10-Feb-2017 Aon Plcs2.q4cdn.com/545627090/files/doc_financials/2016/... · Q4 2016 Earnings Call Corrected Transcript 10-Feb-2017 ... President, Chief Executive Officer & Executive

Corrected Transcript

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10-Feb-2017

Aon Plc (AON)

Q4 2016 Earnings Call

Aon Plc (AON) Q4 2016 Earnings Call

Corrected Transcript 10-Feb-2017


2 Copyright © 2001-2017 FactSet CallStreet, LLC

CORPORATE PARTICIPANTS

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc

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

OTHER PARTICIPANTS

David Anthony Styblo Analyst, Jefferies LLC

Adam Klauber Analyst, William Blair & Co. LLC

Quentin McMillan Analyst, Keefe, Bruyette & Woods, Inc.

Sarah E. DeWitt Analyst, JPMorgan Securities LLC

Kai Pan Analyst, Morgan Stanley & Co. LLC

Jay Arman Cohen Analyst, Bank of America Merrill Lynch

Jon Paul Newsome Analyst, Sandler O'Neill & Partners LP

Joshua D. Shanker Analyst, Deutsche Bank Securities, Inc.

Charles Joseph Sebaski Analyst, BMO Capital Markets (United States)

Ryan J. Tunis Analyst, Credit Suisse Securities (USA) LLC

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

MANAGEMENT DISCUSSION SECTION

Operator: Good morning and thank you for holding. Welcome to Aon Plc's fourth quarter and full-year 2016

earnings conference call. At this time, all parties will be in a listen-only mode until the question-and-answer

portion of today's call. If anyone has any objections, you may disconnect your 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 Litigation Reform Act of 1995. Such statements are subject to certain risks and

uncertainties that could cause actual results to differ materially from historical results or those anticipated.

Information concerning risk factors that could cause such differences are described in the press release covering

our fourth quarter and full-year 2016 results as well as having been posted on our website.

Now it's my pleasure to turn the call over to Greg Case, President and CEO of Aon Plc. Sir, you may begin. ......................................................................................................................................................................................................................................................


Thanks very much and good morning, everyone. Welcome to our fourth quarter and full-year 2016 conference

call. Joining me today is our CFO, Christa Davies. I would note that there are slides available on our website for

you 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 review. First is our performance against key metrics we communicate to shareholders. Second is overall

organic growth performance, including continued areas of strategic investment and this morning's important

subsequent announcement of a definitive agreement to sell certain outsourcing assets.

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 year: grow organically; expand margins; increase earnings

per share; and deliver free cash flow growth.

Turning to slide 3, in the fourth quarter, organic revenue growth was 3% overall, with growth across both

segments, highlighted by strong double-digit growth in our healthcare exchange business. Operating margin

increased 210 basis points, reflecting significant operational improvement in both segments. EPS increased 13%

to $2.56, primarily reflecting strong operating performance, effective capital management, and a lower effective

tax rate.

If we turn to the full year, organic revenue growth was 3% overall, including growth across every major business.

Operating margin increased 80 basis points, driven by strong operating performance and record margin results in

Risk Solutions and HR Solutions. EPS increased 7% to $6.59. And finally, free cash flow increased 22% to a

record $2.1 billion.

Overall, we delivered positive performance across each of our key metrics for both the quarter and the full year.

Substantial investments in high-growth areas, improved operational performance, and record free cash flow

generation continue to position the firm for increased shareholder value creation over the long term.

Turning to slide 4, on the second topic of growth in 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% overall, driven by growth

across all major businesses. As we've discussed previously, we're driving a set of initiatives to maximize return on

invested capital and making strategic investments to strengthen underlying performance and position our Risk

Solutions segment for long-term growth and improved operating leverage.

We continue to drive improvement in client leadership, with management of our renewal book portfolio through a

proactive client partnership we call Aon Client Promise, which is driving retention rates of more than 90% on

average across retail brokerage, including: record retention rates in the U.S. and EMEA; new business generation

of more than $360 million in the fourth quarter across retail brokerage, including double-digit growth in EMEA and

the Pacific regions as well as another consecutive quarter of record new business in U.S. retail; and 23

consecutive quarters of positive net new business in core treaty reinsurance.

In addition, we're increasing operating leverage from our significant investments in innovative technology and data

and analytics, including Aon Inpoint, a growing business where we help carriers become more competitive and

operationally efficient by integrating our market-leading data and analytics with strategic consulting and access to

Aon's unmatched expertise. This includes the Risk Insight Platform, which now captures 3.4 million trades and

nearly $170 billion of bound premium, as well as our reinsurer dashboard, ReView. Another example is our Aon

broking initiative to better match client need with insurer risk appetite, including our ability to identify structured

portfolio solutions. And finally, we're investing significantly in high-growth businesses, including cyber, Health and

Benefits, and in Affinity.





Most recently in the fourth quarter, we announced the acquisition of Admix, a leading Health and Benefits

brokerage and solutions firm in Brazil, enabling Aon to expand its capabilities throughout Latin America.

Additionally, we completed the acquisition of Stroz Friedberg, a global leader in cyber security and cyber

remediation as well earlier in the year. Finally, another important example is Univers, a leading elective benefits

enrollment services firm in our Health and Benefits brokerage business.

Reflecting on our individual businesses within Risk Solutions, in the Americas, organic revenue growth was 3%

against a strong comparable of 6% in the prior-year quarter. Exposures continue to be modestly positive across

the region while the impact from pricing was negative, resulting in a modestly negative market impact overall. We

saw strong growth in Affinity, with continued strength in the Consumer Solutions group. Results also reflect strong

growth in Latin America, driven by effective capital management of the renewal book portfolio as well as

continued record new business generation in U.S. retail.

In international, organic revenue growth was 2% against a strong comparable of 6% in the prior-year quarter. The

impact from pricing remains modestly negative on average, driven by fragile market conditions in various

countries across Asia and Europe, while exposures are modestly improving, resulting in a relatively flat market

impact overall.

We saw growth across every major region, including the Pacific, Asia, and EMEA. Results were highlighted by

double-digit growth in the Health and Benefits brokerage business across both Asia and EMEA regions. We also

saw overall strength across the Pacific in both New Zealand and Australia, driven by strong new business

generation.

In Reinsurance, organic revenue growth was 2%, similar to the prior-year quarter. This marks the fifth consecutive

quarter of positive growth in Reinsurance. For the full year, the Reinsurance business delivered organic revenue

growth of 1%, reflecting a return to growth in 2016, as anticipated. Results in the quarter were primarily driven by

continued net new business generation in treaty and growth in facultative placements as well as growth in new

products such as ReView. Results were partially offset by an unfavorable market impact globally and a modest

decline in capital markets transactions.

