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Transcript of Aon PLC 2011
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8/13/2019 Aon PLC 2011
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2 0 1 1 A n n u a l F i n a n c i a l R e p o r t
w w w . a o n . c o m
I I I 1 . 1 , 1 1 1 1 , 1 , 1 9 1 . 112025895
2011 Annual Financial Report
Received SEC
AP82tt2
WsDC 20549
www.aon.com
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T o O u r S h a r e h o l d e r s :A s A o n c e l e b r a t e s i t s 2 5 t h y e a r a s a g l o b a l b r a n d , I a m p l e a s e d t o r e p o r t t o y o u t h a t o u r f i r m
f i n i s h e d 2 0 1 1 w i t h a n o t h e r s o l i d p e r f o r m a n c e , r e f l e c t i n g c o n t i n u e d m o m e n t u m i n o u r R i s k S o l u t i o n sa n d H R S o l u t i o n s b u s i n e s s e s a s w e d e l i v e r v a l u e t o c l i e n t s a r o u n d t w o o f t h e m o s t i m p o r t a n t i s s u e sf a c i n g t h e g l o b a l e c o n o m y : r i s k a n d p e o p l e .T h i s s u c c e s s i s t h e r e s u l t o f t h e d e d i c a t e d a n d t i r e l e s s w o r k o f o u r o v e r 6 0 , 0 0 0 c o l l e a g u e s a r o u n dt h e w o r l d w h o a r e c o m m i t t e d t o p r o v i d i n g d i s t i n c t i v e v a l u e t o o u r c l i e n t s e v e r y d a y .I w a n t t o t h a n k o u r s h a r e h o l d e r s f o r v o t i n g o v e r w h e l m i n g l y t o a p p r o v e t h e b o a r d ' s d e c i s i o n t om o v e o u r c o r p o r a t e h e a d q u a r t e r s t o t h e U n i t e d K i n g d o m . T h i s m o v e w i l l p r o v i d e g r e a t e r a c c e s s t oe m e r g i n g m a r k e t s a n d a l l o w A o n t o t a k e b e t t e r a d v a n t a g e o f t h e s t r a t e g i c p r o x i m i t y t o L l o y d ' s a n d t h eL o n d o n m a r k e t .T h i s m o v e w i l l a l s o h a v e s e v e r a l n e a r - a n d l o n g - t e r m f i n a n c i a l b e n e f i t s , i n c l u d i n g i n c r e a s e df i n a n c i a l f l e x i b i l i t y a n d i m p r o v e d c a p i t a l a l l o c a t i o n . A s t h e p r o p o r t i o n o f A o n ' s r e v e n u e f r o mi n t e r n a t i o n a l o p e r a t i o n s c o n t i n u e s t o g r o w , t h e a b i l i t y t o a l l o c a t e c a p i t a l f o r i n v e s t m e n t a n d g r o w t h w i l lb e e v e n m o r e v i t a l t o t h e f i r m ' s o n g o i n g s u c c e s s .O v e r a l l , i n 2 0 1 1 w e a c c o m p l i s h e d a n u m b e r o f g o a l s a g a i n s t o u r t h r e e s t r a t e g i c o b j e c t i v e s : p r o v i d ed i s t i n c t i v e v a l u e t o o u r c l i e n t s , a t t r a c t a n d r e t a i n u n m a t c h e d t a l e n t , a n d d e l i v e r o p e r a t i o n a l e x c e l l e n c e .O u r m o s t s i g n i f i c a n t a c c o m p l i s h m e n t s f o r 2 0 1 1 i n c l u d e d t h e f o l l o w i n g :
W e c o n t i n u e d t o s t r e n g t h e n o u r i n d u s t r y - l e a d i n g p o s i t i o n a s t h e # 1 i n t e r m e d i a i y o f p r i m a r y r i s ki n s u r a n c e , t h e # 1 i n t e r m e d i a r y o f r e i n s u r a n c e , a n d t h e # 1 h u m a n r e s o u r c e c o n s u l t i n g a n do u t s o u r c i n g f i r m w i t h u n m a t c h e d t a l e n t a n d c a p a b i l i t i e sW e a c h i e v e d i m p r o v e d o r g a n i c r e v e n u e g r o w t h a c r o s s b o t h o f o u r b u s i n e s s e s i n a y e a r w h e nm a c r o - e c o n o m i c a n d i n d u s t r y p r e s s u r e s c o n t i n u e t o b e f e l t i n m a n y m a r k e t s a r o u n d t h e g l o b eW e a c h i e v e d a n e s t i m a t e d $ 2 3 3 m i l l i o n o f c u m u l a t i v e r e s t r u c t u r i n g a n d s y n e r g y s a v i n g s u n d e rt h e A o n H e w i t t r e s t r u c t u r i n g p r o g r a m a n d a r e f u l l y o n t r a c k t o a c h i e v e $ 3 5 5 m i l l i o n o fc u m u l a t i v e r e s t r u c t u r i n g a n d s y n e r g y s a v i n g s i n 2 0 1 3W e d e l i v e r e d 2 1 % g r o w t h i n n e t i n c o m e p e r s h a r e a t t r i b u t a b l e t o A o n s h a r e h o l d e r sL a s t l y , w e i n c r e a s e d c a s h f l o w f r o m o p e r a t i o n s 3 0 % t o o v e r $ 1 b i l l i o n , e n a b l i n g t h e r e t u r n o fm o r e t h a n $ 1 b i l l o n o f e x c e s s c a p i t a l t o s h a r e h o l d e r s t h r o u g h o u r s h a r e r e p u r c h a s e p r o g r a m a n dp a y m e n t o f d i v i d e n d s o n c o m m o n s t o c k
A o n i s i n a u n i q u e l e a d e r s h i p p o s i t i o n . O u r s o l i d o p e r a t i o n a l p e r f o r m a n c e , c o m b i n e d w i t h s t r o n ge x p e n s e d i s c i p l i n e a n d c a s h f l o w g e n e r a t i o n , p r o v i d e s u s w i t h t h e o p p o r t u n i t y t o m a k e s i g n i f i c a n ti n v e s t m e n t s i n o u r c o l l e a g u e s a n d i n o u r c a p a b i l i t i e s i n o r d e r t o c r e a t e v a l u e f o r o u r s h a r e h o l d e r s . W ew i l l c o n t i n u e t o s t r e n g t h e n o u r l e a d e r s h i p p o s i t i o n i n t h e m a r k e t p l a c e a n d b u i l d o n o u r i n d u s t r y - l e a d i n gc a p a b i l i t i e s t o i d e n t i f y a n d c a p t u r e g r o w t h o p p o r t u n i t i e s a c r o s s a l l o f o u r m a r k e t s .I n R i s k S o l u t i o n s ,
W e a r e i n v e s t i n g i n c l i e n t l e a d e r s h i p t o d r i v e g r e a t e r p r o d u c t i v i t y a n d e f f i c i e n c y w i t h t h e r o l l - o u to f t h e R e v e n u e E n g i n e i n E M E A a n d A s i a P a c i f i c , a s w e l l a s t h e r o l l o u t o f C l i e n t P r o m i s e ,w h i c h i s d r i v i n g g r e a t e r r e t e n t i o n a n d r o l l o v e r r a t e s a c r o s s o u r c l i e n t b a s e
A O NAotiTo Our Shareholders
As Aon celebrates its 25th year as global brand am pleased to report to you that our firm
finished 2011 with another solid performance reflecting continued momentum in our Risk Solutionsand HR Solutions bu si ne ss es a s we deliver value to clients around two o f t he most important issues
facing the global economy risk and people
This success is the result of t he dedicated and tireless work of our over 60000 colleagues around
the world who are committed to providing distinctive value to our clients every day
want to thank our shareholders for voting overwhelmingly to approve the boards de cision t o
move our corporate headquarters t o t he United Kingdom This move will provide greater access to
emerging markets and allow Aon to take better advantage o f t he strategic proximity to Lloyds and the
London market
This move will also have several near- and long-term financial benefits including increased
financialflexibility
and improved capital allocation As the proportion of Aons revenue from
international operations continues to grow the ability to allocate capital for investment and growth will
be even more vital t o t he firms ongoing success
Overall in 2011 we accomplished number of goals against our three strategic objectives provide
distinctive value to our clients attract and retain unmatched talent and deliver operational excellence
Our most significant accomplishments for 2011 included the following
We continued to strengthen our industry-leading position as the intermediary of primary risk
insurance the intermediary of reinsurance and the human resource consulting and
outsourcing firm with unmatched talent and capabilities
We achieved improved organic revenue growth across both of our businesses in year when
macro-economic and industry pressures continue to be felt in many markets around the globe
We achieved an estimated $233 million of cumulative restructuring and synergy savings under
the
Aon Hewitt restructuring program and are fully on t ra ck t o achieve
$355 million of
cumulative restructuring and synergy savings in 2013
We delivered 21% growth in net income per share attributable to Aon shareholders
Lastly we increased cash flow from operations 30% to over $1 billion enabling the return of
more than $1 billon of excess capital to shareholders through our share repurchase program and
payment of dividends on common stock
Aon is in unique leadership position Our solid operational performance combined with strong
expense discipline and cash flow generation provides us with the opportunity to make significant
investments in our colleagues and in our capabilities in order to create value for our shareholders We
will continue to strengthen our leadership position in the marketplace and build on our industry-leading
capabilities to identify and capture growth opportunities across all of our markets
In Risk Solutions
We are investing in client leadership to drive greater productivity and efficiency w ith t he roll-out
o f t he Revenue Engine in EMEA and Asia Pacific as well as the roll out of Client Promise
which is driving greater retention and rollover rates across our client base
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W e c o n t i n u e t o i n v e s t i n i n n o v a t i v e t e c h n o l o g y s u c h a s F A C o n n e c t a n d o u r G l o b a l R i s k I n s i g h tP l a t f o r m , w h i c h i s t h e w o r l d ' s l e a d i n g g l o b a l r e p o s i t o r y o f r i s k a n d i n s u r a n c e p l a c e m e n ti n f o r m a t i o nW e a r e d r i v i n g o u r A o n B r o k i n g i n i t i a t i v e t o b e t t e r m a t c h c l i e n t n e e d s w i t h i n s u r e r a p p e t i t e f o rr i s k , r e s u l t i n g i n b e t t e r e c o n o m i c s f o r a l l p a r t i c i p a n t sW e c o n t i n u e d t o i n v e s t i n t h e f u t u r e o f o u r f i r m a s w e l l a s e x p a n d o u r i n t e r n a t i o n a l f o o t p r i n tt h r o u g h a c q u i s i t i o n s s u c h a s G l e n r a n d M I B i n S o u t h A f r i c a
A n d f i n a l l y , e f f e c t i v e J a n u a r y 1 , 2 0 1 2 , w e a l i g n e d o u r g l o b a l h e a l t h a n d b e n e f i t s p l a t f o r m u n d e rR i s k S o l u t i o n s t o b e t t e r l e v e r a g e a b r o a d e r g l o b a l d i s t r i b u t i o n c h a n n e l a n d t o s t r e n g t h e n t h ed e e p b r o k e r a g e c a p a b i l i t i e s i n d a t a a n d a n a l y t i c s w i t h c l i e n t s a n d i n s u r a n c e c a r r i e r sA s w e h a v e d i s c u s s e d p r e v i o u s l y , w e h a v e p r o v e d t h e c o n c e p t o f t h e s e i n v e s t m e n t s i n 2 0 1 1 , a n da s w e m o v e i n t o 2 0 1 2 a n d 2 0 1 3 , w e w i l l c o n t i n u e t o d r i v e g r e a t e r s c a l e a n d i n c r e a s e o p e r a t i n g l e v e r a g ea s a r e s u l t o f t h e s e i n v e s t m e n t s i n o u r R i s k S o l u t i o n s s e g m e n t .
