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29-Apr-2016

Aon Plc (AON)

Q1 2016 Earnings Call

Aon Plc (AON) Q1 2016 Earnings Call

Corrected Transcript 29-Apr-2016


2 Copyright © 2001-2016 FactSet CallStreet, LLC

CORPORATE PARTICIPANTS

Gregory C. Case President and Chief Executive Officer

Christa Davies Chief Financial Officer & Executive Vice President

................................................................................................................................................................................................................................

OTHER PARTICIPANTS

Sarah E. DeWitt JPMorgan Securities LLC

David Anthony Styblo Jefferies LLC

Quentin McMillan Keefe, Bruyette & Woods, Inc.

Kai Pan Morgan Stanley & Co. LLC

Vinay Misquith Sterne Agee CRT

Brian Robert Meredith UBS Securities LLC

Charles Joseph Sebaski BMO Capital Markets (United States)

Josh D. Shanker Deutsche Bank Securities, Inc.

................................................................................................................................................................................................................................

MANAGEMENT DISCUSSION SECTION

Operator: Good morning and thank y ou for holding. Welcome to Aon Plc's First Quarter 2016 Earnings

Conference Call. At this time all participants will be in listen-only mode until the question-and-answer portion of

today 's call. If any one has any objection, you may disconnect y our line at this time.

I would also like to remind all parties that this call is being recorded. And that it is important to note that some of

the comments in today's call may constitute certain statements that are forward-looking in nature, as defined by

the Private Securities Reform Act of 1995. Such statements are subject to certain risk and uncertainties that could

cause actual results to differ materially fro m historical results or those anticipated. Information concerning risk

factors that could cause such differences are described in the press release covering our first quarter 2016 results,

as well as having been posted on our website.

Now it is my pleasure to turn the call over to Greg Case, President and CEO of Aon Plc. ................................................................................................................................................................................................................................


Good morning, everyone, and welcome to our first quarter of 2016 conference call. Joining me here today is our

CFO, Christa Davies. I would note that there are slides available on our website for y ou to follow along with our

commentary today.





And consistent with previous quarters I'd like to cover two areas before turning the call over to Christa for further

financial rev iew. First is our performance against key metrics we communicate to shareholders. And second is

overall organic growth performance, including continued areas of strategic investment across Aon.

On the first topic, our performance versus key metrics. Each quarter we measure our performance against the key

metrics we focus on achieving over the course of the y ear, grow organically, expand margins, increase earnings per

share, and deliver free cash flow growth.

Turning to slide 3. In the first quarter organic revenue growth was 3% with growth across every major business,

highlighted by 4% growth in each of our retail brokerage businesses and positive organic growth in Reinsurance.

Operating margin increased 20 basis points, reflecting strong operating performance in Ris k Solutions. EPS

decreased 1% to $1.35, including a $0.10 unfavorable impact from changes in foreign currency. And finally, free

cash flow was $221 million, reflecting solid underlying performance in our seasonally weakest cash flow quarter.

Overall, our first quarter results reflect the strength of our industry leading franchise and a solid start to the y ear.

With organic revenue growth across every major business, adjusted operating margin expansion, improved return

on invested capital, and effective allocation of capital, highlighted by the repurchase of $750 million of stock.

Turning to slide 4. On the second topic of growth and investment I want to spend the next few minutes discussing

the quarter for both of our segments.

In Risk Solutions organic revenue growth was 3%, similar to the prior year quarter, driven by growth across all

major businesses. As we've discussed previously we're driving a set of initiatives and making strategic investments

that are strengthening the underlying performance and position our Risk Solutions segment for long term growth

and improved operating leverage.

With management of our renewal book through Aon Client Promise and retention rates of more than 90% on

average across retail brokerage, highlighted by record retentio n levels of nearly 94% in U.S. Retail and EMEA.

New business generation of $225 million across retail brokerage, including record new business in U.S. Retail.

Twenty consecutive quarters of positive net new business in core treaty Reinsurance.

An increased operating leverage from our significant investments in innovative technology and data and analy tics,

including Aon InPoint, which captures over 3 million trades and $160 billion of bound premium. ReView, our

reinsurer dashboard combined with strategic consulting to help reinsurers to be more effective capital markets for

seeing company clients. And our Aon Broking initiative to better match client need with insurer appetite for risk.

A great example of our innovation in data and analy tics was the launch of Aon Client Treaty, the largest ever

underwritten portfolio of risk in the history of Lloy d's. Since launching on January 1 we remain very excited about

the positive impact of the Client Treaty for our largest and most sophisticated clients. We've had te rrific success in

feedback from clients around the world. And continue to attract new clients with the Client Treaty being a major

differentiator.

And finally , we're expanding our content and global footprint through tuck-in acquisitions that increase scale in

emerging markets or expand capability.

Reflecting on the indiv idual businesses within Risk Solutions. In the Americas, organic revenue growth was 4%,

similar to the prior y ear quarter. Exposures continue to be positive across the region, while the i mpact on pricing

was negative, resulted in a relatively stable market impact overall, similar to the last six quarters. We saw double -





digit growth in Latin America, driven by management of the renewable book portfolio with many regions

delivering strong growth, despite macroeconomic challenges facing the region.

In U.S. Retail growth was driven by solid retention rates and continued record new business generation, led by a

diverse portfolio of products, including health, P&C, and surety. Affinity also recorded solid performance,

highlighted by strong growth in the consumer solutions.

In International organic revenue growth was 4%, compared to 3% in the prior -year quarter. Similar to the last six

quarters exposures continue to be stable. And the impact from pricing was modestly negative on average, driven

by fragile market conditions in various countries across Europe and Asia and continued pricing pressure in the

Pacific region.

Results reflect strong growth in Asia, including strength in Health and Benefi ts and strong management of the

renewal book portfolio. In Continental Europe we saw solid growth, driven by both new business generation and

management of the renewal book portfolio, reflecting strong leadership across the region, as the macroeconomic

env ironment continues to stabilize. And in the Pacific we saw continued strength in New Zealand, while Australia

showed modest growth.

In Reinsurance organic revenue growth was 1%, compared to negative 1% in the prior y ear quarter, reflecting our

prev ious guidance of an expected return to modest growth in 2016. Results in the quarter were primarily driven by

growth in global facultative placements, cedent demand in treaty, and from new business generation. Results were

partially offset by unfavorable market impact.