Overall, market conditions remained similar to prior discussions. Price declines continue to moderate and ceding

demand continues to increase against record levels of capital. Against that backdrop, Aon's leading data and

analytics have been instrumental in driving innovative capital solutions across new markets, including U.S.

mortgage credit risk, life and annuity risk, and other emerging risks such as cyber liability.

Overall across Risk Solutions, our strategic investments in high-growth areas and in data and analytics continue

to drive new business generation, strong retention rates, and increased returns across the portfolio, positioning

the Risk Solutions segment for continued long-term growth.

Before turning to HR Solutions, I'd like to wish my colleague and friend Steve McGill, our former Group President

and Chairman of HR Solutions, well in the next chapter of his career. Steve has spent nearly 40 years in the

industry and has been a valued leader at Aon. Going forward, our Global Risk Solutions business will be led by

two exceptional colleagues, Michael O'Connor as CEO of Aon Risk Solutions and Eric Andersen as the CEO of

Aon Benfield.

Now turning to HR Solutions, organic revenue growth was 5% overall, driven by solid growth across high-demand

areas where we continue to invest in innovative solutions and client serving capabilities. These investments





reflect Aon's leadership and in-depth understanding of market trends, including solutions to help plan sponsors

both manage pension risk and drive better retirement outcomes for their employees.

A double-digit area of growth has been delegated investment consulting, where assets under management have

grown from $10 billion to $90 billion in five years. We expect continued global growth in this area as sponsors are

faced with regulatory changes and increasingly complex global markets; in addition, continued investments to

strengthen our industry-leading portfolio of health solutions covering the full range of benefit strategies, client size,

and funding choices, including our suite of private healthcare exchanges.

We saw strong double-digit growth across our exchange solutions, including increased enrollments across both

our active and retiree platforms and significantly improved profitability for the full year. And finally, we're investing

in data analytics across our health and retirement investment practices to provide superior advice and drive better

outcomes for our clients and our clients' employees.

Reflecting on the individual businesses within HR Solutions, in Outsourcing, organic revenue growth was 8%

compared to 4% in the prior-year quarter. Results reflect strong double-digit growth in our healthcare exchange

business, driven by an increase in enrollments across the platform as well as certain project-related work. We

also saw continued growth in HR BPO, driven by new client wins in cloud-based solutions.

In Consulting Services, organic revenue growth was flat. We saw continued strong growth in global retirement

consulting, specifically for delegated investments in Consulting Services, reflecting an increasing demand for

Aon's tailored solutions and independent advice. We also saw growth in Communications Consulting from

continued momentum of employers communicating to employees on financial and health wellness. Results in the

quarter were offset by a decline in project-related work than the prior-year quarter as well as a modest decline in

our talent and compensation consulting business.

In summary of our performance, we end 2016 in a position of strength. We delivered growth across both

segments, invested heavily in high-growth areas like cyber risk, advisory, and health and benefits, achieved

record operating margins across the firm, and generated a record $2.1 billion of free cash flow for the year.

Now I'd like to turn to slide 6 of the presentation to discuss another exciting step in our journey. This morning we

announced a definitive agreement to sell our Benefits Administration and HR Business Process Outsourcing

assets. We believe this transaction reflects a continuation of our proven strategy and creates a catalyst for the

next step of significant shareholder value creation.

For over a decade, we've been on a mission to strengthen our firm: a mission of increased focus on providing

advice and solutions; a mission enabled by proprietary data and analytics; a mission to be the preeminent

professional services firm in the world focused on risk, retirement, and health.

We've taken strategic actions from virtually every angle to achieve this mission, beginning with the dispositions of

lower-margin capital-intensive insurance underwriting businesses and risk, reallocating capital from balance

sheets to high-value solutions, strengthening our capabilities to serve global clients locally, and investing to build

a set of unmatched data and analytics, including $85 billion of annual risk premiums supported by our Inpoint and

ReView technology, $30 billion for the annual premium in health with a full set of health solutions, $4 trillion of

pension assets under independent advisory with $90 billion under delegation.

We believe in our mission and the progress has been positive, with 6% annual revenue growth and 16% annual

growth in total shareholder returns over the last 10 years, but we are not standing still. The decision to sell these





outsourcing assets is another exciting step against our mission, creating a win-win situation for our clients and for

Aon: for our outsourcing clients, a partner in Blackstone, who will set the global standard for operations

excellence and technology innovation in this area; and for Aon, another step to sharpen our focus on advice and

solutions.

We are reallocating resources from capital-intensive outsourcing assets to accelerating investment in high-growth

high-margin areas across retirement and health, including such areas as delegated investment consulting, health

and benefits brokerage, and private healthcare exchanges. Overall, we're excited about the step and what it

means for Aon, for our clients, and for our shareholders as the next step of significant shareholder value creation.

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

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc

Thank you, Greg, and good morning, everyone.

As Greg noted, this transaction further strengthens the firm's advisory capability and accelerates innovation

through effective allocation of capital to maximize client and shareholder value.

The pending sale of the Benefits Administration and HR BPO assets is expected to generate gross cash proceeds

up to $4.8 billion, including $4.3 billion of cash consideration at closing and an additional consideration up to $500

million based on performance. Total after-tax cash proceeds are expected to be $3 billion. This reflects a multiple

of approximately 12.1 times 2016 EBITDA of $396 million, which includes intercompany corporate allocations and

other expense adjustments.

We believe this transaction reflects a continuation of our proven strategy and is further evidence of our disciplined

capital management approach to drive improved return on capital, which has increased each year since 2010, up

540 basis points to 17.1% in 2016. Driven by effective capital deployment of free cash flow and transaction

proceeds, savings from operating model integration, and a lower effective tax rate, we expect the transaction to

be accretive to 2018 FactSet consensus analyst estimates of $7.97 per share.

Further, we also announced that part of the proceeds from this transaction will be allocated to an increase in our

previously authorized share repurchase program. The repurchase program will increase by $5 billion, bringing the

total amount currently authorized for repurchase to approximately $7.7 billion as of February 10, 2017.

Lastly, we expect the transaction to close by the end of the second quarter 2017, which results in the assets being

placed into discontinued operations for the first quarter of 2017. For modeling the impact of divested operating

income and stranded costs going forward, we would eliminate $323 million of adjusted operating income while

adding $91 million of corporate allocations and other expense adjustments. These two adjustments we estimate

would reduce your future expectations by $414 million on an annual basis before any other adjustments for timing

of close and potential actions we may take to improve operational performance.

Now let me turn to the financial results for the quarter and year on page 8 of the presentation. Our results in the

quarter reflect growth, operational improvement in both segments, strong double-digit free cash flow growth to a

record $2.1 billion for the year, and effective capital management. Further, we deployed roughly $2.5 billion of

capital in 2016 through share repurchase, attractive acquisitions in high-growth businesses, and dividends.