I n H R S o l u t i o n s ,W e a r e e x p a n d i n g o u r i n t e r n a t i o n a l f o o t p r i n t a s t h e w o r k f o r c e i s i n c r e a s i n g l y b e c o m i n g m o r eg l o b a l , w i t h i n v e s t m e n t s i n k e y t a l e n t a n d c a p a b i l i t i e s a c r o s s e m e r g i n g m a r k e t sW e a r e c o n t i n u i n g t o i n v e s t i n e x p a n d i n g o u r c o r e H R B P 0 o f f e r i n g s t h r o u g h p o i n t s o l u t i o n so p p o r t u n i t i e s s u c h a s d e p e n d e n t e l i g i b i l i t y a u d i t s a n d a b s e n c e m a n a g e m e n t d i a g n o s t i c sW e a r e e x p a n d i n g o u r i n d u s t r y - l e a d i n g b e n e f i t s a d m i n i s t r a t i o n p l a t f o r m f r o m l a r g e - m a r k e t t om i d d l e - m a r k e tF i n a l l y , w e c o n t i n u e t o s t r e n g t h e n o u r i n d u s t r y - l e a d i n g p o s i t i o n i n h e a l t h c a r e e x c h a n g e s ,e n a b l i n g c l i e n t s t o p r e p a r e f o r u l t i m a t e c h a n g e s i n h e a l t h c a r e l e g i s l a t i o n w i t h d e s i g n , p u r c h a s i n ga n d a d m i n i s t r a t i o n c a p a b i l i t y
W h e t h e r i t i s a n e a r t h q u a k e a n d t s u n a m i i n J a p a n o r f l o o d s i n A u s t r a l i a a n d N e w Z e a l a n d , o u rc o l l e a g u e s w e r e o n t h e g r o u n d i n a r a p i d r e s p o n s e m o d e , h e l p i n g c l i e n t s a n d f e l l o w c o l l e a g u e s d e a lw i t h t h e b u s i n e s s a n d p e r s o n a l a s p e c t s o f t h e s e c a t a s t r o p h i c e v e n t s . A s w e s u r v e y t h e g l o b e , i t i s c l e a rt h a t t h e m a g n i t u d e , s c o p e a n d c o m p l e x i t y o f r i s k c o n t i n u e s t o i n c r e a s e , b o t h i n t e r m s o f t r a d i t i o n a l r i s ks u c h a s p r o p e r t y , c a s u a l t y o r d i r e c t o r s a n d o f f i c e r s ' l i a b i l i t y , a n d n o n - t r a d i t i o n a l r i s k s u c h a s t e r r o r i s ma n d p a n d e m i c .O n t h e p e o p l e s i d e , h e a l t h c a r e r e f o r m i s a g r o w i n g i s s u e f o r U . S . c o m p a n i e s i n n e e d o f a d v i c ea n d s o l u t i o n s t o m a n a g e t h e c o m p l e x l e g i s l a t i v e c h a n g e s a h e a d . I n 2 0 1 1 , w e i d e n t i f i e d t h e u n i q u eo p p o r t u n i t y t o i n v e s t i n h e a l t h c a r e e x c h a n g e s ; j u s t o n e e x a m p l e o f t h e m a n y d i f f e r e n t i a t i n g s o l u t i o n sw e a r e a b l e t o p r o v i d e t o o u r c l i e n t s .W h i l e t h e g l o b a l e c o n o m y a p p e a r s t o b e m a k i n g s o m e i m p r o v e m e n t , m a n y o f o u r c l i e n t s a r e s t i l lf a c i n g s t r o n g e c o n o m i c h e a d w i n d s . F o r t u n a t e l y , A o n h a s t r e m e n d o u s c a p a b i l i t y a n d u n m a t c h e dr e s o u r c e s t o s u p p o r t t h e m i n t h e s e t i m e s . T h e s t r e n g t h o f o u r g l o b a l n e t w o r k a n d o u r d e m o n s t r a t e da b i l i t y t o d e l i v e r w o r l d w i d e c a p a b i l i t y o n a t r u l y l o c a l l e v e l m a k e s A o n b e t t e r e q u i p p e d t h a n a n y o n ee l s e t o s e r v e t h e n e e d s o f o u r c l i e n t s .O u r p o r t f o l i o o f R i s k S o l u t i o n s a n d H R S o l u t i o n s g i v e s u s t h e f i n a n c i a l s t r e n g t h a n d f l e x i b i l i t y t o
i n v e s t i n o u r b u s i n e s s e s , a n d i n o u r c l i e n t s a n d c o l l e a g u e s , s p e c i f i c a l l y i n c r i t i c a l a r e a s s u c h a s t r a i n i n g ,t e c h n o l o g y , t a l e n t a n d b r a n d . F o r e x a m p l e , A o n B e n f i e l d i n v e s t s a p p r o x i m a t e l y $ 1 0 0 m i l l i o n e a c h y e a ri n a n a l y t i c c a p a b i l i t y w h i c h h e l p s t o d e l i v e r d i s t i n c t i v e v a l u e t o c l i e n t s .I t i s c o n t i n u e d i n v e s t m e n t s s u c h a s t h e s e t h a t w i l l s t r e n g t h e n o u r a b i l i t y t o b e t t e r s e r v e o u r c l i e n t s ,p r o v i d e g r e a t e r o p p o r t u n i t i e s f o r c o l l e a g u e s , a n d i n c r e a s e v a l u e f o r s h a r e h o l d e r s . T h e s e i n v e s t m e n t s a r eb e i n g m a d e w i t h i n t h e c o n t e x t o f o u r o n g o i n g m a r g i n i m p r o v e m e n t s . A s w e a d d t o o u r g l o b a l n e t w o r ka n d b u i l d u p o n o u r c a p a b i l i t i e s , w e a r e i d e n t i f y i n g a n d e l i m i n a t i n g e f f i c i e n c i e s a n d c o s t s f r o m
We continue to invest in innovative technology such as FAConnect and our Global Risk Insight
Platform which is the worlds leading global repository of risk and insurance placement
information
We are driving our Aon Broking initiative to better match client needs with insurer appetite for
risk resulting in better economics for all participants
We continued to invest in th e f u tu re o f our firm as well as expand our international footprint
through acquisitions such as Glenrand MIB in South Africa
And finally effective January 2012 we aligned our global health and benefits platform under
Risk Solutions to better leverage broader global distribution channel and to strengthen the
deep brokerage capabilities in data and analytics with clients and insurance carriers
As we have discussed previously we have proved the concept of these investments in 2011 and
as we move into 2012 and 2013 we will continue to drive greater scale and increase operating leverage
as result of these investments in our Risk Solutions segment
In HR Solutions
We are expanding our international footprint as the workforce is increasingly becoming more
global with investments in key talent and capabilities across emerging markets
We are continuing to invest in expanding our core HR BPO offerings through point solutions
opportunities such as dependent eligibility audits and absence management diagnostics
We are expanding our industry-leading benefits administration platform from large-market to
middle-market
Finally we continue to strengthen our industry-leading position in health care exchanges
enabling clients to prepare for ultimate changes in health care legislation with design purchasing
and administration capability
Whether it is an earthquake and tsunami in Japan or floods in Australia and New Zealand our
colleagues were on the ground in rapid response mode helping clients and fellow colleagues deal
with the business and personal aspects of these catastrophic events As we survey the globe it is clear
t ha t t he magnitude scope and complexity of risk continues to increase both in terms of traditional risk
such as property casualty or directors and officers liability and non-traditional risk such as terrorism
and pandemic
On the people side health care reform is growing issue for U.S companies in need of advice
and so lu tion s t o manage the complex legislative changes ahead In 2011 we identified the unique
opportunity to invest in health care exchanges just one example o f t he many differentiating solutions
we a re a bl e t o provide to our clients
While the global economy appears to be making some improvement many of our clients are still
facing strong economic headwinds Fortunately Aon has tremendous capability and unmatched
resources to support them in these times The strength of our global network and our demonstrated
ability to deliver worldwide capability on truly local level makes Aon better equipped than anyoneelse to serve the needs of our clients
Our portfolio of Risk Solutions and HR Solutions gives us the financial strength and flexibility to
invest in our businesses and
in our
clients and colleagues specifically
in criticalareas such as training
technology talent and brand For example Aon Benfield invests approximately $100 million each yearin analytic capability which helps to deliver distinctive value to clients
It is continued investments such as these that will strengthen our ability to better serve our clients
provide greater opportunities for colleagues and increase value for shareholders These investments are
being made w ith in t he c on te xt o f our ongoing margin improvements As we add to our global network
and build upon our capabilities we are identifying and eliminating efficiencies and costs from
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n o n - c l i e n t f a c i n g a r e a s . T h e s e a c t i o n s a l l o w u s t o m a k e c o n t i n u e d a n d s i g n i f i c a n t i n v e s t m e n t s i n o u rb u s i n e s s a n d i n o u r p e o p l e w h i l e s i m u l t a n e o u s l y d e l i v e r i n g m a r g i n i m p r o v e m e n t .L o o k i n g f o r w a r d , t h e n e x t f i v e y e a r s a t A o n w i l l b e k e y t o h o w w e p o s i t i o n o u r f i r m f o r g r o w t h f o rt h e n e x t 5 0 y e a r s . I t r u l y b e l i e v e t h a t A o n h a s t h e u n i q u e c a p a b i l i t y i n t e r m s o f r e s o u r c e s a n d p e o p l e t or e m a i n a s t h e l e a d e r i n r i s k m a n a g e m e n t a n d h u m a n r e s o u r c e c o n s u l t i n g a n d o u t s o u r c i n g f o r t h el o n g - t e r m .T h i s i s a n e x c i t i n g t i m e t o b e p a r t o f A o n . I t i s a p l e a s u r e f o r m e t o b e p a r t o f t h e l e a d e r s h i p t e a mt h a t i s w o r k i n g h a r d o n y o u r b e h a l f , a n d I h o p e y o u s h a r e m y c o n f i d e n c e i n t h e v i e w t h a t c o n t i n u e ds u c c e s s l i e s a h e a d f o r A o n i n 2 0 1 2 a n d b e y o n d .L a s t l y , o n a p e r s o n a l n o t e , I w a n t t o t h a n k J a n K a l f f , E d e n M a r t i n , A n d r e w M c K e n n a a n d J o h nR o g e r s f o r t h e i r m a n y y e a r s o f d i s t i n g u i s h e d s e r v i c e a s m e m b e r s o f A o n ' s B o a r d o f D i r e c t o r s . T h e i rc o l l e c t i v e w i s d o m a n d i n s i g h t h a s a l l o w e d A o n t o e v o l v e i n t o t h e p r e e m i n e n t g l o b a l p r o f e s s i o n a ls e r v i c e s f i r m t h a t i t h a s b e c o m e t o d a y , a n d w e w i l l m i s s t h e i r s a g e c o u n s e l a s w e c o n t i n u e o n o u r p a t ho f p r o g r e s s a n d m o m e n t u m .T h a n k y o u f o r t h e f a i t h a n d t r u s t y o u h a v e p l a c e d i n o u r B o a r d o f D i r e c t o r s a n d m a n a g e m e n tt e a m . Y o u r s u p p o r t i s i n v a l u a b l e t o o u r e f f o r t s , a n d w e w i l l w o r k h a r d t o e x c e e d y o u r e x p e c t a t i o n s .