As the rate of price decline continues to moderate, capital is being deployed to new markets, including U.S.

mortgage credit risk, life and annuity risk, and other emerging risks, such as cy ber liability. And as highlighted in

our prior discussions, new opportunities for growth, combined with industry leading data analytics, has

positioned our Reinsurance business for a return to modest growth in 2016.

Turning to HR Solutions. Organic revenue growth was 2% with growth across both businesses. We'r e seeing

growth in high demand areas, where we have strategically invested in innovative solutions and clients serving

capabilities, reflecting Aon Hewitt's leadership and in depth understanding of market trends. Including as clients

manage risk against pension schemes that are frozen, largely underfunded, and facing regulatory changes;

solutions to de-risk pensions plans; and support for delegated investment solutions, a strong growth area, where

assets under management have grown from $10 billion to roughly $85 billion in 5 y ears.

Continued investment to strengthen our industry leading portfolio of health solutions, covering a full range of

benefit strategies, client size, and funding choices, including our suite of private health care exchanges.

We're also investing in Software-as-a-Service models in our HR BPO business, where growth in new clients and

conversion of existing clients is driv ing strong demand as well as the expansion of our capabilities to include

financial implementations.

And finally , we're investing in our Talent and Rewards business, as we're seeing strong demand for data and

analy tics to support increasing organizational change.

Turning to the indiv idual businesses within HR Solutions. In Consulting Services organic revenue growth wa s 3%,

compared to 2% in the prior y ear quarter. Results in the quarter reflect continued growth in retirement

consulting, primarily driven by demand for delegated investment consulting services. We also saw growth in core





pension solutions, where we provide clients the best combination of expertise and execution. And modest growth

in communications consulting.

In Outsourcing organic revenue growth was 1%, compared to 4% in the prior y ear quarter. The prior y ear quarter

included certain out of cy cle follow-on enrollments on our Retiree Exchange, related to a very large client

implementation. Results excluding the follow-on enrollments in the prior year reflect strong growth in HR BPO,

driven by new client wins in cloud based solutions.

In summary , we delivered solid organic growth across every major business and strengthened our operational

performance, driven by our industry leading platform of client serving capabilities and investments in data and

analy tics.

With that said I'm now pleased to turn the call over to Christa for further financial review. Christa? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President

Thanks so much, Greg, and good morning, everyone. As Greg noted our first quarter results reflect a solid start to

the y ear. We delivered organic revenue growth across both segments and delivered strong operating margin

improvement in Risk Solutions. We improved return on invested capital through the disposition of certain

businesses and effectively allocated capital, highlighted b y the repurchase of $750 million of ordinary shares in

the quarter, more share repurchase than we've done in any quarter since 2008. Strong share repurchase, coupled

with the recent announcement of a 10% increase to the quarterly cash dividend, reflects our long term belief in the

strengthening free cash flow of the firm.

Now let me turn to the financial results for the quarter on page 6 of the presentation. Our core EPS performance,

excluding certain items, decreased 1% to $1.35 per share for the first qu arter, compared to $1.37 in the prior year

quarter. Certain items that were adjusted for in the core EPS performance and highlighted in the schedules on

page 12 of the press release, include non-cash intangible asset amortization.

As we noted at the beginning of the call we evaluate performance over the course of the y ear, as macro factors or

certain actions to strengthen underlying performance may distort results on a near term basis.

To help put the first quarter underlying EPS in context, first, we inc urred unfavorable foreign currency related

impacts totaling $0.10 per share, including $0.05 per share of translation for a stronger U.S. dollar and $0.05 per

share for remeasurement of monetary assets and liabilities in non-functional currencies, primarily resulting from

significant devaluation of the exchange rate in Venezuela. Going forward, if currency are to remain stable at

today 's rates, we would expect an immaterial impact for the rest of the y ear.

Second, we took steps to further strengthen return on invested capital with the disposition of certain businesses.

In HR Solutions we incurred $0.06 per share of transaction and portfolio repositioning related costs in

connection with dispositions. These costs were more than offset by $0.10 per share of g ains recorded in other

income.

Lastly , the prior y ear quarter benefited from $0.12 per share of other income gains.

Now let me talk about each of the segments on the next slide. In our Risk Solutions segment organic revenue

growth was 3%, operating margin increased 100 basis points to 24.2%, and operating income increased 3%





compared to the prior y ear quarter. Operating income included a $13 million unfavorable impact from FX.

Excluding this impact underlying operating income increased 6% versus the prior y ear quarter.

Operating margin improvement of 100 basis points includes a 30 -basis-point favorable impact from FX.

Excluding the impact from FX, underlying operating margin improved 70 basis points in the quarter. Strong

operating improvement in the first quarter reflects organic growth in each business, including Reinsurance, and

improved return on their investments in data and analy tics across the portfolio.

We continue to face certain headwinds in the first quarter from an unfavorable market impact in Reinsurance and

weaker economic conditions in a number of geographies. Despite these challenges our performance in Risk

Solutions reflects strong new business generation and increased operating leverage in the business.

We expect continued growth and operational improvement throughout 2016, as we make progress towards our

long term operating margin target of 26%. In addition, if short term interest rates continue to rise, we believe we

have significant leverage to an improving interest rate environment, a s every 100 basis point rise in global interest

rate should result in approximately $45 million of investment income.

Turning to the HR Solutions segment. Organic revenue growth was 2%. Operating margin decreased 140 basis

points to 11 .8%. And operating income decreased 14% compared to the prior y ear quarter. Results were exactly in

line with our previously provided guidance. Operating income included a $3 million unfavorable impact from FX.

As mentioned previously underlying results from the quarter inc luded $20 million, or minus 220 basis points, of

transaction and portfolio repositioning related costs, as we continue to drive improved return on capital for the

firm. The gain relating to the sale of our Recruitment Process Outsourcing business was repor ted in other income.

Strong underlying operating performance was driven by organic revenue growth in high demand areas where

we've been investing, as well as expense discipline and return on our investments.

Looking forward, we expect continued growth in revenue, operating income, and margin in 2016 towards our long

term target of 22% with quarterly patterning of operating income results in HR Solutions similar to 2015. More

specifically, operating income will be down in the first half and up in the second half of the y ear, most notably in

Q4.