Our core EPS performance excluding certain items increased 13% to $2.56 per share for the fourth quarter

compared to $2.27 in the prior-year quarter. Certain items that were adjusted for in the core EPS performance

and highlighted in the schedules on page 13 in the press release include non-cash intangible asset amortization

and non-cash expenses related to certain pension settlements, as well as transaction costs related to the sale of

the outsourcing assets.

Also included in the results was a $0.03 per share favorable impact related to foreign currency translation, due

primarily to U.S. dollar strength against the pound. For the full year, foreign currency translation had a $0.01

unfavorable impact on EPS. If currencies were to remain stable at today's rates, we would expect foreign currency

translation to have a modest unfavorable impact in the first quarter of 2017.

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

growth was 3%. Operating income increased 9%, and operating margin increased 190 basis points to 27.6%

compared to the prior-year quarter. Operating margin improvement of 190 basis points reflects solid organic

revenue growth across every major business and 100 basis points of favorable impact from foreign currency

translation, partially offset by $6 million or minus 30 basis points of transaction-related costs for acquisitions

previously mentioned.

For the full year, operating income increased 5% and operating margin improved 90 basis points to a record

24.5%, driven by return on our investments across the portfolio and a 60 basis point favorable impact from foreign

currency translation.

Turning to the HR Solutions segment, organic revenue growth was 5%. Operating income increased 7%, and

operating margin increased 210 basis points to 28.3% compared to the prior-year quarter. Operating performance

in the fourth quarter primarily reflects strong growth in our high-demand investment areas and expense discipline

as we take steps to reduce certain costs related to previous dispositions. Results were modestly offset by an $8

million or minus 10 basis point unfavorable impact from foreign currency translation.

For the full year, operating income on a reported basis decreased 1% and operating margin increased 30 basis

points to a record 18.4%. Driven by specific decisions to dispose of certain businesses at the beginning of 2016,

we believe it's helpful to look at the underlying operational improvement of the platform. Adjusting for the impact of

approximately $29 million of lost operating income and stranded costs related to previous dispositions and $20

million of unfavorable foreign currency translation, underlying operating income would have increased 5%, with

operating margins increasing 120 basis points to 19.6% for the full year.

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

decreased $4 million to $57 million. Interest income was $3 million compared to $4 million in the prior-year

quarter. Interest expense increased to $2 million to $70 million due to an increase in total debt outstanding. Other

income of $9 million primarily includes gains due to the favorable impact of exchange rates on the

remeasurements of assets and liabilities in non-functional currencies. The prior-year quarter primarily included a

gain on the sale of our Asset Management business and Outsourcing in HR Solutions. Going forward, we expect

a run rate of approximately $45 million per quarter of unallocated expense, $3 million per quarter of interest

income, and $70 million per quarter of interest expense.

Turning to taxes, the adjusted effective tax rate on net income from continuing operations, excluding the

applicable tax impact associated with non-cash pension settlements, decreased to 14.9% compared to 17.9% in

the prior-year quarter. Changes in the geographic distribution of income and certain favorable discrete tax

adjustments impacted the adjusted effective tax rate in the current quarter and for the full year against our





underlying operating tax rate of approximately 19%. The prior-year quarter adjusted effective tax rate excluded

the applicable tax impact associated with expenses related to legacy litigation. As discussed on prior calls,

discrete tax adjustments can be favorable or unfavorable in any given period.

Lastly, average diluted shares outstanding decreased 4% to 268.3 million in the fourth quarter compared to 279.3

million in the prior-year quarter, as we effectively allocate capital. The company repurchased 1.8 million Class A

ordinary shares for approximately $200 million in the fourth quarter. Actual shares outstanding on December 31

were 262 million, and there are approximately 5 million additional dilutive equivalents. Estimated Q1 2017

beginning diluted share count is approximately 267 million, subject to share price movement, share issuance, and

share repurchase.

As mentioned previously, the company announced an increase in its previously authorized share repurchase

program this morning. The repurchase program will increase by $5 billion, bringing the total amount currently

authorized for repurchase to approximately $7.7 billion as of February 10, 2017.

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

31, 2016, cash and short-term investments decreased to $721 million. Total debt outstanding was approximately

$6.2 billion. Total debt to EBITDA on a GAAP basis was 2.5 times. While debt to EBITDA will be initially elevated

as a result of this transaction, we expect to return back to the 2.5 area in 2018.

Cash flow from operations for the full year increased 16% or $317 million to a record $2.3 billion, primarily driven

by an increase in underlying net income after adjusting for certain non-cash pension expenses, lower cash

pension contributions, and lower cash taxes. We also saw underlying working capital improvement, reflected by a

2-day decrease in days sales outstanding over the trailing 12-month period.

Free cash flow, as defined by cash flow from operations less CapEx, increased 22% or $385 million to a record

$2.1 billion, driven by strong growth in cash flow from operations and a $68 million decrease in CapEx. In 2016,

we delivered strong double-digit free cash flow growth, reflecting momentum as we focus on converting each

dollar of revenue into the highest free cash flow yield.

Turning to the next slide to discuss our free cash flow growth over the long term, we value the firm based on free

cash flow and allocate capital to maximize free cash flow returns. We've made substantial progress since

introducing free cash flow as a key financial metric in 2012 and continued to take significant steps to position the

firm for the double-digit free cash flow growth over the long term.

There are three primary areas that we expect to contribute to incremental free cash flow growth going forward.

The first is continued operational performance, driven by organic revenue growth and margin expansion. The

second is working capital improvements as we focus on closing the gap between receivables and payables.

We've made substantial progress in this area over the last five years, and working capital provided a positive

inflow as part of our record free cash flow generation in 2016. We expect working capital to contribute to free cash

flow by over $500 million over the long term. And third is lower cash tax payments, reflecting a lower effective tax

rate rates over time.

In summary, we delivered positive performance across each of our four key metrics for the quarter and full year.

We're heading into 2017 in a position of strength, driven by our substantial investments in high-growth areas, our

record free cash flow generation, and continued discipline around capital deployment opportunities. We've

increased return on invested capital from 11.7% in 2010 to over 17% in 2016. The transaction announced this





morning will further enable the firm to improve return on invested capital, accelerate free cash flow growth, and

create the next wave of shareholder value creation.

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

QUESTION AND ANSWER SECTION

Operator: Thank you. [Operator Instructions] We now have questions on queue. The first one is coming from the

line of Dave Styblo from Jefferies. Sir, your line is now open. ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A I think you might be on mute, Dave. ......................................................................................................................................................................................................................................................

David Anthony Styblo Analyst, Jefferies LLC Q Here we go. Can you guys hear me now? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A Yes. ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A We can. ......................................................................................................................................................................................................................................................

