative, customized health and benefits strategies for clients of all sizes a
Slide 31: Wealth Solutions
Wealth Solutions Global business is becoming increasingly difficult to navigate. We help employers, fiduciaries, and investment officers optimize results to provide a more secure future. Retirement Consulting & Pension Administration: • Utilizes our deep pension expertise to deliver high-quality int
Slide 32: Appendix A: Reconciliation of Non-GAAP Measures – Organic Revenue Growth
Appendix A: Reconciliation of Non-GAAP Measures – Organic Revenue Growth Aon Organic Revenue Reconciliation Q3'20 Q4'20 FY'20 Q1'21 Q2'21 Q3'21 Q4'21 FY'21 Q1'22 Q2'22 Q3'22 Q4'22 FY'22 Q1'23 Q2'23 Q3’23 Commercial Risk Current period revenue 1,320 1,664 5,861 1,640 1,643 1,505 1,847 6,635 1,719 1,6
Slide 33: Appendix A: Organic Revenue Growth (Cont'd)
Appendix A: Reconciliation of Non-GAAP Measures – Organic Revenue Growth (Cont’d) Aon Organic Revenue Reconciliation 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD'23 Total Revenue Current period revenue 8,512 11,287 11,514 11,815 12,045 11,682 11,627 9,998 10,770 11,013 11,066
Slide 34: Appendix B: Operating Income and Diluted Earnings Per Share
Appendix B: Reconciliation of Non-GAAP Measures – Operating Income and Diluted Earnings Per Share Three Months Ended September 30, Nine Months Ended September 30, % (millions, except percentages) 2023 2022 % Change 2023 2022 Change Revenue $ 2,953 $ 2,696 10 % $ 10,001 $ 9,349 7 % Operating income $
Slide 35: Appendix B: Operating Income and Diluted EPS (Cont'd)
Appendix B: Reconciliation of Non-GAAP Measures – Operating Income and Diluted Earnings Per Share1 (Cont’d) 35
Slide 36: Appendix C: Adjusted Operating Income and Margin and ROIC
Appendix C: Adjusted Operating Income and Margin and Reconciliation of Return on Invested Capital (ROIC) Return on Invested Capital (ROIC) is a non-GAAP measure calculated as adjusted net operating profit after tax (NOPAT) divided by average invested capital (short-term debt, + long-term debt + tota
Slide 37: Appendix D: Other Income (Expense) Under Pension Accounting Standard
Appendix D: Other Income (Expense) Under Pension Accounting Standard Effective 1/1/2018 (ASU No. 2017-07) With the exception of service cost, all financial components of net periodic pension cost and net periodic postretirement benefit cost shifted from above the line in compensation and benefits ex
Slide 38: Appendix E: Reconciliation of Free Cash Flow & Free Cash Flow Margin
Appendix E: Reconciliation of Free Cash Flow & Free Cash Flow Margin Free Cash Flow Margin is a non-GAAP measure calculated as Free Cash Flow (defined as Cash Flows from Operations less Capital Expenditures) / Total Revenue and represents our conversion rate of revenue into cash. The metric for the
Slide 39: Investor Relations
Investor Relations Leslie Follmer leslie.follmer@aon.com Office: 312-381-3230 Nicole Hendry nicole.hendry@aon.com Office: 312-381-5505 Grace Lenz grace.lenz@aon.com Office: 847-442-0622 39