Now let me discuss a few of the line items outside of the operating segments on slide 9. Unallocated expenses were

$46 million, compared to $47 million in the prior year quarter. Interest income was $2 million, compa red to $3

million in the prior y ear quarter. Interest expense increased $4 million to $69 million, due to an increase in total

debt outstanding.

Other income of $18 million primarily includes gains on the sale of certain businesses, partially offset by lo sses

due to the unfavorable impact of exchange rates on the remeasurement of assets and liabilities in non -functional

currencies. Going forward, we expect a run rate of approximately $45 million per quarter of unallocated expense

and $3 million per quarter of interest income.

Interest expense in the second quarter is expected to be approximately $72 million or modestly higher than the

first quarter, due to the overlap of $750 million of notes placed in February and $500 million of notes due in May .

We currently expect interest expense to decline to $70 million per quarter thereafter.

Turning to taxes. The effective tax rate on net income from continuing operations decreased to 18.4%, compared

to the prior y ear quarter at 19.1%, due to the geographic distribution of income and certain favorable discrete tax

adjustments.





Lastly , average diluted shares outstanding decreased 5% to 273.7 million in the first quarter, compared to 287.1

million in the prior y ear quarter, as we effectively allocate capital and man age dilution. The company repurchased

7 .7 million Class A ordinary shares for approximately $750 million in the first quarter. The company has $3.3

billion of remaining authorization under its share repurchase program.

Actual shares outstanding on March 31 were 264.8 million. And there are approximately 5 million additional

dilutive equivalents. Estimated Q2 2016 beginning dilutive share count is approximately 270 million, subject to

share price movement, share issuance, and share repurchase.

Now let me turn to the next slide to highlight our solid balance sheet and strong cash flow growth on slide 10. At

March 31, 2016, cash and short term investments were $1.1 billion. We expect levels to return to our normal run

rate between $600 million to $800 million in the second quarter.

Total debt outstanding was approximately $6.6 billion. And total debt to EBITDA on a GAAP basis was 2.7 times.

Cash flow from operations for the first 3 months decreased 8% or $25 million to $273 million. This was primarily

driven by unfavorable timing of certain tax related items that we expect to normalize by Q2, partially offset by

working capital improvements and a decline in cash paid for pensions and restructuring.

Free cash flow, as defined by cash flow from operations less CapEx, decreased 6% or $15 million to $221 million,

reflecting a decline in cash flow from operations, partially offset by a $10 million decrease in CapEx.

Turning to the next slide to discuss our significant increases in free cash flow. We value the fir m based on free

cash flow and allocate capital to maximize free cash flow returns. Free cash flow of $2.4 billion in 2017 is not our

end goal, as further long term sustainable free cash flow will be driven by continued operating income growth and

additional working capital initiatives beyond 2017.

There are four primary areas that are expected to contribute to our near term goal of delivering $2.4 billion or

more for the full y ear 2017. The first is continued operational performance, driven by organic reve nue growth and

margin expansion. The second is working capital improvements, as we focus on closing the gap between

receivables and pay ables. The third is declining uses of cash for pension, CapEx, and restructuring, which we

expect to free up more than $90 million of annual free cash flow between the end of the 2015 and 2017. And

fourth, lower cash tax payments reflecting a lower effective tax rate.

Turning to our pension plans. We've taken significant steps to reduce volatility and liability, as we've closed plans

to new entrants, frozen plans from accruing additional benefits, and continue to derisk certain plan assets. We

currently expect contributions to decline by approximately $44 million in 2016 and expect non -cash pension

income to be a modest benefit in 2016 versus 2015.

Regarding our restructuring program. As all charges related to restructuring program have been incurred, we

expect cash payments to decline by $9 million to approximately $19 million in 2016. And continue to decline

thereafter to an immaterial amount.

In summary we delivered solid underlying results in the first quarter. Investments in our industry leading

platform of client serving capabilities across risk, retirement, and health continue to position the firm for long

term revenue growth, further margin expansion, and strong free cash flow generation towards our near term goal

of $2.4 billion for the full y ear 2017.





With that I'd like to turn the call back over to the operator for questions.

QUESTION AND ANSWER SECTION

Operator: Thank y ou. We will now begin the question-and-answer session. [Operator Instructions] And now our

first question comes from the line of Sarah DeWitt of JPMorgan. Y ou may now ask y our question. ................................................................................................................................................................................................................................

Sarah E. DeWitt JPMorgan Securities LLC Q Hi. Good morning. ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A Hi, Sarah. ................................................................................................................................................................................................................................

Sarah E. DeWitt JPMorgan Securities LLC Q I was wondering if y ou could talk about what y ou're seeing in terms of the broader macro environment and y our

confidence in y our ability to grow in both Risk Solutions and HR Solutions in the face of a softening P&C market

and somewhat choppy economy. ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A Let me just reflect and take a step back a little bit, Sarah. We feel very – candidly, very good about continued

progress. Y ou saw it. And y ou've seen us grow in each of the last number of y ears.

But if y ou think about our confidence both in the current environment for the coming years – by the way , not just

grow the business but also improve margins, tracking toward our 26% and 22% goals in Risk and in HR Solutions.

And I would just say , listen, just as an example. This often gets linked back into the pricing on the insurance side.

And we would encourage you to separate those and just consider – think about from Aon's standpoint, three

sources of growth. And just thinking on the Risk side for a moment.

Our ability to grow in the traditional business, property/casualty, D&O, all those pieces reflects a multiyear

investment in something we called Aon Client Promise. This is really helping us bring more new clients into the

fray and do more with the existing clients. And as proof points for that set of – that roll out – by that way , that's

also across HR Solutions as well. Look at new business in Q1. It was a record in U.S. Retail. It was a record

worldwide. By the way, that's a record on top of a record. It was the same in Q1 in 2015 with record levels of

retention. So this is just 94% in U.S. Retail, for example, and EMEA. So these are just examples of sort of what's

happening in the core business and what we're about.

And we would say , by the way, as an aside, the market overall as we look at it is a bit frankly more – a bit more

stable when y ou think about pricing and insured values. But that's just one aspect of Aon.

Another aspect is our ability to grow outside the traditional core. And think about in this regard just a couple of

examples here. We got two existing $1 billion revenue businesses we've invested in heavily. Affinity being one, $1





billion business growing exceptionally well. Health and Benefits, $1 billion business plus, also growing just

proportionately well.