A k e r , / e ,G r e g o r y C . C a s eP r e s i d e n t a n d C h i e f E x e c u t i v e O f f i c e r
non-client facing areas These actions allow us to make continued and significant investments in our
business and in our people while simultaneously delivering margin improvement
Looking forward the next five years at Aon will be key to how we position our firm for growth for
the next 50 years truly believe that Aon has the unique capability in terms of resources and people to
remain as the leader in risk management and human resource consulting and outsourcing for the
long-term
This is an exciting time to be part of Aon It is pleasure for me to be part o f t he leadership team
that is working hard on your behalf and hope you
share my confidence in the view that continued
success lies ahead for Aon in 2012 and beyond
Lastly on personal note want to thank Jan Kalff Eden Martin Andrew McKenna and John
Rogers for their many years of distinguished service as members of Aons Board of Directors Their
collective wisdom and insight has allowed Aon to evolve into the preeminent global professional
services firm that it has become today and we will miss their sage co un se l a s we continue on our path
of progress and momentum
Thank you for the faith and trust you have placed in our Board of Directors and management
team Your support is invaluable to our efforts and we will work hard to exceed your expectations
Gregory Case
President and Chief Executive Officer
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I n d i c a t e b y c h e c k m a r k i f t h e r e g i s t r a n t i s a w e l l - k n o w n s e a s o n e d i s s u e r , a s d e f i n e d i n R u l e 4 0 5 o f t h e S e c u r i t i e sA c t . Y E S I N N O EI n d i c a t e b y c h e c k m a r k i f t h e r e g i s t r a n t i s n o t r e q u i r e d t o f i l e r e p o r t s p u r s u a n t t o S e c t i o n 1 3 o r S e c t i o n 1 5 ( d ) o f t h e
E x c h a n g e A c t . Y E S E N OI n d i c a t e b y c h e c k m a r k w h e t h e r t h e r e g i s t r a n t ( 1 ) h a s f i l e d a l l r e p o r t s r e q u i r e d t o b e f i l e d b y S e c t i o n 1 3 o r 1 5 ( d ) o ft h e S e c u r i t i e s E x c h a n g e A c t o f 1 9 3 4 d u r i n g t h e p r e c e d i n g 1 2 m o n t h s ( o r f o r s u c h s h o r t e r p e r i o d t h a t t h e r e g i s t r a n t w a sr e q u i r e d t o f i l e s u c h r e p o r t s ) , a n d ( 2 ) h a s b e e n s u b j e c t t o s u c h f i l i n g r e q u i r e m e n t s f o r t h e p a s t 9 0 d a y s . Y E S I E N OI n d i c a t e b y c h e c k m a r k w h e t h e r t h e r e g i s t r a n t h a s s u b m i t t e d e l e c t r o n i c a l l y a n d p o s t e d o n i t s c o r p o r a t e W e b s i t e , i fa n y , e v e r y I n t e r a c t i v e D a t a F i l e r e q u i r e d t o b e s u b m i t t e d a n d p o s t e d p u r s u a n t t o R u l e 4 0 5 o f R e g u l a t i o n S - T ( 2 3 2 . 4 0 5o f t h i s c h a p t e r ) d u r i n g t h e p r e c e d i n g 1 2 m o n t h s ( o r f o r s u c h s h o r t e r p e r i o d t h a t t h e r e g i s t r a n t w a s r e q u i r e d t o s u b m i ta n d p o s t s u c h f i l e s ) . Y E S N O
I n d i c a t e b y c h e c k m a r k i f d i s c l o s u r e o f d e l i n q u e n t f i l e r s p u r s u a n t t o I t e m 4 0 5 o f R e g u l a t i o n S - K i s n o t c o n t a i n e dh e r e i n , a n d w i l l n o t b e c o n t a i n e d , t o t h e b e s t o f r e g i s t r a n t ' s k n o w l e d g e , i n d e f i n i t i v e p r o x y o r i n f o r m a t i o n s t a t e m e n t si n c o r p o r a t e d b y r e f e r e n c e i n P a r t I I I o f t h i s F o r m 1 0 - K o r a n y a m e n d m e n t t o t h i s F o r m 1 0 - K . C II n d i c a t e b y c h e c k m a r k w h e t h e r t h e r e g i s t r a n t i s a l a r g e a c c e l e r a t e d f i l e r , a n a c c e l e r a t e d f i l e r , a n o n - a c c e l e r a t e df i l e r , o r a s m a l l e r r e p o r t i n g c o m p a n y . S e e t h e d e f i n i t i o n s o f l a r g e a c c e l e r a t e d f i l e r , a c c e l e r a t e d f i l e r , a n d s m a l l e rr e p o r t i n g c o m p a n y i n R u l e 1 2 b - 2 o f t h e E x c h a n g e A c t .
L a r g e a c c e l e r a t e d f i l e r E A c c e l e r a t e d f i l e r E N o n - a c c e l e r a t e d f i l e r E S m a l l e r r e p o r t i n g c o m p a n y E l( D o n o t c h e c k i f a s m a l l e r r e p o r t i n g c o m p a n y . )I n d i c a t e b y c h e c k m a r k w h e t h e r t h e r e g i s t r a n t i s a s h e l l c o m p a n y ( a s d e f i n e d i n R u l e 1 2 b - 2 o f t h e E x c h a n g e A c t ) .Y E S E N O
A s o f J u n e 3 0 , 2 0 1 1 , t h e a g g r e g a t e m a r k e t v a l u e o f t h e r e g i s t r a n t ' s c o m m o n s t o c k h e l d b y n o n - a f f i l i a t e s o f t h er e g i s t r a n t w a s $ 1 6 , 7 5 9 , 2 9 8 , 7 7 9 b a s e d o n t h e c l o s i n g s a l e s p r i c e a s r e p o r t e d o n t h e N e w Y o r k S t o c k E x c h a n g e C o m p o s i t eT r a n s a c t i o n L i s t i n g .N u m b e r o f s h a r e s o f c o m m o n s t o c k o u t s t a n d i n g a s o f J a n u a r y 3 1 , 2 0 1 2 w a s 3 2 5 , 1 7 9 , 1 6 3 .
D O C U M E N T S I N C O R P O R A T E D B Y R E F E R E N C EP o r t i o n s o f A o n C o r p o r a t i o n ' s P r o x y S t a t e m e n t f o r t h e 2 0 1 2 A n n u a l M e e t i n g o f S t o c k h o l d e r s t o b e h e l d o n M a y 1 8 ,2 0 1 2 a r e i n c o r p o r a t e d b y r e f e r e n c e i n t h i s F o r m 1 0 - K i n r e s p o n s e t o P a r t I I I , I t e m s 1 0 , 1 1 , 1 2 , 1 3 a n d 1 4 .