David Anthony Styblo Analyst, Jefferies LLC Q Okay, great. Thanks for the questions. I think I'll start with a qualitative question just about the transaction here

and understanding maybe the history of when you put these assets together. And I think the rationale back then

was cost synergies and diversification and so forth. And then over time as we fast-forwarded, can you just explain

a little bit more about the rationale now? As you're divesting these assets, is it more so because it's maybe one of

your lower margin business lines and you see better opportunities for the ROIC as you look to deploy some of

that cash organically or inorganically internally to some of the other areas that you mentioned? Maybe you could

flesh out some of those opportunities that you're looking at. And then I've got a second question on just the

accretion that I'll hold for you in a second. ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A Sure, and that's a great place to start, Dave. For us, we see this as very much a natural progression. And really

you go back more than a decade as you think about what we've tried to do, same strategy, same approach,

focused on preeminent firm in the world focused on risk, retirement, health, all things around that, talent, capital,

the things that come with that, really risk, retirement, and health.





You've seen us make substantial investments all along the way, particularly focused around expertise and

excellence in advice and solutions. And where we can underpin it by data and analytics, we've doubled down and

invested more and more against that. That has served us exceptionally well. And we love that strategy, we

continue to double down and invest in that strategy.

The addition of Hewitt to the Aon family in 2010 was a great, great catalyst for us that reinforced our efforts

around retirement and health among other areas, and we've really incorporated those capabilities and continued

to strengthen and build Aon. And all you're seeing today is yet another opportunity to step back and say where is

the best place for us to put capital, how can we do it most effectively to reinforce the same strategy, preeminent

firm in the world focused on risk, retirement, and health, particularly around advice, solutions, underpinned by

data and analytics, and that's exactly what we're able to do today as we announced this divestiture.

And what's great about this is we're taking our outsourcing assets, partnering with Blackstone. Our clients are

going to be exceptionally well-served with Blackstone and the innovation they can bring to the table. And we are

going to then now be able to innovate more and more focused on our core strategy around risk, retirement, and

health on the topics of advice, solutions, and data. So for us, this is just a great outcome and represents a

continuation of a strategy we've been on for a long time that served us quite well. ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A And, Dave, the other thing I would add just to your question on return on capital is it's absolutely driven by our

return on capital strategy. This is a lower revenue growth, lower margin business for us. You can see that in the

schedule attached to the transaction release, and it will improve the overall return on capital of Aon. We believe

Aon post this transaction will be higher revenue growth, higher margin, and a higher return on capital with higher

free cash flow growth. ......................................................................................................................................................................................................................................................

David Anthony Styblo Analyst, Jefferies LLC Q And as far as the areas, I know you mentioned a couple, the exchanges and then reallocating assets to retirement

and so forth. Can you talk a little bit more about those areas that you're most interested in, whether it's organically

or inorganically? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A We're going to continue again to make investments all along the topics of retirement, health, risk, et cetera. If you

think about maybe just the last year, the investments we've made in Admix, Univers, Cammack, Mayfair, all these

are areas that really are health-related acquisitions and brought great capability, the investments we've made in

delegated. We love this space. It's gone from $10 billion, as I said before, to $90 billion in delegated, so I love the

spaces around retirement. You see us investing a lot in data and analytics as it relates to risk, retirement, and

health.

So for us, Dave, this again is a continuation of the strategy we've been on for a long time, and this gives us the

opportunity to allocate even more capital into these areas and really double down on risk, retirement, and health.

This is quite consistent if you go back in time and think about what we did when we divested of our insurance

underwriting assets and invested it back into the business. Now we've got yet another opportunity. Christa

described and I described a real catalyst for us to increase shareholder return as a result of this. ......................................................................................................................................................................................................................................................





David Anthony Styblo Analyst, Jefferies LLC Q Okay, that's helpful. And then just on the numbers, maybe you can give us a little bit more of a quantitative bridge

for the operating income loss. I think it's 15%-plus of the total, and how you replace that, whether it's – I think

buybacks can only do so much. Maybe you could give us a better idea. Are you thinking about using maybe half

of the $3 billion for buybacks or some sort of range there? And then what else is helping to bridge that? I know

you've talked about operating expense savings. Is that more so because you're just integrating the businesses a

little bit more? And then on the tax savings, is there actual real tax savings, or does the tax rate go lower just

because the business mix changes? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A Thanks, Dave. So I think in terms of how you think about modeling this, if you took the 2016 operating income

number on a GAAP basis, you'd eliminate $323 million of adjusted operating income and then you'd add back $91

million of corporate allocations and other expenses. So therefore, you'd adjust your 2016 numbers by $414 million

on an annual basis, and that's really the base from which you then start to model going forward. So I think that's

what you're taking out.

In terms of guidance going forward, what we have said is we expect to be accretive to 2018 FactSet analyst

estimates of $7.97. And the way in which we would get there is continued operating income growth of the

business, continued savings as we bring together the operational model of Aon under Aon United, areas like IT

and real estate as you think about Aon much more focused on advice and solutions. As outsourcing business

being much more capital intensive, it allows us to actually generate savings there on the operating model side.

We will have a lower effective tax rate really as a result of the things we continue to say, lower tax rate, rate

reductions in different countries around the world, and overall geographic distribution of income. And in terms of

use of proceeds, as we think about the business going forward, we really think about continuing to employ

proceeds on a return on capital basis in terms of cash-on-cash returns.

As you look, and we would expect that we would deploy the proceeds and our free cash flow growth in a mix of

M&A and share repurchase, if you look at 2016, we did about $1 billion of M&A. As we think about the pipeline of

M&A, we have fantastic return on capital opportunities there, we'd expect that trend to continue. And we also, as

you saw, authorized an increase in our share repurchase program of $5 billion, and we now have $7.7 billion of

share repurchase authorization remaining. And share repurchase remains our highest return on capital

opportunity across Aon. But we do see terrific opportunities through improved operating income growth, M&A,

share repurchase, reduced operating model savings, and a lower effective tax rate to get back to accretive in

2018. ......................................................................................................................................................................................................................................................

David Anthony Styblo Analyst, Jefferies LLC Q Thanks, I'll step back for others. ......................................................................................................................................................................................................................................................

Operator: Thank you. Our next question comes from the line of Adam Klauber from William Blair. Your line is

now open. ......................................................................................................................................................................................................................................................





Adam Klauber Analyst, William Blair & Co. LLC Q Good morning, thanks. ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A Hi, Adam. ......................................................................................................................................................................................................................................................

Adam Klauber Analyst, William Blair & Co. LLC Q Also on the transaction, so you're selling the benefit and administration platform, the HR BPO, but it sounds like

you're still going to be in the benefit brokerage business and the exchange business. Can you tell us how that's

going to work? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A Adam, it's very much going to work like it works today. When you think about it, we're going to – stick to the

exchanges for an example. Just as it is today, we're going to be involved in architecture and design, all the carrier

relationships, the plan details that come together, the actuarial work which underpins that, the risk management

which is so important and critical for the back-end risk adjustment of that. And our new partner, Blackstone, is

going to be helping and supporting around administration and call centers and enrollment flow and all the things

that are important to that.