So y ou've got the traditional. You've got these things outside the core I just described. And then equally e xciting

for us is the ability to grow in new areas, where we've made substantial investment. And just a few examples of

those would be like Aon Client Treaty, I highlighted the largest ever underwritten portfolio of risk for Lloy d's. Aon

InPoint, 40 plus carriers on that platform now. And ReView.

And then finally I would just highlight what we just did in U.S. mortgage over the last couple of y ears has frankly

brought insurance capital into the mortgage market. And in 2015 alone I think that's about $3.5 b illion in net new

premium, $5 billion since inception.

So the point being here, Sarah, this is such an important question. We believe we continue to prove the point that

organic growth and margin improvement for us is not about insurance pricing or market impact. It's really about

our ability to continue to invest and bring market – bringing into the market capabilities and real products that

help our clients succeed. And frankly, that engine is under our control. It's working. And it's continuing to build .

And a lot of the things we've invested in historically are just coming online.

And y ou saw it also in the momentum as we finished 2015. In 2015 we grew organically, had record margins in

Risk, record margins in HR Solutions, record free cash flow, and r ecord EPS. That momentum in 2015 carries us

into 2016. And it really is that engine that's driv ing it. So does that answer y our question around growth? ................................................................................................................................................................................................................................

Sarah E. DeWitt JPMorgan Securities LLC Q Y es. That's great. Very thorough. And then secondly, there were recent new inversion rules, which propose

essentially limiting the amount of inter-company debt. Could y ou just talk about what the implications for this

could be for Aon and as well as y our tax rate? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A Sure. So I think there were two primary sets of proposed regulation published by the U.S. Treasury. The first

proposed regulation applies to inversion transactions, and therefore does not apply to us. We completed our

redomicile over 4 y ears ago. It was signed off by the IRS in September 2013. And following our redomicile our

capital structure looks like any other foreign based company in a territorial tax system.

The second proposed regulation applies to inter-company debt placed after April 4, 2016. Our inter-company debt

was placed prior to April 4 and would also not apply to Aon's current global capital structure. The majority of our

existing inter-company debt will come due on 2023 and after. Overall, we feel really comfortable wit h our current

effective tax rate for the foreseeable future. ................................................................................................................................................................................................................................

Sarah E. DeWitt JPMorgan Securities LLC Q Okay . And I know it's a way s away but what would happen in 2023? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A





I mean the way we think about this, Sarah, is we have an overall capital structure. And we use inter -company debt

as one part of that to help drive investments globally. But there are many other factors that influence that. As a

U.K. company we operate in territorial tax system, which has different repatriation impacts than a worldwide tax

sy stem. We're growing in geographies with declining statutory tax rates, such as the U.K., where we're domiciled,

where the tax rate is currently 20%. And it's going to decline over the coming y ears to 17%.

And so statutory tax rates are a really important part of the business decision for where we invest and build new

products and services. And we also leverage net operating losses where possible to decide where we invest and

grow businesses.

So I guess what I would say is, as we think about our business going forward, our overall global capital structure

we feel is appropriate for our business. And therefore, we feel really comfortable with our current effective tax rate

for the foreseeable future. ................................................................................................................................................................................................................................

Sarah E. DeWitt JPMorgan Securities LLC Q Okay . Great. Thank y ou. ................................................................................................................................................................................................................................

Operator: Thank y ou very much. Our next question comes from the line of Dave Sty blo of Jefferies. You may

now ask y our question. ................................................................................................................................................................................................................................

David Anthony Styblo Jefferies LLC Q Hi. Good morning. Thanks for the questions. The follow-up on Sarah's, I certainly appreciate the macro comments

and the new areas of growth. That's I'm sure attributing to the stronger growth in Retail I suspect with the 4% up

there.

But I'm also wondering, more on the core side, and we've seen of couple of y our peers post slower growth than

that. And actually talk about some sluggishness in the EU. Of course the pricing pressures and so forth and just

overall tempering of growth.

So I'm curious if y ou're just in areas or markets that are not seeing that? Or if y ou're perhaps gaining some share

from peers? What's sort of y our assessment more on the core part of the business? ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A We can step back, David, and essentially say, look – and I described three areas around – the traditional, sort of

areas outside the traditional, and then areas related to some of the data and analy tics efforts we've made around

investments. And we're seeing growth in all three areas. Frankly, we saw growth.

And we're in all the countries. So we're in 120 countries around the world. It's the most comprehensive platform

out there. And we saw growth in EMEA, in Germany , in France, in Italy. We – note the retention rates I described

before and the new business generation.

So while they 're – while the market conditions we think remain relatively stable – and again we would say on

balance, when y ou think about pricing and insured values, put those two together and call those mar ket impact.





Often times y ou hear about pricing, you don't hear about market impact. Market impact has as much impact as

pricing.

On balance we actually think 2016 looks than better than 2015 for our global footprint. But y ou saw growth across

EMEA and the countries I just highlighted. Y ou're seeing new business generation. This is in the core business, net

new business generation in the U.S. and in EMEA that is literally record levels in Q1. And it was record on top of

record. So the comps are extremely, extremely high. And record new retention rates that – approaching 94%, 95%.

So for us, look, we're going to keep investing around how we – in client leadership how we actually bring new

clients in and how we serve them. And serve them more comprehensively. And that's the engine we have control

over. And that's the engine that's working both in a traditional side, very much the traditional side, as well as the

areas like Affinity and Health and Benefits, as well as the net new areas we're investing in beyond that. ................................................................................................................................................................................................................................

David Anthony Styblo Jefferies LLC Q Okay . Very good. If I can move over to the HR side, the Solutions side there, and just dig into a little bit more of

the Outsourcing. That was a little bit more of a standout being particularly soft than it was sort of similar to a prior

y ear.

But can y ou tell us more about the puts and takes there, the retention, the business activity? And then as it relates

to sort of the margins in the segment and earnings, I know y ou said it was consistent with what y ou were looking

for, but a little bit steeper than I guess what we had expected or I had at least expected from the outside. Does any

part of – did y ou expect the repositioning costs and so forth to happen when y ou originally set guidance? Or is this

something sort of new? ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A Well, I would start – let me just start a little bit of top line growth overall, then Christa give a little background on

some of the – on details around the margin opportunities here.