E CU N I T E D S T A T E S M a i l P r o c e s s i n gS E C U R I T I E S A N D E X C H A N G E C O M M I S S I t t b hW a s h i n g t o n , D . C . 2 0 5 4 9
A o n C o r p o r a t i o n( E x a c t n a m e o f r e g i s t r a n t a s s p e c i f i e d i n i t s c h a r t e r )D E L A W A R E 3 6 - 3 0 5 1 9 1 5( S t a t e o r o t h e r j u r i s d i c t i o n o f ( I . R . S . E m p l o y e ri n c o r p o r a t i o n o r o r g a n i z a t i o n ) I d e n t i f i c a t i o n N o . )
2 0 0 E . R A N D O L P H S T R E E T 6 0 6 0 1C H I C A G O , I L L I N O I S ( Z i p C o d e )( A d d r e s s o f p r i n c i p a l e x e c u t i v e o f f i c e s )( 3 1 2 ) 3 8 1 - 1 0 0 0( R e g i s t r a n t ' s t e l e p h o n e n u m b e r , i n c l u d i n g a r e a c o d e )
S e c u r i t i e s r e g i s t e r e d p u r s u a n t t o S e c t i o n 1 2 ( b ) o f t h e A c t :T i t l e o f E a c h C l a s so n V V h i c h R e g i s t e r e da m e o f E a c h E x c h a n g e
A P R 1 8 2 0 1 2F O R M 1 0 , - K( M a r k O n e ) A N N U A L R E P O R T P U R S U A N T T O S E C T I O N 1 3 O R 1 A M W A I r b cS E C U R I T I E S E X C H A N G E A C T O F 1 9 3 4 4 0 5F o r t h e f i s c a l y e a r e n d e d D e c e m b e r 3 1 , 2 0 1 1O R
1 1 1 T R A N S I T I O N R E P O R T P U R S U A N T T O S E C T I O N 1 3 O R 1 5 ( d ) O F T H ES E C U R I T I E S E X C H A N G E A C T O F 1 9 3 4C o m m i s s i o n f i l e n u m b e r : 1 - 7 9 3 3
C o m m o n S t o c k , $ 1 p a r v a l u e N e w Y o r k S t o c k E x c h a n g eS e c u r i t i e s r e g i s t e r e d p u r s u a n t t o S e c t i o n 1 2 ( g ) o f t h e A c t : N O N E
UNITED STATESMail Processing
SECURITIES AND ECHANGE COMMISStWashington D.C 20549
FOR1VI 10-K APR 18201
Mark One
ANNUAL REPORT PURSUANT TO SECTION 13 OR 1Wf TJbSECURITIES EXCHANGE ACT OF 1934
405For the fiscal year ended December 31 2011
OR
LI TRANSITION REPORT PURSUANT TO SECTION 13 OR 15d OF THESECURITIES EXCHANGE ACT OF 1934
Commission file number 1-7933
Aon CorporationExact name of registrant as specified in its charter
DELAWARE 36-3051915
State or other jurisdiction of I.R.S Employer
incorporation or organization Identification No
200 RANDOLPH STREET 60601CHICAGO ILLINOIS Zip Code
Address of principal executive offices
312 381-1000Registrants telephone number including area code
Securitiesregistered pursuant to Section 12b o f t he Act
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock $1 par value New York Stock Exchange
Securities registered pursuant to Section 12g of the Act NONE
Indicate by check mark if the registrant is well-known seasoned issuer as defined in Rule 405 of the Securities
Act.YESj NOL
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15d of the
Exchange Act YES NO
Indicate by check mark whether the registrant has filed all reports required to be filed by Section 13 or 15d ofthe Securities Exchange Act of 1934 during the preceding 12 months or for such shorter period that the registrant was
required to file such reports and has been subject to such filing requirements for the past 90 days YES NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site if
any every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 232.405of this chapter during the preceding 12 months or for such shorter period that the registrant was required to submitand post such files YES NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein and will not be contained to the best of registrants knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K fl
Indicate by check mark whether the registrant is large accelerated filer an accelerated filer non-accelerated
filer o r s ma ll er reporting company See the definitions of large accelerated filer accelerated filer and smaller
reporting company in Rule 12b-2 o f t he Exchange Act
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company
Do not check if smaller reporting company
Indicate by check mark whether the registrant is shell company as defined in Rule 12b-2 of the Exchange ActYES NO EI
As of June 3 0 2 01 1 the aggregate market value o f t he registrants common stock held by non-affiliates of the
registrant was $16759298779 based on the closing sales price as reported on the New York Stock ExchangeCompositeTransaction Listing
Number of shares of common stock outstanding as of January 31 2012 was 325179163
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Aon Corporations Proxy Statement for the 2012 Annual Meeting of Stockholders to be held on May 182012 are incorporated by reference in this Form 10-K in response to Part III Items 10 11 12 13 and 14
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I t e m 1 . B u s i n e s s .O V E R V I E W
A o n C o r p o r a t i o n ' s s t r a t e g y i s t o b e t h e p r e e m i n e n t p r o f e s s i o n a l s e r v i c e f i r m i n t h e w o r l d , f o c u s e do n t h e t o p i c s o f r i s k a n d p e o p l e . A m i C o r p o r a t i o n ( w h i c h m a y b e r e f e r r e d t o a s A o n , t h eC o m p a n y , w e , U s , o r o u r ) i s t h e l e a d i n g g l o b a l p r o v i d e r o f r i s k m a n a g e m e n t s e r v i c e s , i n s u r a n c ea n d r e i n s u r a n c e b r o k e r a g e , a n d h u m a n r e s o u r c e c o n s u l t i n g a n d o u t s o u r c i n g , d e l i v e r i n g d i s t i n c t i v e c l i e n tv a l u e v i a i n n o v a t i v e a n d e f f e c t i v e r i s k m a n a g e m e n t a n d w o r k f o r c e p r o d u c t i v i t y s o l u t i o n s . A o n w a si n c o r p o r a t e d i n 1 9 7 9 u n d e r t h e l a w s o f D e l a w a r e , a n d i s t h e p a r e n t c o r p o r a t i o n o f b o t hl o n g - e s t a b l i s h e d a n d a c q u i r e d c o m p a n i e s . W e h a v e a p p r o x i m a t e l y 6 2 , 0 0 0 e m p l o y e e s a n d c o n d u c t o u ro p e r a t i o n s t h r o u g h v a r i o u s s u b s i d i a r i e s i n m o r e t h a n 1 2 0 c o u n t r i e s a n d s o v e r e i g n t i e s .W e s e r v e c l i e n t s t h r o u g h t h e f o l l o w i n g o p e r a t i n g s e g m e n t s :
R i s k S o l u t i o n s a c t s a s a n a d v i s o r a n d i n s u r a n c e a n d r e i n s u r a n c e b r o k e r , h e l p i n g c l i e n t s m a n a g et h e i r r i s k s v i a c o n s u l t a t i o n , a s w e l l a s n e g o t i a t i o n a n d p l a c e m e n t o f i n s u r a n c e r i s k w i t h i n s u r a n c ec a r r i e r s t h r o u g h o u r g l o b a l d i s t r i b u t i o n n e t w o r k .H R S o l u t i o n s p a r t n e r s w i t h o r g a n i z a t i o n s t o s o l v e t h e i r m o s t c o m p l e x b e n e f i t s , t a l e n t a n d r e l a t e df i n a n c i a l c h a l l e n g e s , a n d i m p r o v e b u s i n e s s p e r f o r m a n c e b y d e s i g n i n g , i m p l e m e n t i n g ,c o m m u n i c a t i n g a n d a d m i n i s t e r i n g a w i d e r a n g e o f h u m a n c a p i t a l , r e t i r e m e n t , i n v e s t m e n tm a n a g e m e n t , h e a l t h c a r e , c o m p e n s a t i o n a n d t a l e n t m a n a g e m e n t s t r a t e g i e s .
O u r c l i e n t s a r e g l o b a l l y d i v e r s i f i e d a n d i n c l u d e a l l s e g m e n t s o f t h e e c o n o m y ( i n d i v i d u a l s t h r o u g hp e r s o n a l l i n e s , m i d - m a r k e t c o m p a n i e s a n d l a r g e g l o b a l l y c o m p a n i e s ) a n d e v e r y i n d u s t r y i n t h e e c o n o m yi n o v e r 1 2 0 c o u n t r i e s g l o b a l l y . T h i s d i v e r s i f i c a t i o n o f c u s t o m e r b a s e p r o v i d e s s t a b i l i t y i n d i f f e r e n te c o n o m i c s c e n a r i o s t h a t m a y a f f e c t s p e c i f i c i n d u s t r i e s , c u s t o m e r s e g m e n t s o r g e o g r a p h i e s .O v e r t h e l a s t f i v e y e a r s w e h a v e f o c u s e d o u r p o r t f o l i o o n h i g h e r m a r g i n , c a p i t a l l i g h t p r o f e s s i o n a ls e r v i c e s b u s i n e s s e s t h a t h a v e h i g h r e c u r r i n g r e v e n u e s t r e a m s a n d s t r o n g f r e e c a s h f l o w g e n e r a t i o n . A o nd r i v e s i t s c a p i t a l d e c i s i o n m a k i n g p r o c e s s a r o u n d r e t u r n o n i n v e s t e d c a p i t a l ( R O I C ) , f i r m l y b e l i e v i n gt h i s m e t h o d o l o g y h a s a h i g h e r c o r r e l a t i o n t h a n a n y o t h e r m e t r i c w i t h s h a r e h o l d e r v a l u e c r e a t i o n . T h i sf o c u s o n r e t u r n o n i n v e s t e d c a p i t a l ( R O I C ) , m e a s u r e d o n a c a s h o n c a s h b a s i s , l e d t o a n u m b e r o fs i g n i f i c a n t p o r t f o l i o c h a n g e s : e x i t i n g t h e l o w e r - m a r g i n , c a p i t a l i n t e n s i v e i n s u r a n c e u n d e r w r i t i n g
b u s i n e s s e s a n d i n v e s t i n g i n B e n f i e l d a n d H e w i t t , s u b s t a n t i a l f r a n c h i s e s t o g r o w f r e e c a s h f l o w o v e r t i m e .I I I n A p r i l 2 0 0 8 , w e c o m p l e t e d t h e s a l e o f o u r C o m b i n e d I n s u r a n c e C o m p a n y o f A m e r i c a( C I C A ' ) a n d S t e r l i n g I n s u r a n c e C o m p a n y ( S t e r l i n g ) s u b s i d i a r i e s , w h i c h r e p r e s e n t e d t h em a j o r i t y o f t h e o p e r a t i o n s o f o u r f o r m e r I n s u r a n c e U n d e r w r i t i n g s e g m e n t .
I n A u g u s t 2 0 0 9 , w e c o m p l e t e d t h e s a l e o f o u r r e m a i n i n g p r o p e r t y a n d c a s u a l t y i n s u r a n c eu n d e r w r i t i n g o p e r a t i o n s t h a t w e r e i n r u n - o f f . T h e r e s u l t s o f a l l o f t h e s e o p e r a t i o n s a r e r e p o r t e di n d i s c o n t i n u e d o p e r a t i o n s f o r a l l p e r i o d s p r e s e n t e d .I n N o v e m b e r 2 0 0 8 , w e e x p a n d e d o u r R i s k S o l u t i o n s p r o d u c t o f f e r i n g s t h r o u g h t h e m e r g e r w i t hB e n f i e l d G r o u p L i m i t e d ( B e n f i e l d ) , a l e a d i n g i n d e p e n d e n t r e i n s u r a n c e i n t e r m e d i a r y . B e n f i e l dp r o d u c t s h a v e b e e n i n t e g r a t e d w i t h o u r e x i s t i n g r e i n s u r a n c e p r o d u c t s .
o I n O c t o b e r 2 0 1 0 , w e c o m p l e t e d t h e a c q u i s i t i o n o f H e w i t t A s s o c i a t e s , I n c . ( H e w i t t ) , o n e o f t h ew o r l d ' s l e a d i n g h u m a n r e s o u r c e c o n s u l t i n g a n d o u t s o u r c i n g c o m p a n i e s . H e w i t t o p e r a t e s g l o b a l l yt o g e t h e r w i t h A o n ' s e x i s t i n g c o n s u l t i n g a n d o u t s o u r c i n g o p e r a t i o n s u n d e r t h e n e w l y c r e a t e d A o nH e w i t t b r a n d i n o u r H R S o l u t i o n s s e g m e n t .
