AON(AON) - 2023 Q2 - Quarterly Report

Revenue Growth and Performance - Revenue increased by $194 million, or 7$3.2 billion in Q2 2023, driven by 6% organic revenue growth and a 2% favorable impact from fiduciary investment income, partially offset by a 1% unfavorable impact from foreign currency translation[119] - Organic revenue growth was 6% in Q2 2023, driven by strong retention, renewal book management, and net new business generation[120] - Commercial Risk Solutions revenue increased by $82 million, or 5$1.8 billion in Q2 2023, with 5% organic revenue growth[127] - Reinsurance Solutions revenue increased by $70 million, or 13$607 million in Q2 2023, with 9% organic revenue growth[128] - Health Solutions revenue increased by $33 million, or 8$447 million in Q2 2023, with 10% organic revenue growth[129] - Wealth Solutions revenue increased by $9 million, or 3$352 million in Q2 2023, with 2% organic revenue growth[130] - Organic revenue growth for Q2 2023 was 6%, with Commercial Risk Solutions growing 5%, Reinsurance Solutions growing 9%, Health Solutions growing 10%, and Wealth Solutions growing 2%[148] Operating Margin and Income - Operating margin increased to 26.5% in Q2 2023 from 23.5% in the prior year period, primarily driven by 6% organic revenue growth[119] - Adjusted operating margin was 27.3% in Q2 2023, up from 26.2% in the prior year period, reflecting organic revenue growth and increased fiduciary investment income[120] - Adjusted operating margin for Q2 2023 was 27.3%, up from 26.2% in Q2 2022, driven by higher revenue and lower legal settlement expenses[152] - Operating income for the three months ended June 30, 2023, was $842 million under U.S. GAAP, with adjustments of$25 million, resulting in a non-GAAP adjusted operating income of $867 million[155] Net Income and Earnings Per Share - Net income increased by$61 million, or 12%, to $575 million in Q2 2023 compared to the prior year period[119] - Diluted earnings per share was$2.71 in Q2 2023, up from $2.33 in the prior year period[119] - Net income attributable to Aon shareholders increased to$560 million ($2.71 per diluted share) in Q2 2023 from$501 million ($2.33 per diluted share) in Q2 2022[145] - Net income attributable to Aon shareholders for the six months ended June 30, 2023, was$1,610 million under U.S. GAAP, with adjustments of $30 million, resulting in a non-GAAP adjusted net income of$1,640 million[158] - Diluted net income per share attributable to Aon shareholders for the six months ended June 30, 2023, was $7.79 under U.S. GAAP, with adjustments of$0.14, resulting in a non-GAAP adjusted diluted EPS of $7.93[158] Expenses and Cost Management - Depreciation of fixed assets decreased by$1 million (3%) in Q2 2023 compared to Q2 2022, and by $1 million (1$3 million (6%) for the first six months of 2023 compared to the same period in 2022[136] - Other general expense decreased by $71 million (18$58 million legal settlement charge in the prior period[137] - Interest expense increased by $28 million to$130 million in Q2 2023 compared to Q2 2022, driven by higher total debt and interest rates, including an $11 million non-recurring charge[139] - Interest expense for the six months ended June 30, 2023, was$241 million, consistent with the same period in 2022[158] Cash Flow and Liquidity - Free cash flow for the six months ended June 30, 2023, was $986 million, compared to$1,063 million for the same period in 2022[162] - Operating cash flow for the six months ended June 30, 2023 remained flat at $1.1 billion compared to the same period in 2022[173] - Pension contributions decreased to$31 million for the six months ended June 30, 2023, down from $40 million in the prior year period[174] - Cash flow from investing activities increased by$253 million to $128 million for the six months ended June 30, 2023, compared to$125 million used in the prior year period[175] - Capital expenditures increased to $145 million for the six months ended June 30, 2023, up from$68 million in the prior year period[178] Debt and Financial Instruments - Total debt increased by $0.6 billion to$11.3 billion at June 30, 2023 compared to December 31, 2022[183] - The company has $1.8 billion in available credit from two primary committed credit facilities[187] - Aon Global Limited issued Senior Notes with various interest rates and maturity dates, including 4.00$0.05 and $0.19 on net income per diluted share during the three and six months ended June 30, 2023, respectively[164] - Foreign exchange rate fluctuations had an unfavorable impact of$0.19 on diluted net income per share for the six months ended June 30, 2023[210] Fiduciary Assets and Investments - Fiduciary assets at June 30, 2023, included cash and cash equivalents of $7.5 billion and fiduciary receivables of$10.7 billion[169] - Total cash and cash equivalents and funds held on behalf of clients increased by $1.4 billion in 2023, reaching$19.345 billion[171] - Short-term investments decreased by $252 million compared to December 31, 2022[176] Share Repurchases and Distributable Profits - The company repurchased 1.7 million shares at an average price of$323.96 per share during the six months ended June 30, 2023[181] - Distributable profits exceeded $29.3 billion as of June 30, 2023, up from$29.0 billion at December 31, 2022[186] Credit Ratings and Obligations - Moody's Investor Services upgraded the company's outlook to Positive from Stable on June 26, 2023[191] - Aon plc's revised Obligor group reported a net loss of $664 million for the six months ended June 30, 2023[203] - Receivables due from non-guarantor subsidiaries increased to$3,772 million as of June 30, 2023, compared to $1,300 million as of December 31, 2022[204] - Payables to non-guarantor subsidiaries decreased to$14,840 million as of June 30, 2023, from $16,171 million as of December 31, 2022[204] - Aon plc hedged approximately 45% of its U.K. subsidiaries' expected exposures to U.S. dollar, euro, and Japanese yen transactions for 2023 and 2024[208]