First, we would say our first quarter performance in Outsourcing is exactly consistent with what we left the y ear

with in 2015. And our expectations for 2016 are exactly in line with what we had expected them to be. So there has

really not been a change. There's a bit of noise in the quarter, which we could describe, but it's exactly the same.

By the way , if y ou just think about Outsourcing growth overall and go back to 2013, 2014, and 2015. 2013 is 1%;

2014 is 1%; 2015 is 4%; 2016, it's back to 1%. It 's 4% in 2015 because we were very fortunate to support a very,

very, very large client on a Retiree Exchange opportunity. And that actually skewed 2015. Absent that, the

trajectory looks exactly the same.

And from a growth standpoint for the year, we fee l very, very good about what we're able to do. In particular, some

of the things we're doing with cloud based applications, which has just been exceptionally strong underlying

growth and a stronger pipeline.

So top line growth, we feel very good about where we are, how we started the quarter, and no change in

expectations for 2016. ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A





And then in terms of y our question around, did we expect the charges from reconstructing we took in this quarter?

Absolutely. We've really been very focused on return on capital for a number of y ears now as y ou know. And we

gave guidance in Q4 that we would grow revenue, operating income, and margin for the full y ear 2016 in HR

Solutions. And we're absolutely going to do that.

And we also gave guidance that operating income would pattern similar to 2015 with operating income down in

the first half, up in the second half, and up particularly in Q4. And really what you observe in Q1 is us continuing

to improve return on capital as we manage our portfolio. And we did exit the Recruitment Process Outsourcing

business. And y ou can see the gain of $0.10 in the other income line.

And then transaction and deal related costs in the HR operating income line of $0.06 or $20 million. And that

really had a minus 220 basis point impact on margin in the quarter. Ex that, you can see that the HR Solutions

margin in the quarter would have been 14%.

So y ou can see the underlying improvement in margin in our business, as we con tinue to focus on return on

capital and drive revenue, operating income, and margin growth for the full y ear 2016. ................................................................................................................................................................................................................................

David Anthony Styblo Jefferies LLC Q That's great. And then just one final one on the treasury to come back to the inter -company debt aspect in 2023.

So it's my understanding that there's nothing wrong with having inter-company debt. It's just the matter in which

it's being used to support the business. Is that something y ou guys, one, agree with?

And number two, is there any way to quantify how much debt you have? And to give us a sense of is there any of

that that might be at risk that might not be categorized the way it is as debt right now? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A We would say that we're going to continue to invest in the U.S. And inter-company debt is the way in which it will

be enabled. And so we will continue to use inter-company debt to help us invest and grow our U.S. business over

the coming y ears. So absolutely we think it's a core part of the way we run our business.

And then we absolutely think about inter-company debt similar to third party debt. We manage it in terms of

coverage and leverage ratios as y ou would expect. And we really have a global capital structure that looks li ke any

other foreign based company in a territorial tax sy stem.

So we think that our global capital structure is appropriate for our company. And we feel really comfortable with

our current effective tax rate for the foreseeable future. ................................................................................................................................................................................................................................

David Anthony Styblo Jefferies LLC Q Thanks. ................................................................................................................................................................................................................................

Operator: Thank y ou very much. Our next question comes from the line of Quentin McMillan of KBW. Y ou may






Gregory C. Case President and Chief Executive Officer A Quentin, y ou may be on mute. ................................................................................................................................................................................................................................

Quentin McMillan Keefe, Bruyette & Woods, Inc. Q Sorry about that. Thank y ou so much. Greg, you called out particular strength in the Health business in y our

prepared comments. And I just wanted to sort of drill into the Health and Benefit segment a littl e bit more

specifically. I think y ou said it's sort of a $1 billion business now.

Can y ou give us a little bit more color on in terms of if that's growing at an organic clip sort of above or in line with

what the rest of y our brokerage segment is? May be what the profitability is? And sort of how y ou guys v iew it

currently and going forward? ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A Y eah. I would just literally – what I just was try ing to highlight a little bit was just when y ou think abou t some of

the investments we're making outside of some of the retail brokerage pieces that Sarah was highlighting, that's

one example. That just happens to be Health and Benefits.

What we're very excited about, Quentin, is the overall Health category. And this is a category we've been investing

in substantially for a number of y ears. And you're seeing that literally on the Health and Benefits side, which is $1

billion plus business, growing exceptionally well.

But y ou also see it on what we're doing on the exchange side, a whole range of health solutions. We administer

benefits for 22 million plus Americans, 10 – 11 million of which is really on the Health side. And for us we see this

category as one of the primary areas of investment for Aon over time. And it's been exceptionally positive really

across the board. ................................................................................................................................................................................................................................

Quentin McMillan Keefe, Bruyette & Woods, Inc. Q Great. Thank y ou so much. And then secondly, Christa, if I could just ask a question in terms of the share

repurchase. Obviously y ou guys have been very clear that y ou believe share repurchase is the best and highest

return use of capital.

But is there a way for us to sort of get a better understanding in terms of how y ou look at the return metrics on

share repo versus M&A versus investment in the business? May be just what's most important to y ou? And if y ou

can give us any kind of color or clarity in terms of what the level of return might be in one versus the other? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A So we have been very clear that we manage this in terms of return on capital. The way we measure the return on

capital is on a cash-on-cash metric. And as we think about sort of share repurchase and the return that that

generates, we have a discounted cash flow v iew of Aon over time. And it is a very conservative view of the

company, because we've beaten our own cash flow forecast in each of the last 5 y ears. So this kind of cash flow

really is the value highlighted by the $2.4 billion in free cash flow we'll gener ate in 2017. And then future growth

in cash from there onwards.





And we do absolutely trade off investment in share repurchase, M&A, organic investment, pension, et cetera. And

so that's how we think about it. And in terms of Q1 we did take advantage of a lower share price in the quarter to

do the largest amount of share repurchase we've done, $750 million, since 2008. ................................................................................................................................................................................................................................