F o l l o w i n g t h e a c q u i s i t i o n s o f B e n f i e l d G r o u p i n 2 0 0 8 a n d H e w i t t A s s o c i a t e s i n 2 0 1 0 , t h e C o m p a n yh a s s u c c e s s f u l l y t r a n s f o r m e d t h e p o r t f o l i o t o w a r d s h i g h e r - m a r g i n , c a p i t a l l i g h t p r o f e s s i o n a l s e r v i c e s
P A R T I
2
PART
Item Business
OVERVIEW
Aon Corporations strategy is to be the preeminent professional service firm in the world focused
on the topics of ianr1people Aori Corporation which may be referre d to as Aon theCompany we us or our is the leading global provider of risk management services insuranceand reinsuranc brokerage and human resource consulting and outsourcing delivering distinctive client
value via innovative and effective risk management and workiorce productivity solutions Aon was
incorporated in 1979 under the laws of Delaware and is the parent corporation of both
long-established and acquired companies We have approximately 62000 employees and conduct our
operations through various subsidiaries in more than 120 countries and sovereignties
We serve clients through the following operating segments
Risk Solutions acts as an advisor and insurance and reinsurance broker helping clients manage
their risks via consultation as well as negotiation and placement of insurance risk with insurance
carriers through our global distribution network
HR Solutions partners with organizations to solve their most complex benefits talent and related
financial challenges and improve business performance by designing implementing
communicating and administering wide range of human capital retirement investment
management health care compensation and talent management strategies
Our clients are globally diversified and include all segments o f the economy individuals through
personal lines mid-market companies and large globally companies and every industry in the economy
in over 120 countries globally This diversification of customer base provides stability in different
economic scenarios that may affect specific industries customer segments or geographies
Over the last five years we have focused our portfolio on higher margin capital light professional
services businesses that have high recurring revenue streams and strong free cash flow generation Aon
drives its capital decision making process around return on invested capital ROIC firmly believingthis methodology has higher correlation than any
other metric with shareholder value creation This
focus on return on invested capital ROTC measured on cash on cash basis l ed to number of
significant portfolio changes exiting the lower-margin capital intensive insurance underwriting
businesses and investing in Benfield and Hewitt substantial franchises to grow free cash flow over time
In April 2008 we completed the sal e of our Combined Insurance Company of America
CICA and Sterling Insurance Company Sterling subsidiaries which represented themajority o f the operations of our former Insurance Underwriting segment
In August 2009 we completed the sal e o f our remaining property and casualty insurance
underwriting operations that were in run-off The results of all of these operations are reported
in discontinued operations for all periods presented
In November 2008 we expanded our Risk Solutions product offerings through the merger with
Benfield Group Limited Benfield leading independent reinsurance intermediary Benfield
products have been integrated with our existing reinsurance products
In October 2010 we completed the acquisition of Hewitt Associates Inc Hewitt one of the
worlds leading human resource consulting and outsourcing companies Hewitt operates globally
together with Aons existing consulting and outsourcing operations under the newly created Aon
Hewitt brand in our HR Solutions segment
Following the acquisitions of Benfield Group in 2008 and Hewitt Associates in 2010 the Company
has successfully transformed the portfolio towards higher-margin capital light professional services
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b u s i n e s s e s w i t h 6 0 % o f r e v e n u e s i n R i s k S o l u t i o n s a n d 4 0 % o f t o t a l r e v e n n e s i n H R S o l u t i o n s ,r e s u l t i n g i n h i g h r e c u r r i n g r e v e n u e s t r e a m s a n d s t r o n g f r e e c a s h f l o w g e n e r a t i o n c h a r a c t e r i s t i c s .O n J a n u a r y 1 3 , 2 0 1 2 , w e a n n o u n c e d a s a n i m p o r t a n t p a r t o f o u r g l o b a l g r o w t h s t r a t e g y , o u ri n t e n t i o n t o c h a n g e o u r j u r i s d i c t i o n o f i n c o r p o r a t i o n f r o m D e l a w a r e t o t h e U . K . a n d m o v e o u rc o r p o r a t e h e a d q u a r t e r s t o L o n d o n . T h e t r a n s a c t i o n r e q u i r e s a s h a r e h o l d e r v o t e a n d u p o n a p p r o v a l i se x p e c t e d t o c l o s e i n t h e s e c o n d q u a r t e r o f 2 0 1 2 . M o v i n g o u r g l o b a l h e a d q u a r t e r s t o t h e U . K . i se x p e c t e d t o e n h a n c e o u r f o c u s o n g r o w t h , p r o d u c t a n d b r o k i n g i n n o v a t i o n s a t A o n B r o k i n g , t a l e n td e v e l o p m e n t a n d f i n a n c i a l f l e x i b i l i t y . T h e t r a n s a c t i o n i s e x p e c t e d t o s u p p o r t o u r s t r a t e g y a n d i se x p e c t e d t o d e l i v e r s i g n i f i c a n t v a l u e t o o u r s h a r e h o l d e r s .
B U S I N E S S S E G M E N T SR i s k S o l u t i o n s
T h e R i s k S o l u t i o n s s e g m e n t g e n e r a t e d a p p r o x i m a t e l y 6 0 % o f o u r c o n s o l i d a t e d t o t a l r e v e n u e s i n2 0 1 1 , a n d h a s a p p r o x i m a t e l y 3 2 , 0 0 0 e m p l o y e e s w o r l d w i d e . W e p r o v i d e r i s k a n d i n s u r a n c e b r o k e r a g ea n d r e l a t e d s e r v i c e s i n t h i s s e g m e n t .P r i n c i p a l P r o d u c t s a n d S e r v i c e s
W e o p e r a t e i n t h i s s e g m e n t t h r o u g h t w o s i m i l a r t r a n s a c t i o n a l p r o d u c t l i n e s : r e t a i l b r o k e r a g e a n dr e i n s u r a n c e b r o k e r a g e . I n a d d i t i o n , a k e y c o m p o n e n t o f t h i s b u s i n e s s i s o u r r i s k c o n s u l t i n g s e r v i c e s .R e t a i l b r o k e r a g e e n c o m p a s s e s o u r r e t a i l b r o k e r a g e s e r v i c e s , a f f i n i t y p r o d u c t s , m a n a g i n g g e n e r a lu n d e r w r i t i n g , p l a c e m e n t , a n d c a p t i v e m a n a g e m e n t s e r v i c e s . T h e A m e r i c a s ' o p e r a t i o n s p r o v i d e p r o d u c t sa n d s e r v i c e s t o c l i e n t s i n N o r t h , C e n t r a l a n d S o u t h A m e r i c a , t h e C a r i b b e a n , a n d B e r m u d a . O u rI n t e r n a t i o n a l o p e r a t i o n s i n t h e U n i t e d K i n g d o m ; E u r o p e , M i d d l e E a s t a n d A f r i c a ; a n d A s i a P a c i f i co f f e r s i m i l a r p r o d u c t s a n d s e r v i c e s t o c l i e n t s t h r o u g h o u t t h e r e s t o f t h e w o r l d .
O u r e m p l o y e e s d r a w u p o n o u r g l o b a l n e t w o r k o f r e s o u r c e s , i n d u s t r y - l e a d i n g d a t a a n d a n a l y t i c s ,a n d s p e c i a l i z e d e x p e r t i s e t o d e l i v e r v a l u e t o c l i e n t s r a n g i n g f r o m s m a l l a n d m i d - s i z e d b u s i n e s s e s t om u l t i - n a t i o n a l c o r p o r a t i o n s a s w e l l a s i n d i v i d u a l s i n n e e d o f p e r s o n a l c o v e r a g e . W e w o r k w i t h c l i e n t s t oi d e n t i f y t h e i r b u s i n e s s n e e d s a n d h e l p t h e m a s s e s s a n d u n d e r s t a n d t h e i r t o t a l c o s t o f r i s k . O n c e w e h a v eg a i n e d a n u n d e r s t a n d i n g o f o u r c l i e n t s ' r i s k m a n a g e m e n t n e e d s , w e a r e a b l e t o l e v e r a g e o u r g l o b a ln e t w o r k a n d i m p l e m e n t a c u s t o m i z e d r i s k a p p r o a c h w i t h l o c a l A o n r e s o u r c e s . T h e o u t c o m e i s ac o m p r e h e n s i v e r i s k s o l u t i o n p r o v i d e d l o c a l l y a n d p e r s o n a l l y . T h e A o n C l i e n t P r o m i s e e n a b l e s o u rc o l l e a g u e s a r o u n d t h e g l o b e t o d e s c r i b e , b e n c h m a r k a n d p r i c e t h e v a l u e w e d e l i v e r t o c l i e n t s i n au n i f i e d a p p r o a c h , b a s e d o n t h e t e n m o s t i m p o r t a n t c r i t e r i a t h a t o u r c l i e n t s b e l i e v e a r e c r i t i c a l t om a n a g i n g t h e i r t o t a l c o s t o f r i s k .
K n o w l e d g e a n d f o r e s i g h t , u n p a r a l l e l e d b e n c h m a r k i n g a n d c a r r i e r k n o w l e d g e a r e t h e q u a l i t i e s a tt h e h e a r t o f o u r p r o f e s s i o n a l s e r v i c e s e x c e l l e n c e . D e l i v e r i n g s u p e r i o r v a l u e t o c l i e n t s a n d d i f f e r e n t i a t i o nf r o m c o m p e t i t o r s w i l l b e d r i v e n t h r o u g h k e y A o n B r o k i n g i n i t i a t i v e s , s u c h a s t h e d e v e l o p m e n t o f t h eG l o b a l R i s k I n s i g h t P l a t f o r m ( G R I P ) i n 2 0 1 0 , w h i c h u n i q u e l y p o s i t i o n s u s t o p r o v i d e o u r c l i e n t sa n d i n s u r e r s w i t h a d d i t i o n a l m a r k e t i n s i g h t a s w e l l a s n e w p r o d u c t o f f e r i n g s a n d f a c i l i t i e s . G R I P h e l p si n s u r e r s s t r e n g t h e n t h e i r v a l u e p r o p o s i t i o n t o A o n c l i e n t s b y p r o v i d i n g t h e m w i t h c u t t i n g - e d g e a n a l y t i c si n p r e p a r a t i o n f o r r e n e w a l s e a s o n a n d b u s i n e s s p l a n n i n g c o n s u l t a t i o n r e g a r d i n g s t r a t e g y , d e f i n i t i o n o fr i s k a p p e t i t e , a n d a r e a s o f f o c u s . G R I P p r o v i d e s o u r c l i e n t s w i t h i n s i g h t s i n t o m a r k e t c o n d i t i o n s ,p r e m i u m r a t e s a n d b e s t p r a c t i c e s i n p r o g r a m d e s i g n , a c r o s s a l l i n d u s t r i e s a n d e c o n o m i c c e n t e r s .A s a r e t a i l b r o k e r , w e s e r v e a s a n a d v i s o r t o c l i e n t s a n d f a c i l i t a t e a w i d e s p e c t r u m o f r i s km a n a g e m e n t s o l u t i o n s f o r p r o p e r t y l i a b i l i t y , g e n e r a l l i a b i l i t y , p r o f e s s i o n a l a n d d i r e c t o r s ' a n d o f f i c e r s 'l i a b i l i t y , w o r k e r s ' c o m p e n s a t i o n , v a r i o u s h e a l t h c a r e p r o d u c t s , a s w e l l a s o t h e r e x p o s u r e s . O u r b u s i n e s s i sc o m p r i s e d o f s e v e r a l s p e c i a l t y a r e a s s t r u c t u r e d a r o u n d s p e c i f i c p r o d u c t a n d i n d u s t r y n e e d s .