And at the front end, this is the place where as we think about innovation, we're going to continue to invest in data

and analytics to really innovate on the front end as we think about the architecture and design. So for us, this is a

very, very natural progression. And what we're excited about is we're now going to actually to be bringing to a

client innovation on both the front end more intensively through us and on the operations side through Blackstone.

So we think this is again, as I described, a real win-win-win and lets us really focus on the areas that we have

highest interest in, highest return on invested capital, high margin, high growth, and it gives our clients the

opportunity to actually benefit from more innovation across the supply chain. ......................................................................................................................................................................................................................................................

Adam Klauber Analyst, William Blair & Co. LLC Q So it sounds like you're still going to sell and distribute the product, but Blackstone will really run the technology

and call center. Is that how the arrangement works? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A Yes, it really is. That's a great way to describe it. And again, I'd think about it. For those who are more focused

and familiar with the risk side of the business, it's not dissimilar to us structuring incredibly complex transactions

for our client on the risk side. And then we partner with insurers, who obviously do the underwriting and the

claims, some of the claims processing and pieces around that. So we think this is a very natural progression, and

we're very excited about it. ......................................................................................................................................................................................................................................................





Adam Klauber Analyst, William Blair & Co. LLC Q Okay, thanks. And then as far as the Workday and some of the other ERP implementation service business, is

that a similar arrangement? Are you keeping the distribution, or is that business mainly going to Blackstone? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A No, this all goes to Blackstone. And it really – again, we wanted to make sure that platform was a very standalone

clear platform to serve clients effectively. We believe we've got that accomplished, and we're going to focus on

the advice and solutions part of the overall supply chain for our clients. ......................................................................................................................................................................................................................................................

Adam Klauber Analyst, William Blair & Co. LLC Q So will you still be selling that work to implementation, but then Blackstone will be doing the work? Is that again

how it works? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A No, it's not. Again, Blackstone owns all the pieces around the outsourcing parts of this. ......................................................................................................................................................................................................................................................

Adam Klauber Analyst, William Blair & Co. LLC Q Okay. ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A And the execution parts of this. We're going to be relating to clients on the front end on the overall program and

how it would work for them. ......................................................................................................................................................................................................................................................

Adam Klauber Analyst, William Blair & Co. LLC Q Okay. And then on the free cash flow, obviously you've done a great job. You had previously talked about a

target. Does the target reset lower because you've taken a lot of free cash out of the business? How should we

think about that going forward? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A Obviously, we're very pleased with the $2.1 billion in free cash flow for 2016. It was really driven by operating

income growth, improvements in working capital, lower pension cash, and lower cash taxes, so we're very

pleased with that outcome. And you can see, we expect free cash flow to continue to grow double digits going

forward. And so that will be the expectation, as I said, because Aon exiting this business, Aon post this

transaction is really a higher revenue growth, higher margin, higher return on capital business, with higher free

cash flow growth. ......................................................................................................................................................................................................................................................





Adam Klauber Analyst, William Blair & Co. LLC Q Right. But does the base start from a lower base just because... ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A Yes, that's right. ......................................................................................................................................................................................................................................................

Adam Klauber Analyst, William Blair & Co. LLC Q Okay, okay, okay, that makes sense. And then as far as the cost saving element of this, will there be a charge

related to it, and will most those cost savings be attained in 2018, or is this going to be a several-year program? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A Like we've always done, Adam, for us this is about building long-term value, so you will see us invest back into

the business in all the ways Christa described, but also around creating efficiencies. And so in the coming months

and quarters, you're going to see us take up efforts and initiatives to do that. And again, we have an opportunity

now to really streamline the business in ways we haven't done before, very much focused on the areas around

advice, solutions, and data and analytics. ......................................................................................................................................................................................................................................................

Adam Klauber Analyst, William Blair & Co. LLC Q Okay, thank you very much. ......................................................................................................................................................................................................................................................

Operator: Thank you. The next question comes from the line of Quentin McMillan from KBW. Your line is now

open. ......................................................................................................................................................................................................................................................

Quentin McMillan Analyst, Keefe, Bruyette & Woods, Inc. Q Hi, thanks very much, guys. I just wanted to touch on the tax rate. You obviously said that you're going to be able

to achieve a lower tax rate by divesting this business. And I'm assuming that's in relation to the current tax

environment that we have today. But could you talk about any thoughts that you might have if the U.S. corporate

rate was to decline? Would the thoughts basically still hold true? And then just on the bigger picture questions that

are out there, do you have any current thoughts about interest deductibility going away or anything else that may

come to pass? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A Look, Quentin. As we think about the legislative environment we're in, obviously there's a lot of uncertainty right

now. We're certainly monitoring it very closely. At this stage, it's too early to tell as there's little guidance and no

draft legislation written on how this would impact financial services, insurance, or insurance brokerage. And so

we'll let you know as we learn more. ......................................................................................................................................................................................................................................................





Quentin McMillan Analyst, Keefe, Bruyette & Woods, Inc. Q Okay, great. Then just in terms of the Health and Benefits business as it relates to the healthcare exchange, are

you going to be folding the healthcare exchange in there as a tool that will be sold in conjunction with that? And

then also obviously putting up double-digit growth in Health and Benefits in Asia and EMEA was very strong in the

quarter. But in the Americas, some other peers of yours had talked about a little bit longer decision-making

process from some of their clients related to the ACA and other healthcare decisions that could be changing. Did

you see any weakness in the Americas that could show up in the back half of this year or might have changed the

selling cycle there at all? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A We really didn't on that point, Quentin. And we've stepped back and said listen, for us it isn't about one specific

area, so it's not about an exchange or Health and Benefits piece, it's about health. As we said before, we love the

category. We've got a business, it's a $1.5 billion business that has grown double digits over the last three years

with a very, very attractive margin. And we're doubling down and investing in that. Whether it's on the exchange,

in H&B, in elective, we love the space and we're going to continue to double down and invest in it. We see a lot of

momentum there. ......................................................................................................................................................................................................................................................

Quentin McMillan Analyst, Keefe, Bruyette & Woods, Inc. Q Okay, great, and just one quick one. In terms of the share repurchases, just a little bit below what I would have

expected in the fourth quarter. Can you just comment? Was your share repurchase in the fourth quarter impacted

by the fact that you had material non-public information from this deal? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A Yes, it was. ......................................................................................................................................................................................................................................................

Quentin McMillan Analyst, Keefe, Bruyette & Woods, Inc. Q Okay, thank you. ......................................................................................................................................................................................................................................................

Operator: Thank you. Our next question comes from the line of Sarah DeWitt from JPMorgan. Ma'am, your lie is

now open. ......................................................................................................................................................................................................................................................