Quentin McMillan Keefe, Bruyette & Woods, Inc. Q Great. And I just – one of the parts that I wanted to sort of touch upon in that – and I apologize for not asking it

more clearly – is just the divestiture y ou had in the business as well. Sort of the overall return y ou have. That y ou

mentioned improved the return on invested capital. Is there sort of other businesses that might be dragging t hat

down? And are y ou sort of looking to optimize the entire portfolio that way? Or are – do y ou feel good about

where everything sits currently? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A I mean y ou should think over the coming y ears that we're going to continue to manage our business on a return on

capital basis. We'll continue to invest in the highest return on capital areas. We'll continue to divest or invest less

in the lowest return areas.

So we're going to continue to manage this portfolio over time. And I wouldn't note that it – I'd note that it's

happening across the firm. We had a small divestiture in our Retail Brokerage business in the first quarter too.

And so y ou should just think about us continuing to manage the p ortfolio and to continue the drive return on

invested capital across the entire business. ................................................................................................................................................................................................................................

Quentin McMillan Keefe, Bruyette & Woods, Inc. Q Perfect. Thanks so much for the time. ................................................................................................................................................................................................................................

Operator: Thank y ou very much. Our next question comes from the line of Kai Pan of Morgan Stanley . You may


Kai Pan Morgan Stanley & Co. LLC Q Good morning. Thank y ou so much. It's just a follow-up of Quentin's question, buybacks. So it looks like $7 50

million, a very strong number especially for seasonally weak in the first quarter. I just wonder, does it alter the

pace of y our buybacks throughout the y ear?

And also could – if could y ou talk a little bit more about the source of funding for buy backs? Because – in related

to last 2 y ear, pretty strong, like $2.3 billion in 2014 and $1.6 billion in 2015. ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A Y eah. So, Kai, if we think about buyback, we've absolutely described it as the highest return on capital use of cash

we have today. And therefore, as y ou think about the sources of cash that can contribute to buyback, it's really

about the strong free cash flow growth we're generating from the business each y ear.





And then as we think about leverage, we really think about our current investment grade rating as incredibly

important to us and stay ing within our existing debt-to-EBITDA ratio. But as EBITDA and free cash flow grows, it

really creates an opportunity for us to add additional leverage. [ph] And so there are (37:42) the tw o sources, free

cash flow from operations plus additional leverage as our cash flow and EBITDA grows over time.

And as we think about the balance of the y ear, we're not really giving specific guidance, Kai. But really what I

would say is, as y ou think about the cash we generate over any y ear, we're going to manage the investment of that

cash based on return on capital. ................................................................................................................................................................................................................................

Kai Pan Morgan Stanley & Co. LLC Q Then just follow up at the leverage. If the 2.7 [times] level is the optimum level you want to mai ntain? Or there

y ou want to work it down? Or y ou can even lever up from the current levels? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A Y eah. So as we think about our current investment grade rating, Kai, what we would say is it's really 3 times to 3.5

times on a Moody 's basis, which is really how we manage it internally. And if y ou translate that to a GAAP debt -to-

EBITDA basis, it's 2 times to 2.5 times. So it's slightly above the range that we would like to be in an optimal basi s. ................................................................................................................................................................................................................................

Kai Pan Morgan Stanley & Co. LLC Q Okay . Okay . That's great. And then for Greg is, could you comment broadly about the recent market dislocation as

well? Y our commentary about the rising tension between brokers as well as the carriers. ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A Y eah. From our standpoint as we think about where we are in the market, we're not seeing anything unusual

about what's gone on over time frankly. We've got a set of market partners who we – who are incredibly important

to us, because they're important to our clients. And our focus every day is really maniacally around how we bring

solutions to clients to help drive their business. And candidly, the market partners are central to that. Absolutely

critical.

So we find ourselves actually working more and more with market partners in way s to sort of come up with new

and innovative solutions. And it's really been great.

I mean one of the things we just spent time talking about, something we call Carrier Link, which is actually

enabling us to bring our global capability or global demand to carriers around the world. Carrier Link for example

for Lloy d's but for other carriers as well to actually make it more electronic, to actually make it more efficient.

So for us we see our market partners as extremely central. And just want to continue to reinforce and foster those

relationships on behalf of our clients. ................................................................................................................................................................................................................................

Kai Pan Morgan Stanley & Co. LLC Q That's great. If I may last one is that is there any better way for us to model the other income line? ................................................................................................................................................................................................................................





Christa Davies Chief Financial Officer & Executive Vice President A I mean I would say it is inherently on an underlying basis flat. I think it has been very lumpy, based on sort of the

return on capital moves we've been making around some portfolio repositioning. But we ourselves, when we

budget internally, budget it at $0. ................................................................................................................................................................................................................................

Kai Pan Morgan Stanley & Co. LLC Q Okay . Great. Thank y ou so much for all the answers. ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A Sure. ................................................................................................................................................................................................................................

Operator: Thank y ou very much. Our next question comes from the line of Vinay Misquith of Sterne Agee CRT.

Y ou may now ask y our question. ................................................................................................................................................................................................................................

Vinay Misquith Sterne Agee CRT Q Hi. Good morning. So, the first question is on the Consulting segment. Ch rista, you mentioned that the margins

were 14%. So just wanted to reconfirm that that's the right base for the future. Is the 14% margin the right base?

And also surprised [ph] that margin then creates (40:50) about 80 basis points, when organic growth, [p h] 22%

(40:53). So can y ou help me on that please? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A Sure. So if y ou exclude the one-time charges of $20 million in Q1, then 14% Q1 HR Solutions margin is the right

underly ing margin for the business. That is absolutely right.

And then what I would say is we've been investing a lot in that business. We've been investing in our delegated

investments business, which is growing fantastically. We've now got $85 billion in assets under managem ent.

We've been investing a lot in our BPO SaaS business, which is growing fantastically. We're winning substantial

deals. And the pipeline there is fantastic. And we're investing a lot in our Talent business. We just bought a

business called Modern Survey during the first quarter, and it's fantastic.

So we're feeling really good about the investments we've made in this business. And really what you're observing is

the return on those investments. ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A One of the – look, of I'd add today as well. As y ou think about these investments drive top line, as Christa has just

described. But they also in many respects – not all – but in many respects inject a level of operating leverage into

the business that's actually quite powerful.

So we're growing top line. But we're also able to improve margin at lesser levels of growth, if y ou see where I'm

coming from. And by the way, y ou see that in Risk Solutions and y ou see that in HR Solutions both. So these





investments we've been making over time that are beginning to – y ou're beginning to see show up have both

pieces in the context of that. So it really is an investment at scale, if y ou will, in terms of sort of making a

difference across Aon. ................................................................................................................................................................................................................................