3
businesses with 60% of revenues in Risk Solutions and 40% of total revenies in HR Solutions
resulting in high recurring revenue streams and strong free cash flow generation characteristics
On January 13 2012 we announced as an important part of our global growth strategy our
intention to change our jurisdiction of incorporation from Delaware t o th e U.K and move our
corporate headquarters to London The transaction requires shareholder vote and upon approval is
expected to close in the second quarter of 2012 Moving our global headquarters t o t he U.K is
expected to enhance our focus on growth product and broking i nn ov at io ns a t Aon Broking talent
development and financial flexibility The transaction is expected to support our strategy and is
expected to deliver significant value to our shareholders
BUSINESS SEGMENTS
Risk Solutions
The Risk Solutions segment generated approximately 60% of our consolidated total revenues in
2011 and has approximately 32000 employees worldwide We provide risk and insurance brokerageand related services in this segment
Principal Products and Services
We operate in this segment through two similar transactional product lines retail brokerage and
reinsurance brokerage
In
addition key component of this
business is our risk consulting services
Retail brokerage encompasses our retail brokerage services affinity products managing general
underwriting placement and captive management services The Americas operations provide productsand services to clients in North Central and South America the Caribbean and Bermuda Our
International operations in the United Kingdom Europe Middle East and Africa and Asia Pacific
offer similar products and services to clients throughout the rest of th e world
Ouremployees draw upon our global network of resources industry-leading data and analytics
and specialized expertise to deliver value to clients ranging from small and mid-sized businesses to
multi-national corporations as well as individuals in need of personal coverage We work with clients to
identify their business needs and help them assess and understand their total cost of risk Once we have
gained an understanding of our clients risk management needs we are a bl e t o leverage our global
network and implement customized risk approach with local Aon resources The outcome is
comprehensive risk solution provided locally and personally The Aon Client Promise enables ourcolleagues around the globe to describe benchmark and price the value we deliver to clients in
unified approach based on the ten most important criteria that our clients believe are critical to
managing their total cost of risk
Knowledge and foresight unparalleled benchmarking and carrier knowledge are the qualities at
t he h ea rt o f our professional services excellence Delivering superior value to clients and differentiation
from competitors will be driven through key Aon Broking initiatives such as the development o f t he
Global Risk Insight Platform GRIP in 2010 which uniquely positions us to provide our clientsand insurers with additional market insight as well as new product offerings and facilities GRIP helpsinsurers strengthen their value proposition to Aon clients by providing them with cutting-edge analyticsin preparation for renewal season and business planning consultation regarding strategy definition of
risk appetite and areas of focus GRIP provides our clients with insights into market conditions
premium rates and best practices inprogram
design across all industries and economic centers
As retail broker we serve as an advisor to clients and facilitate wide spectrum of risk
management solutions for property liability general liability professional and directors and officers
liability workers compensation various healthcare products as well as other exposures Our business is
comprised of several specialty areas structured around specific product and industry needs
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W e d e l i v e r s p e c i a l i z e d a d v i c e a n d s e r v i c e s i n s u c h i n d u s t r i e s a s t e c h n o l o g y , f i n a n c i a l s e r v i c e s ,a g r i b u s i n e s s , a v i a t i o n , c o n s t r u c t i o n , h e a l t h c a r e a n d e n e r g y , a m o n g o t h e r s . T h r o u g h o u r g l o b a l a f f i n i t yb u s i n e s s , w e p r o v i d e p r o d u c t s f o r p r o f e s s i o n a l l i a b i l i t y , l i f e , d i s a b i l i t y i n c o m e a n d p e r s o n a l l i n e s f o ri n d i v i d u a l s , a s s o c i a t i o n s a n d b u s i n e s s e s a r o u n d t h e w o r l d .I n a d d i t i o n , w e a r e a m a j o r p r o v i d e r o f r i s k c o n s u l t i n g s e r v i c e s , i n c l u d i n g c a p t i v e m a n a g e m e n t , t h a tp r o v i d e o u r c l i e n t s w i t h a l t e r n a t i v e v e h i c l e s f o r m a n a g i n g r i s k s t h a t w o u l d b e c o s t - p r o h i b i t i v e o ru n a v a i l a b l e i n t r a d i t i o n a l i n s u r a n c e m a r k e t s .F i n a l l y , o u r e S o l u t i o n s p r o d u c t s e n a b l e c l i e n t s t o m a n a g e r i s k s , p o l i c i e s , c l a i m s a n d s a f e t y c o n c e r n se f f i c i e n t l y t h r o u g h a n i n t e g r a t e d t e c h n o l o g y p l a t f o r m .
R e i n s u r a n c e b r o k e r a g e o f f e r s s o p h i s t i c a t e d a d v i s o r y s e r v i c e s i n p r o g r a m d e s i g n a n d c l a i m r e c o v e r i e st h a t e n h a n c e t h e r i s k / r e t u r n c h a r a c t e r i s t i c s o f i n s u r a n c e p o l i c y p o r t f o l i o s , i m p r o v e c a p i t a l u t i l i z a t i o n ,a n d e v a l u a t e a n d m i t i g a t e c a t a s t r o p h i c l o s s e x p o s u r e s w o r l d w i d e . A n i n s u r a n c e o r r e i n s u r a n c e c o m p a n ym a y s e e k r e i n s u r a n c e o r o t h e r r i s k - t r a n s f e r s o l u t i o n s o n a l l o r a p o r t i o n o f t h e r i s k s i t i n s u r e s . T oa c c o m p l i s h t h i s , o u r r e i n s u r a n c e b r o k e r a g e s e r v i c e s u s e d y n a m i c f i n a n c i a l a n a l y s i s a n d c a p i t a l m a r k e ta l t e r n a t i v e s , s u c h a s t r a n s f e r r i n g c a t a s t r o p h e r i s k t h r o u g h s e c u r i t i z a t i o n . R e i n s u r a n c e b r o k e r a g e a l s oo f f e r s c a p i t a l m a n a g e m e n t t r a n s a c t i o n a n d a d v i s o r y s e r v i c e s .W e a c t a s a b r o k e r o r i n t e r m e d i a r y f o r a l l c l a s s e s o f r e i n s u r a n c e . W e p l a c e t w o m a i n t y p e s o fp r o p e r t y a n d c a s u a l t y r e i n s u r a n c e : t r e a t y r e i n s u r a n c e , w h i c h i n v o l v e s t h e t r a n s f e r o f a p o r t f o l i o o f r i s k s ,
a n d f a c u l t a t i v e r e i n s u r a n c e , w h i c h e n t a i l s t h e t r a n s f e r o f p a r t o r a l l o f t h e c o v e r a g e p r o v i d e d b y a s i n g l ei n s u r a n c e p o l i c y . W e a l s o p l a c e s p e c i a l t y l i n e s s u c h a s p r o f e s s i o n a l l i a b i l i t y , w o r k e r s ' c o m p e n s a t i o n ,a c c i d e n t , l i f e a n d h e a l t h .W e a l s o p r o v i d e a c t u a r i a l , e n t e r p r i s e r i s k m a n a g e m e n t , c a t a s t r o p h e m a n a g e m e n t a n d r a t i n g a g e n c ya d v i s o r y s e r v i c e s . W e h a v e d e v e l o p e d t o o l s a n d m o d e l s t h a t h e l p o u r c l i e n t s u n d e r s t a n d t h e f i n a n c i a li m p l i c a t i o n s o f n a t u r a l a n d m a n - m a d e c a t a s t r o p h e s a r o u n d t h e w o r l d . A o n B e n f i e l d S e c u r i t i e s p r o v i d e sg l o b a l c a p i t a l m a n a g e m e n t t r a n s a c t i o n a n d a d v i s o r y s e r v i c e s f o r i n s u r a n c e a n d r e i n s u r a n c e c l i e n t s . I nt h i s c a p a c i t y , A o n B e n f i e l d S e c u r i t i e s i s r e c o g n i z e d a s a l e a d e r i n : ( i ) t h e s t r u c t u r i n g , u n d e r w r i t i n g a n dt r a d i n g o f i n s u r a n c e - l i n k e d s e c u r i t i e s ; ( i i ) t h e a r r a n g e m e n t o f f i n a n c i n g f o r i n s u r a n c e a n d r e i n s u r a n c ec o m p a n i e s , i n c l u d i n g L l o y d ' s s y n d i c a t e s ; a n d ( i i i ) p r o v i d i n g a d v i c e o n s t r a t e g i c a n d c a p i t a l a l t e r n a t i v e s ,i n c l u d i n g m e r g e r s a n d a c q u i s i t i o n s . I n p o i n t i s a l e a d i n g p r o v i d e r o f c o n s u l t i n g s e r v i c e s t o t h e i n s u r a n c ea n d r e i n s u r a n c e i n d u s t r y , h e l p i n g c a r r i e r s i m p r o v e t h e i r p e r f o r m a n c e t o a c h i e v e g r o w t h a n d
p r o f i t a b i l i t y .C o m p e n s a t i o n
W e g e n e r a t e r e v e n u e s t h r o u g h c o m m i s s i o n s , f e e s f r o m c l i e n t s , a n d c o m p e n s a t i o n f r o m i n s u r a n c ea n d r e i n s u r a n c e c o m p a n i e s f o r s e r v i c e s w e p r o v i d e t o t h e m . C o m m i s s i o n r a t e s a n d f e e s v a r y d e p e n d i n gu p o n s e v e r a l f a c t o r s , w h i c h m a y i n c l u d e t h e a m o u n t o f p r e m i u m , t h e t y p e o f i n s u r a n c e o r r e i n s u r a n c ec o v e r a g e p r o v i d e d , t h e p a r t i c u l a r s e r v i c e s p r o v i d e d t o a c l i e n t , i n s u r e r o r r e i n s u r e r , a n d t h e c a p a c i t y i nw h i c h w e a c t . P a y m e n t t e r m s a r e c o n s i s t e n t w i t h c u r r e n t i n d u s t r y p r a c t i c e .W e t y p i c a l l y h o l d f u n d s o n b e h a l f o f c l i e n t s a s a r e s u l t o f p r e m i u m s r e c e i v e d f r o m c l i e n t s a n dc l a i m s d u e t o c l i e n t s t h a t a r e i n t r a n s i t f r o m i n s u r e r s . T h e s e f u n d s h e l d o n b e h a l f o f c l i e n t s a r eg e n e r a l l y i n v e s t e d i n i n t e r e s t - b e a r i n g p r e m i u m t r u s t a c c o u n t s a n d c a n f l u c t u a t e s i g n i f i c a n t l y d e p e n d i n go n w h e n w e c o l l e c t c a s h f r o m o u r c l i e n t s a n d w h e n p r e m i u m s a r e r e m i t t e d t o t h e i n s u r a n c e c a r r i e r s .