Sarah E. DeWitt Analyst, JPMorgan Securities LLC Q Hi, good morning. ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A Hi, Sarah. ......................................................................................................................................................................................................................................................





Sarah E. DeWitt Analyst, JPMorgan Securities LLC Q I'm looking at the Risk Solutions organic growth in the quarter. I thought there was going to be some revenue that

was shifting from the third quarter to the fourth quarter, so I thought you would have seen a sequential pickup in

organic versus 3Q. Could just talk about what was going on there? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A Really for us, we actually feel good about where we finished in the year overall. Sarah, obviously the 6% comp in

the prior-year quarter created a little headwind. We don't ever like to use that as an excuse, but the math is the

math. But we really feel good about how we finished the quarter and the year.

If you look at net new business growth, it's again another record across the firm, with real momentum particularly

around what we've done on Aon Client Promise and how that's affected retention rates. So we feel good about it.

We would reflect – again, we always want to drive for more growth, and we're working on doing that. But we

finished the year at 3% overall and record margin. And so for us, it's pretty good progress. ......................................................................................................................................................................................................................................................

Sarah E. DeWitt Analyst, JPMorgan Securities LLC Q Okay, great. Thanks, and then just a couple numbers questions on deals today. How much of the proceeds will

you be using for share buyback? And how much do you expect your overall tax rate to fall, and how much could

the return on invested capital improve? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A Sarah, as we think about the starting point, we do believe that the after-tax cash proceeds are expected to be

about $3 billion. And as we think about those cash proceeds plus our free cash flow, we have substantial amounts

of cash to invest. And we really believe we're going to invest in a mix of M&A and share repurchase. And we're

going to allocate that based on return on capital and cash-on-cash returns. And you can see the chart in the

release in terms of return on capital how much we've grown, over 540 basis points over the last five years. And so

we are divesting a lower revenue growth, lower margin business, and therefore you can expect return on capital

to continue to increase. And we haven't given specific guidance around overall mix of allocating the cash because

we continue to optimize it on a return-on-capital basis. ......................................................................................................................................................................................................................................................

Sarah E. DeWitt Analyst, JPMorgan Securities LLC Q Okay, thanks, and then just the tax rate? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A So as we think about the tax rate going forward, we are not giving future guidance. As we said, we're monitoring

the legislative environment very closely, and we'll continue to update you as we learn more. ......................................................................................................................................................................................................................................................

Sarah E. DeWitt Analyst, JPMorgan Securities LLC Q I just meant with the deal. Could you even just tell us what the tax rate was on the business sold?





Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A It's certainly a higher-tax business because it's mostly a U.S.-based business. And so as you look at the gross

proceeds, you can see the tax rate applicable is very high because it's mostly a U.S.-based business. ......................................................................................................................................................................................................................................................

Sarah E. DeWitt Analyst, JPMorgan Securities LLC Q Okay, all right. Thank you very much. ......................................................................................................................................................................................................................................................

Operator: Thank you. The next question comes from the line of Kai Pan from Morgan Stanley. Your line is now

open. ......................................................................................................................................................................................................................................................

Kai Pan Analyst, Morgan Stanley & Co. LLC Q Thank you and good morning. So with the divesture, in the past you talked about HR Solutions operating margin

target of 22% over the long run. Could this change the target as well as the trajectory towards there? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A Kai, for us again, we feel very good about where we are and the momentum we have around risk, retirement, and

health, and this will continue to reinforce progress there. So you will see momentum and push against that. And

again, we had a record margin as you reflect on the year. So we finished the year at 18.4%, which was again the

highest it's ever been, and you're going to see continued progress against that.

As Christa described, we literally just divested of a business that was lower growth, lower margin, and lower

return on invested capital. So by definition, we're going to get some momentum against that, but that's not as

important for us as what we're going to be able to invest now back into the business in the way as Christa

described, both in M&A as well as in what we're doing in areas like delegated, like the exchanges, like data and

analytics organically, which underpin that. So for us, we believe this is a catalyst for performance, which is what

Christa highlighted in her discussion. ......................................................................................................................................................................................................................................................

Kai Pan Analyst, Morgan Stanley & Co. LLC Q Great. And then you talk now more about potential acquisition opportunities. I just wonder. In the past, you've in

recent years been more focused on buybacks and now acquisition pickup. I just wonder. Is buyback still the best

return from your perspective, or will we see probably more active in terms of acquisitions? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A So, Kai, buyback, as I said earlier, is still the highest return on capital opportunity across the company, and that's

why you saw the increased $5 billion authorization of buyback this morning. And so we have $7.7 billion of

buyback authorization remaining. And what we see in the M&A pipeline is some terrific high return on capital

opportunities. And we will be generating tremendous free cash flow growth over the coming years and we've got

proceeds from the transaction, so we expect to be investing in both. ......................................................................................................................................................................................................................................................





Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A If you look back over time, just filling in on what Christa just described, over the last 10 years we've really

deployed 18-plus billion dollars just around decisions [ph] roughly (45:52), which were obviously in dividends, but

also the part left over was roughly half in buyback and roughly half in M&A. So for us, it really has been an

investment opportunity over time.

We have been very, as Christa described, very disciplined about how we've done that. I think Christa – last year

we had zero in M&A in 2015, and this year we've got $1 billion in 2016. So if you think about – and now we're

going into 2017, so for us this is not about any criteria. This is about straight-up return on investment capital and

making sure we're delivering on behalf of our clients in that regard, but also our shareholders. And that's how

you'll see us deploy capital going forward, just as we've done in the past. ......................................................................................................................................................................................................................................................

Kai Pan Analyst, Morgan Stanley & Co. LLC Q Great, last one. On free cash flow per share, will that also be accretive in 2018 similar to the adjusted EPS? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A We haven't given guidance on that. What we've said about free cash flow is we expect free cash flow to grow

double digits going forward. ......................................................................................................................................................................................................................................................

Kai Pan Analyst, Morgan Stanley & Co. LLC Q Okay, great. Thank you so much. ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A Sure. ......................................................................................................................................................................................................................................................

Operator: Thank you. The next question comes from the line of Jay Cohen from Bank of America Merrill Lynch.

Your line is now open. ......................................................................................................................................................................................................................................................

Jay Arman Cohen Analyst, Bank of America Merrill Lynch Q Thank you. Just to clarify one thing, I'm assuming that the added potential consideration of $500 million, that will

not be included in earnings, correct? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A It's going to happen over time, Jay, so it would happen in many years from now. And so we really think about that

being based on performance. And so we give you guidance over the coming years as the performance gets

delivered. ......................................................................................................................................................................................................................................................





Jay Arman Cohen Analyst, Bank of America Merrill Lynch Q But you will include it then in your adjusted earnings eventually? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A It's cash. It wouldn't flow through earnings. ......................................................................................................................................................................................................................................................