Vinay Misquith Sterne Agee CRT Q That's very helpful. And the sale of the piece of the business in that segment had a 7 % I guess negative impact on

the top line this quarter. Should we expect a similar level for the next few quarters? And part of the guidance I

believe was that y ou would grow y our total revenue. So is it the growth even after the sale of the segment? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A We will continue to grow even after the sale of the segment, y es. And one of the things t hat I would observe that

y ou saw in Q1 2016 as Greg described is we had an unusually strong comparable in Q1 2015 with the enrollments

and the Retiree Exchange of one of our largest clients.

But I think what y ou're seeing in the column – I guess it's page 11 of the earnings release – that minus 7 %, is

really two things going on. It's the exit of the business in Q1 2015, where we exited a business in our pay roll

segment. And then the business that we also exited in Q4 2015. So there's a number of different components going

into this. So it isn't one business. ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A But y ou will see us over time, Vinay, grow this business organically as we described before. And this will

strengthen our ability. We believe this will strengthen our ability to grow organically. And you will see that play

out over the coming quarters. ................................................................................................................................................................................................................................

Vinay Misquith Sterne Agee CRT Q Sure. Fair enough. And just one follow-up on the capital management. Sorry to be [ph] just too depth (43:59). But

the way that I understand that is that just the free cash flow minus the amount you spend on dividends and M&A.

So what number are y ou looking at in terms of M&A for this y ear already?

And also the debt increase, my estimate is that y ou're going to b e up by around $250 million net debt this y ear.

Just wondering if that number makes sense. ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A So we're not going to give specific guidance around M&A in any particular y ear. Because the wa y we run the

process is really around managing return on capital every week and every month to optimize our investments

organically, investments in M&A, investments in share repurchase, et cetera. And so we actually – while we intend

to spend certain amounts on M&A in a y ear, it's going to end up being a different number than – depending on

what the actual opportunities and the returns on those opportunities are.

And then in terms of y our debt question, it's really around, as y ou think about that ratio, 2 times to 2.5 times debt

to EBITDA on a GAAP basis, that's really how we think about managing the company. And so that's the right

leverage level for us going forward.





Vinay Misquith Sterne Agee CRT Q Okay . Thank y ou. ................................................................................................................................................................................................................................

Operator: Thank y ou very much. Our next question comes from the line of Brian Meredith of UBS. Y ou may now

ask y our question. ................................................................................................................................................................................................................................

Brian Robert Meredith UBS Securities LLC Q Y es. Thank y ou. Just a quick one. Greg, can y ou talk about potential implications of Brexit for you guys? ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A Operator, y ou just broke – oh. Y eah. Sorry about that. Got it.

Brexit. Listen, step back overall to top of v iew. A topic of conversation now daily with clients around the world.

Obviously as y ou get into Europe and the U.K., more frequently than that. As we think about – and we really think

about this, Brian, first and foremost for our clients. And we see there's lots of way s it could – that if it ends up

happening could impact them and their operations of their businesses over time. And that's really what we're most

v igilant on.

For Aon we actually feel very comfortable. We'll help them manage through it if they have to endure that. And if

not, we feel comfortable with that as well. So there's not as much impact on Aon overall.

But from our standpoint feel like that there is a set of opportunities here that come out of disruption. If that's the

case and there's a set of items, we're going to help our clients to address it. But for us it really – that's how we'd

shape it out. ................................................................................................................................................................................................................................

Brian Robert Meredith UBS Securities LLC Q Great. ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A And, Brian, the other thing we'd say is any time there's a regulatory change, it means y ou've got to help clients

through that. And so helping clients navigate business interruption insurance, when y ou've got to separate out the

U.K. from Continental Europe, or pension plans, which across EMEA, and y ou've got to separate them out. There's

a lot of activity that would be generated for us.

And the other thing I would say is we have substantial business in the U.K., where we have the U.S. dollar revenue

and a pound expense base. And so to the extent that the pound becomes weaker because of this, it actually

benefits us. ................................................................................................................................................................................................................................

Brian Robert Meredith UBS Securities LLC Q





Thanks. That's helpful. And then last question. I wonder if y ou could give us a little bit of a look at what's the

pipeline look right now for the Corporate Exchange business? ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A We actually feel really good about the continuation of this, Brian, as I said before. First of all, for us, first and

foremost, it's really the Health category. Absolutely really like the position we're in and how that's co ntinuing to

grow. And on the exchange side our clients continue to experience very, very good results. A large percentage of

our clients actually had rate decreases in the last cy cle overall. Satisfaction continues to be very high. And the

pipeline is very, very strong.

We know it takes time for these things to evolve. And you're seeing that play out on the Health Exchange side. But

it really is part of overall Health Solution, which is actually quite, quite strong. ................................................................................................................................................................................................................................

Brian Robert Meredith UBS Securities LLC Q Great. Thanks for the answers. ................................................................................................................................................................................................................................

Operator: Thank y ou very much. Our next question comes from the line of Charles Sebaski of BMO Capital

Markets. Y ou may now ask y our question. ................................................................................................................................................................................................................................

Charles Joseph Sebaski BMO Capital Markets (United States) Q Good morning. Thank y ou. ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A Hey , Charles. ................................................................................................................................................................................................................................

Charles Joseph Sebaski BMO Capital Markets (United States) Q Just curious, Greg, about growth in the Risk business. And not for this quarter per se, but I guess over the next

couple of y ears. Obviously you guys don't give – expect to give guidance on M&A. And y ou haven't done much in

this space over the last few y ears, as y ou had a really strong cash flow growth.

But if looking forward over the next couple of y ears, does that math change? The margins on that business have

increased incredibly well. A lot of the restructuring and what not has been taken out. And y ou guys have one of the

best toolboxes in the industry. Wondering – I guess I just sort of think that the growth in that business should

even be better. While 4% organic is really good in this market, I guess I at some level think that the total line of

that business would be even more than that. And maybe should be over the next few y ears. ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A Listen, we agree in terms of sort of overall opportunity. If y ou step back and think about the journey that Aon has

been on as we've shaped and built our firm, we would say this is an unfinished business for us. This is – while

we've made great progress, and it's really a credit to my Aon colleagues around the world with the progress they've





made over the last number of y ears, the platform we have and given the current state of the – state of where our

clients are with unprecedented risk spacing, traditional and non-traditional. Think about global warming,

pandemic, cyber, terrorism, all the different pieces. The challenges on Health, which are unprecedented literally in

the U.S. and around the world, the challenges on retirement.