W e e a r n i n t e r e s t o n t h e s e a c c o u n t s ; h o w e v e r , t h e p r i n c i p a l i s s e g r e g a t e d a n d n o t a v a i l a b l e f o r g e n e r a lo p e r a t i n g p u r p o s e s .C o m p e t i t i o n
T h e R i s k S o l u t i o n s b u s i n e s s i s h i g h l y c o m p e t i t i v e , a n d w e c o m p e t e p r i m a r i l y w i t h t w o o t h e r g l o b a li n s u r a n c e b r o k e r s , M a r s h & M c L e n n a n C o m p a n i e s , I n c . a n d W i l l i s G r o u p H o l d i n g s L t d . , i n a d d i t i o n t o
4
We deliver specialized advice and services in such industries as technology financial services
agribusiness aviation construction health care and energy among others Through our global affinity
business we provide products for professional liability life disability income and personal lines for
individuals associations and businesses around the world
In addition we are major provider of risk consulting services including captive management that
provide our clients with alternative vehicles for managing risks that would be cost-prohibitive or
unavailable in traditional insurance markets
Finally our eSolutions products enable clients to manage risks policies claims and safety concerns
efficiently through an integrated technology platform
Reinsurance brokerage offers sophisticated advisory services in program design and claim recoveries
that enhance the risk/return characteristics of insurance policy portfolios improve capital utilization
and evaluate and mitigate catastrophic loss exposures worldwide An insurance or reinsurance company
may seek reinsurance or other risk-transfer solutions on all or portion o f t he risks it insures To
accomplish this our reinsurance brokerage services use dynamic financial analysis and capital market
alternatives such as transferring catastrophe risk through securitization Reinsurance brokerage also
offers capital management transaction and advisory services
We act as broker or intermediary for all classes of reinsurance We place two main types of
property and casualty reinsurance treaty reinsurance which involves the transfer of portfolio of risks
and facultative reinsurance which entails the transfer of part or all o f t he coverage provided by single
insurance policy We also place specialty lines such as professional liability workers compensation
accident life and health
We also provide actuarial enterprise risk management catastrophe management and rating agency
advisory services We have developed tools and models that help our clients understand the financial
implications of natural and man-made catastrophes around the world Aon Benfield Securities provides
global capital management transaction and advisory services for insurance and reinsurance clients In
this capacity Aon Benfield Securities is recognized as leader in the structuring underwriting and
trading of insurance-linked securities ii the arrangement of financing for insurance and reinsurance
companies including Lloyds syndicates and iii providing advice on strategic and capital alternatives
including mergers and acquisitions Inpoint is leading provider of consulting services to the insurance
and reinsurance industry helping carriers improve their performance to achieve growth and
profitability
Compensation
We generate revenues through commissions fees from clients and compensation from insurance
and reinsurance companies for services we provide to them Commission rates and fees vary depending
upon several factors which may include the amount of premium the type of insurance or reinsurance
coverage provided the particular services provided to client insurer or reinsurer and the capacity in
which we act Payment terms are consistent with current industry practice
We typically hold funds on be ha lf o f clients as result of premiums received from clients and
claims due to clients that are in transit from insurers These funds held on behalf of clients are
generally invested in interest-bearing premium trust accounts a nd can fluctuate significantly depending
on when we collect cash from our clients and when premiums are r em it te d t o th e insurance carriers
We earn interest on these accounts however
theprincipal
is
segregated and not available for
general
operating purposes
Competition
The Risk Solutions business is highly competitive and we compete primarily with two other global
insurance brokers Marsh McLennan Companies Inc and Willis Group Holdings Ltd in a dd it io n t o
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n u m e r o u s s p e c i a l i s t s , r e g i o n a l a n d l o c a l f i r m s i n a l m o s t e v e r y a r e a o f o u r b u s i n e s s . W e a l s o c o m p e t ew i t h i n s u r a n c e a n d r e i n s u r a n c e c o m p a n i e s t h a t m a r k e t a n d s e r v i c e t h e i r i n s u r a n c e p r o d u c t s w i t h o u t t h ea s s i s t a n c e o f b r o k e r s o r a g e n t s ; a n d w i t h o t h e r b u s i n e s s e s t h a t d o n o t f a l l i n t o t h e c a t e g o r i e s a b o v e ,i n c l u d i n g c o m m e r c i a l a n d i n v e s t m e n t b a n k s , a c c o u n t i n g f i r m s , a n d c o n s u l t a n t s t h a t p r o v i d e r i s k - r e l a t e ds e r v i c e s a n d p r o d u c t s .S e a s o n a l i t y
T h e R i s k S o l u t i o n s s e g m e n t t y p i c a l l y e x p e r i e n c e s h i g h e r r e v e n u e s i n t h e f i r s t a n d f o u r t h c a l e n d a rq u a r t e r s o f e a c h y e a r , p r i m a r i l y d u e t o t h e t i m i n g o f p o l i c y r e n e w a l s .H R S o l u t i o n s
T h e H R S o l u t i o n s s e g m e n t g e n e r a t e d a p p r o x i m a t e l y 4 0 % o f o u r c o n s o l i d a t e d t o t a l r e v e n u e s i n2 0 1 1 . W i t h t h e a c q u i s i t i o n o f H e w i t t i n O c t o b e r 2 0 1 0 , t h i s s e g m e n t n o w h a s a p p r o x i m a t e l y 3 0 , 0 0 0e m p l o y e e s w o r l d w i d e w i t h o p e r a t i o n s i n t h e U . S . , C a n a d a , t h e U . K . , E u r o p e , S o u t h A f r i c a , L a t i nA m e r i c a , a n d t h e A s i a P a c i f i c r e g i o n .P r i n c i p a l P r o d u c t s a n d S e r v i c e s
W e p r o v i d e p r o d u c t s a n d s e r v i c e s i n t h i s s e g m e n t p r i m a r i l y u n d e r t h e A o n H e w i t t b r a n d , w h i c hw a s f o r m e d f o l l o w i n g t h e a c q u i s i t i o n o f H e w i t t .A o n H e w i t t w o r k s t o m a x i m i z e t h e v a l u e o f c l i e n t s ' h u m a n r e s o u r c e s s p e n d i n g , i n c r e a s e e m p l o y e ep r o d u c t i v i t y , a n d i m p r o v e e m p l o y e e p e r f o r m a n c e . O u r a p p r o a c h a d d r e s s e s a t r e n d t o w a r d s m o r ed i v e r s e w o r k f o r c e s ( d e m o g r a p h i c s , n a t i o n a l i t i e s , c u l t u r e s a n d w o r k / l i f e s t y l e p r e f e r e n c e s ) t h a t r e q u i r em o r e c h o i c e s a n d f l e x i b i l i t y a m o n g e m p l o y e r s s o t h a t t h e y c a n p r o v i d e b e n e f i t o p t i o n s s u i t e d t oi n d i v i d u a l n e e d s .
W e w o r k w i t h o u r c l i e n t s t o i d e n t i f y o p t i o n s i n h u m a n r e s o u r c e o u t s o u r c i n g a n d p r o c e s si m p r o v e m e n t s . T h e p r i m a r y a r e a s w h e r e c o m p a n i e s c h o o s e t o u s e o u t s o u r c i n g s e r v i c e s i n c l u d e b e n e f i t sa d m i n i s t r a t i o n , c o r e h u m a n r e s o u r c e p r o c e s s e s , w o r k f o r c e a n d t a l e n t m a n a g e m e n t .A o n H e w i t t o f f e r s a b r o a d r a n g e o f h u m a n c a p i t a l s e r v i c e s i n t h e f o l l o w i n g p r a c t i c e a r e a s :H e a l t h a n d B e n e f i t s a d v i s e s c l i e n t s a b o u t s t r u c t u r i n g , f u n d i n g , a n d a d m i n i s t e r i n g e m p l o y e e b e n e f i tp r o g r a m s , w h i c h a t t r a c t , r e t a i n , a n d m o t i v a t e e m p l o y e e s . B e n e f i t s c o n s u l t i n g a n d b r o k e r a g e i n c l u d e s
h e a l t h a n d w e l f a r e , e x e c u t i v e b e n e f i t s , w o r k f o r c e s t r a t e g i e s a n d p r o d u c t i v i t y , a b s e n c e m a n a g e m e n t ,d a t a - d r i v e n h e a l t h , c o m p l i a n c e , e m p l o y e e c o m m i t m e n t , a n d e l e c t i v e b e n e f i t s s e r v i c e s . E f f e c t i v eJ a n u a r y 1 , 2 0 1 2 , t h e H e a l t h a n d B e n e f i t s c o n s u l t i n g b u s i n e s s w i l l m o v e f r o m t h e H R S o l u t i o n s s e g m e n tt o t h e R i s k S o l u t i o n s s e g m e n t . T h e m o v e w i l l a l l o w t h e b u s i n e s s t o b e n e f i t f r o m a b r o a d e r g l o b a ld i s t r i b u t i o n c h a n n e l a n d t o p r o m o t e o u r d e e p h e a l t h a n d b e n e f i t s c a p a b i l i t i e s i n d a t a a n d a n a l y t i c s w i t hc l i e n t s a n d i n s u r a n c e c a r r i e r s .R e t i r e m e n t s p e c i a l i z e s i n p r o v i d i n g g l o b a l a c t u a r i a l s e r v i c e s , d e f i n e d c o n t r i b u t i o n c o n s u l t i n g ,i n v e s t m e n t c o n s u l t i n g , t a x a n d E R I S A c o n s u l t i n g , a n d p e n s i o n a d m i n i s t r a t i o n .