Jay Arman Cohen Analyst, Bank of America Merrill Lynch Q Right, okay, that's what I thought, just double-checking on that. And then given your goal of reducing the leverage,

will you have to take some explicit deleveraging actions to deal with your debt at all? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A We do not intend to do that. We do believe that the growth in operating income, the additional operating income

that we will add from M&A will be terrific. And as I said, our debt to EBITDA on a GAAP basis was 2.5 times at

year end 2016. And while we'll be slightly elevated post this transaction, we expect to return to 2.5 levels in 2018. ......................................................................................................................................................................................................................................................

Jay Arman Cohen Analyst, Bank of America Merrill Lynch Q That's really helpful. I'm going to sneak one more quick one in. And as we talk about a lower tax rate helping the

accretion by 2018, I'm assuming that's simply because you're getting rid of the business that has a higher tax rate.

This sale should not impact your tax rate from your other businesses, correct? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A It shouldn't, no. ......................................................................................................................................................................................................................................................

Jay Arman Cohen Analyst, Bank of America Merrill Lynch Q Good, thank you. ......................................................................................................................................................................................................................................................

Operator: Thank you. The next question comes from the line of Paul Newsome from Sandler O'Neill. Your line is

now open. ......................................................................................................................................................................................................................................................

Jon Paul Newsome Analyst, Sandler O'Neill & Partners LP Q Good morning, maybe some clarifying questions. The $3 billion in cash, does that include the proceeds from the

$500 million in the performance bonus related to... ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A No, it does not. ......................................................................................................................................................................................................................................................





Jon Paul Newsome Analyst, Sandler O'Neill & Partners LP Q So that's theoretically a positive prospectively? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A It would theoretically be incremental cash over time. And given it's performance-based, as I mentioned earlier, we

would give you an update on the timing and amount of that based on performance in the coming years. ......................................................................................................................................................................................................................................................

Jon Paul Newsome Analyst, Sandler O'Neill & Partners LP Q Was the outsourcing business that you're selling inherently more volatile business from an earnings perspective

than the rest of Aon, or was it pretty similar? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A It's fairly similar. The way I would describe it is it was a lower revenue growth, lower margin, more capital

intensive business, but it was not more volatile. ......................................................................................................................................................................................................................................................

Jon Paul Newsome Analyst, Sandler O'Neill & Partners LP Q And then this is a little bit aside. The accounting change that you made related to the revenue rec in the risk

business, am I to assume that that seasonality change will persist prospectively? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A Absolutely right. ......................................................................................................................................................................................................................................................

Jon Paul Newsome Analyst, Sandler O'Neill & Partners LP Q Okay, that's it for me. Thank you. ......................................................................................................................................................................................................................................................

Operator: Thank you. The next question comes from the line of Josh Shanker from Deutsche Bank. Your line is

now open. ......................................................................................................................................................................................................................................................

Joshua D. Shanker Analyst, Deutsche Bank Securities, Inc. Q Thank you very for taking my questions, two easy ones. Does the $3 billion you're citing, does that include or

exclude the potential higher price if you were to meet certain performance objectives? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A It does not include for $500 million earnout. ......................................................................................................................................................................................................................................................





Joshua D. Shanker Analyst, Deutsche Bank Securities, Inc. Q Excellent, great. And two, following on Adam's question just a little bit, when I think about healthcare exchanges, I

think it's a technology, I think it's a distribution platform. Is Blackstone going to be operating the healthcare

exchange and you're going to be doing I guess the healthcare design? How is that relationship going to work on

this very growthy business? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A On the exchanges, again, as I described before, we're retaining the exchanges. We're going to work with

Blackstone on the exchanges, but we're retaining the exchanges. So we're doing design, broking, actuarial as

those are put into place, and Blackstone will be doing administration delivery against that platform. Again, we

think this is going to be a very seamless connection.

And the beauty of this is we're going to have more innovation on the topic of exchanges than ever before, us on

the front end doing what I just described, Blackstone on the operating back end doing what they described. And it

allows us to apply data and analytics more effectively to actually create that innovation. And you can expect

Blackstone will be doing the same thing on technology innovation from an operations standpoint. And for us, the

net is, as Christa described before, we're in a less capital intensive situation in which we're able to focus on

advice and solutions consistent with what our overall strategy is. ......................................................................................................................................................................................................................................................

Joshua D. Shanker Analyst, Deutsche Bank Securities, Inc. Q Let's say hypothetically an employee accesses a portal and the company is giving $150 – $200 to the exchange

operator. Is Aon getting those revenues or is Blackstone getting those revenues? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A These are split. Blackstone owns the processing pieces of this, as I described before. And we own the front-end

design, broking, actuarial pieces, as I described before. ......................................................................................................................................................................................................................................................

Joshua D. Shanker Analyst, Deutsche Bank Securities, Inc. Q And so you'll share portal fees? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A We're going to get a commission from that standpoint. And then from the operating side, Blackstone will get the

operating revenues from that. ......................................................................................................................................................................................................................................................

Joshua D. Shanker Analyst, Deutsche Bank Securities, Inc. Q Okay, thank you very much. ......................................................................................................................................................................................................................................................





Operator: Thank you. The next question comes from the line of Charles Sebaski from BMO Capital Markets.

Your line is now open. ......................................................................................................................................................................................................................................................

Charles Joseph Sebaski Analyst, BMO Capital Markets (United States) Q Thank you, good morning or afternoon I guess. I guess, Greg, I was hoping you could just walk us through or at

least help me understand relative to the original Hewitt acquisition in 2010. I know in your prepared comments at

the beginning, you mentioned that this is a low margin business and low growth and compared it to the previous

sale of underwriting. I can understand, but the underwriting business was a legacy business I guess when you

came on board and the construct of Aon, as opposed to Hewitt, which was a deal you guys did and the benefits in

HR BPO being the lion's share of that business when it was transacted.

I guess I was trying to understand. What's transpired over the last six years that's given you a different view of

that because on a return on capital basis of that $4.9 billion deal done in 2010, I guess I'm not seeing the return

on capital of that transaction then? Or is it just – is the world different? Did the pieces come together differently

than expected in hindsight, or just the thought process I would appreciate? ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A Let me just step back, Charles, because I think you're making some assumptions which actually are not how we

saw it at all. In fact, if you step back, we couldn't be actually more excited and pleased with bringing Hewitt into

the Aon family. This has always been about building content capability around the topics of risk, retirement, and

health. And Hewitt brought such tremendous capability for us on retirement and health.

We're sitting today in the strongest position we've ever been in categories we absolutely love. We just delivered

record margin against those categories. And now we're in essence in a position where we can continue to grow

and reinvest in those areas. So for us, Hewitt was just an incredibly positive catalyzing event for Aon that really

reinforced and underpinned our strategy. So we love this.