These set of issues for us represent what we believe is an incredible set of demands for clients, needs for clients.

And our platforms are actually very, very well positioned against these mega, really global needs from a client

standpoint.

And as I said at the beginning to Sarah's question, the ways we're helping clients are traditional brokerage, all the

different pieces around that. There are areas that are outside that, as we continue to evolve and develop. By the

way , that's in HR Solutions and in Risk Solutions. And then in areas like data and analy tics, which frankly are

opening up an entire new v ista for us that we've invested in. This is not flavor of the month for us. This has been a

7 -year set of investments, in which we're investing $300 million, $400 million, $500 million over time around on

data and analy tics and insight.

So for us we see this as a tremendous opportunity. And it's not just top line. It really is around operating

performance improvement, which is why again we look at 2016, 2017, 2018 as just a continuation. This is not new

news. A continuation of building Aon, strengthening Aon on behalf of clients. And the record shows we're making

progress against that with more opportunity to come. ................................................................................................................................................................................................................................

Charles Joseph Sebaski BMO Capital Markets (United States) Q I guess what I was try ing to get to is even towards your goals, right, if y ou look at the long term operating margin

in Risk, y ou're kind of already half the way there, if I look back to when y ou laid out y our cash flow doubling plan

in 2012. And as y ou encroach on that, if I think of 2016 or 2017 cash flow doubling, I guess does the math

conceptually change where M&A might become more attractive than share buyback? Because the rapidness of

improvement of the core business has been – so much has already been done. ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A Y eah. Well, listen. Again remember back to what Christa described in terms of our overall framework. We have a

pretty maniacal framework around return on invested capital. And what I would highlight for you is, while we've

done a lot of buy back in the last 10 y ears, we've also done $7 billion, $8 billion worth of M&A. So we've done a

tremendous amount of M&A. We've done a tremendous amount of buyback. And over a 10 -year period, we've

improved operating income 10% per y ear over that period of time and grown EPS about 16% per y ear over that

period of time.

And so we're going to keep looking at these tradeoffs. And we – as we make our cash flow goal in 2017 of $2.4

billion and continue to build on it, as Christa described, our capacity to invest back in the business organically,

M&A, buy back, we have all these at our disposal as we build the firm. And that's why candidly we're very – we're

excited about where we are on the journey and what the p ossibilities are going forward. And we see more

possibilities going forward than we do historically in terms of what the opportunities are going to look like. ................................................................................................................................................................................................................................

Charles Joseph Sebaski BMO Capital Markets (United States) Q I appreciate the answers. Thank y ou very much. ................................................................................................................................................................................................................................





Operator: Thank y ou very much. And our last question comes from the line of Josh Shanker of Deutsche Bank.

Y ou may now ask y our question. ................................................................................................................................................................................................................................

Josh D. Shanker Deutsche Bank Securities, Inc. Q Y eah. Thank y ou for taking my question. Obviously Sarah had some interesting questions regarding the inter-

company debt and the 2023 date. When I look at y our balance sheet by I guess company segment, it seems to be

that half the debt of the $19 billion facility seems to be in current liabilities and hal f of it seems to be in long term

liabilities. How does that work? And in terms of what y ou're reading of the new proposals are, will those current

liabilities be able to be rolled over for another year? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A Y eah. But, Josh, as y ou look at our balance sheet, y ou can see that we have a normal intercompany trade

receivables and pay ables, as all companies do who operate in more than one country. And it's split into short term

and long term. And so that is a normal part of doing business.

And as we said earlier to this question, we feel really comfortable with our current effective tax rate for the

foreseeable future. Because as we think about the new proposed regulations, we're going to continue to invest in

the U.S. v ia inter-company debt, because inter-company debt is permissible under the new proposed regulations. ................................................................................................................................................................................................................................

Josh D. Shanker Deutsche Bank Securities, Inc. Q Well, and will that – I guess that $9 billion of current liability debt inter-company be able to be rolled over for

another y ear? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A Ry an (sic) [Josh] (54:13), there's a bunch of normal – it's not inter-company debt. That is normal trade

receivables and pay ables. ................................................................................................................................................................................................................................

Josh D. Shanker Deutsche Bank Securities, Inc. Q Okay . Inter-company – I guess – so when I look at it, it's hard to say . I actually see the – those $19 billion, I guess

it looks like debt. If it's not really debt, how does that work exactly? ................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President A So we have normal trade receivables and payables, as y ou would expect in any global company. And so the

majority of that is not inter-company debt. ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A I think the punch line, by the way, if y ou step back and think about sort of the trades, because we've gotten a few

questions here on the balance sheet with more interest than we've ever had before. If y ou step back and think





about the tax rate that I think y ou're getting back to. And Christa's point that literally we feel very comfortable

with where it is.

By the way , we feel very comfortable with where it is and for the foreseeable future. That's past 2021, 2022, 2023,

so past that time period. So y ou take all the debt pieces off the table completely and ask, how comfortable are we

with our current tax rate? We feel very comfortable with it.

It will evolve over time back and forth. But we feel very comfortable. And nothing that's hap pened the last 6

months or the last 6 weeks has changed that point of v iew in the least bit. So just – I think that's the governing

thoughts. And so you might want to take away from where we are. ................................................................................................................................................................................................................................

Josh D. Shanker Deutsche Bank Securities, Inc. Q Well, I think that's very reasonable. Thanks, Greg. ................................................................................................................................................................................................................................

Gregory C. Case President and Chief Executive Officer A Sure. ................................................................................................................................................................................................................................

Operator: Thank y ou very much. I would now like to the turn call back over to Greg Case for closing remarks. ................................................................................................................................................................................................................................


I just wanted to say thanks, everybody, for joining today. We really appreciate it. And I appreciate y our interest in

Aon and look forward to the next call. Thanks very much. ................................................................................................................................................................................................................................

Operator: And that concludes today's conference. Thank y ou all for participating. Y ou may now disconnect.





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