C o m p e n s a t i o n f o c u s e s o n c o m p e n s a t i o n a d v i s o r y / c o u n s e l i n c l u d i n g : c o m p e n s a t i o n p l a n n i n g d e s i g n ,e x e c u t i v e r e w a r d s t r a t e g i e s , s a l a r y s u r v e y a n d b e n c h m a r k i n g , m a r k e t s h a r e s t u d i e s a n d s a l e s f o r c ee f f e c t i v e n e s s a s s e s s m e n t s , w i t h s p e c i a l e x p e r t i s e i n t h e f i n a n c i a l s e r v i c e s a n d t e c h n o l o g y i n d u s t r i e s .S t r a t e g i c H u m a n C a p i t a l d e l i v e r s a d v i c e t o c o m p l e x g l o b a l o r g a n i z a t i o n s o n t a l e n t , c h a n g e a n d
o r g a n i z a t i o n a l e f f e c t i v e n e s s i s s u e s , i n c l u d i n g t a l e n t s t r a t e g y a n d a c q u i s i t i o n , e x e c u t i v e o n - b o a r d i n g ,p e r f o r m a n c e m a n a g e m e n t , l e a d e r s h i p a s s e s s m e n t a n d d e v e l o p m e n t , c o m m u n i c a t i o n s t r a t e g y , w o r k f o r c et r a i n i n g a n d c h a n g e m a n a g e m e n t .B e n e f i t s A d m i n i s t r a t i o n a p p l i e s o u r H R e x p e r t i s e p r i m a r i l y t h r o u g h d e f i n e d b e n e f i t ( p e n s i o n ) ,d e f i n e d c o n t r i b u t i o n ( 4 0 1 ( k ) ) , a n d h e a l t h a n d w e l f a r e a d m i n i s t r a t i v e s e r v i c e s . O u r m o d e l r e p l a c e s t h e
numerous specialists regional and local firms in almost every area of our business We also compete
with insurance and reinsurance companies that market and service their insurance products without the
assistance of brokers or agents and with other businesses that do not fall into the categories above
including commercial and investment banks accounting firms and consultants that provide risk-related
services and products
Seasonality
The Risk Solutions segment typically experiences higher revenues in the first and fourth calendar
quarters of each year primarily due to the timing of policy renewals
HR Solutions
The HR Solutions segment generated approximately 40% of our consolidated total revenues in
2011 With the acquisition of Hewitt in October 2010 this segment now has approximately 30000
employees worldwide with operations in the U.S Canada the U.K Europe South Africa Latin
America and the Asia Pacific region
Principal Products and Services
We provide products and services i n t hi s segment primarily under the Aon Hewitt brand which
was formed following the acquisition of Hewitt
Aon Hewitt works to maximize the value of clients human resources spending increase employee
productivity and improve employee performance Our approach addresses trend towards more
diverse workforces demographics nationalities cultures and work/lifestyle preferences that require
more choices and flexibility among employers so that they can provide benefit options suited to
individual needs
We work with our clients to identify options in human resource outsourcing and process
improvements The primary areas where companies choose to use outsourcing services include benefits
administration core human resource processes workforce and talent management
Aon Hewitt offers broad range of human capital services in the following practice areas
Health and Benefits advises clients about structuring funding and administering employee benefit
programs which attract retain and motivate employees Benefits consulting and brokerage includes
health and welfare
executive benefits
workforcestrategies
andproductivity
absence
managementdata-driven health compliance employee commitment and elective benefits services Effective
January 2012 the Health and Benefits consulting business will move from the HR Solutions segment
to the Risk Solutions segment The move will allow the business to benefit fro m broa de r global
distribution channel and to promote our deep health and benefits capabilities in data and analytics with
clients and insurance carriers
Retirement specializes in providing global actuarial services defined contribution consulting
investment consulting tax and ERISA consulting and pension administration
Compensation focuses on compensation advisory/counsel including compensation planning design
executive reward strategies salary survey and benchmarking market share studies and sales force
effectiveness assessments with special expertise in the financial services and technology industries
Strategic Human Capital delivers advice to complex global organizations on talent change and
organizational effectiveness issues including talent strategy and acquisition executive
on-boarding
performance management leadership assessment and development communication strategy workforce
training and change management
Benefits Administration applies our HR expertise primarily through defined benefit pension
defined contribution 401k and health and welfare administrative services Our model replaces the
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r e s o u r c e - i n t e n s i v e p r o c e s s e s o n c e r e q u i r e d t o a d m i n i s t e r b e n e f i t p l a n s w i t h m o r e e f f i c i e n t , e f f e c t i v e ,a n d l e s s c o s t l y s o l u t i o n s . I n a d d i t i o n , w e a r e b u i l d i n g a n d o p e r a t i n g h e a l t h c a r e e x c h a n g e s t h a t p r o v i d ee m p l o y e r s w i t h a c o s t e f f e c t i v e a l t e r n a t i v e t o t r a d i t i o n a l e m p l o y e e a n d r e t i r e e h e a l t h c a r e , w h i l e h e l p i n gi n d i v i d u a l s s e l e c t t h e i n s u r a n c e t h a t b e s t m e e t s t h e i r n e e d s .H u m a n R e s o u r c e B u s i n e s s P r o c e s s O u t s o u r c i n g ( H R B P O ) p r o v i d e s m a r k e t - l e a d i n g s o l u t i o n s t om a n a g e e m p l o y e e d a t a ; a d m i n i s t e r b e n e f i t s , p a y r o l l a n d o t h e r h u m a n r e s o u r c e s p r o c e s s e s ; a n d r e c o r d
a n d m a n a g e t a l e n t , w o r k f o r c e a n d o t h e r c o r e H R p r o c e s s t r a n s a c t i o n s a s w e l l a s o t h e r c o m p l e m e n t a r ys e r v i c e s s u c h a s a b s e n c e m a n a g e m e n t , f l e x i b l e s p e n d i n g , d e p e n d e n t a u d i t a n d p a r t i c i p a n t a d v o c a c y .C o m p e n s a t i o n
R e v e n u e s a r e p r i n c i p a l l y d e r i v e d f r o m f e e s p a i d b y c l i e n t s f o r a d v i c e a n d s e r v i c e s . I n a d d i t i o n ,i n s u r a n c e c o m p a n i e s p a y u s c o m m i s s i o n s f o r p l a c i n g i n d i v i d u a l a n d g r o u p i n s u r a n c e c o n t r a c t s , p r i m a r i l yl i f e , h e a l t h a n d a c c i d e n t c o v e r a g e s , a n d p a y u s f e e s f o r c o n s u l t i n g a n d o t h e r s e r v i c e s t h a t w e p r o v i d e t ot h e m . P a y m e n t t e r m s a r e c o n s i s t e n t w i t h c u r r e n t i n d u s t r y p r a c t i c e .C o m p e t i t i o n
O u r H R S o l u t i o n s b u s i n e s s f a c e s s t r o n g c o m p e t i t i o n f r o m o t h e r w o r l d w i d e a n d n a t i o n a l c o n s u l t i n gc o m p a n i e s , a s w e l l a s r e g i o n a l a n d l o c a l f i r m s . C o m p e t i t o r s i n c l u d e i n d e p e n d e n t c o n s u l t i n g f i r m s a n dc o n s u l t i n g o r g a n i z a t i o n s a f f i l i a t e d w i t h a c c o u n t i n g , i n f o r m a t i o n s y s t e m s , t e c h n o l o g y , a n d f i n a n c i a ls e r v i c e s f i r m s , l a r g e f i n a n c i a l i n s t i t u t i o n s , a n d p u r e p l a y o u t s o u r c e r s . S o m e o f o u r c o m p e t i t o r s p r o v i d ea d m i n i s t r a t i v e o r c o n s u l t i n g s e r v i c e s a s a n a d j u n c t t o o t h e r p r i m a r y s e r v i c e s . W e b e l i e v e t h a t w e a r eo n e o f t h e l e a d i n g p r o v i d e r s o f h u m a n c a p i t a l s e r v i c e s i n t h e w o r l d .S e a s o n a l i t y
D u e t o b u y i n g p a t t e r n s i n t h e m a r k e t s w e s e r v e , r e v e n u e s t e n d t o b e s l i g h t l y h i g h e r i n t h e f o u r t hq u a r t e r .L i c e n s i n g a n d R e g u l a t i o n
O u r b u s i n e s s a c t i v i t i e s a r e s u b j e c t t o l i c e n s i n g r e q u i r e m e n t s a n d e x t e n s i v e r e g u l a t i o n u n d e r U . S .f e d e r a l a n d s t a t e l a w s , a s w e l l a s t h e l a w s o f o t h e r c o u n t r i e s i n w h i c h w e o p e r a t e . S e e t h e d i s c u s s i o nc o n t a i n e d i n t h e R i s k F a c t o r s s e c t i o n i n P a r t I , I t e m l A o f t h i s r e p o r t f o r i n f o r m a t i o n r e g a r d i n g h o wa c t i o n s b y r e g u l a t o r y a u t h o r i t i e s o r c h a n g e s i n l e g i s l a t i o n a n d r e g u l a t i o n i n t h e j u r i s d i c t i o n s i n w h i c h w eo p e r a t e m a y h a v e a n a d v e r s e e f f e c t o n o u r b u s i n e s s .
R i s k S o l u t i o n sR e g u l a t o r y a u t h o r i t i e s i n t h e s t a t e s o r c o u n t r i e s i n w h i c h t h e o p e r a t i n g s u b s i d i a r i e s o f o u r R i s kS o l u t i o n s s e g m e n t c o n d u c t b u s i n e s s m a y r e q u i r e i n d i v i d u a l o r c o m p a n y l i c e n s i n g t o a c t a s p r o d u c e r s ,b r o k e r s , a g e n t s , t h i r d p a r t y a d m i n i s t r a t o r s , m a n a g i n g g e n e r a l a g e n t s , r e i n s u r a n c e i n t e r m e d i a r i e s , o ra d j u s t e r s .U n d e r t h e l a w s o f m o s t s t a t e s i n t h e U . S . a n d m o s t f o r e i g n c o u n t r i e s , r e g u l a t o r y a u t h o r i t i e s h a v er e l a t i v e l y b r o a d d i s c r e t i o n w i t h r e s p e c t t o g r a n t i n g , r e n e w i n g a n d r e v o k i n g p r o d u c e r s ' , b r o k e r s ' a n da g e n t s ' l i c e n s e s t o t r a n s a c t b u s i n e s s i n t h e s t a t e o r c o u n t r y . T h e o p e r a t i n g t e r m s m a y v a r y a c c o r d i n g t ot h e l i c e n s i n g r e q u i r e m e n t s o f t h e p a r t i c u l a r s t a t e o r c o u n t r y , w h i c h m a y r e q u i r e , a m o n g o t h e r t h i n g s
t h a t a f i r m o p e r a t e s i n t h e s t a t e o r c o u n t r y t h r o u g h a l o c a l c o r p o r a t i o n . I n a f e w s t a t e s a n d c o u n t r i e s ,l i c e n s e s m a y b e i s s u e d o n l y t o i n d i v i d u a l r e s i d e n t s o r l o c a l l y o w n e d b u s i n e s s e n t i t i e s . I n s u c h c a s e s , o u rs u b s i d i a r i e s e i t h e r h a v e s u c h l i c e n s e s o r h a v e a r r a n g e m e n t s w i t h r e s i d e n t s o r b u s i n e s s e n t i t i e s l i c e n s e dt o a c t i n t h e s t a t e o r c o u n t r y .
6
resource-intensiveprocesses once required to
administer benefit plans with more efficient effective
and less costly s ol ut io ns I n addition we are building and operating health care exchanges that provide
employers with cost effective alternative to traditional employee and retiree healthcare while helping
individuals select the insurance that best meets their needs
Human Resource Business Process Outsourcing HR BPO provides market-leading solutions tomanage employee data administer benefits payroll and other human resources processes and record
andmanage
talent workforce and other core HR process
transactions as well as other
complementaryservices such as absence man