And the outsourcing business from that standpoint was a business that was more capital intensive. It was a

business that was lower margin, lower return on invested capital, but we continued to invest and build that as well.

And now we have an opportunity, as we announced today, to step back and say now that we've achieved that, we

can actually now divest that asset and now redeploy back into the areas that we have really been focused on all

along. So for us, this is very much a continuation and very much a logical step and a strategy we've had for over a

decade, and really reinforce it.

By the way, just as a reference, again, if one were doing the math, if you were to go back in 2010 and look at our

return on invested capital, and since 2010, our return on invested capital has increased 540 basis points. We feel

pretty good about that progress. We can always do better. We feel pretty good about that progress, and it's a

record now at 17.1%. And the day before we announced it to you, I think we're trading at about $38. And last I

looked, we were slightly higher than that now.

So from a standpoint of how things worked, we feel great about that, not so much from a return standpoint, which

by the way, the mechanics were exceptional, just exceptional, but really from a strategic standpoint. And I would

urge you not to compare what the acquisition of Hewitt was versus what today is because we didn't keep Hewitt

separate. Hewitt was about Aon. It was about strengthening Aon, and it actually accomplished all that frankly and

exceeded our expectations. ......................................................................................................................................................................................................................................................





Charles Joseph Sebaski Analyst, BMO Capital Markets (United States) Q Okay. And then I guess – I appreciate that, and I guess a couple of numbers questions. For Christa, I guess

thinking of the free cash flow going forward, you guys have put in this presentation the annualized growth, which

is very helpful. Is it reasonable since how you calculate cash flow, operating cash flow less CapEx, but we don't

have it split out by business? Our starting point of the $2.1 billion for 2016 just being netted down by the adjusted

EBITDA number that you provided for the sold business, is $1.6 billion the adjusted starting point for cash flow for

2016? Is that a reasonable way to think about your double-digit starting? ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A Yes, I think that, and then there was CapEx of about $80 million. And so as you think about that, you're starting

with slightly higher basis and then double-digit cash flow growth from there I think is the right way to think about it. ......................................................................................................................................................................................................................................................

Charles Joseph Sebaski Analyst, BMO Capital Markets (United States) Q Okay. And then finally on taxes, I know you don't give any guidance. But the tax hit on the sale, about 30% I think

on the $3 billion cash versus the $4.3 billion sale price, is that going to have a disproportionate effect in 2017

numbers relative to your tax rate going back? Is that going to flow through differently than the business would? I'm

just trying to understand how that's going to affect current year's overall organizational tax for the 2017 period. ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A I would separate out the transaction from the operating rate. And I did say again for 2016, the right underlying

operating rate for Aon was about 19%, and it has remained that way for several years. And so that's been the

operating rate for the last couple of years. The transaction is a one-time item and would not flow through the

adjusted EPS and effective tax rate. ......................................................................................................................................................................................................................................................

Charles Joseph Sebaski Analyst, BMO Capital Markets (United States) Q Thank you very much for the answers. ......................................................................................................................................................................................................................................................

Operator: Thank you. Our last question comes from the line of Ryan Tunis from Credit Suisse. Your line is now

open. ......................................................................................................................................................................................................................................................

Ryan J. Tunis Analyst, Credit Suisse Securities (USA) LLC Q Hey, thanks. I just had a question on how we should think about the level of accretion possibly here relative to the

consensus $7.97. Because I guess thinking about the deployment of proceeds into all buyback or M&A and the

lost operating income of $323 million doesn't seem to quite get me back to $7.97. And I hear you guys that you're

not giving the guidance on the tax rate or specific cost saves, but I'm wondering. Should we be thinking about this

as significantly accretive to $7.97 to compensate you guys for the risk of having to do this, or is $7.97 more the

target now for 2018? Thanks. ......................................................................................................................................................................................................................................................





Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A So, Ryan, what we've said is we're going to be accretive to the FactSet $7.97. We haven't given more guidance

than that. And what I would say is it is a combination of proceeds and return on those proceeds from the

transaction, continued organic revenue growth and margin expansion in our businesses, savings as we bring

together the operational model, particularly in IT and real estate, and a reduction in tax rate. So they're the

component pieces that get you there. ......................................................................................................................................................................................................................................................

Gregory C. Case President, Chief Executive Officer & Executive Director, Aon Plc A And what I might add, Ryan, if I could, we didn't see this, you mentioned risk, compensate for risk. We don't see it

that way. I just want to emphasize again. We really see this as an opportunity to take another step forward in a

journey that we've been on for over a decade. This is exactly consistent with what we continue to do as we

allocate capital, reallocate capital, think about our structure, think about performance improvement, all against a

strategy around being the preeminent firm focused on risk, retirement, and health in every single way, and using

more and more data and analytics, content, insight as a way to drive that strategy.

And so for us, this was a natural progression. In fact, the possibility to do it and serve clients well on the

outsourcing side for us made it an imperative. This is something we absolutely had to do because we're excited

about what it means for Aon. We're excited about what it means for Blackstone, and we're excited about what it

means for our clients. So for us, this wasn't about risk. This was a real step forward that strengthens our firm for

the long term. And we'd just say, as we started this conversation, we see this as a real catalyst for shareholder

value creation for Aon. ......................................................................................................................................................................................................................................................

Ryan J. Tunis Analyst, Credit Suisse Securities (USA) LLC Q Okay, understood. Thank you. And then I think Christa just mentioned that what can continue to drive accretion

here is margin expansion in the remaining businesses. I guess looking at organic growth this year, just on the

brokerage side 3%, to have margins expand off of that, are you saying that you think that organic can accelerate

off the 3% next year, or do you think that 3% organic growth can still produce margin expansion in that business?

Thanks. ......................................................................................................................................................................................................................................................

Christa Davies Chief Financial Officer & Executive Vice President, Aon Plc A Ryan, one of the things we're extremely proud of is in 2016, our risk business, we delivered 3% organic revenue

growth overall and record margins of 24.5%. And one of the things that we've mentioned many times is, because

of the investments we made over the last several years in data and analytics, we can drive margin expansion

quite substantially at lower levels of growth. It's certainly not our aspiration. Our aspiration is to grow higher than

we are today. But we are getting return on those investments in data and analytics, and that is driving more than

half of the margin expansion you've seen in each of the last three years. And so we're very confident about

continued margin expansion in our risk business. ......................................................................................................................................................................................................................................................

Ryan J. Tunis Analyst, Credit Suisse Securities (USA) LLC Q Thank you for the questions. ......................................................................................................................................................................................................................................................





Operator: Thank you. I would now like to turn the call back over to Greg Case for closing remarks. ......................................................................................................................................................................................................................................................


Thanks very much, everybody, for joining the call, and we look forward to our discussion next quarter. ......................................................................................................................................................................................................................................................

Operator: Thank you. And that concludes today's conference. Thank you all for joining. You may now

disconnect.

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